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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993. Commission file number 1-10242.
KEMPER CORPORATION
(Exact name of registrant as specified in charter)
DELAWARE 36-6169781
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(State of Incorporation) (I.R.S. Employer Identification Number)
ONE KEMPER DRIVE
LONG GROVE, ILLINOIS 60049
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (708) 320-4700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock ($5 par value) New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
Series A Cumulative Convertible Preferred Stock (no par, $25 stated value, $2
annual dividend)
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in the definitive proxy statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
At March 17, 1994, 33,152,986 shares of common stock of Kemper Corporation were
outstanding, and based upon the last sale price as reported in The Wall Street
Journal, the aggregate market value of the shares of common stock held by
nonaffiliates was approximately $2.0 billion.
DOCUMENTS FROM WHICH INFORMATION IS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December 31,
1993 are incorporated by reference into Parts I and II.
Portions of the Proxy Statement, scheduled to be mailed on or about April 8,
1994 for the annual meeting of stockholders to be held May 11, 1994, are
incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS.
Incorporated in Delaware in 1967 as a nonoperating holding company with
subsidiaries primarily in the property-casualty insurance business, Kemper
Corporation ("Kemper") today is a financial services holding company with
continuing operations in four business segments: asset management, life
insurance, securities brokerage and real estate. Certain financial information
by segment is set forth in ITEM 1(b) below. Selected consolidated financial data
of Kemper and its subsidiaries (the "Company") for the last five fiscal years is
provided in ITEM 6. The business operations of the Company's four segments are
described in ITEM 1(c).
The Company has entered 1994 with approximately 6,335 employees, more than 10
percent fewer than its continuing operations had one year earlier, as all three
of its core businesses -- asset management, life insurance and securities
brokerage -- reduced their employee counts. In addition, there were more than
2,200 employees of subsidiaries the Company divested during 1993.
RECENT DIVESTITURES
During 1993, the Company exited the property-casualty insurance, reinsurance and
risk management businesses. These businesses comprise the Company's discontinued
operations as reported in this Form 10-K, including those portions of the Kemper
Corporation 1993 Annual Report to Stockholders (the "Annual Report") expressly
incorporated herein by reference.
The Company's discontinued property-casualty insurance operations consisted of
two regional companies which write primarily personal automobile and homeowners
insurance, Economy Fire & Casualty Company ("Economy") and Federal Kemper
Insurance Company ("FKI"). In late 1992, the Company announced its intent to
sell Economy and FKI. On August 31, 1993, the Company sold Economy to St. Paul
Fire and Marine Insurance Company in a transaction valued at $420 million. On
December 31, 1993, the Company sold FKI to Anthem P&C Holdings, Inc. (part of
the Associated Group) for $95 million in cash. The Company recorded $92.2
million in after-tax gains from these sales.
On August 2, 1993, Kemper exchanged the stock of its reinsurance and risk
management subsidiaries for 17.4 million shares of Kemper's common stock
previously held by Lumbermens Mutual Casualty Company ("Lumbermens"), the
Company's former parent. The exchange transaction was valued at $610.2 million.
The Company recorded a $204.7 million tax-free gain on the exchange. This
transaction reduced the number of common shares outstanding by more than
one-third. It also reduced Lumbermens' ownership of Kemper common stock to
approximately 4 percent. Lumbermens' ownership had been approximately 38 percent
since April 1989 when Lumbermens' ownership declined from approximately 49
percent in another stock exchange transaction. In the 1989 transaction,
Lumbermens acquired the Company's national, primarily commercial lines,
property-casualty subsidiary, American Motorists Insurance Company ("AMICO").
Lumbermens, AMICO, a subsidiary of AMICO and American Manufacturers Mutual
Insurance Company are known as the Kemper National Insurance Companies ("KNIC").
As a result of the 1989 AMICO transaction, the Company and KNIC established
separate managements. In 1990, the two organizations established differing
boards of directors and distinct employee groups. In 1992, Kemper and KNIC
ceased to have a common chairman of the board. In connection with the 1993
exchange transaction, Kemper and Lumbermens agreed that each of the Company and
KNIC generally may not, for a period of five years, compete with each other in
their respective primary businesses. The two organizations are not considered
affiliated for securities and insurance law purposes beginning in August 1993.
STRATEGIC INITIATIVES
In addition to divesting its discontinued operations in 1993, the Company in the
early 1990s took the following actions to streamline management, control costs
and improve profitability. In 1990, the Company consolidated its five regional
securities brokerage subsidiaries into a single firm focused mainly on its
retail sales operations. Although profitability of the Company's securities
brokerage operations was hurt in 1992 and 1993 by supplemental additions to
legal reserves (mainly for litigation predating the 1990 consolidation), these
operations settled certain significant litigation matters within established
reserves in late 1993 and early 1994.
Since late 1991, the Company intensified its management of real estate-related
investments due to adverse markets and recorded real estate-related reserves,
writedowns and operating losses totaling in excess of $1 billion. The Company
has implemented strategies to reduce its real estate-related investments.
Effective January 1, 1993, the Company contributed the equity real estate joint
venture interests it held with its largest (now former) joint venture partner to
a master limited
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partnership with Lumbermens and its subsidiaries, which partnership in early
1994 acquired the former partner's equity interests. At December 31, 1993, the
Company's real estate related-investments were 17.7 percent of its total
invested assets and cash, down from a peak of 28.1 percent at September 30,
1991. The Company received net cash loan repayments of more than $275 million in
December 1993 and $100 million in March 1994 in connection with the formations
of a real estate mortgage investment conduit and a real estate investment trust,
respectively.
In 1991, Kemper announced its parental guarantee of any future indebtedness of
its life insurance subsidiaries. During 1992 and 1993, the Company purchased
from its life insurance subsidiaries real estate-related assets for $639.4
million in cash. During 1991, 1992 and 1993, the Company also contributed $275.8
million to the capital of the life insurance subsidiaries. Focusing on their
term life and variable annuity products, these subsidiaries also ceded
approximately $900 million of fixed-rate annuity liabilities in reinsurance
transaction effected in 1991 and 1992. In 1992 and 1993, the Company integrated
the management and operations of its two life insurance subsidiaries. Further
addressing the quality of the life companies' investment portfolios, the Company
reduced holdings of below investment-grade securities (excluding real
estate-related investments) from 22.0 percent of its total invested assets and
cash at year-end 1990 to 2.7 percent at year-end 1993.
In 1992, the Company contributed its risk management operations to a partnership
with Lumbermens. Lumbermens acquired these operations in their entirety in the
1993 exchange transaction.
Anticipating the $438 million reduction of Kemper's stockholders' equity from
the acquisition of 17.4 million treasury shares in the 1993 exchange
transaction, Kemper raised $260 million of equity capital through private
placements of preferred stock in the second quarter of 1993. In addition, Kemper
issued $29 million of common stock during 1993, as well as an aggregate of $42.6
million in 1992 and 1991. These amounts were in addition to $100 million of
preferred stock sold to Lumbermens at year-end 1992.
In another private placement during 1993, Kemper raised $200 million of
long-term debt, primarily to repay short-term debt incurred mainly to finance
purchases of real estate-related assets from the Company's life insurance
subsidiaries. In late 1993, in anticipation of the scheduled expiration of
certain lines of credit, Kemper renegotiated with certain banks its committed
but undrawn lines of credit totaling $325.0 million.
MANAGEMENT RESTRUCTURING
Under a reorganization of management structure commenced in late 1993, the
Company is replacing reporting channels divided by subsidiary with reporting
channels organized by function. Historically, each subsidiary generally acted as
its own company with autonomous policies, procedures and priorities. The new
management structure establishes five functional operating groups -- asset
management, life insurance and annuities, sales and distribution, information
and customer service, and real estate -- and four major staff groups -- finance,
administration, legal and planning. The Company believes this configuration will
encourage actions based on what would be best for the corporate whole, thereby
making Kemper and its subsidiaries more competitive and more profitable.
The new unified management structure has not changed the Company's segmentation
for reporting purposes, although management of components within each segment
can differ and overlap. The asset management and life insurance and annuities
operating groups produce, or "manufacture," the Company's financial and
insurance products, which the sales and distribution operating group markets.
The "manufacturing" groups roughly coincide with the respective asset management
and life insurance segments, except that the sales and distribution (including
marketing to distributors), information and customer service (including
technology) and finance (including accounting) functions are managed under
different executive vice presidents, and the other staff functions cross all
segment and subsidiary lines of authority. The sales and distribution group
includes most of the Company's securities brokerage segment, the life insurance
segment's sales function and the asset management segment's sales company and
its financial institutions distributor. The information and customer service
group also includes the Company's securities clearing and mutual fund transfer
agency functions. The real estate operating group manages the life insurance and
real estate segments' real estate-related investments, utilizing the information
and customer service operating function as well as the staff groups.
Certain of the above-described divestitures, initiatives and other actions and
developments are further described by segment in the business descriptions in
ITEM 1(c) below and in Management's Discussion and Analysis which is
incorporated by reference into ITEM 7 below from the Annual Report.
RECENT DEVELOPMENTS
On March 14, 1994, General Electric Capital Corporation ("GECC") announced an
unsolicited proposal to acquire the outstanding common stock of Kemper for $55
per share. On March 17, 1994, the board of directors of Kemper rejected the bid,
stating that the Company is not for sale at this time. On March 20, 1994, GECC
requested a list of Kemper's
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stockholders. On March 24, 1994, GECC filed a preliminary proxy statement with
the Securities and Exchange Commission in connection with GECC's solicitation of
proxies to elect four of its nominees to the board of directors of Kemper. On
March 28, 1994, Kemper filed its preliminary proxy statement, including therein
Kemper's nominees for reelection to the board of directors, and mailed it to
stockholders together with the Annual Report. See Part III of this Form 10-K.
In connection with GECC's announcement, on March 15, 1994, Moody's Investors
Service placed "under review with direction uncertain" its Baa2 senior debt
rating and Baa3 preferred stock rating of Kemper and its Baa1 financial strength
ratings of both of the Company's life insurance subsidiaries; Standard & Poor's
Corporation placed "on Credit Watch with 'developing' implications" its BBB
senior debt rating and BB+ preferred stock rating of Kemper; and Duff & Phelps
Credit Rating Co. placed "on Rating Watch -- Uncertain" Kemper's A- senior debt
rating, Federal Kemper Life Assurance Company's AA- claims-paying ability rating
and Kemper Investors Life Insurance Company's A+ claims-paying ability rating.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The following table shows the Company's net income (loss) by category over the
last five years (in millions):
<TABLE>
<CAPTION>
NET INCOME (LOSS) BY CATEGORY 1993 1992 1991 1990 1989
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<S> <C> <C> <C> <C> <C>
Asset management.................................... $ 99.1 $ 88.3 $ 85.0 $ 58.1 $ 59.2
Life insurance...................................... 79.8 (25.5) 45.8 74.6 85.0
Securities brokerage................................ (3.7) (38.4) 6.2 (181.7) (4.6)
Real estate......................................... (257.7) (209.1) (40.8) (16.3) (5.9)
Other operations and corporate...................... (18.8) (30.0) (20.2) (4.5) (9.7)
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Total continuing operations....................... (101.3) (214.7) 76.1 (69.8) 124.0
Discontinued operations............................. 336.8 11.3 128.4 81.7 183.4
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Total............................................. $ 235.5 $ (203.4) $ 204.5 $ 11.9 $ 307.4
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</TABLE>
The amounts of revenue, earnings (loss) from continuing operations, before
income tax and cumulative effect of changes in accounting principles, and assets
attributable to each of the Company's segments, as well as the other operations
and corporate category, for the three years ended December 31, 1993 are set
forth in the note, incorporated herein by reference, captioned "Segment
information" of the Notes to Consolidated Financial Statements in the Annual
Report. Certain selected financial information of the discontinued operations
category is included in the note, incorporated herein by reference, captioned
"Discontinued operations" of the Notes to Consolidated Financial Statements in
the Annual Report.
(C) NARRATIVE DESCRIPTION OF BUSINESS AND GENERAL DEVELOPMENT OF SUBSIDIARIES.
REGULATION
The Company's asset management and securities brokerage subsidiaries, as
investment advisers and broker-dealers, are generally subject to regulation by
the Securities and Exchange Commission (the "SEC"), the Commodity Futures
Trading Commission (the "CFTC"), the National Association of Securities Dealers,
Inc. and/or the exchanges of which the firms are members, as well as the
securities commissions of the states in which the firms are licensed to do
business. The New York Stock Exchange, Inc. (the "NYSE") is the primary
regulatory body for its member firms, including the Company's securities
brokerage operations. These regulators are charged with assuring that the firms
maintain adequate net capital and comply with a variety of approved sales
practices and operational standards, and the regulators oversee the licensing,
registration and/or approval of the firms' employees, representatives and, in
some circumstances, owners. The regulators make periodic examinations and review
annual, quarterly, monthly and other reports on the financial condition and
operations, including market practices, of each individual firm. In addition,
variable annuities offered and variable universal life products planned to be
offered by one of the Company's life insurance subsidiaries, and the related
separate accounts, are subject to regulation by the SEC.
The Company's two life insurance subsidiaries are generally subject to
regulation and supervision by the insurance departments of Illinois, their
domiciliary state, and the other jurisdictions in which the companies are
licensed to do business. These departments enforce laws and regulations designed
to assure that life insurance companies maintain adequate capital and surplus,
manage investments according to prescribed character, standards and limitations
and comply with a variety of operational standards. The departments also make
periodic examinations of individual companies and review annual and other
reports on the financial condition of each company operating within their
respective jurisdictions. Regulations, which often vary from state to state,
cover most aspects of the insurance business,
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including market practices, forms of policies and accounting and financial
reporting procedures. In 1992, the National Association of Insurance
Commissioners (the "NAIC") announced, and in 1993 Illinois adopted, risk-based
capital requirements for life insurance companies. See "LIFE INSURANCE SEGMENT
- -- Risk-Based Capital" below. These requirements are not expected to have any
material regulatory impact on the Company's life insurance subsidiaries.
Insurance holding company laws enacted in many states grant additional powers to
state insurance commissioners to regulate acquisitions of and by domestic
insurance companies, to require periodic disclosure of relevant information and
to regulate certain transactions with related companies. These laws also impose
prior approval requirements for certain transactions with affiliates and
generally regulate dividend distributions by an insurance subsidiary to its
holding company parent.
Broker-dealer risk assessment rules enacted in 1991 also relate to affiliate
transactions. These rules provide for periodic reporting of certain
relationships among, and financial information regarding, the Company's asset
management and securities brokerage subsidiaries and certain of their
affiliates.
The Company believes it is in compliance in all material respects with all
applicable regulations. For information on regulatory and other dividend
restrictions, see ITEM 5(c).
ASSET MANAGEMENT SEGMENT
The asset management segment primarily consists of Kemper Financial Services,
Inc. ("KFS") and its subsidiaries, including INVEST Financial Corporation
("INVEST"), Kemper Asset Management Company and Kemper Service Company ("KSvC").
Kemper Financial Services, Inc.
KFS, founded in 1948, is incorporated in Delaware and is a registered investment
adviser and broker-dealer. KFS and its subsidiaries manage mutual fund,
insurance company and other institutional investment portfolios. Headquartered
in Chicago, KFS is one of the largest asset managers in the country. The
Company's share of the industry's total mutual fund sales in the United States
was 1.0 percent in 1993, 2.3 percent in 1992 and 2.1 percent in 1991, based on
Investment Company Institute ("ICI") data. A February 7, 1994 U.S. News and
World Report article ranked the Kemper mutual fund family among the top 10 of
the 28 largest fund families in the United States based on the magazine's
proprietary index. At December 31, 1993 and 1992, assets under management by KFS
and its subsidiaries totaled $69.3 billion. Of this amount, bond, stock and
money market mutual fund assets accounted for $47.4 billion at December 31, 1993
and $48.1 billion at December 31, 1992. See the table, incorporated herein by
reference, on page 23 of the Annual Report setting forth assets under management
by category at December 31, 1993, 1992 and 1991.
Bond mutual fund assets under management increased $1.1 billion in 1993 after
increasing $3.1 billion in 1992. The 1993 increase was primarily due to
investment appreciation. The 1992 increase was primarily due to sales as certain
investors sought to maintain both a level of security and higher returns,
relative to money funds, in a low interest rate environment.
The interest rate environment also contributed to strong sales of stock mutual
funds in 1993 and 1992. Stock mutual fund assets increased $1.0 billion in 1993
after increasing $1.9 billion in 1992. Sales of stock mutual funds in 1993 were
down from record 1992 sales in part due to both investment performance in an
environment generally adverse to KFS' growth stock orientation and the increased
number of new competitor funds. Sales of stock mutual funds accounted for
approximately 35 percent of the segment's total open-end mutual fund sales in
1993, compared with 32 percent in 1992 and 18 percent in 1991. Stock mutual fund
assets as a percentage of the Company's total stock and bond mutual fund assets
under management totaled 27 percent at December 31, 1993, up from 17 percent
three years earlier.
Including its international mutual funds sold in the United States (see "Foreign
Activities" below), the segment's total bond and stock mutual fund asset market
share at December 31, 1993 was 2.19 percent of the United States marketplace,
compared with 2.77 percent and 3.05 percent at December 31, 1992 and 1991,
respectively, based on ICI data. The decreases reflected increasing competition
from securities brokerage and advisory firms, as well as financial institutions,
all emphasizing sales of their proprietary products. The 1993 decrease also
reflected the loss of the contract to manage approximately $1.0 billion of
assets (primarily no-load stock mutual funds) previously managed by Selected
Financial Services, Inc., a KFS subsidiary. A new third-party manager of these
funds was appointed effective May 1, 1993.
In 1993 and 1992, money market assets under management declined by $2.8 billion
and $2.5 billion, respectively, in a low interest rate environment. Some of this
amount was reinvested in the segment's other mutual funds, as KFS and its
subsidiaries strive to have mutual funds for virtually every economic
environment. The 1993 decrease also reflected the year-end loss of a $1.5
billion account withdrawn by a nonaffiliated broker. Money fund assets fell $7.3
billion in 1991, primarily reflecting the loss of KFS' then-largest
nonaffiliated account which began managing its own assets. Based on ICI
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data, the Company's money fund assets under management represented a 2.18
percent share of the United States money fund marketplace at December 31, 1993,
compared with 2.72 percent at year-end 1992 and 3.21 percent at year-end 1991.
Of the $12.3 billion in money fund assets managed at December 31, 1993, $4.1
billion was in the Kemper Money Market Fund -- Money Market Portfolio, making it
the 12th largest money fund in the country.
Chicago-based Kemper Asset Management Company and London-based Kemper Investment
Management Company Limited manage most of the segment's institutional investment
business. Investment advisory business accounted for $4.7 billion of assets
under management at December 31, 1993 and $4.3 billion of assets under
management at December 31, 1992. The Company is taking a number of steps to
increase this business domestically and internationally. Sales efforts over the
last few years have been targeted at both public sector retirement plans and
investment management consultants.
For Kemper mutual fund customers in the qualified plan (401(k)) market, the
Company also offers "KemFlex," a computerized account service system. KemFlex
facilitates sales and servicing and is being successfully marketed mainly to
employers with fewer than 1,000 employees.
The $69.3 billion in assets managed by KFS and its subsidiaries at December 31,
1993 included $9.8 billion of assets of Kemper affiliates and $7.4 billion of
assets of KNIC and others. See the note, incorporated herein by reference,
captioned "Related-party transactions" of the Notes to the Consolidated
Financial Statements in the Annual Report.
INVEST Financial Corporation
INVEST was incorporated in Delaware in 1982. KFS owns approximately 95 percent
of INVEST. Headquartered in Tampa, Florida, and licensed as a broker-dealer in
50 states, the District of Columbia and Puerto Rico, INVEST sells through
registered representatives at more than 700 offices of banks, thrifts and credit
unions nationwide. In each of the last three years, INVEST was the second
largest distributor of KFS' mutual fund products and the largest single
distributor of the annuity products of Kemper Investors Life Insurance Company
("KILICO"). In 1993, INVEST accounted for 19.0 percent of the revenue and $4.8
million of the net income of the asset management segment.
Kemper Service Company
KSvC was incorporated in Delaware in 1986. Located in Kansas City, Missouri, and
at KFS' Chicago headquarters, KSvC and its subsidiary, Supervised Service
Company, Inc., provide hardware, software and back-office administrative
services, including transfer agent-related functions, for KFS' mutual fund
business. In addition, KSvC provides certain computer service bureau functions,
facilities and office and/or telecommunications services for the Company's asset
management, securities brokerage, life insurance and real estate segments.
ASSET MANAGEMENT STRATEGIES
One of the segment's marketing strategies is to sell through diverse channels.
Financial intermediaries market most of the segment's products, except for the
Kemper Money Market Fund which KFS sells directly to the public. The major
portion of the segment's 1993 and 1992 open-end mutual fund sales were through
nonaffiliated regional and national securities brokerage firms, while financial
institutions such as banks and thrifts, financial planners and other specialty
distributors of financial products have accounted for increasing proportions of
the segment's sales in recent years. INVEST and the Company's securities
brokerage segment accounted for approximately 20.2 percent and 8.5 percent,
respectively, of KFS' 1993 open-end mutual fund sales. See "SECURITIES BROKERAGE
SEGMENT" below.
In recent years, certain of KFS' money market products have been marketed under
distributors' private labels, with KFS specified as the manager. In early 1994,
KFS announced plans to offer a new family of five funds, under the name Sterling
Funds, through banks and other financial institutions. Like the use of INVEST,
the Sterling Funds strategy is designed to take advantage of the increasing
opportunities for sales of mutual funds through banks. The Company expects the
primary market for the Sterling Funds family will be customers of small to
medium size institutions which, unlike certain larger institutions, do not offer
their own proprietary funds. In 1993, financial institutions accounted for
approximately 27 percent of KFS' gross mutual fund sales.
Another key strategy is to offer an extensive array of mutual fund products.
During 1993, KFS added a new spread load fund to its 12b-1 Kemper Investment
Portfolios product and two stock and bond funds to its retirement fund series.
As of March 1, 1994, KFS and its subsidiaries had open-end and closed-end mutual
fund offerings representing 59 separate investment portfolios.
By mid-1994, KFS is planning to establish for many of its funds, subject to
approval by the shareholders of such funds, a multiple class structure to
provide fund shareholders with the choice of either (i) the traditional
front-end load option, or (ii) a spread load (contingent deferred sales charge)
fund charging annual 12b-1 distribution fees (certain of KFS'
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funds already provide a variation of this option), or (iii) a level load plan
charging annual service and 12b-1 fees with no advance commission on the sale.
Under this structure, KFS would be offering a broad product line with 21 stock
and bond funds, each in three configurations, in place of 33 stock and bond
funds currently offered. In addition, KFS would offer for qualifying investors
(mainly institutions making large investments) a no-load and no distribution fee
option. The Company believes the multiple class structure will, among other
consequences, encourage additional investment in the funds and help maintain the
competitive position of such funds in relation to other funds which offer or may
offer such choices.
The Company strives to have competitive products for its customers' needs in any
economic environment. In the recent low interest rate environment, KFS has been
emphasizing its stock and bond mutual fund products to respond to investors'
search for higher yields and real returns.
FOREIGN ACTIVITIES
Although business from outside the United States is not presently material to
the segment's operations, internationalization is an emerging development
affecting asset management business strategies. KFS entered the global
marketplace in 1980 with the launching of the Kemper International Fund. At
December 31, 1993, the segment's international products accounted for $1.3
billion in assets under management, compared with $1.3 billion at December 31,
1992 and $1.5 billion at December 31, 1991.
KFS is targeting U.S. investors' interest in foreign markets as well as overseas
interest in U.S.-based investments. In 1994, KFS plans to launch the
International 2004 Fund, a principal guarantee target maturity equity fund, to
offer an international option complementing KFS' five domestic equity funds
which feature principal guarantees.
In 1989, KFS' direct parent company, Kemper Financial Companies, Inc. ("KFC"),
entered into a cooperative arrangement with Banco Santander, one of Spain's
largest banks in terms of assets. Pursuant to the arrangement, KFC and the bank
have jointly developed financial services business activities in the U.S. and
Europe. In 1990, KFS and Banco Santander introduced the Growth Fund of Spain, a
closed-end fund which invests in equity securities of Spanish companies. The
fund was underwritten by a syndicate which included the Company's securities
brokerage operations.
OTHER ASSET MANAGEMENT FACILITIES.
KFS owns 50 percent of IFTC Holdings, Inc., which wholly owns Investors
Fiduciary Trust Company, a state-chartered trust company. KFS wholly owns Kemper
International Management, Inc., a registered investment adviser, and Kemper
Sales Company, which assists representatives distributing KFS' financial
products and KILICO's annuity products. KFS owns 15.6 percent of Dimensional
Fund Advisors, Inc., an investment management company offering quantitative or
passive investment products to the tax-exempt institutional investment
community.
COMPETITION
The Company's asset management operations compete with other asset managers,
other brokerage and advisory firms that manage assets or produce financial
products such as mutual funds similar to those produced by KFS, and other
financial institutions such as banks, thrifts and insurance companies that
market other types of investment products.
The Company stresses the relative size and balance between its production and
distribution capabilities and emphasizes diversity among products, services and
income sources. The Company focuses on increasing assets under management,
controlling operational costs, establishing alternative distribution outlets and
matching products and services with economic conditions. The segment increased
advertising efforts in each of the last three years to enhance its competitive
position.
The asset management industry is becoming increasingly competitive, with banks
and securities brokerage firms offering proprietary products and with the
proliferation of products being offered in the marketplace through multiple
distribution channels. The numbers of competitors and their products have
increased significantly for several years, as barriers to entry, such as capital
requirements, are low relative to other regulated businesses. Individuals are
also assuming greater control over their savings and retirement dollars and are
placing greater emphasis on asset allocation and controlling risk. The Company
has adopted certain business strategies to address these competition issues,
such as brand name marketing emphasizing long-term investment performance,
distribution through diversified channels, and cost control and improved service
through internalization of its shareholder accounting system (scheduled for
completion in late 1994).
EMPLOYEES
At December 31, 1993, KFS employed approximately 690 persons, and KSvC employed
1,040. INVEST has approximately 340 employees but also utilizes the services of
approximately 1,200 registered representatives at subscribing banks, thrifts and
credit unions.
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LIFE INSURANCE SEGMENT
The Company's life insurance business, produced by Federal Kemper Life Assurance
Company ("FKLA") and Kemper Investors Life Insurance Company ("KILICO"),
primarily consists of a variety of term and interest-sensitive (mostly
universal) life insurance products and fixed-rate and variable annuity
contracts. Each company has emphasized different products and distribution
methods. Both companies are licensed in the District of Columbia and all states
except New York. In early 1992, the Company named a common chairman and chief
executive officer for both FKLA and KILICO who is charged with increasing their
efficiencies. During 1992 and 1993, the Company integrated the two life
companies' operations and their strategic directions.
Changing marketplace dynamics affected the life insurance industry over the last
three years. To accommodate customers' increased preference for safety over
higher yields, the Company reduced investment risk and strengthened the capital
position of the life insurance segment. Investments are an integral part of the
Company's life insurance business. See the discussion captioned "Investments,"
incorporated herein by reference, on pages 29 through 36 of the Annual Report.
For life insurance sales by product, see the table, incorporated herein by
reference, on page 26 of the Annual Report. Life insurance sales include both
new and renewal net premiums written for term and ordinary life products as well
as deposits received on certain long-duration contracts such as annuity and
interest-sensitive life products.
The segment's total life insurance in-force grew to $91.3 billion at December
31, 1993, compared with $84.2 billion and $73.4 billion at year-end 1992 and
1991, respectively. The segment issued new life insurance business in 1993 of
$17.5 billion in face amount, down from $21.5 billion in 1992, due in part to
competitive conditions. The decreases of $250.5 million in 1993 and $147.4
million in 1992 in general account (fixed-rate annuity) sales reflected the
segment's continuing strategy to direct its sales efforts toward separate
account (variable annuity) products, which pose minimal investment risk for the
Company and increase administrative fees earned.
The following table shows selected relative contributions of FKLA and KILICO to
the life insurance segment for the three years ended December 31, 1993 (in
millions):
<TABLE>
<CAPTION>
SALES REVENUE INVESTED ASSETS INSURANCE IN-FORCE
------------------ ------------------ -------------------- -----------------------
FKLA KILICO FKLA KILICO FKLA KILICO FKLA KILICO
------- ------- ------- ------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993............................ $ 308.1 $ 510.0 $ 388.4 $ 338.1 $2,563.7 $5,373.2 $ 89,614.3 $1,732.9
1992............................ 360.5 716.5 334.8 353.6 2,418.7 5,021.5 82,428.7 1,794.4
1991............................ 372.2 679.2 343.2 404.6 2,139.0 5,286.1 71,581.5 1,847.8
</TABLE>
Federal Kemper Life Assurance Company
FKLA, founded in 1905, is incorporated under the insurance laws of Illinois.
FKLA markets a selected range of life insurance and annuity products primarily
through independent general agents and brokerage general agents.
In 1993, term and ordinary life products together accounted for 49.7 percent of
FKLA's sales, and interest-sensitive life products accounted for 25.0 percent.
The face value of its term, ordinary and interest-sensitive life insurance sold
in 1993 was $17.5 billion, compared with $21.5 billion in 1992 and $26.5 billion
in 1991. FKLA's total life insurance in-force at December 31, 1993 rose to $89.6
billion from $82.4 billion at year-end 1992 and from $71.6 billion at year-end
1991 after taking into account lapses (nonrenewals) of $8.8 billion in 1993,
$9.1 billion in 1992 and $10.0 billion in 1991.
Although the persistency of interest-sensitive life products suffered in each of
the last three years in large part due to a declining interest rate environment
and asset quality issues, persistency on term and ordinary life products in
recent years was helped in part by a tightening of agency requirements (further
described below) and a shift over the past few years to marketing term products
with level premiums and longer premium guarantees. The NAIC, however, has
proposed a model regulation which would require higher reserves on policies with
longer premium guarantees. If the regulation is adopted in its present form, it
would not apply to policies issued prior to its effective date, such date would
be no earlier than 1995, and in response, the Company and the industry would
likely market products with shorter premium guarantees.
To help increase sales and profitability, FKLA continues to design new life
insurance products. In 1993 and 1992, most of FKLA's new sales came from Kemper
Certain-T and Kemper Super-T, two low-cost term life insurance products offering
ten-and 15-year premium guarantees, and from Kemper CVT (Cash Value Term), a
flexible premium, adjustable, universal life insurance policy offering term-like
premiums guaranteed to remain level for the first 20 policy years. In 1993, FKLA
lowered the minimum face amount (policy size) requirements on these products to
make them more affordable for more customers as well as including an accelerated
death benefit rider for policy holders.
7
<PAGE> 9
For its mortality-based products, FKLA establishes a measure of protection
through careful underwriting and reinsurance arrangements. The Company believes
FKLA's normal underwriting and reserving practices take into account all known
mortality risks, including the acquired immune deficiency syndrome (AIDS).
Virtually all new applicants for FKLA's mortality-based policies are tested for
the AIDS virus, and the majority of FKLA's in-force business has been tested.
In recent years, FKLA has tightened agency requirements, reducing the number of
general agents while increasing sales through these larger, more consistent
producers. In addition, FKLA increasingly utilizes other marketing organizations
such as agents associated with financial institutions, securities brokerage
firms and property-casualty insurance agencies. FKLA has also developed
marketing arrangements with other life insurance companies that do not
participate in the low-cost term marketplace. Such arrangements help FKLA
increase sales by allowing other companies to market its products.
Most of the preceding distribution channels also handle FKLA's annuity products.
Annuities accounted for 25.3 percent of FKLA's 1993 sales, 38.0 percent of its
1992 sales and 43.8 percent of its 1991 sales. Annuities also accounted for
approximately $1.3 billion of FKLA's invested assets at both December 31, 1993
and 1992. FKLA has sold its annuity products primarily through its general
agency force. FKLA has expanded its presence in the bank and thrift market with
annuity products designed to compete with certificates of deposit. In recent
years, FKLA also enhanced its annuity line to focus on sales of products to
school districts and municipalities. The Company is planning to enlarge its life
insurance companies' distribution to this and other marketplaces by utilizing
relationships established by its securities brokerage operations.
In addition to developing innovative, low-cost products, FKLA utilizes advanced
computer systems to provide quality service while keeping expenses at a minimum.
For many years, FKLA has utilized a "team underwriting" approach. By organizing
its underwriters and related personnel into small work groups that make
extensive use of systems technology, FKLA has developed what it believes is a
significant cost advantage in the life insurance marketplace. FKLA also captures
policy information electronically at its source (the producer) and makes it
available to various parties in the process of underwriting and handling the
life insurance business.
Kemper Investors Life Insurance Company
KILICO, founded in 1947, is incorporated under the insurance laws of Illinois.
KILICO's lines of insurance and annuity products complement the offerings of the
Company's asset management segment. KILICO offers both individual fixed-rate
(general account) and individual and group variable (separate account) annuity
contracts, as well as individual universal life and variable life insurance
products, through various channels. Financial institutions, nonaffiliated and
affiliated securities brokerage firms, insurance agents and financial planners
are important distribution channels for KILICO products.
Annuities accounted for approximately 99 percent of KILICO's sales in recent
years. KILICO's annuities generally have disappearing surrender charges that are
a specified percentage of policy values and decline as the policy ages. General
account annuity and interest-sensitive life policies are guaranteed to
accumulate at specified interest rates but allow for periodic crediting rate
changes. KILICO's separate account assets totaled $1.50 billion at December 31,
1993 and $1.14 billion at December 31, 1992.
In the recent low interest rate environment, and to reduce its exposure to
investment risk, KILICO is placing more emphasis on marketing its separate
account products. Unlike fixed-rate annuity business where KILICO manages spread
revenue, variable annuities pose minimal investment risk for KILICO and increase
administrative fee revenue. KILICO's sales of its separate account annuities
were $263.7 million in 1993, after having risen 142.2 percent to $275.9 million
in 1992 from $113.9 million in 1991. In 1992, KILICO introduced Kemper PASSPORT,
a variable and market value adjusted annuity featuring a choice of investment
portfolios, an increasing estate benefit, tax-free transfers and a selection of
guaranteed rates for a variety of terms. The January 1994 Money magazine ranked
a KILICO variable annuity, Kemper Advantage III, ninth of the top 20 variable
annuities based on, among other factors, returns and fees. Separate account
annuities represented 51.7 percent of KILICO's total sales in 1993, compared
with 38.5 percent in 1992 and 16.8 percent in 1991.
The drop in interest rates and certain strategic reductions in crediting rates
lowered general account annuity sales for KILICO in the last three years.
KILICO's sales also were hurt by fixed-rate annuity buyers' focus on investment
risk. General account annuities represented $244.2 million, or 47.9 percent, of
KILICO's total sales in 1993, compared with $435.6 million, or 60.8 percent, in
1992, and $557.2 million, or 82.0 percent, in 1991.
KILICO's sales of interest-sensitive life products decreased again in 1993, to
$2.0 million, from $5.0 million in 1992 and $8.0 million in 1991, for the same
reasons its sales of general account annuities declined. Overall, sales of
interest-sensitive life products represented less than 1 percent of KILICO's
total sales in 1993, 1992 and 1991.
8
<PAGE> 10
KILICO maintains a broad product selection designed to appeal to annuity and
life insurance policyholders in diverse economic environments. KILICO structures
its products to offer guaranteed returns, investment opportunities or a
combination of both to help policyholders meet multiple insurance and financial
objectives.
Cost control is another key business strategy. KILICO is using enhanced software
and benefiting from the integration of its operations with those of FKLA. Under
the Company's management restructuring announced in late 1993, KILICO and FKLA
are further coordinating their distribution functions with the capabilities of
the securities brokerage and asset management segments.
NAIC RATIOS
The NAIC annually calculates certain statutory financial ratios for most
insurance companies in the United States. These calculations are known as the
Insurance Regulatory Information System ("IRIS") ratios. There presently are
twelve IRIS ratios. The primary purpose of the ratios is to provide an "early
warning" of any negative developments. The NAIC reports the ratios to state
regulators who may then contact the companies if three or more ratios fall
outside the NAIC's "usual ranges".
Based on statutory financial data as of December 31, 1993, FKLA had one ratio
and KILICO had five ratios outside the usual ranges. FKLA's adequacy of
investment income ratio was adversely affected by lower investment income.
KILICO's net change in capital and surplus as well as its net gain to total
income ratios were adversely affected by realized investment losses. See the
discussion captioned "Investments," incorporated herein by reference, on pages
29 through 36 of the Annual Report. KILICO's change in premium, change in
product mix and change in reserving ratios reflected its strategic reductions of
general account business, including the below-described fixed-annuity
reinsurance transactions. Other than certain states requesting quarterly
financial reporting and/or explanations of the underlying causes for certain
ratios, no state regulators have taken any action due to FKLA's or KILICO's IRIS
ratios for 1993 or earlier years.
RISK-BASED CAPITAL
In the early 1990's, reflecting a recessionary environment and the insolvencies
of a few large life insurance companies, both state and federal legislators have
increased scrutiny of the existing insurance regulatory framework. While various
initiatives, such as a new model investment law, are being considered for future
implementation by the NAIC, it is not presently possible to predict the future
impact of potential regulatory changes on the Company.
Under asset adequacy and risk-based capital rules adopted in 1993 in Illinois
(the domiciliary state of the Company's life insurance subsidiaries), state
regulators may mandate remedial action for inadequately reserved or inadequately
capitalized companies. The new asset adequacy rules are designed to assure that
reserves and assets are adequate to cover liabilities under a variety of
economic scenarios. The focus of the new capital rules is a risk-based formula
that applies prescribed factors to various risk elements in an insurer's
business and investments to develop a minimum capital requirement designed to be
proportional to the amount of risk assumed by the insurer. FKLA and KILICO have
reserves and capital levels exceeding any which would mandate action under the
new rules.
RESERVES AND REINSURANCE
The following table provides a breakdown of the Company's reserves for life
policy benefits by product type at December 31, 1993, 1992 and 1991 (in
millions):
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
General account annuities.............................................. $5,508.9 $5,446.7 $5,627.4
Life insurance:
Interest-sensitive................................................... 1,628.3 1,619.4 1,552.5
Term and other....................................................... 243.6 270.9 203.4
Ceded life policy benefits............................................. 836.0 -- --
-------- -------- --------
Total............................................................. $8,216.8 $7,337.0 $7,383.3
-------- -------- --------
-------- -------- --------
</TABLE>
Ceded life policy benefits shown above reflect coinsurance (indemnity
reinsurance) transactions in which KILICO reinsured liabilities of approximately
$500 million in 1992 and $400 million in 1991 with Fidelity Life Association
("FLA"), an affiliated mutual insurance company. FLA shares management,
operations and employees with FKLA and KILICO, but produces separate life
insurance and annuity products, including whole life policies not produced by
FKLA or KILICO as well as other policies similar to certain FKLA policies. At
December 31, 1993, KILICO's reinsurance recoverable from FLA related to these
coinsurance transactions totaled approximately $746 million. KILICO remains
9
<PAGE> 11
primarily liable to its policyholders for this amount. Utilizing FKLA's
employees, KILICO is the servicing company for this coinsured business and is
reimbursed by FLA for the related servicing expenses. Excluding this
coinsurance, KILICO, because it is primarily an annuity company, reinsures only
a very limited portion of its business. KILICO has immaterial exposure to
mortality losses.
FKLA's maximum retention on any single mortality policy risk is $300 thousand.
FLA is one of FKLA's primary reinsurers of mortality coverages written by FKLA
prior to 1992. In 1992, FKLA began to reinsure risks over FKLA's retention
limits with nonaffiliated insurers. At December 31, 1993, FKLA's reinsurance
recoverable from FLA for its mortality reinsurance totaled approximately $48
million. FKLA remains primarily liable to its policyholders for the face amount
of its reinsured mortality coverages. See the note, incorporated herein by
reference, captioned "Reinsurance" of the Notes to the Consolidated Financial
Statements in the Annual Report.
COMPETITION
The life insurance subsidiaries are in a highly competitive business and compete
with a large number of other stock and mutual life insurance companies, many of
which are larger financially, although none is truly dominant in the industry.
FKLA primarily competes in the low-cost mortality products marketplace, although
annuities have constituted a sizable portion of FKLA's sales and profits in
recent years. KILICO, with its emphasis on annuity products, competes for
savings dollars in many of the same marketplaces as KFS, which has complementary
products. See "ASSET MANAGEMENT SEGMENT--Competition" above in this ITEM 1(c).
Like KFS and the Company's securities brokerage operations, KILICO is wholly
owned by KFC, which in turn was approximately 96 percent owned by Kemper on a
fully converted basis at December 31, 1993.
The life insurance companies' principal methods of competition continue to be
innovative products, often designed for selected distribution channels and
economic conditions, as well as appropriate product pricing, careful
underwriting, expense control and the quality of services provided to
policyholders and agents. Certain of their financial strength ratings and
claims-paying/performance ratings, however, were lower in 1993 than in earlier
years and impacted sales efforts in certain markets.
To address its competition, the segment has adopted certain business strategies.
These include additional reductions of real estate-related assets; continued
focus on existing and new term and variable annuity products; distribution
through diversified channels, with new emphasis on financial institutions and
the Company's securities brokerage operations' retail base; and ongoing efforts
to continue as a low-cost provider of insurance products and high-quality
services to agents and policyholders through the use of technology.
RANKINGS AND RATINGS
FKLA ranked 13th in ordinary life insurance issued and 19th in ordinary life
insurance in-force at year-end 1992 of the 135 U.S. life insurance companies
reported in the June 21, 1993 Best's Insurance Management Reports--Life/Health.
According to Best's Agents Guide to Life Insurance Companies, 1993, as of
December 31, 1992, FKLA and KILICO, respectively, were ranked 104th and 54th of
1,370 life insurers by admitted assets; 35th and 442nd of 1,239 by insurance
in-force; and 156th and 220th of 1,299 by net premiums written.
A.M. Best Company, an industry analyst, has assigned an A- ("Excellent") rating
to both FKLA and KILICO (lowered from A during 1993); Moody's Investors Service
has assigned an insurance financial strength rating of Baa1 ("adequate") to both
companies (unchanged in 1993); and Duff & Phelps Credit Rating Co. has assigned
claims-paying ability ratings of AA- ("very high") to FKLA and A+ ("high") to
KILICO (lowered from AAA and AA, respectively, during 1993). See "Recent
Developments" in ITEM 1(a) of this Form 10-K.
EMPLOYEES
At December 31, 1993, FKLA had approximately 390 employees, which it shares with
KILICO and FLA.
10
<PAGE> 12
SECURITIES BROKERAGE SEGMENT
The Company's securities brokerage business chiefly consists of retail brokerage
(sales, consulting and research) and also includes institutional brokerage,
investment banking and securities underwriting services. Services are provided
to individuals and institutions primarily by Kemper Securities, Inc. ("KSI"),
which commenced operations in the third quarter of 1990 as Kemper Securities
Group, Inc. upon the merger and restructuring of the Company's five regional
securities brokerage operations: Bateman Eichler, Hill Richards, based in
California; Blunt Ellis & Loewi, Milwaukee; Boettcher & Company, Denver; Lovett
Underwood Neuhaus & Webb, Houston; and Prescott, Ball & Turben, Cleveland and
New York. The unified firm adopted its present name in July 1992, retiring the
names of its five divisions at that time. KSI can trace its foundations back to
1910.
Kemper Securities, Inc.
Based in Chicago and incorporated in Delaware, KSI is a NYSE member firm
licensed as a broker-dealer in all 50 states, Puerto Rico and the District of
Columbia. KSI is also a registered investment adviser. KSI is one of the largest
distributors of KFS' mutual fund products. KSI is primarily retail oriented, as
more than 80 percent of its revenue in each of the last three years was from
retail sales operations. KSI's operations, however, maintain a measure of
diversification in the areas of investment banking, municipal finance and
institutional sales.
In addition to tracking certain widely followed companies, KSI's equity and
fixed-income research analysts follow certain local companies not usually
covered by other large brokerage firms. KSI's regional focus is marketed to
those investors who may prefer to invest in companies in their own communities.
This focus also serves KSI in providing investment banking services to selected
financial institutions and local governments. The Company believes KSI enjoys
close, value-added relationships with its customers.
According to the Securities Industry Yearbook 1993-1994, published by the
Securities Industry Association, KSI ranked tenth nationwide by number (164) of
offices, tenth by number (1,475) of retail investment consultants (registered
representatives), twelfth by total number (1,565) of retail and institutional
investment consultants and fifteenth by number (4,260) of employees (including
employees of KSI subsidiaries) at year-end 1992.
At December 31, 1993, KSI had 161 offices and a total of 1,321 investment
consultants. The Company believes the number of investment consultants decreased
in 1993 primarily due to rumors that KSI was for sale. In 1993, the Company
reinforced, through public statements, compensation arrangements and its new
management structure, its commitment to KSI as a core distributor of the
Company's financial and insurance products. A 14 percent increase in commission
revenue per investment consultant in 1993, compared with 1992, offset the
reduced number of consultants. KSI was able to improve profitability in 1993
because of continued participation in strong markets, the increased productivity
of investment consultants, ongoing focus on KSI's core retail business and a
cost reduction program. That program included substantial reductions in staff,
as the segment ended the year with 460, or 11 percent, fewer employees than at
the beginning of 1993.
In 1993 and 1992, KSI incurred net losses due to several factors including
litigation-related expenses. See the discussion captioned "Securities
brokerage," incorporated herein by reference, on pages 26 and 27 of the Annual
Report. Reflecting improved markets and expense savings from the 1990 KSI
restructuring, the securities brokerage operations returned to profitability in
1991 for the first time since the bull market of 1986. KSI exited the risk
arbitrage business in late 1990 and reduced its inventory positions to minimize
exposure to trading losses.
Beginning in the mid to late 1980s, the Company implemented certain programs for
cost control and joint efficiencies, including utilization of a joint clearing
operation, Kemper Clearing Corp. ("KCC"), and data processing support through
Beta Systems Inc.("Beta"). KCC is a subsidiary, and Beta is a sister company, of
KSI. KSI has an objective of shifting as much as possible from fixed to variable
expenses which rise and fall with volumes of business, especially market volume.
Such steps are designed to reduce the volatility of the securities firm's
earnings.
Kemper Clearing Corp.
KCC was incorporated in Delaware in 1984. A NYSE member firm, KCC is based in
Milwaukee and also has a presence in New York. KCC executes and clears trades of
securities and commodities for KSI and INVEST. KCC also provides selected
services to certain unaffiliated firms. KCC accounted for $10 million of the
1993 revenue of the securities brokerage segment. The clearing and
administrative functions of KCC improve efficiencies for the Company and
services for the firms' customers.
11
<PAGE> 13
Beta Systems Inc.
Beta licenses software and provides data processing services to affiliated and
nonaffiliated securities firms on a service bureau basis. This company also
markets an on-line service, BETAQUOTE, which combines real time quote data with
customer account information. Beta accounted for $14 million of the 1993 revenue
of the securities brokerage segment.
COMPETITION
KSI is in a highly competitive business and competes with a large number of
other brokerage firms, many having greater financial resources. Some are
national firms offering products competing with those of KFS as well as
providing securities brokerage, investment banking and other financial services.
Other competitors include brokerage firms that sell primarily to financial
institution customers as well as financial institutions that increasingly offer
proprietary products such as mutual funds through brokerage subsidiaries. The
Company's subsidiaries in the securities brokerage segment compete using
innovative products, appropriate pricing and quality service to customers. The
segment is also focusing on its retail business strength.
EMPLOYEES
At December 31, 1993, KSI employed approximately 3,170 persons, KCC 480 persons
and Beta 150 persons.
REAL ESTATE SEGMENT
Subsidiaries within this segment were part of the Company's other operations and
corporate category in 1992 and 1991 before being reclassified to this segment
when it was established in 1993. In addition, certain of the Company's equity
investments in real estate were accounted for in the insurance company
subsidiaries before the equity was transferred to the Company's real estate
subsidiaries in mid-1992. This segment also includes virtually all of the
Company's 50 percent ownership interest in a master limited partnership (the
"MLP") between subsidiaries of the Company and subsidiaries of Lumbermens as
well as 50 percent of Kemper Real Estate Management Company ("KREMCO"). See the
discussion captioned "Real estate," incorporated herein by reference, on page 28
of the Annual Report.
REAL ESTATE SUBSIDIARIES
The Company's real estate subsidiaries include Kemper Portfolio Corp., which is
wholly owned by Kemper ("KPC"); KPC's wholly owned subsidiary, FKLA Realty
Corporation ("FKLA Realty"); KFC Portfolio Corp., which is wholly owned by KFC
("KFCPC," which, together with KPC, is referred to below as the "portfolio
companies"); and KFCPC's wholly owned subsidiaries, KILICO Realty Corporation
("KILICO Realty"), Kemper/Cymrot, Inc. and Kemper Real Estate, Inc. (which three
subsidiaries, together with FKLA Realty, are referred to below as the "realty
companies"). The realty companies act as general or limited partners in various
joint ventures. The majority of the Company's real estate loans are on
properties or projects where subsidiaries of Kemper or Lumbermens have taken
ownership positions with a small number of partners.
Historically, these properties or projects have been managed by the partners'
organizations, and most are still so managed today. The Company, however, has
intensified its management of real estate over the last two years. Also, in the
third quarter of 1992, the Company formed KREMCO, and KREMCO then assumed
management of the properties in which the Company, Lumbermens or their
respective affiliates shared interests with Peter B. Bedford or his affiliates.
These properties are located primarily in the Pacific region of the United
States. In connection with the agreement to form the MLP, Lumbermens acquired 50
percent of KREMCO from the Company in March 1993.
During 1993 and 1992, the Company contributed $639.4 million in cash to the
capital of its portfolio companies, which then acquired from the Company's
insurance subsidiaries most of the Company's equity interests in real estate and
subordinated real estate loans. Given the subordination of such loans to the
Company's life insurance segment's loans and the recourse to the realty
companies of loans held by the insurance companies, the real estate segment
recorded most of the Company's 1993 and 1992 provisions for real estate-related
losses. Given its equity ownership, the segment also recorded most of the real
estate operating losses. For additional real estate disclosures, see the
discussion captioned "Investments," incorporated herein by reference, on pages
29 through 36 of the Annual Report, and see the notes, also incorporated herein
by reference, captioned "Summary of significant accounting policies--Invested
assets and related income," "Related party transactions," "Invested assets and
related income ," "Unconsolidated investees," "Concentration of credit risk" and
"Financial instruments--off-balance-sheet risk" of the Notes to the Consolidated
Financial Statements in the Annual Report.
12
<PAGE> 14
EMPLOYEES
At December 31, 1993, KREMCO had approximately 200 employees, and the Company's
real estate personnel included approximately 70 employees of KFS.
OTHER OPERATIONS AND CORPORATE CATEGORY
This category primarily consists of holding company overhead. The other
operations and corporate category also included a 30-person, New York-based
investment banking firm, Peers & Co., until its sale to a third party in March
1993.
EMPLOYEES
At December 31, 1993, Kemper had approximately 75 holding company employees.
(D) FINANCIAL INFORMATION RELATING TO FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
The foreign operations of the Company are not material to its overall results.
ITEM 2. PROPERTIES
As set forth below, Kemper Corporation and certain of its subsidiaries have both
capital leases, for which the financial commitments are not material, and
operating leases. For its holding company headquarters, Kemper Corporation
leases from Lumbermens 32,000 sq. ft. in Long Grove, Illinois. See the two
notes, incorporated herein by reference, captioned "Related-party transactions"
and "Commitments and contingent liabilities" of the Notes to Consolidated
Financial Statements in the Annual Report. The Company believes its current and
planned facilities are adequate for its present needs.
ASSET MANAGEMENT SEGMENT
KFS leases 530,000 sq. ft. of office space in Chicago, Illinois. Most of this
space is leased through December 31, 1996, with renewal options. KFS is
exploring the possibility of leasing replacement office space in Chicago
beginning in 1995 or 1996. KSvC leases 230,000 sq. ft. in Kansas City, Missouri.
INVEST leases 38,500 sq. ft. in Tampa, Florida. The companies comprising this
segment also rent office space in various other locations from which they
transact business.
LIFE INSURANCE SEGMENT
FKLA and KILICO lease from Lumbermens 72,000 sq. ft. of office space in Long
Grove, Illinois. KILICO also utilizes certain space leased by KFS in Chicago.
SECURITIES BROKERAGE SEGMENT
For its office space, KSI leases 277,000 sq. ft. in two locations in Chicago,
Illinois; 153,000 sq. ft. in one location in Denver, Colorado; 115,000 sq. ft.
in one location in Houston, Texas; 49,000 sq. ft. in one location in Cleveland,
Ohio; 30,000 sq. ft. in one location in Los Angeles, California; 118,000 sq. ft.
in two locations in Milwaukee, Wisconsin; 38,000 sq. ft. in two locations in New
York City; and 709,000 sq. ft. in 139 other locations nationwide. KSI owns a
90,000 sq. ft. building in Cleveland, Ohio. Beta leases 44,000 sq. ft. in
Milwaukee. KCC leases 24,000 sq. ft. in New York City.
REAL ESTATE SEGMENT
The real estate subsidiaries utilize KFS' facilities in Chicago. KREMCO leases
45,000 sq. ft. from MLP ventures and 30,000 sq. ft. from unrelated parties in
the various locations from which it does business.
(All sq. ft. figures in this ITEM 2 are approximate.)
13
<PAGE> 15
ITEM 3. LEGAL PROCEEDINGS
In the fourth quarter of 1992, the SEC issued a formal order of private
investigation authorizing the SEC staff to investigate the Company's real
estate-related accounting and disclosure practices since January 1, 1989. This
investigation is an outgrowth of the earlier informal inquiry that the Company
previously disclosed. The Company continues to cooperate with the staff as the
investigation proceeds. The staff has not advised the Company whether it intends
to recommend that the SEC authorize an enforcement action against the Company,
and the Company does not know whether any such action will ultimately result.
ASSET MANAGEMENT
In August 1993, a class action styled Tabankin, et al. v. Kemper Short-Term
Global Income Fund, et al. was filed in federal court in the Northern District
of Illinois on behalf of various investors in the Kemper Short-Term Global
Income Fund during the period from October 29, 1990 to December 31, 1992, and in
the Short-Term Global Income Portfolio of Kemper Investment Portfolios
(collectively with the Global Income Fund, the "Funds") during the period from
February 1, 1991 to December 31, 1992. The complaint alleges violations of
various federal securities laws and common law fraud based on alleged material
misstatements or omissions concerning the investment strategies of the Funds
arising out of declines in the share price (net asset value) of the Funds when
the value of the U.S. dollar rose against a number of European currencies in the
aftermath of the rejection of the Maastricht Treaty, the collapse of the
Exchange Rate Mechanism, and the resulting devaluation of European currencies in
the fall of 1992. Plaintiffs' claim for damages is unspecified.
In January 1994, the defendants' motion to dismiss was granted and judgment
entered with a memorandum opinion finding, among other things, that the Funds'
prospectuses adequately disclosed both the risks associated with the Funds'
investment strategies and the risks to net asset value which could arise from
currency devaluations. Plaintiffs moved for leave to file an amended complaint.
In March 1994, the district court granted plaintiffs' motion. The Company
believes it has meritorious defenses and intends to vigorously defend this class
action.
SECURITIES BROKERAGE
In December 1993, a federal district court in Portland, Oregon entered judgment
on a May 1993 jury verdict against Boettcher & Company, a predecessor firm of
KSI, in a class action lawsuit filed in 1988 by persons who purchased securities
of Melridge, Inc. between November 1983 and 1987. If upheld on appeal, the
judgment could result in liability of up to approximately $57 million, depending
on various factors including the amount of written claims actually filed by
class members, exclusive of any interest and attorneys' fees that may be awarded
on certain claims. In its verdict, the jury found Boettcher 30 percent at fault
for violations of federal and state securities laws in connection with certain
public offerings of Melridge common stock and convertible debentures in the
mid-1990, as well as secondary market transactions in both securities. Certain
former Melridge executives were found 30 percent at fault for the violations,
and other defendants who had settled with the plaintiffs were found 40 percent
at fault. KSI has appealed the judgment and intends to vigorously pursue all
available legal remedies.
In the opinion of the Company's management, based on the advice of legal
counsel, the resolution of the preceding and other pending legal proceedings is
not expected to have a material adverse effect on the Company and its
subsidiaries taken as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1993, no matters were submitted to a vote of
security holders.
14
<PAGE> 16
EXECUTIVE OFFICERS OF THE REGISTRANT
AS OF MARCH 30, 1994
KEMPER CORPORATION
<TABLE>
<CAPTION>
OFFICER PRINCIPAL BUSINESS EXPERIENCE
NAME, AGE AND POSITION SINCE DURING PAST FIVE YEARS
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
David B. Mathis (55) 1989 Chairman of the Board and Chief Executive Officer from
Chairman of the Board, February 1992; prior thereto, President until September
Chief Executive Officer 1992 from May 1990 and Chief Operating Officer until
and Director February 1992 from May 1990; 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 September
President, Chief Operating Officer 1992; prior thereto, Chief Investment Officer until May
and Director 1993 from May 1991. Also Senior Executive Vice President
of KFS and Chief Investment Officer of KFS until November
1993 from March 1990; prior thereto, Executive Vice
President and Chief Investment Officer of KFS.
- ------------------------------------
John H. Fitzpatrick (37) 1986 Executive Vice President and Chief Financial Officer from
Executive Vice President, May 1993; prior thereto, Senior Vice President and Chief
Chief Financial Officer Financial Officer from May 1990; prior thereto, Vice
and Director President. Also Executive Vice President and Chief
Financial Officer of KFC from January 1994.
- ------------------------------------
Charles M. Kierscht (54) 1993 Executive Vice President from May 1993. Also Chairman of
Executive Vice President the Board, President and Chief Executive Officer of KFC
and Director and KFS from July 1991; prior thereto, Executive Vice
President of KFC and President and Chief Operating
Officer of KFS. Chairman and Chief Executive Officer of
KILICO until February 1992 from July 1991; prior thereto,
Chairman of KILICO from March 1990.
- ------------------------------------
James R. Boris (49) 1994 Executive Vice President from January 1994. Also Chairman
Executive Vice President of the Board and Chief Executive Officer of both Kemper
Securities Holdings, Inc. and Kemper Securities, Inc.
from January 1990. Also Executive Vice President of KFC
since March 1990. Chairman of the Board and Chief
Executive Officer of INVEST until July 1991.
- ------------------------------------
Robert T. Jackson (48) 1994 Executive Vice President from January 1994; prior
Executive Vice President thereto, Senior Vice President from May 1991. Also
Executive Vice President of KFC from January 1994; prior
thereto, Senior Vice President of KFC from May 1990;
prior thereto, Vice President of KFC. Treasurer and Chief
Financial Officer of KFC until January 1994. Also Senior
Executive Vice President of KFS from March 1990; Chief
Financial Officer of KFS until January 1994. Executive
Vice President and Chief Financial Officer of KILICO
until May 1992.
- ------------------------------------
John B. Scott (49) 1994 Executive Vice President from January 1994. Chairman of
Executive Vice President the Board, President and Chief Executive Officer of FKLA
and FLA. Also Chairman and Chief Executive Officer of
KILICO from February 1992 and President from November
1993. Also Executive Vice President of KFC from January
1994.
- ------------------------------------
Alan J. Baltz (57) 1990 Senior Vice President from May 1990; prior thereto,
Senior Vice President Controller of Lumbermens.
- ------------------------------------
Kathleen A. Gallichio (39) 1990 Senior Vice President, General Counsel and Corporate
Senior Vice President, Secretary from January 1994; prior thereto, General
General Counsel Counsel and Corporate Secretary from May 1991; prior
and Corporate Secretary thereto, Corporate Counsel and Corporate Secretary from
May 1990; prior thereto, Assistant General Counsel of
Lumbermens.
- ------------------------------------
Joseph R. Sitar (48) 1994 Senior Vice President and Chief Accounting Officer from
Senior Vice President January 1994; also Chief Accounting Officer of KFC from
and Chief Accounting Officer January 1994; prior thereto, Vice President and
Comptroller of American Life Insurance Company from
October 1989; prior thereto, Deputy Controller of
American International Group, Inc.
- ------------------------------------
John W. Burns (42) 1986 Treasurer from May 1990; prior thereto, Assistant
Treasurer Treasurer. Also Treasurer of KFC since January 1994;
prior thereto, Chief Accounting Officer of KFC since
January 1993. Treasurer of Lumbermens until May 1990.
- ------------------------------------
</TABLE>
15
<PAGE> 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(A) The common stock ($5 par value) of Kemper Corporation is traded on the New
York Stock Exchange under the symbol KEM. The following table shows the range of
high and low sales prices for each quarterly period during 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
------------------ ------------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
4th Quarter......................................................... $41 5/8 $33 1/8 $30 1/8 $21 1/2
3rd Quarter......................................................... 42 1/4 32 7/8 27 1/4 20 3/4
2nd Quarter......................................................... 42 3/4 32 1/4 30 7/8 23 1/4
1st Quarter......................................................... 43 26 1/8 46 1/8 30 3/4
</TABLE>
(B) At March 1, 1994, there were approximately 12,700 holders of record of
Kemper Corporation common stock. This number includes approximately 6,500
persons who hold shares only through the Kemper Corporation Dividend
Reinvestment and Stock Purchase Plan.
(C) Kemper Corporation has paid quarterly cash dividends on its common stock
since 1968. The annual dividend paid in each of 1993 and 1992 was $.92 per
share, or $.23 per quarter.
RESTRICTIONS ON DIVIDENDS
The Second Restated Certificate of Incorporation, as amended, of Kemper
Corporation restricts its ability to pay cash dividends on its common stock by
requiring the prior payment of all cumulative and current cash dividends on the
outstanding shares of its preferred stock. See the note, incorporated herein by
reference, captioned "Preferred stock" of the Notes to Consolidated Financial
Statements in the Annual Report.
As a Delaware corporation, Kemper Corporation may only declare and pay dividends
from its surplus or from its net profits for the fiscal year in which the
dividends are declared and/or the preceding year.
Dividend distributions to stockholders from an insurance company are restricted
by state insurance laws. In Illinois, where Kemper's life insurance subsidiaries
are domiciled, if such dividend, together with other distributions during the 12
preceding months, would exceed the greater of (a) ten percent of the insurer's
surplus as regards policyholders as of the preceding December 31, or (b) the
statutorily adjusted net income for the preceding calendar year, then such
proposed dividend must be reported to the director of insurance at least 30 days
prior to the proposed payment date and may be paid only if not disapproved. In
Illinois, insurance laws also permit payment of dividends only out of earned
surplus, exclusive of all or most unrealized capital gains.
Dividend distributions from securities brokerage firms are restricted by federal
and state securities laws, the rules or regulations thereunder and/or the rules
and regulations of an exchange of which a firm is a member. The Company's
registered broker-dealer and investment adviser subsidiaries cannot lawfully pay
dividends that would either reduce their respective net capital amounts below
the minimum amounts required or cause certain net capital decreases without
prior regulatory approval.
Additional information relative to dividend restrictions may be found in the
note, incorporated herein by reference, captioned "Stockholders'
equity--retained earnings" of the Notes to Consolidated Financial Statements in
the Annual Report.
(D) While it is the intention of the directors to continue quarterly cash
dividends, future declarations and the amounts of such dividends will be
dependent upon, among other factors, the earnings of Kemper Corporation, its
financial condition, its capital requirements and general business conditions.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made both to the Eleven-Year Consolidated Summary, incorporated
herein by reference only for the five years ended December 31, 1993, and to the
Notes to the Consolidated Financial Statements, incorporated herein by
reference, contained in the Annual Report.
16
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The section captioned MANAGEMENT'S DISCUSSION AND ANALYSIS on pages 21 through
38 of the Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Kemper Corporation hereby incorporates by reference the following statements and
notes from the Annual Report:
<TABLE>
<CAPTION>
ANNUAL REPORT
PAGE(S)
-------------
<S> <C>
Consolidated Financial Statements............................................................ 42-45
Notes to Consolidated Financial Statements................................................... 46-67
Report of Independent Public Accountants..................................................... 68
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Kemper Corporation:
Under date of March 7, 1994, we reported on the consolidated balance sheet of
Kemper Corporation and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1993, as
contained in the Annual Report to Stockholders. These consolidated financial
statements and our report thereon are incorporated by reference in the Annual
Report on Form 10-K for the year 1993.
In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the financial statement schedules as listed in
the accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG PEAT MARWICK
Chicago, Illinois
March 7, 1994
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Kemper Corporation:
We consent to incorporation by reference in the Registration Statements No.
33-50736 on Form S-8 and No. 2-71680 on Form S-3 of Kemper Corporation of our
report dated March 7, 1994, relating to the consolidated balance sheet of Kemper
Corporation and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1993, which report
appears in the December 31, 1993 Annual Report on Form 10-K of Kemper
Corporation.
KPMG PEAT MARWICK
Chicago, Illinois
March 30, 1994
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
17
<PAGE> 19
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(A) IDENTIFICATION OF DIRECTORS.
The section captioned ELECTION OF DIRECTORS of Kemper Corporation's Proxy
Statement scheduled to be mailed on or about April 8, 1994 for the annual
meeting of stockholders to be held May 11, 1994 is incorporated herein by
reference.
(B) IDENTIFICATION OF EXECUTIVE OFFICERS.
The section captioned EXECUTIVE OFFICERS OF THE REGISTRANT included in Part I of
this Annual Report on Form 10-K is incorporated herein by reference.
(C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES--not applicable.
(D) FAMILY RELATIONSHIPS--none.
(E) BUSINESS EXPERIENCE--see ITEMS 10(a) and 10(b).
(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS--none.
(G) PROMOTERS AND CONTROL PERSONS--not applicable.
ITEM 11. EXECUTIVE COMPENSATION
The sections captioned COMPENSATION OF EXECUTIVE OFFICERS and COMPENSATION OF
DIRECTORS of Kemper Corporation's Proxy Statement scheduled to be mailed on or
about April 8, 1994 for the annual meeting of stockholders to be held May 11,
1994 are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The section captioned GENERAL INFORMATION of Kemper Corporation's Proxy
Statement scheduled to be mailed on or about April 8, 1994 for the annual
meeting of stockholders to be held May 11, 1994 is incorporated herein by
reference.
(B) SECURITY OWNERSHIP OF MANAGEMENT.
The section captioned SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS of
Kemper Corporation's Proxy Statement scheduled to be mailed on or about April 8,
1994 for the annual meeting of stockholders to be held May 11, 1994 is
incorporated herein by reference.
(C) CHANGES IN CONTROL.
There are no arrangements, known to the Company, the operation of which may at a
subsequent date result in a change in control of Kemper Corporation. In March
1994, however, GECC made an unsolicited proposal to acquire the Company. See
"Recent Developments" in Part I of this Form 10-K, and see the sections,
incorporated herein by reference, captioned GECC'S UNSOLICITED PROPOSAL and
CERTAIN LEGAL PROCEEDINGS of Kemper Corporation's Proxy Statement scheduled to
be mailed on or about April 8, 1994 for the annual meeting of stockholders to be
held May 11, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) TRANSACTIONS WITH MANAGEMENT AND OTHERS--None.
(B) CERTAIN BUSINESS RELATIONSHIPS--not applicable.
(C) INDEBTEDNESS OF MANAGEMENT--not applicable.
(D) TRANSACTIONS WITH PROMOTERS--not applicable.
18
<PAGE> 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS.
Kemper Corporation has incorporated by reference from the Annual Report (see
ITEMS 6 and 8 above) the following consolidated financial statements of the
Company:
<TABLE>
<CAPTION>
PAGE(S)
OF
ANNUAL
ANNUAL REPORT REPORT
- ---------------------------------------------------------------------------------------------------- -------
<S> <C>
Eleven-year Consolidated Summary (only for 1993, 1992, 1991, 1990 and 1989)......................... 40-41
Consolidated Balance Sheet, December 31, 1993 and December 31, 1992................................. 42
Consolidated Statement of Operations, three years ended December 31, 1993........................... 43
Consolidated Statement of Stockholders' Equity, three years ended December 31, 1993................. 44
Consolidated Statement of Cash Flows, three years ended December 31, 1993........................... 45
Notes to Consolidated Financial Statements.......................................................... 46-67
</TABLE>
(A)(2) SCHEDULES
The following schedules are supplemental to the financial statements of Kemper
Corporation and subsidiaries and are located in this Form 10-K on the pages
indicated. All other schedules are omitted because the information required to
be stated therein is included in the financial statements or notes thereto or
because they are inapplicable.
<TABLE>
<CAPTION>
PAGE(S)
OF
SCHEDULE TITLE FORM 10-K
- -------- ------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
I Summary of investments, other than investments in related parties, at December 31, 1993... 22
III Condensed financial information of Kemper Corporation (registrant only),
at and for the three years ended December 31, 1993........................................ 23-25
IV Indebtedness of and to related parties--not current, for the three years ended December
31, 1993.................................................................................. 26
V Supplementary insurance information, for the three years ended December 31, 1993.......... 27-29
VI Reinsurance, for the three years ended December 31, 1993.................................. 30
VIII Valuation and qualifying accounts, for the three years ended December 31, 1993............ 31
IX Short-term borrowings, for the year ended December 31, 1993*.............................. 32
</TABLE>
- ---------------
* This schedule for the years ended December 31, 1992 and 1991 is incorporated
by reference to Kemper Corporation's Form 10-K Annual Reports (File No.
1-10242) already on file with the SEC.
(A)(3) EXHIBITS
The exhibits listed on the accompanying Index to Exhibits at pages 33 through 37
below are filed as part of this Form 10-K.
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the fourth quarter of 1993. On January
18, 1994, Kemper Corporation filed a current report on Form 8-K which reported,
under item 5 thereof, (A) a December 22, 1993 refinancing of $275.3 million of
mortgage and other real estate-related loans and related accrued interest; (B) a
January 1994 transaction with a former joint venture real estate partner; (C)
the December 30, 1993 sales of certain equity investments, resulting in
after-tax gains of $37.8 million; (D) the December 31, 1993 sale of Federal
Kemper Insurance Company; (E) the settlement of certain litigation matters
during December 1993 and January 1994; (F) the termination on January 12, 1994
of a line of credit; and (G) a reorganization of management structure.
19
<PAGE> 21
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints John H. Fitzpatrick,
Executive Vice President and Chief Financial Officer, and Kathleen A. Gallichio,
Senior Vice President, General Counsel and Corporate Secretary, his true and
lawful attorney-in-fact with authority together or individually to execute in
the name of each such signatory, and with authority to file with the Securities
and Exchange Commission, any and all amendments to this Annual Report on Form
10-K, together with any exhibits thereto and other documents therewith,
necessary or advisable to enable Kemper Corporation to comply with the
Securities Exchange Act of 1934, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof, which
amendments may make such other changes in the Annual Report on Form 10-K as the
aforesaid attorney-in-fact executing the same deems appropriate.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, Kemper Corporation has duly caused this Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Long Grove, State of
Illinois, on the 29th day of March, 1994.
KEMPER CORPORATION
By: /s/ DAVID B. MATHIS
-------------------------
David B. Mathis
Chairman of the Board
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 HAS BEEN SIGNED
BELOW BY THE FOLLOWING PERSONS ON BEHALF OF KEMPER CORPORATION IN THE CAPACITIES
INDICATED ON THE 29TH DAY OF MARCH, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
/s/ DAVID B. MATHIS Chairman of the Board, Chief Executive Officer and
- ------------------------------------------------------ Director
David B. Mathis
/s/ STEPHEN B. TIMBERS President, Chief Operating Officer
- ------------------------------------------------------ and Director
Stephen B. Timbers
/s/ JOHN H. FITZPATRICK Executive Vice President, Chief Financial Officer
- ------------------------------------------------------ and Director
John H. Fitzpatrick
/s/ CHARLES M. KIERSCHT Executive Vice President and Director
- ------------------------------------------------------
Charles M. Kierscht
/s/ JOSEPH R. SITAR Senior Vice President
- ------------------------------------------------------ and Chief Accounting Officer
Joseph R. Sitar
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
SIGNATURE CAPACITIES
- --------- ----------
<S> <C>
/s/ JOHN T. CHAIN JR. Director
- ------------------------------------------------------
John T. Chain Jr.
/s/ J. REED COLEMAN Director
- ------------------------------------------------------
J. Reed Coleman
/s/ RAYMOND F. FARLEY Director
- ------------------------------------------------------
Raymond F. Farley
/s/ PETER B. HAMILTON Director
- ------------------------------------------------------
Peter B. Hamilton
/s/ GEORGE D. KENNEDY Director
- ------------------------------------------------------
George D. Kennedy
/s/ JOSEPH E. LUECKE Director
- ------------------------------------------------------
Joseph E. Luecke
/s/ RICHARD D. NORDMAN Director
- ------------------------------------------------------
Richard D. Nordman
/s/ KENNETH A. RANDALL Director
- ------------------------------------------------------
Kenneth A. Randall
/s/ DANIEL R. TOLL Director
- ------------------------------------------------------
Daniel R. Toll
</TABLE>
21
<PAGE> 23
SCHEDULE I
KEMPER CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS
DECEMBER 31, 1993
(in thousands)
Summary of investments, other than broker-dealer trading accounts, at December
31, 1993 are detailed as follows:
<TABLE>
<CAPTION>
CARRYING AMORTIZED
VALUE(A) COST(B)
---------- ----------
<S> <C> <C>
Fixed maturities:
Government: United States......................................................... $ 14,155 $ 13,924
Foreign........................................................... 14,640 14,306
Obligations of states and political subdivisions, special revenue and
non-guaranteed................................................................. 195,765 189,618
Public utilities.................................................................. 251,215 243,673
Mortgage backed................................................................... 1,989,473 1,938,170
Convertible bonds................................................................. 12,739 10,647
All other corporate............................................................... 2,855,188 2,737,254
---------- ----------
Total fixed maturities.................................................... 5,333,175 5,147,592
---------- ----------
Equity securities:
Common stock:
Banks and insurance companies.................................................. 44,348 7,485
Industrial, miscellaneous and other............................................ 12,409 6,075
---------- ----------
Total common stocks....................................................... 56,757 13,560
Nonredeemable preferred stocks................................................. 42,211 39,806
---------- ----------
Total equity securities................................................... 98,968 53,366
---------- ----------
Total fixed maturities and equity securities........................................ 5,432,143 5,200,958
---------- ----------
Short-term investments.............................................................. 713,401 713,401
Joint venture mortgage loans........................................................ 1,053,403 1,235,960
Third-party mortgage loans.......................................................... 153,880 153,880
Real estate owned................................................................... 78,174 78,174
Other real estate-related investments............................................... 194,014 457,105
Other loans and investments:
Policy loans...................................................................... 364,882 364,882
Other loans and investments....................................................... 81,835 81,835
---------- ----------
Total other loans and investments......................................... 446,717 446,717
---------- ----------
Total investments......................................................... $8,071,732 $8,286,195
---------- ----------
---------- ----------
</TABLE>
- ---------------
(a) Investments in fixed maturities (bonds and redeemable preferred stocks) are
carried at market value. For fixed maturity securities, market value is
determined by using market quotations, or independent pricing services that
use prices provided by market makers or estimates of market values obtained
from yield data relating to instruments or securities with similar
characteristics, or fair value as determined in good faith by the Company's
portfolio manager. Equity securities of nonrelated companies are generally
carried at market value using the closing prices as of the balance sheet
date derived from either a major securities exchange or the National
Association of Securities Dealers Automated Quotations system. Mortgage
loans and other real estate-related investments are carried at original
cost, reduced by repayments, write-downs and valuation reserves.
(b) Fixed maturities at original cost reduced by repayments and adjusted for
amortization of premiums or accrual of discounts and other-than-temporary
declines in value.
See Notes to Consolidated Financial Statements of Kemper Corporation and
Subsidiaries.
22
<PAGE> 24
SCHEDULE III
KEMPER CORPORATION
CONDENSED BALANCE SHEET (REGISTRANT ONLY)
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1992
---------- ----------
<S> <C> <C>
ASSETS
Cash.............................................................................. $ 1,377 $ 905
Investment in common stock of affiliates.......................................... 1,071,936 1,683,554
Notes receivable--affiliates...................................................... 866,914 478,950
Short-term investments............................................................ 162,616 27,348
Property and equipment, net....................................................... 2,269 2,420
Accounts receivable and other assets.............................................. 42,537 6,198
---------- ----------
Total assets............................................................ $2,147,649 $2,199,375
---------- ----------
---------- ----------
LIABILITIES
Accounts payable and accrued expenses............................................. $ 132,412 $ 61,621
6.875% Notes Due 2003............................................................. 200,000 --
8.80% Notes Due 1998.............................................................. 110,750 110,750
Medium-term notes................................................................. 65,500 65,500
Notes payable--other.............................................................. 20,000 195,390
---------- ----------
Total liabilities....................................................... 528,662 433,261
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, no par value(a):
Series A Convertible(b)......................................................... 600 626
Series C Perpetual(c)........................................................... 100,000 100,000
Series D Convertible(d)......................................................... 30,000 --
Series E Convertible(e)......................................................... 230,000 --
Common stock, $5 par value(f)..................................................... 323,104 318,268
Additional paid-in capital........................................................ 313,531 295,863
Unrealized loss on foreign currency translations.................................. (56,878) (16,949)
Unrealized gain on investments, net of tax........................................ 155,004 114,399
Retained earnings................................................................. 1,549,580 1,370,629
---------- ----------
Subtotal................................................................ 2,644,941 2,182,836
Less treasury shares, at cost(g).................................................. 1,025,954 416,722
---------- ----------
Total stockholders' equity.............................................. 1,618,987 1,766,114
---------- ----------
Total liabilities and stockholders' equity.............................. $2,147,649 $2,199,375
---------- ----------
---------- ----------
</TABLE>
(a) Authorized 20,000,000 shares.
(b) Issued December 31, 1993, 23,998 shares; December 31, 1992, 25,044.
(c) Issued December 31, 1993, 2,000,000 shares; December 31, 1992, 2,000,000
shares.
(d) Issued December 31, 1993, 66,638.53 shares.
(e) Issued December 31, 1993, 4,600,000 shares.
(f) Authorized 200,000,000 shares: issued December 31, 1993, 64,620,863 shares;
December 31, 1992, 63,653,600 shares.
(g) December 31, 1993, 31,717,505 shares; December 31, 1992, 14,334,708 shares.
See Notes to Consolidated Financial Statements of Kemper Corporation and
Subsidiaries.
23
<PAGE> 25
SCHEDULE III
CONTINUED
KEMPER CORPORATION
CONDENSED STATEMENT OF OPERATIONS (REGISTRANT ONLY)
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1993 1992 1991
---------- ---------- ---------
<S> <C> <C> <C>
Dividends from continuing subsidiaries:
Federal Kemper Life Assurance Company................................... $ 31,683 $ 41,683 $ 11,683
Kemper Financial Companies, Inc......................................... -- 23,451 27,951
---------- ---------- ---------
Total.............................................................. 31,683 65,134 39,634
Interest and other income, net of operating expenses and income tax....... (1,175) (12,277) (8,055)
---------- ---------- ---------
Subtotal, before cumulative effect of changes in accounting
principles........................................................ 30,508 52,857 31,579
Cumulative effect of changes in accounting principles, net of tax......... (2,530) (1,226) --
---------- ---------- ---------
Subtotal........................................................... 27,978 51,631 31,579
---------- ---------- ---------
Equity in undistributed earnings (loss) of continuing subsidiaries after
deducting dividends received:
Asset management........................................................ 99,087 88,288 85,000
Life insurance.......................................................... 48,095 (67,133) 34,112
Securities brokerage.................................................... (3,640) (38,433) 6,233
Real estate............................................................. (257,753) (209,117) (40,789)
Other operations........................................................ (15,051) (39,912) (40,072)
---------- ---------- ---------
Total.............................................................. (129,262) (266,307) 44,484
---------- ---------- ---------
Net income (loss) from continuing operations.................... (101,284) (214,676) 76,063
Income from discontinued operations, net of tax........................... 39,929 11,276 128,476
Gain on sale of discontinued operations to related party, net of tax...... 204,668 -- --
Gain on other sales of discontinued operations, net of tax................ 92,174 -- --
---------- ---------- ---------
Net income (loss)............................................... $ 235,487 $ (203,400) $ 204,539
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See Notes to Consolidated Financial Statements of Kemper Corporation and
Subsidiaries.
24
<PAGE> 26
SCHEDULE III
CONTINUED
KEMPER CORPORATION
CONDENSED STATEMENT OF CASH FLOWS (REGISTRANT ONLY)
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1992 1991
----------- ----------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................ $ 235,487 $ (203,400) $ 204,539
Reconcilement of net income (loss) to net cash provided:
Equity in undistributed net (income) loss of continuing
subsidiaries................................................ 129,262 266,307 (44,484)
Gains on sales of discontinued operations..................... (296,842)
Change in non-cash items:
Accounts receivable and other assets........................ (20,639) 2,588 513
Account payable and accrued expenses........................ (28,513) 7,318 13,616
Other, net.................................................. (15,642) 34,674 52,035
----------- ----------- ---------
Net cash provided by operating activities................ 3,113 107,487 226,219
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable, net................................ (387,964) (219,100) (147,350)
Purchase of short-term investments............................... (3,720,358) (2,183,816) (830,549)
Sale of short-term investments................................... 3,589,183 2,303,455 693,023
Investment in affiliates......................................... (110,232) (147,326) (93,255)
Sale of discontinued operations.................................. 380,269 -- --
Other, net....................................................... (780) -- --
----------- ----------- ---------
Net cash used in investing activities.................... (249,882) (246,787) (378,131)
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issued................................ 28,995 18,180 25,987
Issuance of long-term debt....................................... -- -- 20,000
Issuance of 8.80% Notes Due 1998................................. -- -- 110,750
Issuance of 6.875 % Notes Due 2003............................... 200,000 -- --
Issuance of preferred stock...................................... 251,920 100,000 --
Treasury shares acquired......................................... (2,786) (914) (184)
Dividends paid to stockholders................................... (56,458) (44,951) (44,253)
Increase (decrease) in notes payable, net........................ (175,390) 66,890 40,750
Other, net....................................................... 960 626 (1,019)
----------- ----------- ---------
Net cash provided by financing activities................ 247,241 139,831 152,031
----------- ----------- ---------
Net increase in cash................................... 472 531 119
CASH, beginning of year............................................ 905 374 255
----------- ----------- ---------
CASH, end of year.................................................. $ 1,377 $ 905 $ 374
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
See Notes to Consolidated Financial Statements of Kemper Corporation and
Subsidiaries.
25
<PAGE> 27
SCHEDULE IV
KEMPER CORPORATION AND SUBSIDIARIES
INDEBTEDNESS OF AND TO RELATED PARTIES--NOT CURRENT
YEAR ENDED DECEMBER 31, 1993
(in millions)
<TABLE>
<CAPTION>
A
- ------------------
B C D E
----------- ----------- ----------- -----------
BALANCE BALANCE
NAME OF RELATED PARTY AT INDEBTEDNESS OF AT
- --------------------- DECEMBER 31 ----------------------- DECEMBER 31
1992 ADDITIONS DEDUCTIONS 1993
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Loans to real estate joint ventures(1)(2)........................ $ 1,506.2 $ 572.1 $736.2 $ 1,342.1
----------- --------- ---------- -----------
----------- --------- ---------- -----------
</TABLE>
- -------------------------
(1) Among other items, additions and deductions include rollovers of maturing
loans as described in the table captioned "Real Estate Portfolio"
incorporated by reference into Item 7 of the 1993 Form 10-K from the
section captioned, "Management's Discussion and Analysis," of the Annual
Report to Stockholders.
(2) Included in loans to real estate joint ventures are joint venture mortgage
loans, real estate-related bonds and other real estate-related loans, net
of reserves and write-downs.
YEAR ENDED DECEMBER 31, 1992
(in millions)
<TABLE>
<CAPTION>
A B C D E
- ------------------ ----------- ----------- ----------- -----------
BALANCE BALANCE
AT INDEBTEDNESS OF AT
DECEMBER 31, ----------------------- DECEMBER 31,
NAME OF RELATED PARTY 1991 ADDITIONS DEDUCTIONS 1992
- --------------------------------------------------------------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C>
Loans to real estate joint ventures(1)(2)...................... $1,902.3 $ 633.6 $1,029.7 $1,506.2
------------ --------- ---------- ------------
------------ --------- ---------- ------------
</TABLE>
- ----------------
(1) Among other items, additions and deletions include rollovers of maturing
loans as described in the table captioned "Real Estate Portfolio"
incorporated by reference into Item 7 of the 1993 Form 10-K from the section
captioned, "Management's Discussion and Analysis," of the Annual Report to
Stockholders.
(2) Included in loans to real estate joint ventures are joint venture mortgage
loans, real estate-related bonds and other real estate-related loans, net of
reserves and write-downs.
26
<PAGE> 28
SCHEDULE V
KEMPER CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
YEAR ENDED DECEMBER 31, 1993
(in thousands)
<TABLE>
<CAPTION>
A B C F G
- ------------------ ----------- ----------- -------- ----------
DEFERRED
POLICY LIFE NET
ACQUISITION POLICY PREMIUM INVESTMENT
SEGMENT COSTS BENEFITS(1) REVENUE INCOME
- ------------------ ----------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Asset management................................................. $ -- $ -- $ -- $ --
Life insurance................................................... 622,592 8,216,762 157,667 500,507
Securities brokerage............................................. -- -- -- --
Real estate...................................................... -- -- -- (74,941)
Other operations & corporate..................................... -- -- -- 10,589
Eliminations..................................................... -- -- -- (9,348)
----------- ----------- -------- ----------
Total....................................................... $ 622,592 $ 8,216,762 $157,667 $ 426,807
----------- ----------- -------- ----------
----------- ----------- -------- ----------
</TABLE>
<TABLE>
<CAPTION>
A H I J
- ------------------ ------------ ----------- ---------
INSURANCE
CLAIM COSTS AMORTIZED
AND POLICY OTHER
POLICYHOLDER ACQUISITION OPERATING
SEGMENT BENEFITS COSTS EXPENSES
- ------------------ ------------ ----------- ---------
<S> <C> <C> <C>
Asset management.............................................................. $ -- $ -- $ --
Life insurance................................................................ 514,304 60,367 23,133
Securities brokerage.......................................................... -- -- --
Real estate................................................................... -- -- --
Other operations & corporate.................................................. -- -- --
Eliminations.................................................................. -- -- --
------------ ----------- ---------
Total.................................................................... $514,304 $60,367 $23,133
------------ ----------- ---------
------------ ----------- ---------
</TABLE>
- -------------------------
(1) Includes $836.0 million of ceded life policy benefits.
27
<PAGE> 29
SCHEDULE V
CONTINUED
KEMPER CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
YEAR ENDED DECEMBER 31, 1992
(in thousands)
<TABLE>
<CAPTION>
A B C F G
- ------------------ ----------- ---------- -------- ----------
DEFERRED
POLICY LIFE NET
ACQUISITION POLICY PREMIUM INVESTMENT
SEGMENT COSTS BENEFITS REVENUE INCOME
- ------------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Asset management................................................. $ -- $ -- $ -- $ --
Life insurance................................................... 578,482 7,337,018 135,922 568,639
Securities brokerage............................................. -- -- -- --
Real estate...................................................... -- -- -- (51,061)
Other operations and corporate................................... -- -- -- 12,310
Eliminations..................................................... -- -- -- (7,595)
----------- ---------- -------- ----------
Total....................................................... $ 578,482 $7,337,018 $135,922 $ 522,293
----------- ---------- -------- ----------
----------- ---------- -------- ----------
</TABLE>
<TABLE>
<CAPTION>
A H I J
- ------------------ ------------- ----------- ---------
INSURANCE
CLAIM COSTS AMORTIZED
AND POLICY OTHER
POLICYHOLDER ACQUISITION OPERATING
SEGMENT BENEFITS COSTS EXPENSES
- ------------------ ------------- ----------- ---------
<S> <C> <C> <C>
Asset management............................................................. $ -- $ -- $ --
Life insurance............................................................... 598,128 66,786 47,138
Securities brokerage......................................................... -- -- --
Real estate.................................................................. -- -- --
Other operations and corporate............................................... -- -- --
Eliminations................................................................. -- -- --
------------- ----------- ---------
Total................................................................... $ 598,128 $66,786 $47,138
------------- ----------- ---------
------------- ----------- ---------
</TABLE>
28
<PAGE> 30
SCHEDULE V
CONTINUED
KEMPER CORPORATION AND SUBSIDIARIES
(CONTINUING OPERATIONS)
SUPPLEMENTARY INSURANCE INFORMATION
YEAR ENDED DECEMBER 31, 1991
(in thousands)
<TABLE>
<CAPTION>
A B C F G
- ------------------ ----------- ---------- -------- ----------
DEFERRED
POLICY LIFE NET
ACQUISITION POLICY PREMIUM INVESTMENT
SEGMENT COSTS BENEFITS REVENUE INCOME
- ------------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Asset management................................................. $ -- $ -- $ -- $ --
Life insurance................................................... 520,948 7,383,292 123,929 675,440
Securities brokerage............................................. -- -- -- --
Real estate...................................................... -- -- -- --
Other operations & corporate..................................... -- -- -- (8,868)
Eliminations..................................................... -- -- -- (12,724)
----------- ---------- -------- ----------
Total....................................................... $ 520,948 $7,383,292 $123,929 $ 653,848
----------- ---------- -------- ----------
----------- ---------- -------- ----------
</TABLE>
<TABLE>
<CAPTION>
A H I J
- ------------------ ---------- ----------- --------
BENEFITS,
CLAIMS,
LOSSES AND AMORTIZED OTHER
SETTLEMENT POLICY OPERATING
SEGMENT EXPENSES ACQUISITION EXPENSES
- ------------------ ---------- ----------- --------
<S> <C> <C> <C>
Asset management............................................................... $ -- $ -- $ --
Life insurance................................................................. 639,396 47,825 47,525
Securities brokerage........................................................... -- -- --
Real estate.................................................................... -- -- --
Other operations & corporate................................................... -- -- --
Eliminations................................................................... -- -- --
---------- ----------- --------
Total..................................................................... $ 639,396 $47,825 $ 47,525
---------- ----------- --------
---------- ----------- --------
</TABLE>
29
<PAGE> 31
SCHEDULE VI
KEMPER CORPORATION AND SUBSIDIARIES
REINSURANCE
THREE YEARS ENDED DECEMBER 31, 1993
(dollars in thousands)
<TABLE>
<CAPTION>
PERCENT
OF
CEDED TO ASSUMED AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
1993 AMOUNT COMPANIES COMPANIES AMOUNT TO NET
---- ----------- ----------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Life insurance in-force.................... $91,304,277 $27,457,957 $ 42,849 $63,889,169 0.1%
----------- ----------- ---------- ----------- -------
----------- ----------- ---------- ----------- -------
Life insurance premium revenue............. $ 212,055 $ 54,503 $ 115 $ 157,667 0.1%
----------- ----------- ---------- ----------- -------
----------- ----------- ---------- ----------- -------
1992
----
Life insurance in-force..................... $84,186,349 $25,038,419 $36,797 $59,184,727 0.1%
----------- ----------- --------- ----------- -------
----------- ----------- --------- ----------- -------
Life insurance premium revenue.............. $ 198,785 $ 62,960 $ 97 $ 135,922 0.1%
----------- ----------- --------- ----------- -------
----------- ----------- --------- ----------- -------
1991
----
Life insurance in-force..................... $73,429,279 $22,442,953 $ -- $50,986,326 0.0%
----------- ----------- --------- ----------- -------
----------- ----------- --------- ----------- -------
Life insurance premium revenue.............. $ 178,556 $ 54,862 $ 235 $ 123,929 0.2%
----------- ----------- --------- ----------- -------
----------- ----------- --------- ----------- -------
</TABLE>
30
<PAGE> 32
SCHEDULE VIII
KEMPER CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
TWO YEARS ENDED DECEMBER 31, 1993
(in thousands)
<TABLE>
<CAPTION>
ADDITIONS
----------------------------
BALANCE AT CHARGED TO BALANCE AT
DECEMBER 31, COSTS AND CHARGED TO DECEMBER 31,
DESCRIPTION 1992 EXPENSES OTHER ACCOUNTS DEDUCTIONS 1993
- -------------------------------------------- ------------ ---------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Asset Valuation Reserves
Joint venture mortgage loans.............. $ 97,039 $ -- $ 85,518 $ -- $182,557
Third-party mortgage loans................ 5,207 -- -- (5,207) --
Other real estate-related investments..... 245,988 -- 17,103 -- 263,091
------------ ---------- ----------- ---------- ------------
Total................................ $348,234 $ -- $102,621(1) $ (5,207)(1) $445,648
------------ ---------- ----------- ---------- ------------
------------ ---------- ----------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
ADDITIONS
----------------------------
BALANCE AT CHARGED TO BALANCE AT
DECEMBER 31, COSTS AND CHARGED TO DECEMBER 31,
DESCRIPTION 1991 EXPENSES OTHER ACCOUNTS DEDUCTIONS 1992
- -------------------------------------------- ------------ ---------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Asset Valuation Reserves
Joint venture mortgage loans.............. $ 43,456 $ -- $ 55,527 $ (1,944) $ 97,039
Third-party mortgage loans................ 14,986 -- 37,477 (47,256) 5,207
Other real estate-related investments..... 65,477 -- 241,404 (60,893) 245,988
------------ ---------- ----------- ---------- ------------
Total................................ $123,919 $ -- $334,408(1) $ (110,093)(2) $348,234
------------ ---------- ----------- ---------- ------------
------------ ---------- ----------- ---------- ------------
</TABLE>
- ---------------
(1) Charged to Realized investment gain (loss) in the Consolidated Statement of
Operations.
(2) Transferred to real estate owned and equity investments in real estate.
31
<PAGE> 33
SCHEDULE IX
KEMPER CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
YEAR ENDED DECEMBER 31, 1993
(dollars in thousands)
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
CATEGORY OF WEIGHTED AMOUNT AMOUNT AVERAGE
AGGREGATE BALANCE AVERAGE OUTSTANDING OUTSTANDING RATE
SHORT-TERM AT END OF INTEREST DURING DURING DURING THE
BORROWINGS(A) PERIOD RATE PERIOD(B) PERIOD(C) PERIOD(D)
- ----------------------------------------------- --------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Banks $ 349,237 3.56% $ 617,067 $ 465,162 3.53%
</TABLE>
- ---------------
(a) Bank loans are short-term borrowings with interest rates that generally vary
with short-term money market rates.
(b) The maximum amount outstanding during 1993 was computed using the balances
outstanding at each month end.
(c) The average amount outstanding during 1993 was computed using the average
daily balances outstanding.
(d) The weighted average interest rate incurred during 1993 was computed using
interest expense incurred to the average principal outstanding during the
year.
32
<PAGE> 34
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
(3) Articles of incorporation and bylaws:
<S> <C> <C>
3.1(a) Second Restated Certificate of Incorporation of Kemper Corporation. . .
3.1(b) Certificate of Amendment of Second Restated Certificate of Incorporation of Kemper
Corporation. . .
3.1(c) Certificate of Correction of Certificate of Amendment of Second Restated Certificate of
Incorporation of Kemper Corporation. . .
3.1(d) Certificate of Designations, Preferences and Rights of Series B Junior Participating
Preferred Stock, Without Par Value, of Kemper Corporation. . .
3.1(e) Certificate of Designations, Preferences and Rights of Series C Cumulative Preferred
Stock of Kemper Corporation. . .
3.1(f) Certificate of Designations, Preferences and Rights of Series D Index Exchangeable
Preferred Stock of Kemper Corporation. . .
3.1(g) Certificate of Designations, Preferences and Rights of Series E Cumulative Convertible
Preferred Stock, Without Par Value, of Kemper Corporation. . .
3.1(h) Certificate of Correction of Second Restated Certificate of Incorporation of Kemper
Corporation. . .
3.2 Bylaws of Kemper Corporation. . .
<CAPTION>
(4) Instruments defining the rights of security holders, including indentures:
<S> <C> <C>
4.1(a) Indenture dated as of January 15, 1987 between Kemper Corporation and the Chase Manhattan
Bank, N.A., defining the rights of holders of certain debt securities of Kemper
Corporation, is incorporated herein by reference to Exhibit No. 4.1 to Kemper
Corporation's Form S-3 Registration Statement No. 33-7780 filed August 5, 1986.
4.1(b) First Supplemental Indenture, dated September 14, 1989, supplemental to the Indenture de-
scribed in Exhibit No. 4.1(a) hereof, is incorporated herein by reference to Exhibit No.
4 to Kemper Corporation's Quarterly Report on Form 10-Q filed November 14, 1989.
4.1(c) Indenture dated as of September 15, 1993 between Kemper Corporation and the First
National Bank of Chicago, defining the rights of holders of certain debt securities of
Kemper Corporation. . .
4.2 Rights Agreement dated as of July 18, 1990 between Kemper Corporation and Harris Trust
and Savings Bank is incorporated herein by reference to Exhibits 1 and 2 to the Form 8-A
filed by Kemper Corporation on July 20, 1990.
4.3(a) Form of certificate representing Kemper Corporation's Medium-Term Notes, Series 1, is
incorporated herein by reference to Exhibit No. 4.3 to Kemper Corporation's Annual Report
on Form 10-K filed March 31, 1987.
4.3(b) Form of certificate representing Kemper Corporation's Medium-Term Notes, Series 2, is
incorporated herein by reference to Exhibit No. 4 to Kemper Corporation's Amendment No. 1
to Form S-3 Registration Statement No. 33-31083 filed September 21, 1989.
4.3(c) Form of certificate representing Kemper Corporation's 8.80% Notes Due 1998 is
incorporated herein by reference to Exhibit No. 4.3(c) to Kemper Corporation's Annual
Report on Form 10-K filed March 30, 1992.
4.3(d) Form of certificates representing Kemper Corporation's 6.875% Notes Due 2003. . .
4.4 Certificate of Incorporation and Bylaws of Kemper Corporation, defining the rights of
holders of Kemper Corporation's Common Stock and Preferred Stock, are filed as described
in Exhibit No. 3 hereof.
<CAPTION>
(9) Voting trust agreement -- none.
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT NO.
- ------------
<S> <C>
(10) Material contracts:
10.1(a) Credit Agreement dated as of November 1, 1993 among Kemper Corporation, certain banks,
certain co-agents and The First National Bank of Chicago as administrative agent. . .
10.1(b) Credit Agreement dated as of November 1, 1993 among Kemper Corporation, certain banks,
certain co-agents and The First National Bank of Chicago as administrative agent. . .
10.2 Indemnification Agreement dated as of April 30, 1992 by and among Kemper Corporation and
Lumbermens Mutual Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company is incorporated herein by reference to Exhibit No.
10.1 to Kemper Corporation's Quarterly Report on Form 10-Q filed May 15, 1992.
10.3(a) The Kemper Financial Companies, Inc. 1986 Stock Option Plan is incorporated herein by
reference to Exhibit No. 10.4(a) to Kemper Financial Companies, Inc.'s Form S-4
Registration Statement No. 33-8259 filed August 26, 1986.
10.3(b) The Kemper Financial Companies, Inc. 1987 Stock Option Plan is incorporated herein by
reference to Exhibit No. 10.4(b) to Kemper Corporation's Annual Report on Form 10-K filed
March 31, 1987.
10.3(c) The Kemper Financial Companies, Inc. 1988 Stock Option Plan is incorporated herein by
reference to Exhibit No. 10.4(c) to Kemper Corporation's Annual Report on Form 10-K filed
March 31, 1987.
10.4(a) Purchase Agreement executed October 24, 1986 by and between Kemper Financial Companies,
Inc. and The First National Bank of Chicago is incorporated herein by reference to
Exhibit No. 10.6 to Kemper Corporation's Annual Report on Form 10-K filed March 31, 1987.
10.4(b) Amendment dated December 23, 1993 to Purchase Agreement executed October 24, 1986. . .
10.5(a) The Kemper Financial Services Profit Sharing Plan is incorporated herein by reference to
Exhibit No. 10.5(a) to Kemper Financial Companies, Inc.'s Form S-4 Registration Statement
No. 33-8259 filed August 26, 1986.
10.5(b) The Kemper Financial Services Supplemental Benefit Plan is incorporated herein by
reference to Exhibit No. 10.5(b) to Kemper Financial Companies, Inc.'s Form S-4
Registration Statement No. 33-8259 filed August 26, 1986.
10.6(a) Indenture dated as of September 1, 1986 between Kemper Financial Companies, Inc. and
Continental Illinois National Bank and Trust Company of Chicago, defining the rights of
holders of Kemper Financial Companies, Inc. Floating Rate Convertible Subordinated
Debentures is incorporated herein by reference to Exhibit No. 4 to Kemper Financial
Companies, Inc.'s Amendment No. 3 to Form S-4 Registration Statement No. 33-8259 filed
November 6, 1986.
10.6(b) Supplemental Indenture dated December 31, 1986 between Kemper Financial Companies, Inc.
and Continental Illinois National Bank and Trust Company of Chicago, supplemental to the
Indenture described in Exhibit No. 10.6(a) hereof, is incorporated herein by reference to
Exhibit No. 10.8 to Kemper Corporation's Annual Report on Form 10-K filed March 31, 1987.
10.6(c) Supplemental Indenture dated April 20, 1987 between Kemper Financial Companies, Inc., and
Continental Illinois National Bank and Trust Company of Chicago, supplemental to the
Indenture described in Exhibit No. 10.6(a) hereof, is incorporated herein by reference to
Exhibit No. 19 to Kemper Corporation's Quarterly Report on Form 10-Q filed May 15, 1987.
10.6(d) Supplemental Indenture dated April 22, 1988 between Kemper Financial Companies, Inc. and
Continental Illinois National Bank and Trust Company of Chicago, supplemental to the
Indenture described in Exhibit No. 10.6(a) hereof, is incorporated herein by reference to
Exhibit No. 4.1(d) to Kemper Financial Companies, Inc.'s Amendment No. 1 to Form S-1
Registration Statement (No. 33-21271) filed April 26, 1988.
10.6(e) Supplemental Indenture dated May 3, 1989 between Kemper Financial Companies, Inc. and
Continental Bank, N.A., supplemental to the Indenture described in Exhibit No. 10.6(a)
hereof, is incorporated herein by reference to Exhibit No. 4.1(e) to Kemper Financial
Companies, Inc.'s Amendment No. 1 to Form S-1 Registration Statement (No. 33-28793) filed
May 30, 1989.
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
10.6(f) Supplemental Indenture dated as of April 26, 1990 between Kemper Financial Companies,
Inc. and Continental Bank, National Association, supplemental to the Indenture described
in Exhibit No. 10.6(a) hereof, is incorporated herein by reference to Exhibit No. 4(f) to
Kemper Financial Companies, Inc's Amendment No. 1 to Form S-2 Registration Statement No.
33-34556 filed May 7, 1990.
10.7(a) Investment Agreements between Kemper Financial Services, Inc., including certain of its
subsidiaries, and Lumbermens Mutual Casualty Company, including certain of its
subsidiaries, are incorporated herein by reference to Exhibit No. 10.16 of Kemper
Corporation's Annual Report on Form 10-K filed March 29, 1990.
10.8(a) Kemper Corporation 1982 Incentive Stock Option Plan is incorporated herein by reference
to Exhibit No. 10 to Kemper Corporation's Annual Report on Form 10-K filed March 31,
1982.
10.8(b) Kemper Corporation 1985 Amended Stock Option Plan is incorporated herein by reference to
Exhibit A to Kemper Corporation's Proxy Statement mailed April 22, 1987 for the annual
meeting of stockholders held May 20, 1987.
10.8(c) Kemper Corporation 1990 Stock Option Plan is incorporated herein by reference to Exhibit
B to Kemper Corporation's Proxy Statement mailed April 1, 1991 for the annual meeting of
stockholders held May 15, 1991.
10.9 Kemper Corporation Non-Management Director Stock Option Plan is incorporated herein by
reference to Exhibit A to Kemper Corporation's Proxy Statement mailed April 1, 1991 for
the annual meeting of stockholders held May 15, 1991.
10.10(a) Kemper Corporation Executive Deferred Compensation Program is incorporated herein by
reference to Exhibit No. 10.10(a) to Kemper Corporation's Annual Report on Form 10-K
filed April 1, 1991.
* 10.10(b) Kemper Corporation Director Deferred Compensation Plan is incorporated herein by
reference to Exhibit No. 10.10(b) to Kemper Corporation's Annual Report on Form 10-K
filed March 31, 1993.
* 10.10(c) Federal Kemper Life Assurance Company Director Deferred Compensation Plan is incorporated
herein by reference to Exhibit No. 10.10(c) to Kemper Corporation's Annual Report on Form
10-K filed March 31, 1993.
* 10.10(d) Kemper Corporation Directors Travel Accident Insurance Plan is incorporated herein by
reference to Exhibit No. 10.10(d) to Kemper Corporation's Annual Report on Form 10-K
filed March 31, 1993.
* 10.10(e) Kemper Corporation Directors' Life Insurance Coverage Plan is incorporated herein by
reference to Exhibit No. 10.10(c) to Kemper Corporation's Annual Report on Form 10-K
filed April 1, 1991.
* 10.11(a) Kemper Corporation Senior Executive Long-Term Incentive Plan is incorporated herein by
reference to Exhibit A to Kemper Corporation's Proxy Statement mailed April 12, 1985 for
the annual meeting of stockholders held May 22, 1985.
* 10.11(b) Kemper Corporation 1989 Senior Executive Long-Term Incentive Plan is incorporated herein
by reference to Exhibit A to Kemper Corporation's Proxy Statement mailed April 27, 1989
for the annual meeting of stockholders held May 17, 1989.
* 10.11(c) Kemper Corporation 1993 Senior Executive Long-Term Incentive Plan is incorporated herein
by reference to Exhibit A to Kemper Corporation's Proxy Statement scheduled to be mailed
on or about April 8, 1994 for the annual meeting of stockholders scheduled to be held May
11, 1994.
* 10.12(a) Kemper Corporation Supplemental Retirement Plan (as adopted effective May 16, 1990) is
incorporated herein by reference to Exhibit No. 10.12(a) to Kemper Corporation's Annual
Report on Form 10-K filed April 1, 1991.
* 10.12(b) Kemper Director Retirement Plan is incorporated herein by reference to Exhibit No.
10.12(b) to Kemper Corporation's Annual Report on Form 10-K filed March 29, 1990.
* 10.12(c) Kemper Corporation Minimum Retirement Benefit Arrangement is incorporated herein by
reference to Exhibit No. 10.12(c) to Kemper Corporation's Annual Report on Form 10-K
filed April 1, 1991.
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C> <C>
* 10.13 Form of Officer/Director Indemnification Agreement is incorporated herein by reference to
Exhibit D to Kemper Corporation's Proxy Statement mailed April 22, 1987 for the annual
meeting of stockholders held May 20, 1987.
10.14(a) Partnership Agreement dated April 1, 1991 between National Loss Control Service
Corporation and Kemper National Services, Inc. is incorporated herein by reference to
Exhibit No. 10.14(a) to Kemper Corporation's Annual Report on Form 10-K filed April 1,
1991.
10.14(b) Sponsors' Agreement dated April 1, 1991 among Lumbermens Mutual Casualty Company, Kemper
Corporation and Kemper Risk Management Services is incorporated herein by reference to
Exhibit No. 10.14(b) to Kemper Corporation's Annual Report on Form 10-K filed April 1,
1991.
10.14(c) First Amendment to the Sponsors' Agreement dated August 2, 1993 by and between Lumbermens
Mutual Casualty Company and Kemper Corporation. . .
10.15(a) Stock Rights Agreement dated as of March 31, 1989 by and between Kemper Corporation and
Lumbermens Mutual Casualty Company is incorporated herein by reference to Exhibit No.
10.15(b) to Kemper Corporation's Annual Report on Form 10-K filed March 31, 1989.
10.15(b) First Amendment to Stock Rights Agreement dated as of March 18, 1993 by and between
Lumbermens Mutual Casualty Company and Kemper Corporation is incorporated herein by
reference to Exhibit No. 10.3 to Kemper Corporation's Current Report on Form 8-K filed
March 24, 1993.
10.16 Purchase Agreement dated June 27, 1991 by and between Kemper Corporation and Lumbermens
Mutual Casualty Company is incorporated herein by reference to Exhibit No. 10 to Kemper
Corporation's Quarterly Report on Form 10-Q filed August 14, 1991.
10.17(a) Participation Agreement dated as of December 31, 1991 by and among Kemper Investors Life
Insurance Company, Federal Kemper Life Assurance Company and Lumbermens Mutual Casualty
Company is incorporated herein by reference to Exhibit No. 10.17(a) to Kemper
Corporation's Annual Report on Form 10-K filed March 30, 1992.
10.17(b) Guaranty Agreement dated December 31, 1991 by and between Kemper Corporation and
Lumbermens Mutual Casualty Company is incorporated herein by reference to Exhibit No.
10.17(b) to Kemper Corporation's Annual Report on Form 10-K filed March 30, 1992.
10.18(a) Stock Exchange Agreement dated March 18, 1993 by and between Kemper Corporation and
Lumbermens Mutual Casualty Company is incorporated herein by reference to Exhibit No.
10.1 to Kemper Corporation's Current Report on Form 8-K filed March 24, 1993.
10.18(b) First Amendment dated August 1, 1993 to Stock Exchange Agreement dated March 18,
1993. . .
10.19(a) Agreement to Form Partnership is incorporated herein by reference to Exhibit No. 10.5 to
Kemper Corporation's Current Report on Form 8-K filed March 24, 1993.
10.19(b) Master Limited Partnership Agreement dated as of July 15, 1993. . .
10.20 Stock Purchase Agreement dated July 1, 1993 by and between Kemper Corporation and St.
Paul Fire and Marine Insurance Company is incorporated herein by reference to Exhibit No.
10 on Form 8-K filed September 15, 1993.
10.21 Stock Purchase Agreement dated as of November 23, 1993 by and among Kemper Corporation,
Associated Insurance Companies, Inc. and Anthem P&C Holdings, Inc. is incorporated herein
by reference to Exhibit No. 10 to Kemper Corporation's Current Report on Form 8-K filed
January 18, 1994.
10.22(a) Reinsurance Agreement dated as of May 1, 1991 by and between Kemper Investors Life
Insurance Company and Fidelity Life Association. . .
10.22(b) Reinsurance Agreement dated as of December 1, 1992 by and between Kemper Investors Life
Insurance Company and Fidelity Life Association. . .
10.22(c) Reinsurance Agreement dated March 31, 1989 by and between Federal Kemper Life Assurance
Company and Fidelity Life Association. . .
* 10.23 Form of Termination Protection Agreement effective March 17, 1994. . .
* 10.24 Performance-Based Compensation Program of Kemper Corporation. . .
</TABLE>
* Asterisked exhibits constitute management contracts or compensatory plans or
arrangements.
36
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
(11) Statement regarding computation of per share earnings -- the computation of consolidated
net income (loss) per share for the three years ended December 31, 1993 is included as a
note to the Consolidated Financial Statements of the Company contained in the Annual
Report (see Exhibit No. 13 below).
(12) Statement regarding computation of ratios -- not applicable.
(13) Annual report to security holders -- selected portions, expressly incorporated by
reference into this Form 10-K, of the Annual Report to Stockholders for the year ended
December 31, 1993. . .
(18) Letter regarding change in accounting principles -- not applicable.
(21) Subsidiaries of the registrant -- a list of all of Kemper Corporation's subsidiaries,
except for those which, considered in the aggregate, would not constitute a significant
subsidiary, is filed as Exhibit No. 21 to this Form 10-K. . .
(22) Published report regarding matters submitted to a vote of security holders -- not
applicable.
(23) Consents of experts and counsel -- the consent of KPMG Peat Marwick is contained in ITEM
8 of this Form 10-K. . .
(24) Power of attorney -- a power of attorney is included at the signature page of this Form
10-K above. . .
(28) Information from reports furnished to state insurance regulatory authorities -- not
applicable.
(99) Additional exhibits -- none.
</TABLE>
37
<PAGE> 1
EXHIBIT 3.1(a)
SECOND RESTATED
Certificate of Incorporation
of
KEMPER CORPORATION
WHEREAS, Kemper Corporation, originally incorporated as Kemperco, Inc.,
filed its original certificate of incorporation with the Secretary of State
of the State of Delaware on October 13, 1967; and
WHEREAS, Kemper Corporation filed its first restated certificate of
incorporation with the Secretary of State of the State of Delaware on March
11, 1985; and
WHEREAS, in order to integrate into a single instrument all provisions of
the restated certificate of incorporation which, as a result of three
amendments duly adopted since March of 1985, are now in effect, the
Executive Committee of the Board of Directors of Kemper Corporation
approved and duly adopted this second restated certificate of incorporation
in accordance with the provisions of Section 245(b) of the General
Corporation Law of the State of Delaware on October 8, 1987; and
WHEREAS, this second restated certificate of incorporation only restates
and integrates and does not further amend the provisions of Kemper
Corporation's restated certificate of incorporation and this second
restated certificate of incorporation contains no discrepancy from the
provisions of the restated certificate of incorporation as heretofore
amended and supplemented.
NOW, THEREFORE, effective upon acknowledgement of filing of this second
restated certificate of incorporation by the Secretary of State of the
State of Delaware, the restated certificate of incorporation as heretofore
amended and supplemented shall be superseded and the second restated
certificate of incorporation of Kemper Corporation shall read as follows:
FIRST. The name of the Corporation is KEMPER CORPORATION.
SECOND. The address of its registered office in the State of
Delaware is 1209 Orange Street, Wilmington, New Castle County. The name of
its registered agent at such address is The Corporation Trust Company.
THIRD. The Corporation may:
1. Engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
2. Acquire for cash or securities of the Corporation or of any
person as defined herein owned in whole or in part by the Corporation all
or any part of the business, goodwill, rights or other assets, or the
capital stock or other securities, of any foreign or domestic person, firm,
syndicate, corporation, association, trust, government, governmental agency
or subdivision, legal entities or other public or private bodies (in this
<PAGE> 2
Certificate of Incorporation collectively and separately called "person")
and in connection therewith assume all or any part of the liabilities of
such person.
3. Purchase, subscribe for, invest in, own, guarantee, sell, assign,
exchange, transfer, mortgage, pledge, hypothecate or otherwise dispose of
or deal in and with any capital stock, any voting trust certificates,
scrip, warrants, rights, bonds, debentures, notes, trust receipts, and
other securities, obligations, choses in action and evidences of
indebtedness issued or created by any person including the Corporation; and
issue securities of the Corporation in exchange therefor; and do any and
all acts and things necessary or advisable for the preservation,
protection, improvement and enhancement in value thereof.
4. Purchase and otherwise acquire, collect, realize upon, sell,
mortgage, pledge, and otherwise dispose of, deal in, deal with, invest in
and trade in claims, book debts, acceptances, bills of lading, contracts,
leases, chattel mortgages, choses in action, contracts for the purchase and
sale of chattels, notes, drafts, bills of exchange, deferred payment paper,
warehouse receipts, commmercial accounts, accounts receivable, bills
receivable, conditional sales agreements, negotiable instruments,
commercial paper and evidence of obligations or indebtedness of any and
every kind and nature, secured or unsecured, and any property, title right
or chose in action, evidenced by any of the aforesaid or pledged,
mortgaged, given and retained as security for the payment of any of the
aforesaid.
5. Raise funds through the issuance of the Corporation's securities
and, in the case of debt securities, secure the payment of the principal
thereof and of the interest thereon by mortgage, pledge, hypothecation,
conveyance or assignment in trust of all or any part of the property of the
Corporation, whether at the time owned or thereafter acquired or in which
the Corporation then has or thereafter acquires an interest.
6. Apply for, obtain, register, purchase, lease, use, own, sell,
assign, deal in, and dispose of any trademarks, trade names, brands,
labels, patent rights, patents or copyrights, or applications with respect
thereto, licenses, inventions, improvements, processes and secret formulae,
whether or not used in connection with, or secured under, letters patent or
otherwise of the United States or any foreign country and whether or not in
any way relating to any of the businesses in which the Corporation may
engage, and use and grant licenses in respect thereof.
7. Promote, aid, financially or otherwise, any person whose
securities are held by the Corporation and do all acts necessary to
protect, preserve, improve or enhance the value of such securities; and
guarantee or become surety in respect to the obligations of any person, and
secure the performance or payments of the same by mortgage, pledge,
hypothecation, conveyance or assignment of all or any part of the assets of
the Corporation.
8. Organize any person and dissolve, compromise, liquidate, merge,
consolidate, exchange or affiliate such person with or into any other
person; sell, loan, or lease to any such person, all or any part of the
assets of the Corporation, and receive and accept in payment or exchange
therefor, securities of the transferee or others.
9. Act as agent or representative, broker or factor for, or as
consultant or financial or technical advisor to, any person, and undertake
and carry on the management of the affairs of such person.
<PAGE> 3
10. Act as managers for one or more insurance, surety and/or casualty
companies and/or underwriters of any kind or nature and direct, manage,
supervise and/or control any such company, any department, branch or
auxiliary thereof and/or the operation, finances or conduct thereof, and/or
act as insurance agent or insurance broker.
11. Carry out all or any part of the powers of the Corporation herein
expressed, either alone or in common with any person, and in any part of
the world, or carry out the same, in whole or in part, through, by means
of, with the aid of, or in the name of any other person or persons; and, in
carrying on its business, or for the purpose of attaining or furthering any
or all of its objects, make, execute, take assignments of and perform
contracts of any kind and description, and for any lawful purpose.
12. Render advisory, investigatory, supervisory, investment,
managerial or other services to any person, corporation, trust, firm,
public authority or organization of any kind.
13. Serve in an advisory, managerial and consultive capacity to any
person and establish and maintain bureaus, departments and laboratories for
industrial, financial, statistical, accounting, inventory and other
research work and to engage generally in the business of providing,
promoting, and establishing systems, methods and controls for industrial
and managerial efficiency and operation.
14. Act in any and all parts of the world in any capacity whatsoever
as agent or representative, general or special, for domestic and foreign
corporations, associations, partnerships, syndicates, trusts, entities,
persons, governments, municipalities and other public or private bodies.
The foregoing clauses shall be construed as both purposes and
powers, and the matters expressed in each clause shall, except as otherwise
expressly provided, be in no wise limited by reference to or inference from
the terms of any other clause, but shall be regarded as independent
purposes and powers, and the enumeration of specific purposes and powers
shall not be construed to limit or restrict in any manner the meaning of
general terms or the general powers of the Corporation, now or hereafter
conferred, nor shall the expression of one thing be deemed to exclude
another, although it be of like nature, not expressed; and notwithstanding
the foregoing enumeration of powers the Corporation shall have all
necessary power to do anything that might directly or indirectly benefit
it.
FOURTH. The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is One Hundred Million
Eight Hundred Thousand (100,800,000) shares which shall be divided into two
classes as follows: Eight Hundred Thousand (800,000) shares of Preferred
Stock without par value (Preferred Stock) and One Hundred Million
(100,000,000) shares of Common Stock of the par value of $5 per share
(Common Stock).
Part I - Preferred Stock
1. Shares of Preferred Stock may be issued in one or more series at
such time or times and for such consideration as the Board of Directors may
determine. All shares of any one series shall be of equal rank and
identical in all respects.
2. The Board of Directors is authorized at any time to provide for
<PAGE> 4
the issuance of shares of Preferred Stock in one or more series with such
voting powers, full or limited, or without voting powers, and such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions as shall be
stated and expressed in the resolution or resolutions providing for the
issue thereof adopted by the Board of Directors, and as are not stated and
expressed in this Certificate of Incorporation, or any amendment thereto,
including (but without limiting the generality of the foregoing) the
following:
(a) The distinctive designation and number of shares comprising
such series, which number may (except where otherwise provided by the
Board of Directors in creating such series) be increased or decreased
(but not below the number of shares then outstanding) from time to
time by action of the Board of Directors.
(b) The stated value of each series.
(c) The dividend rate or rates on the shares of such series and
the relation which such dividends shall bear to the dividends payable
on any other class or classes or of any other series of capital stock,
the terms and conditions upon which and the periods in respect of
which dividends shall be payable, whether and upon what conditions
such dividends shall be cumulative and, if cumulative, the date or
dates from which dividends shall accumulate.
(d) Whether the shares of such series shall be redeemable, the
limitations and restrictions with respect to such redemption, the time
or times when, the price or prices at which, and the manner in which
such shares shall be redeemable, including the manner of selecting
shares of such series for redemption if less than all shares are to be
redeemed.
(e) The rights to which the holders of shares of such series
shall be entitled, and the preferences, if any, over any other series
(or of any other series over such series), upon the liquidation of the
Corporation, which rights may vary depending on whether such
liquidation is voluntary or involuntary, and, if voluntary, may vary
at different rates.
(f) Whether the shares of such series shall be subject to the
operation of a purchase, retirement or sinking fund, and if so whether
and upon what conditions such purchase, retirement or sinking fund
shall be cumulative or noncumulative, the extent to which and the
manner in which such fund shall be applied to the purchase or
redemption of the shares of such series for retirement or to other
corporate purposes and the terms and provisions relative to the
operation thereof.
(g) Whether the shares of such series shall be convertible into
or exchangeable for any other securities of the Corporation, and, if
so convertible or exchangeable, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting
the same, and any other terms and conditions of such conversion or
exchange.
(h) The voting powers, full and/or limited, if any, of the
shares of such series; and whether and under what conditions the
shares of such series (alone or together with the shares of one or
more other series having similar provisions) shall be entitled to vote
<PAGE> 5
separately as a single class, for the election of one or more
additional directors of the Corporation in case of dividend arrearages
or other specified events, or upon other matters.
(i) Whether the issuance of any additional shares of such series,
or of any shares of any other series, shall be subject to restrictions as
to issuance, or as to the powers, preferences or rights of any such
other series.
(j) Any other preferences, privileges and powers, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of such series, as the Board of Directors
may deem advisable and as shall not be inconsistent with the
provisions of this Certificate of Incorporation.
3. No dividends shall be paid or declared or set apart for payment
on any particular series of Preferred Stock in respect of any period unless
accumulated dividends shall be or shall have been paid, or declared and set
apart for payment, pro rata on all shares of Preferred Stock at the time
outstanding of each other series which ranks equally as to dividends with
such particular series, so that the amount of dividends declared on such
particular series shall bear the same ratio to the amount declared on each
such other series as the dividend rate of such particular series shall bear
to the dividend rate of such other series.
4. Except to the extent provided in the resolution or resolutions of
the Board of Directors creating any series of Preferred Stock, the holders
of the Preferred Stock shall have no voting power with respect to any
matter whatsoever.
5. Shares of Preferred Stock acquired by the Corporation shall, upon
compliance with any applicable provisions of the General Corporation Law of
the State of Delaware, have the status of authorized and unissued shares of
Preferred Stock and may be reissued by the Board of Directors as part of
the series of which they were originally a part or may be reclassified into
and reissued as part of a new series or as a part of any other series, all
subject to the protective conditions or restrictions of any outstanding
series of Preferred Stock.
6. Series A Cumulative Convertible Preferred Stock.
(a) Designation. The designation of the series of Preferred
Stock, without par value, created by this resolution shall be "Series
A Cumulative Convertible Preferred Stock" (hereinafter called
"Convertible Preferred Stock").
(b) Stated Value. The stated value of the Convertible Preferred
Stock shall be $25.00 per share.
(c) Dividends. The holders of the Convertible Preferred Stock
shall be entitled to receive, but only when and as declared by the
Board out of the funds of the Corporation legally available therefor,
cumulative cash dividends at the annual rate of $2.00 per share, and
no more, payable semiannually on the first business day of July and
January in each year (such days being hereinafter referred to as
"dividend dates", and the periods commencing on the day after each
dividend date, or the date of original issue, as the case may be, and
ending on the next succeeding dividend date being hereinafter referred
to as "dividend periods") to holders of record on such respective
dates, not exceeding 30 days preceding such dividend dates, as may be
<PAGE> 6
determined by the Board in advance of the payments of each particular
dividend for the dividend periods. Such dividends shall commence to
be payable on the January 1 next succeeding the date of original issue
of such shares of the Convertible Preferred Stock (the "Issue Date"),
and shall accrue and be cumulative on each such share from the Issue
Date. In computing the amount of dividends accrued in respect of a
fraction of a year, such amount shall be computed on the basis of a
365-day year. Accumulations of dividends shall not bear interest.
So long as any shares of Convertible Preferred Stock shall be
outstanding the Corporation shall not (i) declare or pay any dividends
(other than dividends payable solely in shares of the Common Stock
and/or any other series or class of stock ranking junior to the
Convertible Preferred Stock as to dividends and rights upon
liquidation) on shares of the Common Stock or on any other shares of
any other series or class of stock ranking junior to the Convertible
Preferred Stock as to dividends or rights upon liquidation or make,
directly or indirectly, any other distribution of any sort in respect
of shares of the Common Stock or shares of any other series or class
of stock ranking junior to the Convertible Preferred Stock as to
dividends or rights upon liquidation, unless all cumulative cash
dividends for all past dividend periods and the then current dividend
period shall have been paid or declared and set apart for payment on
the then outstanding Convertible Preferred Stock or (ii) purchase or
redeem any shares of the Common Stock or shares of any other series or
class of stock ranking junior to the Convertible Preferred Stock
either as to dividends or rights upon liquidation if at the time of
such purchase or redemption the Corporation shall be in default with
respect to any dividend then due on the Convertible Preferred Stock;
provided that, notwithstanding the foregoing, the Corporation may at
any time redeem, purchase or otherwise acquire shares of the Common
Stock or shares of any series or class of stock ranking junior to the
Convertible Preferred Stock either as to dividends or rights upon
liquidation in exchange for, or out of the net cash proceeds from the
concurrent sale of, other shares of the Common Stock or such other
shares of stock ranking junior to the Convertible Preferred Stock, and
further provided that the terms "dividend" and "distribution" as used
in this paragraph (c) shall not include within their respective
meanings rights or warrants to subscribe for or purchase any security.
For the purposes of this resolution or of any certificate filed with
the Secretary of State of the State of Delaware
(i) Shares of Convertible Preferred Stock to be exchanged for
the common stock of Loewi Financial Companies, Ltd., a Delaware
corporation ("Loewi"), pursuant to the terms of a Plan of
Reorganization and Agreement of Merger (the "Plan") among the
Corporation, Loewi and Loewi Financial Corporation, a Delaware
corporation, shall be deemed to be issued as of the day next
succeeding the Effective Date as defined in said Plan;
(ii) The phrase "set apart for payment" shall not be construed
as the required deposit of any funds in trust or in any special
account, but shall merely mean that out of the funds available for the
payment of dividends, a sum sufficient for the payment of dividends on
the Convertible Preferred Stock be reserved by appropriate notation on
the books of the Corporation.
(d) Voting Rights. The holders of Convertible Preferred Stock shall
not be entitled to vote on any matter except as follows. So long as any of
<PAGE> 7
the Convertible Preferred Stock is outstanding, the Corporation will not
without the affirmative vote or consent of the holders of at least a
majority of the shares of the Convertible Preferred Stock (voting with the
holders of any other series of Preferred Stock who are entitled to vote in
such matter) at the time outstanding, given in person or by proxy, either
in writing or by resolution adopted by a meeting called for the purpose,
the holders of such Convertible Preferred Stock and any other series of
Preferred Stock who are entitled to vote in such manner, consenting or
voting (as the case may be) separately as a class regardless of series,
change any of the provisions of the resolutions providing for the issue of
any series of Preferred Stock (including the Convertible Preferred Stock)
so as to affect adversely the preferences, special rights or powers of the
Preferred Stock (including the Convertible Preferred Stock); provided,
however, that, if any such change shall affect adversely the relative
rights, preferences or limitations of one or more, but not all, of the
series of Preferred Stock then outstanding, the affirmative vote or written
consent of the holders of at least a majority of the aggregate number of
shares at the time outstanding of the several series so affected and who
are entitled to vote in such manner shall be required in lieu of the
affirmative vote or written consent of the holders of at least a majority
of the aggregate number of shares of the Preferred Stock at the time
outstanding and who are entitled to vote in such manner.
(e) Redemption. The Convertible Preferred Stock shall not be
redeemable prior to fifteen (15) years from the date of issue; thereafter
shares of the Convertible Preferred Stock may be redeemed in whole or in
part, at any time or from time to time, at the option of the Corporation by
resolution of the Board at the price of $25.00 per share, plus an amount
equal to all dividends thereon accrued or in arrears to the date fixed by
the Board as the redemption date.
Notice of every such redemption shall be mailed, postage prepaid, not
less than 30 nor more than 60 days prior to the date fixed for such
redemption (herein referred to as "redemption date") to each holder of
record of the shares of Convertible Preferred Stock to be redeemed at his
address as the same shall appear on the books of the Corporation. Each
such notice shall specify the redemption date, redemption price and place
of payment. Failure to mail such notice, or any defect therein or in the
mailing thereof, shall not affect the validity of the proceedings for such
redemption except as to the holder to whom the Corporation has failed to
mail said notice or except as to the holder whose notice was defective.
Any notice which was mailed in the manner herein provided shall be
conclusively presumed to have been duly given whether the holder receives
the notice or not.
In order to facilitate the redemption of any shares of Convertible
Preferred Stock that may be chosen for redemption as provided in this
paragraph (e), the Board shall be authorized to cause the transfer books of
the Corporation to be closed as to such shares not more than 60 days prior
to the designated redemption date. In case of the redemption of a part
only of the Convertible Preferred Stock at the time outstanding, the shares
so to be redeemed shall be selected by lot or in such other manner as the
Board may determine.
If on or after the date on which written notice of redemption has been
given as provided in this paragraph (e), and if on or before the redemption
date specified in such notice the Corporation shall irrevocably deposit or
set aside funds sufficient to pay the aggregate redemption price of the
shares of Convertible Preferred Stock so called for redemption, then from
and after the date of such deposit or setting aside, all shares of
<PAGE> 8
Convertible Preferred Stock so called for redemption shall not be deemed to
be outstanding shares for the purpose of voting or determining the total
number of shares entitled to vote on any matter. Any interest accrued on
funds deposited or set aside shall be paid to the Corporation from time to
time and the holders of shares to be redeemed shall have no claim to any
such interest. Any funds so deposited or set aside and unclaimed at the
end of one year from the redemption date shall be repaid to the
Corporation, after which the holders of the shares of Convertible Preferred
Stock so called for redemption shall look only to the Corporation for
payment of the amounts to which they are entitled hereunder.
If notice of redemption shall have been given as provided in this
paragraph (e), on and after the redemption date (unless the Corporation
shall default in making payment of the redemption price) all shares so
called for redemption shall no longer be deemed outstanding and all rights
with respect to such shares, including, but not limited to, the right to
receive dividends thereon, shall cease and terminate notwithstanding that
any certificate for such shares so called for redemption shall not have
been surrendered for cancellation, and the holders of such shares so called
for redemption shall cease to be stockholders and shall have no interest in
or claims against the Corporation except the right to receive the
redemption price without interest, upon surrender of their certificates for
cancellation.
Shares of Convertible Preferred Stock which have been redeemed or
acquired by the Corporation pursuant to this paragraph (e) or to paragraph
(g) hereof shall, upon compliance with any applicable provisions of the
General Corporation Law of the State of Delaware, have the status of
authorized and unissued shares of Preferred Stock, but shall be reissued
only as part of a new series of Preferred Stock to be created by resolution
or resolutions of the Board or as part of any other series of Preferred
Stock the terms of which do not prohibit such reissue, and shall not be
reissued as part of the Convertible Preferred Stock.
Whenever reference is made in this certificate to Common Stock, the
term "Common Stock" shall mean Common Stock, par value $5.00 per share, of
the Corporation as constituted at the date of this certificate, except as
otherwise provided in subparagraph (5) of paragraph (g).
(f) Liquidation Preference. The holders of Convertible Preferred
Stock shall be entitled to receive, before any payment or distribution of
assets of the Corporation (whether capital or surplus) shall be made to or
set apart for the holders of the Common Stock or any other series or class
of stock ranking junior to the Convertible Preferred Stock as to rights
upon liquidation, upon dissolution, liquidation or winding up of the
affairs of the Corporation, voluntary or involuntary, a per share amount of
$25.00 together with the amount of all dividends accrued and unpaid thereon
to the date of final distribution. If, upon any liquidation, dissolution
or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of the Convertible
Preferred Stock shall be insufficient to pay in full the preferential
amount aforesaid, then such assets, or the proceeds thereof, shall be
distributed among such holders ratably in accordance with the respective
amounts which would be payable on such shares if all amounts payable
thereon were paid in full.
Upon any liquidation, dissolution or winding up of the Corporation,
after payment shall have been made in full to the Convertible Preferred
Stock as provided in this paragraph (f) but not prior thereto, the Common
Stock or any other series or class of stock ranking junior to the
<PAGE> 9
Convertible Preferred Stock as to rights upon liquidation shall, subject to
the respective terms and provisions (if any) applying thereto, be entitled
to receive any and all assets remaining to be paid or distributed and the
Convertible Preferred Stock shall not be entitled to share therein.
(g) Conversion. The shares of Convertible Preferred Stock shall be
convertible in whole or in part, at the option of the holders thereof,
sixty (60) months after the date of issue, or any time thereafter, or from
time to time thereafter, at the principal office of the Corporation located
in Long Grove, Illinois or at the offices of such duly appointed transfer
agents for the Convertible Preferred Stock, if any, as the Board may
determine, into fully paid and non-assessable shares (calculated to the
nearest 1/100 of a share) of Common Stock at the rate of .74906 shares of
Common Stock for each share of Convertible Preferred Stock; provided,
however, that in case of the redemption of any shares of Convertible
Preferred Stock, such right of conversion shall cease and terminate, as to
the shares called for redemption, at the close of business on the day next
prior to the date fixed for redemption, unless default shall be made in the
payment of the redemption price. The rate at which shares of Common Stock
shall be deliverable in exchange for shares of Convertible Preferred Stock
upon conversion thereof is hereinafter referred to as the "conversion rate"
for the Convertible Preferred Stock. The conversion rate shall be subject
to adjustment from time to time in certain instances as hereinafter
provided except that no adjustment shall be made unless by reason of the
happening of any one or more of the events hereinafter specified, the
conversion rate then in effect shall be changed by 1% or more, but any
adjustment of less than 1% that would otherwise be required then to be made
shall be carried forward and shall be made at the time of and together with
any subsequent adjustment which, together with any adjustment or
adjustments so carried forward, amounts to 1% or more, provided that such
adjustment shall be made in all events (regardless of whether or not the
amount thereof or the cumulative amount thereof amounts to 1% or more) upon
the happening of one or more of the events specified in either subparagraph
(1) or subparagraph (5) of this paragraph (g). Upon conversion the
Corporation shall make no payment or adjustment on account of dividends
accrued or in arrears on the Convertible Preferred Stock surrendered for
conversion.
Before any holder of Convertible Preferred Stock shall be entitled to
convert the same into Common Stock, he shall surrender the certificate or
certificates for such Convertible Preferred Stock at the principal office
of the Corporation in Long Grove, Illinois, or at the office of any
transfer agent appointed as aforesaid, which certificate or certificates,
if the Corporation shall so request, shall be duly endorsed to the
Corporation or in blank or accompanied by proper instruments of transfer to
the Corporation or in blank, and shall give written notice to the
Corporation at any of said offices that he elects so to convert said
Convertible Preferred Stock, and shall state in writing therein the name or
names in which he wishes the certificate or certificates for Common Stock
to be issued.
The Corporation will as soon as practicable after such deposit of
certificates for Convertible Preferred Stock accompanied by the written
notice and the statement above prescribed, issue and deliver at the
principal office of the Corporation in Long Grove, Illinois, or at the
office of any transfer agent appointed as aforesaid, to the person for
whose account such Convertible Preferred Stock was so surrendered, or to
his nominee or nominees, certificates for the number of full shares of
Common Stock to which he shall be entitled as aforesaid, together with a
cash adjustment for any fraction of a share as hereinafter stated, if not
<PAGE> 10
evenly convertible. Subject to the following provisions of this paragraph,
such conversion shall be deemed to have been made as of the date of such
surrender of the Convertible Preferred Stock to be converted, and the
person or persons entitled to receive the Common Stock issuable upon
conversion of such Convertible Preferred Stock shall be treated for all
purposes as the record holder or holders of such Common Stock on such date.
The Corporation shall not be required to convert, and no surrender of
Convertible Preferred Stock shall be effective for that purpose, while the
stock transfer books of the Corporation are closed for any purpose; but the
surrender of Convertible Preferred Stock for conversion during any period
while such books are so closed shall become effective for conversion
immediately upon the reopening of such books, as if the conversion had been
made on the date such Convertible Preferred Stock was surrendered, and at
the conversion rate in effect at the date of such surrender.
The conversion rate for the Convertible Preferred Stock shall be
subject to adjustment from time to time as follows:
(1) In case the Corporation shall at any time pay a dividend on its
Common Stock in Common Stock, subdivide its outstanding shares of
Common Stock into a larger number of shares or combine its outstanding
shares of Common Stock into a smaller number of shares, the conversion
rate in effect immediately prior thereto shall be adjusted so that
each share of Convertible Preferred Stock shall thereafter be
convertible into the number of shares of Common Stock which the holder
of a share of Convertible Preferred Stock would have been entitled to
receive after the happening of any of the events described above had
such share been converted immediately prior to the happening of such
event. An adjustment made pursuant to this subparagraph (1) shall
become effective retroactively to the record date in the case of a
dividend and shall become effective on the effective date in the case
of a subdivision or combination.
(2) In case the Corporation shall issue rights or warrants to all
holders of shares of Common Stock for the purpose of entitling them
(for a period not exceeding 45 days from the date of issuance) to
subscribe for or purchase shares of Common Stock at a price per share
less than the average market price per share (determined as provided
below) of the Common Stock on the record date for the determination of
the stockholders entitled to receive such rights or warrants, then in
each such case unless the holders of shares of the Convertible
Preferred Stock shall be permitted to subscribe for or purchase shares
of Common Stock on the same basis as though such shares of Convertible
Preferred Stock had been converted into shares of Common Stock
immediately prior to such record date, the number of shares of Common
Stock into which each share of the Convertible Preferred Stock shall
thereafter be convertible shall be determined by multiplying the
number of shares of Common Stock into which each share of Convertible
Preferred Stock was convertible on the day immediately preceding such
record date by a fraction the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on such record date
and the number of additional shares of Common Stock so offered for
subscription or purchase, and the denominator of which shall be the
sum of the number of shares of Common Stock outstanding on such record
date and the number of shares of Common Stock which the aggregate
offering price of the total number of shares so offered would purchase
at such average market price. Such adjustment shall become effective
retroactively immediately after such record date.
For the purpose of any computation under this paragraph (g), the
<PAGE> 11
average market price per share of Common Stock on any date shall be
the average of the daily closing prices for the 30 consecutive trading
days commencing 45 trading days before the date in question. The
closing price for each day shall be the closing bid price for such day
(as reported by NASDAQ, or any comparable successor reporting service)
or, if the Common Stock is then listed on a national securities
exchange, the last sales price regular way or in case no such sale
takes place on such day, the average of the closing bid and asked
prices regular way, in either case as reported by such exchange.
(3) In case the Corporation shall distribute to the holders of Common
Stock any assets (other than any dividend payable solely in cash), any
rights to subscribe (other than those referred to in subparagraph (2)
above) or any evidence of indebtedness or other securities of the
Corporation (other than Common Stock), then in each such case the
number of shares of Common Stock into which each share of Convertible
Preferred Stock shall thereafter be convertible shall be determined by
multiplying the number of shares of Common Stock into which each share
of Convertible Preferred Stock was theretofore convertible on the day
immediately preceding the record date for the determination of the
stockholders entitled to receive such distribution by a fraction the
numerator of which shall be the average market price per share
(determined as provided in subparagraph (2) above) of the Common Stock
on such record date and the denominator of which shall be such average
market price per share less the then fair market value (as determined
in a resolution adopted by the Board, which shall be conclusive
evidence of such fair market value) of the portion of the assets or
evidence of indebtedness or securities so distributed or of such
subscription rights applicable to one share of Common Stock. Such
adjustment shall become effective retroactively immediately after the
record date.
(4) Whenever the conversion rate is adjusted, as herein provided, the
Corporation shall forthwith file with any transfer agents for the
Convertible Preferred Stock appointed as aforesaid a certificate
signed by the President or one of the Vice-Presidents of the
Corporation and by its Treasurer or an Assistant Treasurer, stating
the adjusted conversion rate determined as provided in this paragraph
(g). Such certificate shall show in detail the facts requiring such
adjustment. Whenever the conversion rate is adjusted the Corporation
shall forthwith cause a notice stating the adjustment and the
conversion rate to be mailed to the respective holders of record of
Convertible Preferred Stock. Such transfer agents shall be under no
duty to make any inquiry or investigation as to the statements
contained in any such certificate or as to the manner in which any
computation was made, but may accept such certificate as conclusive
evidence of the statements therein contained, and each transfer agent
shall be fully protected with respect to any and all acts done or
action taken or suffered by it in reliance thereon. No transfer agent
in its capacity as transfer agent shall be deemed to have any
knowledge with respect to any change of capital structure of the
Corporation unless and until it receives a notice thereof pursuant to
the provisions of this subparagraph (4) and in default of any such
notice each transfer agent may conclusively assume that there has been
no such change.
(5) In the event of any capital reorganization or any reclassification
of the capital stock of the Corporation or in the event of the
consolidation or merger of the Corporation with another corporation or
in the event of any sale or conveyance of all or substantially all of
<PAGE> 12
the property of Corporation, each share of Convertible Preferred Stock
shall thereafter be convertible into the number of shares of stock or
other securities or property receivable upon such capital
reorganization, reclassification of capital stock, consolidation,
merger, sale or conveyance, as the case may be, by a holder of the
number of shares of Common Stock into which such share of Convertible
Preferred Stock was convertible immediately prior to such capital
reorganization, reclassification of capital stock, consolidation,
merger, sale or conveyance; and, in any case, appropriate adjustment
(as determined by the Board) shall be made in the application of the
provisions herein set forth with respect to rights and interests
thereafter of the holders of the Convertible Preferred Stock, to the
end that the provisions set forth herein (including the specified
changes in and other adjustments of the conversion rate) shall
thereafter be applicable, as near as reasonably may be, in relation to
any shares of stock or other securities or other property thereafter
deliverable upon the conversion of the Convertible Preferred Stock.
At that certain date sixty (60) months after the date of issue of the
Convertible Preferred Stock, and at all times thereafter, the
Corporation shall reserve and keep available, out of its authorized
and unissued Common Stock, solely for the purpose of effecting the
conversion of the Convertible Preferred Stock, such number of shares
as shall from time to time be sufficient to effect the conversion of
all shares of Convertible Preferred Stock from time to time
outstanding. The Corporation shall from time to time, in accordance
with the laws of the State of Delaware, increase the authorized amount
of its Common Stock if at any time the number of shares of Common
Stock remaining unissued shall not be sufficient to permit the
conversion of all the then outstanding Convertible Preferred Stock.
No fractions of shares of Common Stock are to be issued upon
conversion, but in lieu thereof the Corporation will pay therefore in
cash based on the closing price (determined as provided in the last
sentence of subparagraph (2) above) of the Common Stock on the
business day next preceding the day of conversion.
The Corporation will pay any and all issue and other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock
on conversion of Convertible Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and
delivery of Common Stock in a name other than that in which the
Convertible Preferred Stock so converted was registered, and no such
issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax, or
has established to the satisfaction of the Corporation, that such tax
has been paid.
Part II - Common Stock
1. Dividends. Subject to the preferential dividend rights, if any,
applicable to shares of the Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for
purchase, retirement or sinking funds for the Preferred Stock, the holders
of the Common Stock shall be entitled to receive, to the extent permitted
by law, such dividends as may be declared from time to time by the Board of
Directors.
2. Liquidation. In the event of the voluntary or involuntary
<PAGE> 13
liquidation of the Corporation, after distribution in full of the
preferential amounts, if any, to be distributed to the holders of shares of
the Preferred Stock, holders of the Common Stock shall be entitled to
receive all the remaining assets of the Corporation of whatever kind
available for distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
3. Voting Rights. Each holder of the Common Stock shall have one
vote in respect of each share of stock held by him of record on the books
of the Corporation on all matters voted upon by the stockholders.
Part III - Other Provisions
No holder of stock of any class of the Corporation shall be
entitled as a matter of right to purchase or subscribe for any part of any
security of the Corporation, now or hereafter authorized.
FIFTH. The name and mailing address of each incorporator is as
follows:
Name Mailing Address
James S. Kemper, Jr. 4750 North Sheridan Road
Chicago, Illinois 60640
James W. Harding 4750 North Sheridan Road
Chicago, Illinois 60640
Clifford A. Kiracofe 4750 North Sheridan Road
Chicago, Illinois 60640
SIXTH. The corporation is to have perpetual existence.
SEVENTH. The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatsoever.
EIGHTH. 1. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors, except as may
be otherwise provided by law or by this Certificate of Incorporation. The
Board of Directors shall consist of not less than three (3) nor more than
twenty-one (21) persons subject to the requirements of paragraph 2 of this
Article EIGHTH. Except as otherwise fixed by or pursuant to the provisions
of Article FOURTH of this Certificate of Incorporation relating to the
rights of the holders of Preferred Stock to elect additional directors
under specified circumstances, the exact number of directors shall be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. In addition to the powers and
authority expressly conferred by this Certificate of Incorporation and the
Corporation's bylaws, the Board of Directors may exercise all such powers
of the Corporation and do all such lawful acts and things as are not
required by statute or by this Certificate of Incorporation or by the
Corporation's bylaws to be exercised or done by the stockholders.
2. The directors of the Corporation shall be divided into
three classes designated, respectively, Class I, Class II and Class III.
The number of directors from time to time in office shall be divided as
nearly as possible equally among the three classes. The initial Class I
directors shall serve until the third annual meeting of stockholders
following their initial election; the initial Class II directors shall
serve until the second such meeting; and the initial Class III directors
<PAGE> 14
shall serve until the first such meeting. Upon the expiration of the terms
of the initial directors and thereafter, their successors shall be chosen
for a three (3) year term to succeed those whose terms have expired.
3. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before
any meeting of the stockholders of the Corporation shall be given in the
manner provided in the bylaws of the Corporation.
4. Except as otherwise provided for or fixed by or pursuant
to the provisions of Article FOURTH of this Certificate of Incorporation
relating to the rights of the holders of Preferred Stock to elect directors
under specified circumstances, newly created directorships resulting from
any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or
other cause shall only be filled by the affirmative vote of a majority of
the remaining directors then in office, even though less than a quorum of
the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of
the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been
elected and qualified. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
5. Subject to the rights of the holders of Preferred Stock
to elect directors under specified circumstances, any director may be
removed from office only for cause and only by the affirmative vote of the
holders of 80% of the combined voting power of the then outstanding shares
of stock entitled to vote generally in the election of directors, voting
together as a single class.
6. The Board of Directors shall have power to adopt, amend
and repeal the bylaws of the Corporation (except so far as the bylaws of
the Corporation adopted by the stockholders shall otherwise provide). Any
bylaws adopted by the directors under the power conferred hereby may be
amended or repealed by the directors or by the stockholders.
Notwithstanding the foregoing and anything contained in this Certificate of
Incorporation to the contrary, paragraphs numbered 5 and 6 of the bylaws
shall not be amended or repealed and no provision inconsistent therewith
shall be adopted without the affirmative vote of the holders of at least
80% of the voting power of all the outstanding shares of the Corporation
entitled to vote generally in the election of directors, voting together as
a single class.
7. Notwithstanding anything contained in this Certificate
of Incorporation to the contrary, the affirmative vote of the holders of at
least 80% of the voting power of all outstanding shares of the Corporation
entitled to vote generally in the election of directors, voting together as
a single class, shall be required to alter, amend, adopt any provision
inconsistent with or repeal this Article EIGHTH.
NINTH. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may on the application
in a summary way of this Corporation or of any creditor or stockholder
thereof or on the application of any receiver or receivers appointed for
this Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions
<PAGE> 15
of Section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
stockholders or class of stockholders, of this Corporation, as the case may
be, and also on this Corporation.
TENTH. Meetings of stockholders and of the Board of Directors may
be held within or without the State of Delaware, as the By-Laws may
provide. The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation. Elections of directors
need not be by written ballot unless the By-Laws of the Corporation shall
so provide.
ELEVENTH. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation or
to change the Corporation's capital structure including changes arising
from the issuance of debt or equity securities of the Corporation ranking
senior to or on a parity with existing securities of the Corporation, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to these reservations.
TWELFTH. 1. No contract or transaction between the Corporation and
one or more of its directors or officers, or between the Corporation and
any other corporation, partnership, association, or other organization in
which one or more of its directors or officers are directors or officers,
or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or
participates in the meeting of the Board or committee thereof which
authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if:
(a) The material facts as to his interest and as to the contract
or transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract
or transaction by a vote sufficient for such purpose without counting the
vote of the interested director or directors; or
(b) The material facts as to his interest and as to the contract
or transaction are disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
<PAGE> 16
THIRTEENTH. No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
General Corporation Law of Delaware, or (iv) for any transaction from which
the director derived an improper personal benefit. No amendment to or
repeal of this Article THIRTEENTH shall apply to or have any affect on the
liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
FOURTEENTH. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or duly
called special meeting of such holders and may not be effected by any
consent in writing by such holders. Except as otherwise required by law
and subject to the rights of the holders of Preferred Stock, special
meetings of stockholders of the Corporation may be called at any time and
only by the Board of Directors pursuant to a resolution approved by a
majority of the entire Board of Directors. Each special meeting shall be
held at such date, time and place either within or without the State of
Delaware as shall be designated by the Board of Directors at least ten days
prior to such meeting. At any special meeting of the stockholders, only
such business shall be conducted as shall have been brought before the
meeting by or at the direction of the Board of Directors. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary,
the affirmative vote of the holders of at least 80% of the voting power of
all outstanding shares of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required
to alter, amend, adopt any provision inconsistent with or repeal this
Article FOURTEENTH.
FIFTEENTH. 1. For the purpose of this Article FIFTEENTH:
(a) "Business Combination" means any plan of
merger, consolidation or any sale, lease, exchange
or other disposition of all, or a substantial
part, of the property and assets of the
Corporation other than in the usual and regular
course of business.
(b) "Continuing Director" means (i) any member of
the Board of Directors of the Corporation on the
date on which the Secretary of State of Delaware
accepts for filing a Certificate of Amendment with
respect to this Article, (ii) any successor of a
Continuing Director described in clause (i) who is
recommended, or elected, to succeed a Continuing
Director by the affirmative vote of a majority of
Continuing Directors then on the Board of
Directors of the Corporation, or (iii) any
director who is recommended, or elected, by the
affirmative vote of a majority of Continuing
Directors then on the Board of Directors of the
Corporation to fill a vacancy or a newly created
directorship.
(c) "Voting Stock" means outstanding shares of
stock of the Corporation entitled to vote
<PAGE> 17
generally in the election of Directors.
2. In addition to any affirmative vote or other
actions required by law or by this Certificate of Incorporation, any
Business Combination shall require the affirmative vote of the holders of
at least eighty percent (80%) of the voting power of the Voting Stock of
the Corporation voting together as a single class, voting at a
stockholders' meeting and not by consent in writing. Such affirmative vote
shall be required notwithstanding the fact that no vote be required, or
that a lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
3. The provisions of paragraph 2 of this Article
FIFTEENTH shall not be applicable to any particular Business Combination,
and such Business Combination shall require only such affirmative vote, if
any, of the stockholders as is required by law and any other provision of
this Certificate of Incorporation, if the Business Combination shall have
been approved by the affirmative vote of a majority of the Continuing
Directors, even if the Continuing Directors do not constitute a quorum of
the entire Board of Directors.
4. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least 80% of the voting power of the Voting Stock, voting
together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with or repeal this Article FIFTEENTH.
IN WITNESS WHEREOF, Kemper Corporation has caused this certificate to
be executed, attested and its seal hereunto affixed at Long Grove, Illinois
this 12th day of October, 1987.
KEMPER CORPORATION
/s/J. E. Luecke
(SEAL) J. E. Luecke, Chairman of the Board,
President and Chief Executive Officer
ATTEST: /s/Lee B. McClain
L. B. McClain, Secretary
<PAGE> 1
EXHIBIT 3.1(b)
CERTIFICATE OF AMENDMENT
OF
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
KEMPER CORPORATION
KEMPER CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the original Certificate of Incorporation of Kemper
Corporation (the "Corporation"), originally incorporated as Kemperco, Inc.,
was filed in the Office of the Secretary of State of the State of Delaware
on October 13, 1967, and was thereafter amended effective December 29,
1967, January 2, 1974, May 29, 1979 and May 6, 1982.
SECOND: That the first Restated Certificate of Incorporation of
the Corporation was filed in the Office of the Secretary of State of the
State of Delaware on March 11, 1985, and was thereafter amended effective
July 1, 1985, May 21, 1986 and May 20, 1987.
THIRD: That the Second Restated Certificate of Incorporation of
the Corporation was filed in the Office of the Secretary of State of the
State of Delaware on August 22, 1988.
FOURTH: That at a meeting of the Board of Directors of the
Corporation held on March 21, 1991, resolutions were duly adopted setting
forth a proposed amendment to the Second Restated Certificate of
Incorporation of the Corporation, declaring said amendment to be advisable
and directing that said amendment be submitted for the consideration and
approval of the stockholders of the Corporation at the Annual Meeting of
Stockholders of the Corporation to be held on May 15, 1991. The proposed
amendment would amend Article FOURTH of the Second Restated Certificate of
Incorporation to read in its entirety as follows:
"FOURTH. The total number of shares of all classes of
capital stock which the Corporation shall have authority to issue
<PAGE> 2
is Two Hundred Twenty Million (220,000,000) shares which shall be
divided into two classes as follows: Twenty Million
(20,000,000) shares of Preferred Stock without par value
(Preferred Stock) and Two Hundred Million (200,000,000) shares of
Common Stock of the par value of $5 per share (Common Stock)."
FIFTH: That thereafter, the foregoing amendment was approved, in
accordance with Section 242(b) of the General Corporation Law of the State
of Delaware, by affirmative vote of the holders of a majority of the
outstanding stock entitled to vote thereon present in person or represented
by proxy at the Annual Meeting of Stockholders of the Corporation, duly
held on May 15, 1991 upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware.
SIXTH: That the foregoing amendment to Article FOURTH of the
Second Restated Certificate of Incorporation shall become effective upon
filing of this Certificate of Amendment in the Office of the Secretary of
State of the State of Delaware.
IN WITNESS WHEREOF, KEMPER CORPORATION has caused this
Certificate of Amendment to be executed by Joseph E. Luecke, Chairman of
the Board and Chief Executive Officer of the Corporation, and attested by
Kathleen A. Gallichio, Corporate Secretary of the Corporation, on and as of
this 28th day of May, 1991.
/s/Joseph E. Luecke
Joseph E. Luecke
Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/Kathleen A. Gallichio
Kathleen A. Gallichio
Corporate Secretary
1796MPM
<PAGE> 1
EXHIBIT 3.1(c)
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
KEMPER CORPORATION
KEMPER CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof,
DOES HEREBY CERTIFY:
FIRST: That the Certificate of Amendment of Second Restated
Certificate of Incorporation of Kemper Corporation ("Certificate of
Amendment") was filed in the Office of the Secretary of State of the State
of Delaware on June 6, 1991.
SECOND: That the "Fourth" certified statement in said Certificate of
Amendment is an inaccurate record of the corporate action adopted by the
Board of Directors of the Corporation on March 21, 1991 and subsequently
approved by the stockholders of the Corporation on May 15, 1991.
THIRD: That the correct form of the "Fourth" certified statement in
said Certificate of Amendment is set forth as follows:
FOURTH: That at a meeting of the Board of Directors of the
Corporation held on March 21, 1991, resolutions were duly adopted
setting forth a proposed amendment to the Second Restated Certificate
of Incorporation of the Corporation, declaring said amendment to be
advisable and directing that said amendment be submitted for the
consideration and approval of the stockholders of the Corporation at
the Annual Meeting of Stockholders of the Corporation to be held on
May 15, 1991. The proposed amendment would amend the first sentence
of the first paragraph of Article FOURTH of the Second Restated
Certificate of Incorporation to read in its entirety as follows:
"FOURTH. The total number of shares of all classes of
capital stock which the Corporation shall have authority to issue
is Two Hundred Twenty Million (220,000,000) shares which shall be
divided into two classes as follows: Twenty Million (20,000,000)
shares of Preferred Stock without par value (Preferred Stock) and
Two Hundred Million (200,000,000) shares of Common Stock of the
par value of $5 per share (Common Stock)."
FOURTH: That except as provided in the General Corporation Law of the
State of Delaware, the foregoing Certificate of Correction shall
become effective as of June 6, 1991, the date said Certificate of
Amendment was originally filed.
IN WITNESS WHEREOF, the Certificate of Correction has been executed on
and as of this 17th day of December, 1992 on behalf of Kemper Corporation
by the Chairman of the Board and Chief Executive Officer of said
Corporation and attested by the General Counsel and Corporate Secretary of
said Corporation, who do hereby affirm, under penalties of perjury, that
<PAGE> 2
the foregoing Certificate is the act and deed of the Corporation and the
facts stated therein are true.
KEMPER CORPORATION
By: /s/David B. Mathis
David B. Mathis
Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/Kathleen A. Gallichio
Kathleen A. Gallichio
General Counsel and
Corporate Secretary
12/11/92
945GJN
<PAGE> 1
EXHIBIT 3.1(d)
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES B JUNIOR PARTICIPATING PREFERRED STOCK,
WITHOUT PAR VALUE
of
KEMPER CORPORATION
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
THE UNDERSIGNED, David B. Mathis, Chairman of the Board and Chief
Executive Officer, and Kathleen A. Gallichio, General Counsel and Corporate
Secretary, of KEMPER CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:
FIRST: That, pursuant to the authority conferred upon the Board
of Directors in accordance with the provisions of Part I of Article FOURTH
of the Second Restated Certificate of Incorporation of Kemper Corporation,
the Board of Directors of said corporation, on July 18, 1990, adopted the
following resolution creating a series of 500,000 shares of Preferred Stock
designated as Series B Junior Participating Preferred Stock, without par
value:
FURTHER RESOLVED, That pursuant to the authority vested in this
Board of Directors in accordance with the provisions of Part I of
Article FOURTH of this Company's Second Restated Certificate of
Incorporation, a series of Preferred Stock of the Corporation is
hereby created and authorized, and the designation, amount and
stated value of such series of Preferred Stock and the voting
powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereon, are as set
forth in Exhibit A to these resolutions which, for all purposes,
shall be deemed to be a part hereof; and
SECOND: That the following is a true and correct copy of the
provisions set forth in Exhibit A to the foregoing resolution:
Section 1. Designation, Amount and Stated Value. The shares of
such series shall be designated as "Series B Junior Participating Preferred
Stock, without par value"; the number of shares constituting such series
shall be 500,000 shares; and such shares shall be without stated value.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to
the shares of Series B Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series B Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available for the purpose, quarterly
<PAGE> 2
dividends payable in cash on the last business day of February, May, August
and November in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series B Junior Participating Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $46 or (b)
subject to the provision for adjustment hereinafter set forth, 200 times
the aggregate per share amount of all cash dividends, and 200 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock, par value
$5.00 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series B Junior Participating Preferred
Stock. In the event the Corporation shall at any time after July 18, 1990
(the "Rights Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount to which holders of shares of
Series B Junior Participating Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution on
the Series B Junior Participating Preferred Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $46 per share on the Series B Junior Participating
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on any
outstanding shares of Series B Junior Participating Preferred Stock from
the date of issue of such shares of Series B Junior Participating Preferred
Stock; provided, that if the date of issue of such shares is a date after
the record date for the determination of holders of shares of Series B
Junior Participating Preferred Stock entitled to receive a quarterly
dividend payable on a Quarterly Dividend Payment Date, dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series B Junior Participating Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares
of Series B Junior Participating Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date
shall be no more than 30 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series B
<PAGE> 3
Junior Participating Preferred Stock shall have the following voting
rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series B Junior Participating Preferred Stock shall
entitle the holder thereof to 200 votes on all matters submitted to a vote
of the stockholders of the Corporation. In the event the Corporation shall
at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the number of votes
per share to which holders of shares of Series B Junior Participating
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event, subject in each such
case to the other provisions of the Second Restated Certificate of
Incorporation.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series B Junior Participating Preferred Stock and the holders
of shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
(C)(i) If at any time dividends on any Series B Junior
Participating Preferred Stock shall be in arrears in an amount equal to six
(6) quarterly dividends thereon, the occurrence of such contingency shall
mark the beginning of a period (herein called a "default period") which
shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of Series B Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for payment.
During each default period, all holders of the Series B Participating
Preferred Stock with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, shall have the right to
elect two (2) Directors.
(ii) During any default period, such voting right of the holders
of Series B Junior Participating Preferred Stock may be exercised initially
at a special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that neither such voting right nor the
right of the holders of any other series of Preferred Stock, if any, to
increase, in certain cases, the authorized number of Directors shall be
exercised unless the holders of ten percent (10%) in number of shares of
Preferred Stock outstanding shall be present in person or by proxy at any
such meeting. The absence of a quorum of the holders of Common Stock shall not
affect the exercise by the holders of Preferred Stock of such voting right. At
any meeting at which the holders of Series B Junior Participating Preferred
Stock shall exercise such voting right initially during an existing default
period, they shall have the right, voting as a class, to elect Directors to
fill such vacancies, if any, in the Board of Directors as may then exist up to
two (2) Directors or, if such right is exercised at an annual meeting, to elect
two (2) Directors. If the number which may be so elected at any special
meeting does not amount to the required number, the holders of the Series B
Junior Participating Preferred Stock shall have the right to make such increase
in the number of Directors as shall be necessary to permit the election by them
of the required number. After the holders of the Series B Junior Participating
Preferred Stock shall have exercised their right to elect
<PAGE> 4
Directors in any default period and during the continuance of such period,
the number of Directors shall not be increased or decreased except by vote
of the holders of Series B Junior Participating Preferred Stock as herein
provided or pursuant to the rights of any equity securities ranking senior
to or pari passu with the Series B Junior Participating Preferred Stock.
(iii) Unless the holders of Series B Junior Participating
Preferred Stock shall, during an existing default period, have previously
exercised their right to elect Directors, the Board of Directors may order,
or any stockholder or stockholders owning in the aggregate not less than
ten percent (10%) of the total number of shares of Series B Junior
Participating Preferred Stock outstanding may request, the calling of a
special meeting of the holders of Series B Junior Participating Preferred
Stock, which meeting shall thereupon be called by the Chairman of the
Board, President or Chief Executive Officer, any Executive Vice President,
Senior Vice President or Vice President or the Corporate Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which
holders of Series B Junior Participating Preferred Stock are entitled to
vote pursuant to this paragraph (C)(iii) shall be given to each holder of
record of Series B Junior Preferred Stock by mailing a copy of such notice
to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20
days and not later than 60 days after such order or request or, in the event
of default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Series B Junior Participating Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such
special meeting shall be called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation, if applicable, shall continue to
be entitled to elect the whole number of Directors until the holders of
Series B Junior Participating Preferred Stock shall have exercised their
right to elect two (2) Directors voting as a class, after the exercise of
which right (x) the Directors so elected by the holders of Series B Junior
Participating Preferred Stock (the "Preferred Directors") shall continue in
office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the
office of a Preferred Director may (except as provided in paragraph (C)(ii)
of this Section 3) be filled by an instrument in writing executed by the
remaining Preferred Director and filed with the Corporation. References in
this paragraph (C) to Directors elected by the holders of a particular
class of stock shall include any Director elected by any Director to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Series B Junior Participating Preferred Stock as a
class to elect Directors shall cease, (y) the term of any Directors elected
by the holders of Series B Junior Participating Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as
may be provided for in the certificate of incorporation or by-laws of the
Corporation irrespective of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the certificate of
incorporation or by-laws of the Corporation). Any vacancies in the Board
of Directors effected by the provisions of clauses (y) and (z) of the
foregoing sentence may be filled by a majority of the remaining Directors.
<PAGE> 5
(D) Except as set forth herein, holders of Series B Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series B Junior Participating Preferred Stock
as provided in Section 2 are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared, on shares
of Series B Junior Participating Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other distribution
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Junior
Participating Preferred Stock, except dividends paid ratably on the Series
B Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to
the Series B Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series B Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series B Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective
series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Junior
Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their
<PAGE> 6
cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth therein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon
any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Junior Participating Preferred
Stock unless, prior thereto, the holders of shares of Series B Junior
Participating Preferred Stock shall have received $200 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series B
Liquidation Preference"). Following the payment of the full amount of the
Series B Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series B Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series B Liquidation Preference by
(ii) 200 (as appropriately adjusted as set forth in subparagraph C below to
reflect such events as stock splits, stock dividends and recapitalizations
with respect to the Common Stock) (such number in clause (ii), the
"Adjustment Number"). Following the payment of the full amount of the Series B
Liquidation Preference and the Common Adjustment in respect of all
outstanding shares of Series B Junior Participating Preferred Stock and
Common Stock, respectively, holders of Series B Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed
in the ratio of the Adjustment Number to 1 with respect to such Preferred
Stock and Common Stock, on a per share basis, respectively. In the event,
however, that there are not sufficient assets available to permit payment
in full of the Common Adjustment, then such assets remaining, after payment
in full of the Series B Liquidation Preference, shall be distributed
ratably to the holders of Common Stock.
(B) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the Adjustment Number in effect immediately prior to
such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property,
then in any such case the shares of Series B Junior Participating Preferred
Stock shall at the same time be similarly exchanged or changed in an amount
per share (subject to the provision for adjustment hereinafter set forth)
equal to 200 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii)
<PAGE> 7
subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series B Junior Participating Preferred Stock shall be
adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 8. No Redemption. The shares of Series B Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series B Junior Participating Preferred
Stock shall rank junior to all other series of the Corporation's Preferred
Stock as to the payment of dividends and the distribution of assets, unless
the terms of any such series shall provide otherwise.
Section 10. Amendment. At such time as any shares of Series B
Junior Participating Preferred Stock are outstanding, the Second Restated
Certificate of Incorporation of the Corporation shall not be further
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series B Junior Participating
Preferred Stock so as to affect them adversely without the affirmative vote
of the holders of a majority or more of the outstanding shares of Series B
Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series B Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle
the holder, in proportion to such holder's fractional shares, to exercise
voting rights, receive dividends, participate in distributions and to have
the benefit of all other rights of holders of Series B Junior Participating
Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designations, Preferences
and Rights of Series B Junior Participating Preferred Stock, without par
value, has been executed as of December 29, 1992 on behalf of Kemper
Corporation by the Chairman of the Board and Chief Executive Officer of
said corporation and attested by the General Counsel and Corporate
Secretary of said corporation, who do hereby affirm, under penalties of
perjury, that the foregoing Certificate is the act and deed of the
corporation and the facts stated therein are true.
KEMPER CORPORATION
ATTEST: By:/s/David B. Mathis
David B. Mathis
Chairman of the Board and
/s/Kathleen A. Gallichio Chief Executive Officer
Kathleen A. Gallichio
General Counsel and
Corporate Secretary
12/18/92
924GJN
<PAGE> 1
EXHIBIT 3.1(e)
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES C CUMULATIVE PREFERRED STOCK
OF
KEMPER CORPORATION
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
THE UNDERSIGNED, David B. Mathis, Chairman of the Board and Chief
Executive Officer, and Kathleen a Gallichio, General Counsel and Corporate
Secretary, of KEMPER CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103, thereof, DO
HEREBY CERTIFY:
FIRST: That, pursuant to the authority conferred upon the Board
of Directors in accordance with the provisions of Part I of the Article
FOURTH of the Second Restated Certificate of Incorporation of Kemper
Corporation, as amended, the Executive Committee of the Board of Directors
of said corporation, on December 8, 1992 (pursuant to authority duly
granted by the Board of Directors of said Corporation on November 18,
1992), adopted the following resolution creating a series of 2,000,000
shares of Preferred Stock designated as Series C Cumulative Preferred
Stock:
RESOLVED, That pursuant to the authority vested in the Board of
Directors under the provisions of Part I of ARTICLE FOURTH of this
Company's Second Restated Certificate of Incorporation, as amended, a
series of Preferred Stock of the Company (consisting of 2,000,000
shares, without par value) is hereby created and authorized, and the
designation, amount and stated value of such Series C Cumulative
Preferred Stock and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such
series, and the qualificiations, limitations or restrictions thereon,
are all as set forth in Exhibit A to these resolutions which, for all
purposes, shall be deemed to be a part hereof; and
SECOND: That the following is a true and correct copy of the
provisions set forth in Exhibit A to the foregoing resolution:
Exhibit A
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES C CUMULATIVE PREFERRED STOCK
OF
KEMPER CORPORATION
Pursuant to Section 151 of the General Corporation law
of the State of Delaware, as amended
Section 1. Designation and Amount. The designation of the
<PAGE> 2
series of Preferred Stock, without par value, created by this
resolution shall be "Series C Cumulative Preferred Stock" (hereinafter
called "Series C Preferred Stock"); the number of shares constituting
such series shall be 2,000,000 shares.
Section 2. Stated Value. The stated value of the Series C
Preferred Stock shall be $50.00 per share.
Section 3. Dividends. The holders of the Series C
Preferred Stock shall be entitled to receive, but only when and as
declared by the Board out of the funds of the Corporation legally
available therefor, cumulative cash dividends at the annual rate of
$4.375 per share through January 1, 1996, $4.625 per share from
January 2, 1996 through January 1, 1998 and $5.000 per share
thereafter, and no more, payable quarterly on the first business day
of January, April, July and October in each year (such days being
hereinafter referred to as "dividend dates", and the periods
commencing on the day after each dividend date, or the date of
original issue, as the case may be, and ending on the next succeeding
dividend date being hereinafter referred to as "dividend periods") to
holders of record on such respective dates, not exceeding 30 days
preceding such dividend dates, as may be determined by the Board in
advance of the payment of each particular dividend for the dividend
periods. Such dividends shall commence to be payable on the April 1
next succeeding the date of original issue of such shares of the
Series C Preferred Stock (the "Issue Date"), and shall accrue and be
cumulative on each such share from the Issue Date. In computing the
amount of dividends accrued in respect of a fraction of a year, such
amount shall be computed on the basis of a 365-day year.
Accumulations of dividends shall not bear interest.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series C Preferred Stock as provided in
Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series C Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends (other than dividends payable
solely in shares of the Common Stock and/or any other class or
series of stock ranking junior to the Series C Preferred Stock as
to dividends and rights upon liquidation, dissolution or winding
up) on or make any other distributions in respect of any shares
of Common Stock or any other class or series of stock ranking
junior (either as to dividends or rights upon liquidation,
dissolution or winding up) to the Series C Preferred Stock.
(ii) redeem or purchase or otherwise acquire for
consideration any shares of Common Stock or any other class or
series of stock ranking junior (either as to dividends or rights
upon liquidation, dissolution or winding up) to the Series C
Preferred Stock;
(iii) declare or pay dividends (other than dividends
payable solely in shares of the Common Stock and/or any other
class or series of stock ranking junior to the Series C Preferred
Stock as to dividends and rights upon liquidation, dissolution or
winding up) on or make any other distribution in respect of any
<PAGE> 3
class or series of stock ranking equally (either as to dividends
or rights upon liquidation, dissolution or winding up) with the
Series C Preferred Stock, except dividends paid ratably on the
Series C Preferred Stock and any class or series of stock ranking
equally therewith as to dividends and on which dividends are
payable or in arrears, in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iv) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking equally (either as to
dividends or rights upon liquidation, dissolution or winding up)
with the Series C Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares of
any class or series of stock which ranks equally (either as to
dividends or rights upon liquidation, dissolution or winding up)
with the Series C Preferred Stock in exchange for shares of any
class or series of stock of the Corporation ranking junior
(either as to dividends or rights upon dissolution, liquidation
or winding up) to the Series C Preferred Stock; or
(v) purchase or otherwise acquire for consideration any
shares of Series C Preferred Stock, or shares of any class or
series of stock ranking equally (either as to dividends or rights
upon dissolution, liquidation or winding up) with the Series C
Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective
series or classes;
provided that, notwithstanding the foregoing, the Corporation may at
any time redeem, purchase or otherwise acquire shares of the Common
Stock or shares of any class or series of stock ranking junior to the
Series C Preferred Stock (either as to dividends or rights upon
liquidation, dissolution or winding up) in exchange for, or out of the
net cash proceeds from concurrent sale of, other shares of the Common
Stock or such other shares of stock of any class or series ranking
junior to the Series C Preferred Stock (as to dividends and rights
upon dissolution, liquidation or winding up).
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
part (a) of this Section 4, purchase or otherwise acquire such shares
at such time and in such manner.
Section 5. Voting Rights. Except as otherwise
required by law or by the Corporation's Certificate of
Incorporation, as amended or restated from time to time (the
"Certificate"), the holders of Series C Preferred Stock shall not
be entitled to vote on any matter except as follows:
(a) The Corporation shall not, without first obtaining the
consent of the holders of at least two-thirds of the shares of Series
C Preferred Stock then outstanding, voting as a separate class, either
expressed in writing or by affirmative vote at a meeting called for
that purpose:
<PAGE> 4
(i) alter or change the rights, preferences or privileges
of the shares of Series C Preferred Stock, or otherwise amend,
alter or repeal any provision of the Certificate so as to
adversely affect the rights, preferences or privileges of the
Series C Preferred Stock;
(ii) increase the authorized number of shares of Series C
Preferred Stock;
(iii) issue additional shares of its Series A Cumulative
Convertible Preferred Stock ("Series A Preferred Stock");
(iv) create any new class or series of stock, or any other
securities convertible into equity securities of the Corporation,
that would rank senior to the Series C Preferred Stock as to
dividends or rights upon dissolution, liquidation or winding up
of the Corporation; or
(v) reclassify any class or series of stock so that such
class or series ranks senior to the Series C Preferred Stock as
to dividends or rights upon dissolution, liquidation or winding
up of the Corporation.
The class voting rights set forth herein are in addition to, and shall
not be limited in any way by, the voting rights set forth in Article
Fourth of the Certificate.
(b) If at any time dividends on any Series C Preferred
Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which shall
extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly
dividend period on all shares of Series C Preferred Stock then
outstanding shall have been declared and paid or set apart for
payment. During each default period, all holders of the Series C
Preferred Stock, voting as a class, shall have the right to elect two
(2) Directors.
During any default period, such voting right of the holders
of Series C Preferred Stock may be exercised initially at a special
meeting called pursuant to this Section 5 or at any annual meeting of
stockholders, provided that neither such voting right nor the right of
the holders of any other series of Preferred Stock, if any, to
increase, in certain cases, the authorized number of Directors shall
be exercised unless the holders of ten percent (10%) in number of
shares of Preferred Stock outstanding shall be present in person or by
proxy at any such meeting. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of Preferred
Stock of such voting right. At any meeting at which the holders of
Series C Preferred Stock shall exercise such voting right initially
during an existing default period, they shall have the right, voting
as a class, to elect Directors to fill such vacancies, if any, in the
Board of Directors as may then exist up to two (2) Directors or, if
such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special
meeting does not amount to the required number, the holders of the
Series C Preferred Stock shall have the right to make such increase in
the number of Directors as shall be necessary to permit the election
<PAGE> 5
by them of the required number. After the holders of the Series C
Preferred Stock shall have exercised their right to elect Directors in
any default period and during the continuance of such period, the
number of Directors shall not be increased or decreased except by vote
of the holders of Series C Preferred Stock as herein provided or
pursuant to the rights of Series B Junior Participating Preferred
Stock ("Series B Preferred Stock") or any equity securities ranking
senior to or equally with the Series C Preferred Stock.
During an existing default period, unless the holders of
Series C Preferred Stock shall have previously exercised their right
to elect Directors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Series C Preferred
Stock outstanding may request, the calling of a special meeting of the
holders of Series C Preferred Stock, which meeting shall thereupon be
called by the Chairman of the Board, President or Chief Executive
Officer, any Executive Vice President, Senior Vice President or Vice
President or the Corporate Secretary of the Corporation. Notice of
such meeting and of any annual meeting at which holders of Series C
Preferred Stock are entitled to vote pursuant to this Section 5 shall
be given to each holder of record of Series C Preferred Stock by
mailing a copy of such notice to him at his last address as the same
appears on the books of the Corporation. Such meeting shall be called
on similar notice by any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of
shares of Series C Preferred Stock outstanding. Notwithstanding the
provisions of this Section 5, no such special meeting shall be called
during the period within 60 days immediately preceding the date fixed
for the next annual meeting of the stockholders.
In any default period, the holders of Common Stock, and
other classes of stock of the Corporation, if applicable, shall
continue to be entitled to elect the whole number of Directors until
the holders of Series C Preferred Stock shall have exercised their
right to elect two (2) Directors voting as a class, after the exercise
of which right (x) the Directors so elected by the holders of Series C
Preferred Stock (the "Series C Directors") shall continue in office
until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the
office of a Series C Director may (except as provided in this Section
5) be filled by an instrument in writing executed by the remaining
Series C Director and filed with the Corporation. References in this
Section 5 to Directors elected by the holders of a particular class of
stock shall include any Director elected by any Director to fill
vacancies as provided in clause (y) of the foregoing sentence.
Immediately upon the expiration of a default period, (x) the
right of the holders of Series C Preferred Stock as a class to elect
Directors shall cease, (y) the term of any Directors elected by the
holders of Series C Preferred Stock as a class shall terminate, and
(z) the number of Directors shall be such number as may be provided
for in the Certificate or By-laws of the Corporation irrespective of
any increase made pursuant to the provisions of this Section 5 (such
number being subject, however, to change thereafter in any manner
provided by law or in the Certificate or By-laws of the Corporation).
Any vacancies in the Board of Directors effected by the provisions of
clauses (y) and (z) of the foregoing sentence may be filled by a
majority of the remaining Directors.
<PAGE> 6
Section 6. Redemption. The Series C Preferred Stock shall
not be redeemable except as permitted by this Section 6. From and
after December 31, 1995, shares of Series C Preferred Stock held by
Lumbermens Mutual Casualty Company (or its nominee) may be redeemed,
and from and after December 31, 1997, shares of Series C Preferred
Stock held by any other holder may be redeemed, in whole or in part,
at any time or from time to time, at the option of the Corporation by
resolution of the Board of Directors at the price of $50.00 per share,
plus an amount equal to all dividends thereon accrued or in arrears to
the date fixed by the Board of Directors as the redemption date.
Notice of every such redemption shall be mailed, postage
prepaid, not less than 30 nor more than 60 days prior to the date
fixed for such redemption (herein referred to as "redemption date") to
each holder of record of the shares of Series C Preferred Stock to be
redeemed at his address as the same shall appear on the books of the
Corporation. Each such notice shall specify the redemption date,
redemption price and place of payment. Failure to mail such notice,
or any defect therein or in the mailing thereof, shall not affect the
validity of the proceedings for such redemption except as to the
holder to whom the Corporation has failed to mail said notice or
except as to the holder whose notice was defective. Any notice which
was mailed in the manner herein provided shall be conclusively
presumed to have been duly given whether the holder receives the
notice or not.
In order to facilitate the redemption of any shares of
Series C Preferred Stock that may be chosen for redemption as provided
in this Section 6, the Board shall be authorized to cause the transfer
books of the Corporation to be closed as to such shares not more than
60 days prior to the designated redemption date. In case of the
redemption of a part only of the Series C Preferred Stock at the time
outstanding, the shares so to be redeemed shall be selected by lot or
in such other manner as the Board may determine.
If on or after the date on which written notice of
redemption has been given as provided in this Section 6, and if on or
before the redemption date specified in such notice the Corporation
shall irrevocably deposit or set aside funds sufficient to pay the
aggregate redemption price of the shares of Series C Preferred Stock
so called for redemption, then from and after the date of such deposit
or setting aside, all shares of Series C Preferred Stock so called for
redemption shall not be deemed to be outstanding shares for the
purpose of voting or determining the total number of shares entitled
to vote on any matter. Any interest accrued on funds deposited or set
aside shall be paid to the Corporation from time to time and the
holders of shares to be redeemed shall have no claim to any such
interest. Any funds so deposited or set aside and unclaimed at the
end of one year from the redemption date shall be repaid to the
Corporation, after which the holders of the shares of Series C
Preferred Stock so called for redemption shall look only to the
Corporation for payment of the amounts to which they are entitled
hereunder.
If notice of redemption shall have been given as provided in
this Section 6, on and after the redemption date (unless the
Corporation shall default in making payment of the redemption price)
all shares so called for redemption shall no longer be deemed
outstanding and all rights with respect to such shares, including, but
not limited to, the right to receive dividends thereon, shall cease
<PAGE> 7
and terminate notwithstanding that any certificate for such shares so
called for redemption shall not have been surrendered for
cancellation, and the holders of such shares so called for redemption
shall cease to be stockholders and shall have no interest in or claims
against the Corporation except the right to receive the redemption
price without interest, upon surrender of their certificates for
cancellation.
Shares of Series C Preferred Stock which have been redeemed
or acquired by the Corporation pursuant to this Section 6 shall, upon
compliance with any applicable provisions of the General Corporation
Law of the State of Delaware, have the status of authorized and
unissued shares of Preferred Stock, but shall be reissued only as part
of a new series of Preferred Stock to be created by resolution or
resolutions of the Board or as part of any other series of Preferred
Stock the terms of which do not prohibit such reissue, and shall not
be reissued as part of the Series C Preferred Stock.
Whenever reference is made in this certificate to Common
Stock, the term "Common Stock" shall mean Common Stock, par value
$5.00 per share, of the Corporation as constituted at the date of this
certificate.
Section 7. Liquidation Preference. Upon liquidation,
dissolution or winding up of the affairs of the Corporation, voluntary
or involuntary, the holders of Series C Preferred Stock shall be
entitled to receive, before any payment or distribution of assets of
the Corporation (whether capital or surplus) shall be made to or set
apart for the holders of the Common Stock or any other class or series
of stock ranking junior to the Series C Preferred Stock as to rights
upon liquidation, dissolution or winding up, a per share amount of
$50.00 together with the amount of all dividends accrued and unpaid
thereon to the date of final distribution. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of
the Series C Preferred Stock and any other class or series of stock
ranking equally with the Series C Preferred Stock as to liquidation,
dissolution or winding up of the Corporation shall be insufficient to
pay in full the preferential amount aforesaid, then such assets, or
the proceeds thereof, shall be distributed among such holders ratably
in accordance with the respective amounts which would be payable on
such shares if all amounts payable thereon were paid in full.
Upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the Series
C Preferred Stock as provided in this Section 7 but not prior thereto,
the Common Stock or any other class or series of stock ranking junior
to the Series C Preferred Stock as to rights upon liquidation,
dissolution or winding up shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and
all assets remaining to be paid or distributed and the Series C
Preferred Stock shall not be entitled to share therein.
Section 8. Ranking. The Series C Preferred Stock shall
rank equally with the Series A Preferred Stock and senior to the
Series B Preferred Stock as to dividends and rights upon liquidation,
dissolution or winding up of the Corporation.
IN WITNESS WHEREOF, this Certificate of Designations, Preferences
and Rights of Series C Cumulative Preferred Stock has been executed as of
<PAGE> 8
December 29, 1992 on behalf of Kemper Corporation by the Chairman of the
Board and Chief Executive Officer of said corporation and attested by the
General Counsel and Corporate Secretary of said corporation, who do hereby
affirm, under penalties of perjury, that the foregoing Certificate is the
act and deed of the corporation and the facts stated therein are true.
KEMPER CORPORATION
By: /s/David B. Mathis
David B. Mathis
Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/Kathleen A. Gallichio
Kathleen A. Gallichio
General Counsel and
Corporate Secretary
924lsl
<PAGE> 1
EXHIBIT 3.1(f)
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES D INDEX EXCHANGEABLE PREFERRED STOCK
OF
KEMPER CORPORATION
Pursuant to Section 151(g) of the
General Corporation Law of the
State of Delaware
May 28, 1993
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES D INDEX EXCHANGEABLE PREFERRED STOCK,
WITHOUT PAR VALUE,
OF
KEMPER CORPORATION
Pursuant to Section 151(g) of the General Corporation
Law of the State of Delaware
THE UNDERSIGNED, John H. Fitzpatrick, Executive Vice President, and
Kathleen A. Gallichio, General Counsel and Corporate Secretary, of KEMPER
CORPORATION, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation" or
the "Company"), in accordance with the provisions of Section 103 thereof,
DO HEREBY CERTIFY:
FIRST: That, pursuant to the authority conferred upon the Board of
Directors in accordance with the provisions of Part I of Article Fourth of
the Second Restated Certificate of Incorporation, as amended, of the
Corporation, the Board of Directors of the Corporation, on May 12, 1993,
adopted the following resolution creating a series of 100,000 shares of
Preferred Stock of the Corporation designated as "Series D Index
Exchangeable Preferred Stock, without par value":
FURTHER RESOLVED: That, pursuant to the authority vested in this
Board of Directors in accordance with the provisions of Part I of
Article FOURTH of this Company's Second Restated Certificate of
<PAGE> 2
Incorporation, as amended, a series of Series D Index Exchangeable
Preferred Stock of the Company is hereby created and authorized, and
the designation, amount and stated value of such series of Preferred
Stock and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and
the qualifications, limitations or restrictions thereon, are as set
forth in Exhibit A to these resolutions which, for all purposes, shall
be deemed to be a part hereof; and
SECOND: That, the following is a true and correct copy of the
provisions set forth in Exhibit A to the foregoing resolution:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as "Series D Index
Exchangeable Preferred Stock, without par value" and the number of shares
constituting such series shall be 100,000 shares. The stated value of the
Series D Index Exchangeable Preferred Stock shall be $450.19 per share, the
original per share issue price (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock of the Corporation ranking prior
and superior to the shares of the Series D Index Exchangeable Preferred
Stock with respect to dividends, the holders of shares of the Series D
Index Exchangeable Preferred Stock shall be entitled to receive, but only
when, as and if declared by the Board of Directors of the Corporation out
of funds legally available for such purpose, cumulative monthly dividends
payable in cash on the last business day of each month in each year (each
such date being referred to herein as a "Monthly Dividend Date"),
commencing on June 30, 1993, in an amount per share (rounded to the nearest
cent) equal to the Monthly Dividend Amount (as hereinafter defined).
(B) The "Monthly Dividend Amount" shall mean, with respect to any
Monthly Dividend Date, the sum of (i) the aggregate amount of dividends
paid on one unit of the Market Index (as hereinafter defined) in the full
calendar month immediately preceding the month of such Monthly Dividend
Date, as such aggregate amount of dividends is reported in the S&P 500
Information Bulletin or any successor publication, plus (ii) an amount
equal to $0.94; provided, however, that (a) if the Corporation's senior
unsecured debt is rated less than BBB- by Standard & Poor's Corporation or
less than Baa3 by Moody's Investors Service on any dividend declaration
date, the amount referred to in the foregoing clause (ii) shall be
increased to $1.50, (b) if the Corporation's senior unsecured debt is rated
BBB- by Standard & Poor's Corporation and Baa3 by Moody's Investors Service
on any dividend declaration date, the amount referred to in the foregoing
clause (ii) shall be increased to $1.13 and (c) the aggregate annual
dividends in respect of a share of Series D Index Exchangeable Preferred
Stock shall not in any event be less than $19.13. The "Market Index" shall
be the S&P 500 Index or, in the event that the S&P 500 Index shall cease to
be published, then the Market Index shall be the most reasonably comparable
successor market index as shall be determined by an investment banking firm
of recognized national standing, which investment banking firm shall be
mutually satisfactory to the Corporation and the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the shares of the Series D
Index Exchangeable Preferred Stock then outstanding (the "Successor
Index"). From and after the date on which the S&P 500 Index ceases to be
published (the "Substitution Date"), all calculations under Section 7 or
<PAGE> 3
Section 8 hereof of the Market Index shall be adjusted by multiplying the
Market Index by the Adjustment Factor (as hereinafter defined). The
"Adjustment Factor" shall mean the quotient (expressed as a percentage) of
(i) the closing price, as reported in The Wall Street Journal or any
successor publication, of the S&P 500 Index for the business day
immediately preceding the Substitution Date, divided by (ii) the closing
price, as reported in The Wall Street Journal or any successor publication,
of the Successor Index for the business day immediately preceding the
Substitution Date.
(C) Dividends shall begin to accrue on a daily basis and be
cumulative on any outstanding shares of Series D Index Exchangeable
Preferred Stock from the date of issue of such shares of Series D Index
Exchangeable Preferred Stock. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series D Index Exchangeable
Preferred Stock in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be allocated pro rata
on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors of the Corporation may fix a record date for the
determination of holders of shares of Series D Index Exchangeable Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 60 days prior to the date
fixed for the payment thereof.
(D) In connection with the determination of the amount of dividends
accruing with respect to any Exchange Date (as defined in Section 7(B)
hereof) or Redemption Date (as defined in Section 8 hereof) which, in
either case, is not a Monthly Dividend Date, the amount of any such
dividends shall be determined by multiplying (x) the Monthly Dividend
Amount determined for the immediately preceding Monthly Dividend Date by
(y) the quotient (expressed as a percentage) of (1) the number of days
which have elapsed since the immediately preceding Monthly Dividend Date
(excluding such Monthly Dividend Date itself) up to and including the
Exchange Date or Redemption Date, as the case may be, divided by (2) the
number of days in the month in which such Exchange Date or Redemption Date,
as the case may be, occurs.
SECTION 3. VOTING RIGHTS.
Except as otherwise required by law or by the Corporation's Second
Restated Certificate of Incorporation, as amended or restated from time to
time (the "Certificate of Incorporation"), the holders of Series D Index
Exchangeable Preferred Stock shall not be entitled to vote on any matter
except as follows:
(A) So long as any shares of the Series D Index Exchangeable
Preferred Stock are outstanding, the Corporation shall not, without
first obtaining the consent of the holders of at least 66-2/3% of the
shares of the Series D Index Exchangeable Preferred Stock then
outstanding, voting as a separate class, either expressed in writing
or by affirmative vote at a meeting called for that purpose:
(i) alter or change the rights, preferences or privileges
of the shares of the Series D Index Exchangeable Preferred Stock,
or otherwise amend, alter or repeal any provision of the
Certificate of Incorporation so as to adversely affect the
rights, preferences or privileges of the Series D Index
Exchangeable Preferred Stock;
(ii) increase the authorized number of shares of the
<PAGE> 4
Series D Index Exchangeable Preferred Stock;
(iii) create any new class or series of stock, or any other
securities convertible into equity securities of the Corporation,
that would rank senior to the Series D Index Exchangeable
Preferred Stock as to dividends or rights upon dissolution,
liquidation or winding up of the Corporation; or
(iv) reclassify any class or series of stock so that such
class or series ranks senior to the Series D Index Exchangeable
Preferred Stock as to dividends or rights upon dissolution,
liquidation or winding up of the Corporation.
The class voting rights set forth herein are in addition to, and shall not
be limited in any way by, the voting rights set forth in Article Fourth of
the Certificate of Incorporation.
(B) If at any time either (i) dividends on any shares of the Series D
Index Exchangeable Preferred Stock shall not have been declared and paid in
an amount equal to eighteen (18) full monthly dividends thereon or (ii) the
Corporation shall fail to issue Freely-Tradeable (as defined in
Section 7(A)(i) hereof) shares of Common Stock (as defined in
Section 7(A)(i) hereof) required to be issued in connection with any
exchange of the shares of the Series D Index Exchangeable Preferred Stock
required pursuant to Section 7 hereof, and has not exercised its rights
with respect to redemption of such shares of Series D Index Exchangeable
Preferred Stock under Section 8 hereof, the occurrence of either of such
events shall mark the beginning of a period (herein called a "Default
Period") which shall extend until such time when all accrued and unpaid
dividends for all monthly dividend periods theretofore ended on all shares
of the Series D Index Exchangeable Preferred Stock then outstanding shall
have been declared and paid or set apart for payment or until such time as
the Corporation shall issue such Freely-Tradeable shares of Common Stock
pursuant to Section 7 hereof or such previously issued shares of Common
Stock shall become Freely-Tradeable or the Company shall exercise its
rights under Section 8 hereof with respect to the shares of Series D Index
Exchangeable Preferred Stock required to be exchanged pursuant to said
Section 7 and shall have paid the Redemption Price (as defined in Section 8
hereof), as the case may be. During each Default Period, all holders of
shares of the Series D Index Exchangeable Preferred Stock, voting as a
class, shall have the right to elect two (2) Directors to the Board of
Directors of the Corporation.
During an existing Default Period, such voting right of the holders of
shares of the Series D Index Exchangeable Preferred Stock may be exercised
initially at a special meeting called pursuant to this Section 3 or at any
annual meeting of stockholders; provided, however, that neither such voting
right nor the right of the holders of any other series of Preferred Stock
of the Corporation, if any, to increase, in certain cases, the authorized
number of Directors shall be exercised unless the holders of not less than
ten percent (10%) in number of shares of the Preferred Stock of the
Corporation then outstanding shall be present in person or by proxy at any
such meeting. The absence of a quorum of the holders of Common Stock shall
not affect the exercise by any holders of Preferred Stock of the
Corporation of such voting right. At any meeting at which the holders of
shares of the Series D Index Exchangeable Preferred Stock shall exercise
such voting right initially during an existing Default Period, they shall
have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors of the Corporation as may then
exist up to two (2) Directors or, if such right is exercised at an annual
<PAGE> 5
meeting, to elect two (2) Directors to the Board of Directors of the
Corporation. If the number of Directors which may be so elected at any
special meeting does not amount to the required number, the holders of
shares of the Series D Index Exchangeable Preferred Stock shall have the
right, voting as a class, to make such increase in the number of Directors
then constituting the Board of Directors of the Corporation as shall be
necessary to permit the election by such holders of the required number.
After the holders of the shares of the Series D Index Exchangeable
Preferred Stock shall have exercised their right to elect Directors in any
Default Period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders
of shares of the Series D Index Exchangeable Preferred Stock as herein
provided or pursuant to the rights of the holders of any equity securities
of the Corporation ranking senior to or equally with the Series D Index
Exchangeable Preferred Stock.
During an existing Default Period, unless the holders of shares of the
Series D Index Exchangeable Preferred Stock shall have previously exercised
their right to elect Directors, the Board of Directors of the Corporation
may order, or any stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of the Series D
Index Exchangeable Preferred Stock then outstanding may request, the
calling of a special meeting of the holders of shares of the Series D Index
Exchangeable Preferred Stock, which meeting shall thereupon be called by
the Chairman of the Board, the President or Chief Executive Officer, any
Executive Vice President, Senior Vice President or Vice President or the
Corporate Secretary of the Corporation. Notice of such meeting and of any
annual meeting at which holders of shares of the Series D Index
Exchangeable Preferred Stock are entitled to vote pursuant to this
Section 3 shall be given to each holder of record of shares of the Series D
Index Exchangeable Preferred Stock by mailing a copy of such notice to such
holder at such holder's last address as the same appears on the books of
the Corporation. Such meeting shall be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of the Series D Index
Exchangeable Preferred Stock then outstanding. Notwithstanding the
provisions of this Section 3, no such special meeting shall be called
during the period within 60 days immediately preceding the date fixed for
the next annual meeting of the stockholders of the Corporation.
During an existing Default Period, the holders of Common Stock, and
other classes of stock of the Corporation, if applicable, shall continue to
be entitled to elect the whole number of Directors then constituting the
Board of Directors of the Corporation until the holders of shares of the
Series D Index Exchangeable Preferred Stock shall have exercised their
right, voting as a class, to elect two (2) Directors, after the exercise of
which right (x) the Directors so elected by the holders of shares of the
Series D Index Exchangeable Preferred Stock (the "Series D Directors")
shall continue in office until their successors shall have been elected by
such holders or until the expiration of the Default Period, and (y) any
vacancy in the office of a Series D Director may (except as provided in
this Section 3) be filled by the remaining Series D Director pursuant to an
instrument in writing executed by the remaining Series D Director and filed
with the Corporation. References in this Section 3 to Directors elected by
the holders of a particular class of stock shall include any Director
elected by any Director to fill vacancies as provided in clause (y) of the
foregoing sentence.
Immediately upon the expiration of a Default Period, (x) the right of
the holders of shares of the Series D Index Exchangeable Preferred Stock,
<PAGE> 6
voting as a class, to elect Directors shall cease, (y) the term of any
Series D Directors shall terminate, and (z) the number of Directors shall
be such number as may be provided for in the Certificate of Incorporation
or By-laws of the Corporation irrespective of any increase made pursuant to
the provisions of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the Certificate of
Incorporation or By-laws of the Corporation). Any vacancies in the Board
of Directors of the Corporation effected by the provisions of clauses (y)
and (z) of the foregoing sentence may be filled by a majority of the
remaining Directors.
(C) So long as any shares of the Series D Index Exchangeable
Preferred Stock are outstanding, the Corporation shall not, without first
obtaining the affirmative vote or consent of the holders of at least a
majority of the shares of the Series D Index Exchangeable Preferred Stock
then outstanding, voting as a separate class, either expressed in writing
or by affirmative vote at a meeting called for that purpose, enter into any
consolidation or merger wherein the Corporation is not the surviving or
continuing corporation unless, concurrently with such consolidation or
merger, the Corporation shall, at its option, either (i) redeem (on the
effective date of, and subject to the consummation of, such consolidation
or merger) all shares of the Series D Index Exchangeable Preferred Stock
then outstanding in accordance with the provisions of Section 8 hereof or
(ii) cause to be issued and delivered to each holder of the Series D Index
Exchangeable Preferred Stock in exchange for the Series D Index
Exchangeable Preferred Stock, shares of preferred stock of the surviving or
continuing corporation (after giving effect to such consolidation or
merger) having designations, preferences and rights substantially
identical, in the good faith determination of the Board of Directors of the
Corporation, to the designations, preferences and rights of the Series D
Index Exchangeable Preferred Stock; and, in any case, appropriate
adjustment (as determined by the Board of Directors of the Corporation)
shall be made in the application of the provisions herein set forth with
respect to the rights and interests thereafter of the holders of the Series
D Index Exchangeable Preferred Stock, to the end that the provisions set
forth herein shall thereafter be applicable, as near as reasonably may be,
in relation to any shares of stock thereafter deliverable upon the exchange
of such shares of preferred stock issued in exchange for the Series D Index
Exchangeable Preferred Stock.
(D) Except as specifically set forth herein or as otherwise required
by applicable law, holders of shares of the Series D Index Exchangeable
Preferred Stock shall have no voting rights and their consent shall not be
required for taking any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever monthly dividends payable on the Series D Index
Exchangeable Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series D Index Exchangeable Preferred
Stock then outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends (other than dividends payable
solely in shares of the Common Stock and/or any other class or
series of stock ranking junior to the Series D Index Exchangeable
Preferred Stock as to dividends and rights upon liquidation,
dissolution or winding up) on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any
<PAGE> 7
shares of stock of the Corporation ranking junior (either as to
dividends or rights upon liquidation, dissolution or winding up)
to the Series D Index Exchangeable Preferred Stock;
(ii) declare or pay dividends (other than dividends payable
solely in shares of the Common Stock and/or any other class or
series of stock ranking junior to the Series D Index Exchangeable
Preferred Stock as to dividends and rights upon liquidation,
dissolution or winding up) on or make any other distribution on
any shares of stock of the Corporation ranking on a parity
(either as to dividends or rights upon liquidation, dissolution
or winding up) with the Series D Index Exchangeable Preferred
Stock, except dividends paid ratably on the Series D Index
Exchangeable Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then
entitled;
(iii) redeem, purchase or otherwise acquire for
consideration shares of any stock of the Corporation ranking on a
parity (either as to dividends or rights upon liquidation,
dissolution or winding up) with the Series D Index Exchangeable
Preferred Stock; provided; however, that the Corporation may at
any time redeem, purchase or otherwise acquire shares of any such
parity stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or rights upon
dissolution, liquidation or winding up) to the Series D Index
Exchangeable Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for consideration
any shares of the Series D Index Exchangeable Preferred Stock, or
any shares of stock of the Corporation ranking on a parity with
the Series D Index Exchangeable Preferred Stock, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors of the
Corporation) to all holders of such shares upon such terms as the
Board of Directors of the Corporation, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine
in good faith will result in fair and equitable treatment among
the respective series or classes;
provided, however, that, notwithstanding the foregoing, the Corporation may
at any time redeem, purchase or otherwise acquire shares of the Common
Stock or shares of any class or series of stock ranking junior to the
Series D Index Exchangeable Preferred Stock (either as to dividends or
rights upon liquidation, dissolution or winding up) in exchange for, or out
of the net cash proceeds from the concurrent sale of, other shares of the
Common Stock or other shares of stock of any class or series ranking junior
to the Series D Index Exchangeable Preferred Stock (as to dividends and
rights upon liquidation, dissolution or winding up).
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, redeem, purchase or otherwise acquire such shares at
such time and in such manner.
SECTION 5. REACQUIRED SHARES.
<PAGE> 8
Shares of the Series D Index Exchangeable Preferred Stock which have
been redeemed, purchased or otherwise acquired by the Corporation pursuant
to Section 7 or Section 8 hereof or otherwise shall, upon compliance with
any applicable provisions of the General Corporation Law of the State of
Delaware, have the status of authorized and unissued shares of Preferred
Stock, and shall be reissued only as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of Directors
of the Corporation or as part of any other series of Preferred Stock the
terms of which do not prohibit such reissue, and shall not be reissued as
part of the Series D Index Exchangeable Preferred Stock.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series D Index Exchangeable Preferred
Stock unless, prior thereto, the holders of shares of the Series D Index
Exchangeable Preferred Stock shall have received the Stated Value plus an
amount equal to accrued and unpaid dividends and distributions on such
share of the Series D Index Exchangeable Preferred Stock, whether or not
declared, to the date of such payment (the "Series D Liquidation
Preference"). If, upon liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof,
distributable among the holders of the Series D Index Exchangeable
Preferred Stock shall be insufficient to pay in full the Series D
Liquidation Preference and the liquidation preference with respect to any
shares of stock which rank on a parity with the Series D Index Exchangeable
Preferred Stock as to rights upon liquidation, dissolution or winding up of
the Corporation then outstanding, then such assets, or the proceeds
thereof, shall be distributed among such holders of the Series D Index
Exchangeable Preferred Stock and any such shares of stock which rank on a
parity with the Series D Index Exchangeable Preferred Stock as to rights
upon liquidation, dissolution or winding up of the Corporation ratably in
accordance with the respective amounts which would be payable on such
shares of the Series D Index Exchangeable Preferred Stock and any other
such stock if all amounts payable thereon were paid in full.
Upon any liquidation, dissolution or winding up of the Corporation,
after payment of the Series D Liquidation Preference shall have been made
in full as provided in this Section 6, but not prior thereto, the Common
Stock or any other series or class of stock ranking junior to the Series D
Index Exchangeable Preferred Stock as to rights upon liquidation,
dissolution or winding up shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed and the Series D Index
Exchangeable Preferred Stock shall not be entitled to share therein.
SECTION 7. EXCHANGE.
(A) The Series D Index Exchangeable Preferred Stock may be exchanged
as follows:
(i) Exchange at the Option of the Corporation. Each share of
Series D Index Exchangeable Preferred Stock shall be exchangeable, at
the option of the Corporation, at any time and from time to time on
any business day on or after the first business day of the
thirty-first month after the date of issue thereof and prior to
October 1, 1996, at the principal office of the Corporation located in
Long Grove, Illinois, or at the offices of such duly appointed
<PAGE> 9
transfer agent for the Series D Index Exchangeable Preferred Stock, if
any, as the Board of Directors of the Corporation may from time to
time determine, into such number of Freely-Tradeable (as hereinafter
defined), validly issued, fully paid and non-assessable shares
(calculated to the nearest 1/100 of a share) of Common Stock, $5.00
par value per share, of the Corporation ("Common Stock") as is
determined by multiplying (x) 1.10 by (y) the Exchange Rate (as
hereinafter defined) in effect as of the applicable Exchange Date (as
defined in Section 7(B) hereof); provided, however, that (1) no such
optional exchange shall be made by the Corporation on more than one
occasion during any calendar month and (2) the aggregate number of
shares of the Series D Index Exchangeable Preferred Stock to be
exchanged on such occasion shall not exceed 5% of the aggregate number
of shares of the Series D Index Exchangeable Preferred Stock
originally issued. Any optional exchange of Series D Index
Exchangeable Preferred Stock pursuant to this Section 7(A)(i) shall be
accompanied by a payment in an amount equal to all accrued and unpaid
dividends up to and including the Exchange Date thereof. The term
"Freely-Tradeable" shall mean, with respect to shares of Common Stock
issuable upon exchange of the Series D Index Exchangeable Preferred
Stock, shares that either (y) are registered under the Securities Act
of 1933, as amended (the "Act"), or (z) may immediately be re-sold to
the public pursuant to an available exemption from the registration
requirements of the Act. In addition, the term "Freely-Tradeable"
shall include shares of Common Stock which are otherwise permitted to
be immediately sold publicly by the recipient thereof except that such
shares exceed, as of the date of delivery thereof, the volume
limitations applicable to the number of shares of Common Stock which
may be immediately re-sold by the holder thereof pursuant to Rule 144
under the Act if the applicability of such volume limitations is
solely attributable to such holder being deemed to be an affiliate of
the Corporation for any reason (including, but without limitation, the
ownership or acquisition of any other securities of the Corporation by
such holder or such holder having representation on the Board of
Directors of the Corporation) other than solely as a result of the
receipt by such holder of shares of Common Stock of the Corporation
issued in connection with any exchange of shares of Series D Index
Exchangeable Preferred Stock.
The exchange rate at which shares of Common Stock shall be delivered
upon exchange of each share of the Series D Index Exchangeable
Preferred Stock (the "Exchange Rate") shall equal the quotient
(expressed as a percentage) of (y) the Current Market Price of the
Market Index (as hereinafter defined) determined as of the applicable
Exchange Date divided by (z) the Current Market Price of the Common
Stock (as hereinafter defined) determined as of the applicable
Exchange Date. The "Current Market Price of the Market Index" shall
mean, as of the date of any determination thereof, the closing price,
as reported in The Wall Street Journal or any successor publication,
of the Market Index for the business day immediately preceding the
date of determination. The "Current Market Price of the Common Stock"
shall mean, as of the date of any determination thereof, the closing
price, as reported on the New York Stock Exchange (the "NYSE")
Composite Tape, of shares of Common Stock for the most recent business
day preceding the date of determination on which shares of the Common
Stock were traded on the NYSE.
(ii) Exchange at the Option of the Holder. Each share of Series
D Index Exchangeable Preferred Stock shall be exchangeable, at the
option of the holder thereof, at any time or from time to time on any
<PAGE> 10
business day on or after the first business day of the forty-ninth
month after the date of issue thereof, at the principal office of the
Corporation located in Long Grove, Illinois, or at the offices of such
duly appointed transfer agent for the Series D Index Exchangeable
Preferred Stock, if any, as the Board of Directors of the Corporation
may from time to time determine, into such number of Freely-Tradeable,
validly issued, fully paid and non-assessable shares (calculated to
the nearest 1/100 of a share) of Common Stock as is determined by
multiplying (x) 1.10 by (y) the Exchange Rate in effect as of the
applicable Exchange Date; provided, however, that no such exchange may
be made by any such holder unless the aggregate number of shares of
Common Stock issuable upon such exchange is not less than 200,000
shares or such exchange is made with respect to all of the shares of
the Series D Index Exchangeable Preferred Stock then held by such
holder; and provided, further, that upon receipt of a Holder Exchange
Notice (as defined in Section 7(B) hereof) the Corporation may, at its
option, redeem such shares of the Series D Index Exchangeable
Preferred Stock in accordance with Section 8 hereof on the Holder
Exchange Date (as defined in Section 7(B) hereof) specified in such
Holder Exchange Notice.
(iii) Required Exchanges. Subject to the conditions set
forth in the proviso to the next sentence, and after giving effect to
any prior (y) optional exchange of shares of the Series D Index
Exchangeable Preferred Stock pursuant to Section 7(A)(i) or
Section 7(A)(ii) hereof and (z) optional redemption of shares of the
Series D Index Exchangeable Preferred Stock pursuant to Section 8
hereof, the Corporation shall be required to effect exchanges of
shares of the Series D Index Exchangeable Preferred Stock on each
Required Exchange Date (as hereinafter defined) in an amount such that
the percentage of the shares of the Series D Index Exchangeable
Preferred Stock originally issued which remain outstanding does not
exceed the percentage set forth in the right-hand column below as of
the date set forth opposite such percentage in the left-hand column
below (after giving effect to any exchange of shares of the Series D
Index Exchangeable Preferred Stock on the date set forth in the
left-hand column below) (each such date set forth in the left-hand
column below being herein referred to as a "Required Exchange Date"):
MAXIMUM
LAST BUSINESS DAY OF PERCENTAGE
October, 1996 95%
November, 1996 90%
December, 1996 85%
January, 1997 80%
February, 1997 75%
March, 1997 70%
April, 1997 65%
May, 1997 60%
June, 1997 55%
July, 1997 50%
August, 1997 45%
September, 1997 40%
October, 1997 35%
November, 1997 30%
December, 1997 25%
January, 1998 20%
<PAGE> 11
February, 1998 15%
March, 1998 10%
April, 1998 5%
May, 1998 0%
The number of Freely-Tradeable, validly issued, fully paid and
non-assessable shares (calculated to the nearest 1/100 of a share) of
Common Stock required to be issued in connection with any exchange
required pursuant to this Section 7(A)(iii) shall be determined by
multiplying (x) 1.10 by (y) the number of shares of the Series D Index
Exchangeable Preferred Stock to be exchanged at such time by (z) the
Exchange Rate in effect as of the applicable Required Exchange Date;
provided, however, that (1) no such required exchange may be made by
the Corporation on any day other than the last business day of any
calendar month beginning on or after the first day of October, 1996,
and (2) the aggregate number of shares of the Series D Index
Exchangeable Preferred Stock to be exchanged on any Required Exchange
Date shall not exceed 5% of the aggregate number of shares of the
Series D Index Exchangeable Preferred Stock originally issued. Any
required exchange of Series D Index Exchangeable Preferred Stock
pursuant to this Section 7(A)(iii) shall be accompanied by a payment
in an amount equal to all accrued and unpaid dividends up to and
including the Required Exchange Date thereof.
(B) Mechanics of Exchange. At any time the Corporation exercises its
exchange option described in Section 7(A)(i) hereof, the Corporation shall
transmit written notice to each holder of shares of the Series D Index
Exchangeable Preferred Stock to be exchanged (by facsimile or other
electronic transmission device capable of creating a written record to the
facsimile transmission number of such holder set forth in the books of the
Corporation) of the Corporation's optional exchange of shares of the Series
D Index Exchangeable Preferred Stock (the "Corporation Exchange Notice")
and shall state therein (i) the number of shares of the Series D Index
Exchangeable Preferred Stock held by such holder to be exchanged and (ii)
the date on which such exchange shall occur (the "Corporation Exchange
Date"), which date shall be not less than fifteen (15) days after the date
such Corporation Exchange Notice is transmitted by the Corporation.
At any time any holder of shares of the Series D Index Exchangeable
Preferred Stock desires to exercise its exchange option described in
Section 7(A)(ii) hereof, such holder shall transmit written notice to the
Corporation (by facsimile or other electronic transmission device capable
of creating a written record to the facsimile transmission number of the
Corporation provided in writing to such holder) of such holder's election
to exchange shares of the Series D Index Exchangeable Preferred Stock (the
"Holder Exchange Notice") and shall state therein (i) the number of shares
of the Series D Index Exchangeable Preferred Stock to be exchanged and (ii)
the date on which such exchange shall occur (the "Holder Exchange Date"),
which date shall be not less than fifteen (15) days after the date such
Holder Exchange Notice is transmitted by such holder.
"Notice Date" shall mean (i) in the case of an exchange or a
redemption by the Corporation pursuant to this Section 7 or Section 8
hereof, the date on which the Corporation transmits in the manner herein
provided (prior to 12:00 Noon New York time) the required Corporation
Exchange Notice or the required Redemption Notice (as defined in Section 8
hereof), as the case may be, and (ii) in the case of an exchange by a
holder of shares of the Series D Index Exchangeable Preferred Stock
pursuant to this Section 7, the date on which such holder transmits in the
manner herein provided (prior to 12:00 Noon New York time) the required
<PAGE> 12
Holder Exchange Notice. "Exchange Notice" shall mean the applicable
Corporation Exchange Notice or the applicable Holder Exchange Notice, as
the case may be. "Exchange Date" shall mean and include (i) the applicable
Corporation Exchange Date, (ii) the applicable Holder Exchange Date or
(iii) the applicable Required Exchange Date, as the case may be. Any
notice which is transmitted in the manner herein provided shall be
conclusively presumed to have been duly given and delivered for all
purposes whether the holder receives the notice or not.
On the applicable Exchange Date, the outstanding shares of the Series
D Index Exchangeable Preferred Stock designated in the related Exchange
Notice to be exchanged (or, in the case of a Required Exchange Date, the
outstanding shares of the Series D Index Exchangeable Preferred Stock
designated in Section 7(A)(iii) hereof to be exchanged) shall be deemed to
have been exchanged (and shall be deemed to be no longer outstanding for
the purpose of voting, accruing dividends or determining the total number
of shares entitled to vote on any matter or for any other purpose) without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or
its transfer agent; provided, however, that the Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such exchange unless certificates evidencing such shares of
the Series D Index Exchangeable Preferred Stock being exchanged are
delivered to either the Corporation or its transfer agent, as hereinafter
provided, or the holder of such shares of the Series D Index Exchangeable
Preferred Stock notifies the Corporation or its transfer agent, as
hereinafter provided, that such certificates have been lost, stolen or
destroyed and executes and delivers to the Corporation an agreement
satisfactory in form and substance to the Corporation to indemnify the
Corporation from any loss incurred by the Corporation in connection
therewith. Upon any exchange of shares of the Series D Index Exchangeable
Preferred Stock as aforesaid, the holders of such shares of the Series D
Index Exchangeable Preferred Stock shall surrender the certificates
representing such shares at the principal office of the Corporation located
in Long Grove, Illinois or at its transfer agent for the Common Stock.
Thereupon, there shall be issued and delivered to such holder, promptly at
such office and in such name as is shown on such surrendered certificate or
certificates, or as such holder shall direct in writing, a certificate or
certificates for the number of shares of Common Stock into which such
shares of the Series D Index Exchangeable Preferred Stock of such holder
were exchanged on such Exchange Date. All such shares of Common Stock
delivered in exchange for such shares of the Series D Index Exchangeable
Preferred Stock shall be Freely-Tradeable, validly issued, fully paid and
non-assessable. Any such exchange shall be deemed to have been made on the
Exchange Date, and the person or persons entitled to receive the shares of
Common Stock issuable upon such exchange shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such
Exchange Date.
In order to facilitate the exchange of any shares of the Series D
Index Exchangeable Preferred Stock that may be chosen by the Corporation
for exchange as provided in Section 7(A)(i) or Section 7(A)(iii) hereof,
the Board of Directors of the Corporation shall be authorized to fix a
record date with respect to such exchange, which record date shall not be
more than 60 days prior to the applicable Exchange Date. In the case of
the exchange of less than all of the shares of the Series D Index
Exchangeable Preferred Stock at the time outstanding pursuant to
Section 7(A)(i) or Section 7(A)(iii) hereof, the shares so to be exchanged
shall be selected on a pro-rata basis based on the number of shares of
Series D Index Exchangeable Preferred Stock owned by each holder as of the
<PAGE> 13
record date.
On and after the first day of the thirty-first month after the date of
issue of the Series D Index Exchangeable Preferred Stock, and at all times
thereafter, the Corporation shall reserve and keep available, out of its
authorized but unissued Common Stock (or treasury shares of Common Stock),
solely for the purpose of effecting the exchange of the Series D Index
Exchangeable Preferred Stock, not less than twice the number of shares as
shall from time to time be sufficient to effect the exchange of all shares
of the Series D Index Exchangeable Preferred Stock from time to time
outstanding. The Corporation shall from time to time, in accordance with
the laws of the State of Delaware, endeavor in good faith to increase the
authorized amount of its Common Stock if at the end of any fiscal quarter
of the Corporation the number of shares of Common Stock remaining unissued
shall not be at least twice the number of shares necessary to permit the
exchange of all of the then outstanding shares of the Series D Index
Exchangeable Preferred Stock.
No fractions of shares of Common Stock are to be issued upon any
exchange of the Series D Index Exchangeable Preferred Stock, but in lieu
thereof the Corporation will pay therefor in cash based on the Current
Market Price of the Common Stock determined as of the applicable Exchange
Date.
SECTION 8. REDEMPTION.
The shares of the Series D Index Exchangeable Preferred Stock shall
not be redeemable except as permitted by this Section 8.
The Series D Index Exchangeable Preferred Stock shall not be redeemed
prior to the first business day of the thirty-first month after the date of
issue thereof, except in the case of the redemption of all outstanding
shares of the Series D Index Exchangeable Preferred Stock substantially
concurrently with any consolidation or merger involving the Corporation
wherein the Corporation is not the surviving or continuing corporation. In
the event of any such consolidation or merger or at any time on or after
the first business day of the thirty-first month after the date of issue
thereof, shares of the Series D Index Exchangeable Preferred Stock may be
redeemed, in whole or in part at any time or from time to time on any
business day, at the option of the Corporation, by a payment in cash equal
to the Redemption Price (as hereinafter defined) per share. The
"Redemption Price" per share shall mean the Current Market Price of the
Market Index determined as of the applicable Redemption Date, plus an
amount equal to all accrued and unpaid dividends on such share of the
Series D Index Exchangeable Preferred Stock up to and including the
Redemption Date (as hereinafter defined).
The Corporation shall transmit written notice to each holder of shares
of the Series D Index Exchangeable Preferred Stock to be redeemed (by
facsimile or other electronic transmission device capable of creating a
written record to the facsimile transmission number of such holder set
forth in the books of the Corporation) of every such redemption of shares
of the Series D Index Exchangeable Preferred Stock (the "Redemption
Notice") and shall state therein (i) the number of shares of the Series D
Index Exchangeable Preferred Stock held by such holder to be redeemed and
(ii) the date, which date shall be not less than fifteen (15) days (or
forty-five (45) days in the case of any redemption pursuant to this Section
8 for an aggregate Redemption Price in excess of $10,000,000 (excluding
amounts in respect of dividends)) after the date such Redemption Notice is
transmitted by the Corporation (or, upon receipt by the Corporation of a
<PAGE> 14
Holder Exchange Notice, not less than five (5) days prior to the Exchange
Date designated in said Holder Exchange Notice), on which such redemption
shall occur (the "Redemption Date"). Any notice which is transmitted in
the manner herein provided shall be conclusively presumed to have been duly
given and delivered for all purposes whether the holder receives the notice
or not.
In order to facilitate the redemption of any shares of the Series D
Index Exchangeable Preferred Stock that may be chosen for redemption as
provided in this Section 8, the Board of Directors of the Corporation shall
be authorized to fix a record date with respect to such redemption, which
record date shall not be more than 60 days prior to the applicable
Redemption Date. In case of the redemption of less than all of the shares
of the Series D Index Exchangeable Preferred Stock at the time outstanding,
the shares so to be redeemed shall be selected on a pro-rata basis based on
the number of shares of Series D Index Exchangeable Preferred Stock owned
by each holder as of the record date.
If on or before the Redemption Date specified in such Redemption
Notice the Corporation shall irrevocably deposit or set aside funds
sufficient to pay the aggregate Redemption Price of the shares of the
Series D Index Exchangeable Preferred Stock so called for redemption, then
from and after the date of such deposit or setting aside, all shares of the
Series D Index Exchangeable Preferred Stock so called for redemption shall
be deemed to be no longer outstanding for the purpose of voting or
determining the total number of shares entitled to vote on any matter or
for any other purpose. Any interest accrued on funds deposited or set
aside shall be paid to the Corporation from time to time and the holders of
shares to be redeemed shall have no claim to any such interest. Any funds
so deposited or set aside and unclaimed at the end of one year from the
applicable Redemption Date shall be repaid to the Corporation, after which
the holders of the shares of the Series D Index Exchangeable Preferred
Stock so called for redemption shall look only to the Corporation for
payment of the amounts to which they are entitled hereunder. The holders
of the shares of the Series D Index Exchangeable Preferred Stock so called
for redemption shall not be entitled to receive the Redemption Price
therefor until the certificates evidencing such shares of the Series D
Index Exchangeable Preferred Stock shall have been delivered to either the
Corporation or its transfer agent for cancellation.
If a Redemption Notice shall have been transmitted as provided in this
Section 8, then on and after the Redemption Date (unless the Corporation
shall default in making payment of the Redemption Price) all shares so
called for redemption shall no longer be deemed outstanding and all rights
with respect to such shares, including, but not limited to, the right to
receive dividends thereon, shall cease and terminate notwithstanding that
any certificate for such shares so called for redemption shall not have
been surrendered for cancellation, and the holders of such shares so called
for redemption shall cease to be stockholders and shall have no interest in
or claims against the Corporation except the right to receive the
Redemption Price, without interest, upon surrender of their certificates
for cancellation.
SECTION 9. Ranking.
The Series D Index Exchangeable Preferred Stock shall rank on a parity
with the existing classes of Series A, Series C and Series E Preferred
Stock of the Corporation and senior to the Series B Preferred Stock and the
Common Stock of the Corporation as to the payment of dividends and the
distribution of assets and rights upon liquidation, dissolution or winding
<PAGE> 15
up of the Corporation, unless the terms of any such series shall provide
otherwise.
SECTION 10. FRACTIONAL SHARES.
The Series D Index Exchangeable Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of the Series D Index Exchangeable Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designations, Preferences and
Rights of Series D Index Exchangeable Preferred Stock, without par value,
has been executed as of May 28, 1993, on behalf of Kemper Corporation by
the Executive Vice President of the Corporation and attested by the General
Counsel and Corporate Secretary of the Corporation, who do hereby affirm,
under penalties of perjury, that the foregoing Certificate is the act and
deed of the Corporation and that the facts stated therein are true.
KEMPER CORPORATION
By /s/John H. Fitzpatrick
John H. Fitzpatrick
Executive Vice President
Attest:
/s/Kathleen A. Gallichio
Kathleen A. Gallichio
General Counsel and
Corporate Secretary
<PAGE> 1
EXHIBIT 3.1(g)
Certificate of Designations, Preferences and Rights
of Series E Cumulative Convertible Preferred Stock,
without Par Value,
of
Kemper Corporation
Pursuant to Section 151(g) of the General Corporation
Law of the State of Delaware
THE UNDERSIGNED, David B. Mathis, Chairman of the Board and Chief
Executive Officer, and Kathleen A. Gallichio, General Counsel and Corporate
Secretary, of KEMPER CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), in accordance with the provisions of Section 103
thereof, DO HEREBY CERTIFY:
FIRST: That, pursuant to the authority conferred upon the Board of
Directors in accordance with the provisions of Part I of Article Fourth of
the Second Restated Certificate of Incorporation, as amended, of the
Corporation, the Executive Committee of the Board of Directors of the
Corporation, on April 22, 1993 (pursuant to authority delegated by the
Board of Directors of the Corporation on March 17, 1993), adopted the
following resolution creating a series of 4,600,000 shares of Preferred
Stock of the Corporation designated as "Series E Cumulative Convertible
Preferred Stock":
Resolved: That, pursuant to the authority vested in this
Executive Committee of the Board of Directors in accordance with
the provisions of Part I of Article Fourth of this Company's
Second Restated Certificate of Incorporation, as amended, a
series of 4,600,000 shares of Preferred Stock, without par value,
of the Company is hereby created and authorized, and the
designation, amount and stated value of such series of Preferred
Stock and the voting powers (as previously determined and
authorized by the Board of Directors on March 17, 1993),
preferences and relative, participating, optional and other
special rights of the shares of such series, and the
qualifications, limitations or restrictions thereon, are as set
forth in Exhibit A to these resolutions which, for all purposes,
shall be deemed to be a part hereof; and
SECOND: That, the following is a true and correct copy of the
provisions set forth in Exhibit A to the foregoing resolution:
SECTION 1. DESIGNATION, AMOUNT AND STATED VALUE.
The shares of such series shall be designated as "Series E Cumulative
Convertible Preferred Stock" and shall be without par value, and the number
of shares constituting such series shall be 4,600,000 shares. The stated
value of the Series E Cumulative Convertible Preferred Stock shall be
$50.00 per share (the "Stated Value").
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) The holders of shares of the Series E Cumulative Convertible
Preferred Stock shall be entitled to receive, but only when and as declared
<PAGE> 2
by the Board of Directors of the Corporation out of funds legally available
for such purpose, cumulative quarterly dividends payable in cash on the
first business day of January, April, July and October in each year (each
such date being referred to herein as a "Quarterly Dividend Date"),
commencing on the first such day of July, 1993 (and, in the case of any
accrued but unpaid dividends, at such additional times and for such interim
periods, if any, as determined by the Board of Directors of the
Corporation), at the annual rate of $2.875 per share and no more.
Dividends payable on the Series E Cumulative Convertible Preferred Stock
for any period greater or less than a full quarterly dividend period will
be computed on the basis of a 365-day year. Dividends payable on the
Series E Cumulative Convertible Preferred Stock for each full quarterly
dividend period will be computed by dividing the annual dividend rate of
$2.875 by four (4).
(B) Dividends shall begin to accrue on a daily basis and be
cumulative (whether or not there are funds legally available therefor or
dividends have been declared) on any outstanding shares of Series E
Cumulative Convertible Preferred Stock from the original date of issue of
shares of Series E Cumulative Convertible Preferred Stock. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of
Series E Cumulative Convertible Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors of the Corporation
shall fix a record date for the determination of holders of shares of
Series E Cumulative Convertible Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be
no more than 30 days prior to the date fixed for the payment thereof.
SECTION 3. VOTING RIGHTS.
Except as otherwise required by law or by the Corporation's
Certificate of Incorporation, as amended or restated from time to time (the
"Certificate of Incorporation"), the holders of Series E Cumulative
Convertible Preferred Stock shall not be entitled to vote on any matter
except as follows:
(A) The Corporation shall not, without first obtaining the consent of
the holders of at least two-thirds of the shares of the Series E Cumulative
Convertible Preferred Stock then outstanding, voting as a separate class,
either expressed in writing or by affirmative vote at a meeting called for
that purpose:
(i) alter or change the rights, preferences or privileges of the
shares of Series E Cumulative Convertible Preferred Stock or otherwise
amend, alter or repeal any provision of the Certificate of
Incorporation so as to adversely affect the rights, preferences or
privileges of the Series E Cumulative Convertible Preferred Stock;
(ii) increase the authorized number of shares of Series E
Cumulative Convertible Preferred Stock;
(iii) issue additional shares of its Series A Cumulative
Convertible Preferred Stock;
(iv) create any new class or series of stock, or any other
securities convertible into equity securities of the Corporation, that
would rank senior to the Series E Cumulative Convertible Preferred
Stock as to dividends or rights upon dissolution, liquidation or
<PAGE> 3
winding up of the Corporation; or
(v) reclassify any class or series of stock so that such class
or series ranks senior to the Series E Cumulative Convertible
Preferred Stock as to dividends or rights upon dissolution,
liquidation or winding up of the Corporation.
The class voting rights set forth herein are in addition to, and shall not
be limited in any way by, the voting rights set forth in Article FOURTH of
the Certificate of Incorporation.
(B) If at any time dividends on any shares of the Series E Cumulative
Convertible Preferred Stock shall be in arrears in an amount equal to six
(6) quarterly dividends thereon, the occurrence of such contingency shall
mark the beginning of a period (herein called a "Default Period") which
shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of the Series E Cumulative Convertible Preferred Stock
then outstanding shall have been declared and paid or set apart for
payment. During each Default Period, all holders of shares of the Series E
Cumulative Convertible Preferred Stock, voting as a class, shall have the
right to elect two (2) Directors to the Board of Directors of the
Corporation.
During any Default Period, such voting right of the holders of shares
of the Series E Cumulative Convertible Preferred Stock may be exercised
initially at a special meeting called pursuant to this Section 3 or at any
annual meeting of stockholders, provided that neither such voting right nor
the right of the holders of any other series of Preferred Stock of the
Corporation, if any, to increase, in certain cases, the authorized number
of Directors shall be exercised unless the holders of ten percent (10%) in
number of shares of the Preferred Stock of the Corporation then outstanding
shall be present in person or by proxy at any such meeting. The absence of
a quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of the Corporation of such voting right. At
any meeting at which the holders of shares of the Series E Cumulative
Convertible Preferred Stock shall exercise such voting right initially
during an existing Default Period, they shall have the right to elect
Directors to fill such vacancies, if any, in the Board of Directors of the
Corporation as may then exist up to two (2) Directors or, if such right is
exercised at an annual meeting, to elect two (2) Directors to the Board of
Directors of the Corporation. If the number of Directors which may be so
elected at any special meeting does not amount to the required number, the
holders of shares of the Series E Cumulative Convertible Preferred Stock
shall have the right, voting as a class, to make such increase in the
number of Directors as shall be necessary to permit the election by such
holders of the required number. After the holders of the shares of the
Series E Cumulative Convertible Preferred Stock shall have exercised their
right to elect Directors in any Default Period and during the continuance
of such period, the number of Directors shall not be increased or decreased
except by vote of the holders of shares of the Series E Cumulative
Convertible Preferred Stock as herein provided or pursuant to the rights of
Series B Junior Participating Preferred Stock or of any equity securities
of the Corporation ranking senior to or equally with the Series E
Cumulative Convertible Preferred Stock.
During an existing Default Period, unless the holders of the Series E
Cumulative Convertible Preferred Stock shall have previously exercised
their right to elect Directors, the Board of Directors of the Corporation
may order, or any stockholder or stockholders owning in the aggregate not
<PAGE> 4
less than ten percent (10%) of the total number of shares of the Series E
Cumulative Convertible Preferred Stock outstanding may request, the calling
of a special meeting of the holders of shares of the Series E Cumulative
Convertible Preferred Stock, which meeting shall thereupon be called by the
Chairman of the Board, the President or Chief Executive Officer, any
Executive Vice President, Senior Vice President or Vice President or the
Corporate Secretary of the Corporation. Notice of such meeting and of any
annual meeting at which holders of shares of the Series E Cumulative
Convertible Preferred Stock are entitled to vote pursuant to this Section 3
shall be given to each holder of record of shares of the Series E
Cumulative Convertible Preferred Stock by mailing a copy of such notice to
such holder at such holder's last address as the same appears on the books
of the Corporation. Such meeting shall be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of the Series E Cumulative
Convertible Preferred Stock outstanding. Notwithstanding the provisions of
this Section 3, no such special meeting shall be called during the period
within 60 days immediately preceding the date fixed for the next annual
meeting of the stockholders of the Corporation.
In any Default Period, the holders of Common Stock, and other classes
of stock of the Corporation, if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of shares of the
Series E Cumulative Convertible Preferred Stock shall have exercised their
right, voting as a class, to elect two (2) Directors, after the exercise of
which right (x) the Directors so elected by the holders of shares of the
Series E Cumulative Convertible Preferred Stock (the "Series E Directors")
shall continue in office until their successors shall have been elected by
such holders or until the expiration of the Default Period, and (y) any
vacancy in the office of a Series E Director may (except as provided in
this Section 3) be filled pursuant to an instrument in writing executed by
the remaining Series E Director and filed with the Corporation. References
in this Section 3 to Directors elected by the holders of a particular class
of stock shall include any Director elected by any Director to fill
vacancies as provided in clause (y) of the foregoing sentence.
Immediately upon the expiration of a Default Period, (x) the right of
the holders of shares of the Series E Cumulative Convertible Preferred
Stock as a class to elect Directors shall cease, (y) the term of any Series
E Directors shall terminate, and (z) the number of Directors shall be such
number as may be provided for in the Certificate of Incorporation or
By-laws of the Corporation irrespective of any increase made pursuant to
the provisions of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the Certificate of
Incorporation or By-laws of the Corporation). Any vacancies in the Board
of Directors of the Corporation effected by the provisions of clauses (y)
and (z) of the foregoing sentence may be filled by a majority of the
remaining Directors.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other distributions payable on
the Series E Cumulative Convertible Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series E
Cumulative Convertible Preferred Stock then outstanding shall have been
paid in full, the Corporation shall not:
(i) declare or pay dividends (other than dividends payable
solely in shares of the Common Stock and/or any other class or series
<PAGE> 5
of stock ranking junior to the Series E Cumulative Convertible
Preferred Stock as to dividends and rights upon liquidation,
dissolution or winding up of the Company or in options, warrants or
rights to subscribe for or purchase any such shares) on or make any
other distributions in respect of any shares of Common Stock or any
other class or series of stock ranking junior to the Series E
Cumulative Convertible Preferred Stock (either as to dividends or
rights upon liquidation, dissolution or winding up (such Common Stock
and such other class or series being herein referred to as "Junior
Stock"));
(ii) redeem or purchase or otherwise acquire for consideration
any shares of Junior Stock; or
(iii) declare or pay dividends (other than dividends payable
solely in shares of Common Stock and/or any other class or series of
stock ranking junior to the Series E Cumulative Convertible Preferred
Stock as to dividends and rights upon liquidation, dissolution or
winding up of the Company or in options, warrants or rights to
subscribe for or purchase any such shares) on or make any other
distribution in respect of any class or series of stock ranking
equally as to dividends and rights upon liquidation, dissolution or
winding up (such equally ranking stock being herein referred to as
"Parity Stock") with the Series E Cumulative Convertible Preferred
Stock, except dividends paid ratably on the Series E Cumulative
Convertible Preferred Stock and any class or series of Parity Stock
and on which dividends are payable or in arrears, in proportion to the
total amounts to which the holders of all such shares are then
entitled;
provided that, notwithstanding the foregoing, the Corporation may at any
time redeem, purchase or otherwise acquire shares of Junior Stock in
exchange for, or out of the net cash proceeds from concurrent sale of,
either (i) other shares of Common Stock and/or any other class or series of
stock ranking junior to the Series E Cumulative Convertible Preferred Stock
as to dividends and rights upon liquidation, dissolution or winding up of
the Corporation or (ii) options, warrants or rights to subscribe for or
purchase any such shares.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, redeem, purchase or otherwise acquire such shares at
such time and in such manner.
SECTION 5. REACQUIRED SHARES.
Shares of the Series E Cumulative Convertible Preferred Stock which
have been redeemed, purchased or otherwise acquired by the Corporation
shall, upon compliance with any applicable provisions of the General
Corporation Law of the State of Delaware, have the status of authorized and
unissued shares of Preferred Stock, and shall be reissued only as part of a
new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors or as part of any other series of Preferred Stock
the terms of which do not prohibit such reissue, and shall not be reissued
as part of the Series E Cumulative Convertible Preferred Stock.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up (voluntary or
<PAGE> 6
involuntary), of the Corporation, no distribution shall be made to the
holders of Common Stock or any other class or series of stock ranking
junior to the Series E Cumulative Convertible Preferred Stock as to rights
upon liquidation, dissolution or winding up unless, prior thereto, the
holders of shares of the Series E Cumulative Convertible Preferred Stock
shall have received the Stated Value plus an amount equal to accrued and
unpaid dividends and distributions on such shares of the Series E
Cumulative Convertible Preferred Stock, whether or not declared, to the
date of such payment (the "Series E Liquidation Preference"). If, upon
liquidation, dissolution or winding up of the Corporation, the assets of
the Corporation, or proceeds thereof, distributable among the holders of
the Series E Cumulative Convertible Preferred Stock shall be insufficient
to pay in full the Series E Liquidation Preference and the liquidation
preference with respect to any shares of stock which rank on a parity with
the Series E Cumulative Convertible Preferred Stock as to rights upon
liquidation, dissolution or winding up then outstanding, then such assets,
or the proceeds thereof, will be distributed among the holders of the
shares of Series E Cumulative Convertible Preferred Stock and any such
shares of stock which rank on a parity with the Series E Cumulative
Convertible Preferred Stock as to rights upon liquidation, dissolution or
winding up ratably in accordance with the respective amounts that would be
payable on such shares of Series E Cumulative Convertible Preferred Stock
and any such stock if all amounts payable thereon were paid in full.
Neither a consolidation or merger involving the Corporation or a sale or
transfer of all or substantially all of the assets of the Corporation will
be considered a liquidation, dissolution or winding up, voluntary or
involuntary, of the Corporation.
Upon any liquidation, dissolution or winding up of the Corporation,
after payment of the Series E Liquidation Preference shall have been made
in full as provided in this Section 6, but not prior thereto, the Common
Stock or any other class or series of stock ranking junior to the Series E
Cumulative Convertible Preferred Stock as to rights upon liquidation,
dissolution or winding up shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed and the Series E Cumulative
Convertible Preferred Stock shall not be entitled to share therein.
SECTION 7. CONVERSION.
A. Each share of Series E Cumulative Convertible Preferred Stock
shall be convertible at the option of the holder thereof, at any time and
from time to time, prior to the close of business on the third (3rd) day
prior to the date fixed for redemption of such shares as herein provided,
into fully paid and non-assessable shares of Common Stock, at the rate of
that number of shares of Common Stock for each full share of Series E
Cumulative Convertible Preferred Stock that is equal to $50.00 divided by
the conversion price. The "conversion price" applicable per share of
Common Stock shall initially be equal to $48.36 and shall be adjusted from
time to time in accordance with the provisions of this Section 7, except
that no adjustment shall be made unless by reason of the happening of any
one or more of the events hereinafter specified, the conversion price then
in effect shall be changed by 1% or more, but any adjustment of less than
1% that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with any subsequent
adjustment which, together with any adjustment or adjustments so carried
forward, amounts to 1% or more. In the event of any conversion of Series E
Cumulative Convertible Preferred Stock occurring after the close of
business of any dividend payment record date (with respect to the Series E
Cumulative Convertible Preferred Stock) and prior to the opening of
<PAGE> 7
business on the corresponding Quarterly Dividend Date, the converting
holder will be entitled to receive the dividend payable on such shares on
the corresponding Quarterly Dividend Date notwithstanding the conversion of
such shares following such dividend payment record date and prior to such
Quarterly Dividend Date. However, in such case, the shares of Series E
Cumulative Convertible Preferred Stock surrendered for conversion during
such period (except shares converted after the issuance of a notice of
redemption pursuant to Section 8) must be accompanied by payment in
immediately available funds of an amount equal to the dividend payable on
such shares on such Quarterly Dividend Date. A holder of shares of Series
E Cumulative Convertible Preferred Stock on a Quarterly Dividend Date who
tenders any such shares for conversion on such Quarterly Dividend Date
shall not be required to include payment of such amount of such dividend in
connection with the surrender of such shares of Series E Cumulative
Convertible Preferred Stock. Except as specifically provided in the
previous two sentences, the Corporation shall make no payment, adjustment
or allowance on account of dividends accrued or in arrears on the Series E
Cumulative Convertible Preferred Stock surrendered for conversion.
B. To effect the conversion of shares of Series E Cumulative
Convertible Preferred Stock into Common Stock, the holder thereof
shall surrender the certificate or certificates for such Series E
Cumulative Convertible Preferred Stock (together with any payment required
by Section 7A) at the principal office of the Corporation in Long Grove,
Illinois, or at the office of any transfer agent duly appointed by the
Board of Directors of the Corporation, which certificate or certificates,
if the Corporation shall so request, shall be duly endorsed to the
Corporation or in blank or accompanied by proper instruments of transfer to
the Corporation or in blank, and shall give written notice to the
Corporation at any of said offices that the holder elects so to convert
said Series E Cumulative Convertible Preferred Stock, and shall state in
writing therein the name or names in which the holder wishes the
certificate or certificates for Common Stock to be issued.
The Corporation will as soon as practicable after such deposit of
certificates for Series E Cumulative Convertible Preferred Stock
accompanied by the written notice and the statement above prescribed (and
any payment required by Section 7A), issue and deliver at the principal
office of the Corporation in Long Grove, Illinois, or at the office of any
transfer agent appointed as aforesaid, to the person for whose account such
Series E Cumulative Convertible Preferred Stock was so surrendered, or to
such holder's nominee or nominees, certificates for the number of full
shares of Common Stock to which such holder shall be entitled as aforesaid,
together with a cash adjustment for any fraction of a share as hereinafter
stated, if not evenly convertible. Subject to the following provisions of
this paragraph, such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of
the Series E Cumulative Convertible Preferred Stock to be converted, and
the person or persons entitled to receive the Common Stock issuable upon
conversion of such Series E Cumulative Convertible Preferred Stock shall be
treated for all purposes as the record holder or holders of such Common
Stock on such date. The Corporation shall not be required to convert, and
no surrender of Series E Cumulative Convertible Preferred Stock shall be
effective for that purpose, while the stock transfer books of the
Corporation are closed for any purpose; but the surrender of Series E
Cumulative Convertible Preferred Stock for conversion during any period
while such books are so closed shall become effective for conversion
immediately upon the reopening of such books, as if the conversion had been
made on the date such Series E Cumulative Convertible Preferred Stock was
surrendered, and at the conversion rate in effect at the date of such
<PAGE> 8
surrender.
C. The conversion price or rate for the Series E Cumulative
Convertible Preferred Stock shall be subject to adjustment from time to
time as follows:
(1) In case the Corporation shall at any time pay a dividend on
its Common Stock in Common Stock, subdivide its outstanding shares of
Common Stock into a larger number of shares or combine its outstanding
shares of Common Stock into a smaller number of shares, the conversion
price in effect immediately prior thereto shall be adjusted by
multiplying the conversion price by a fraction, the numerator of which
shall be equal to the number of shares of Common Stock outstanding
prior to the happening of such event and the denominator of which
shall be equal to the number of shares of Common Stock outstanding
immediately after giving effect to such event. An adjustment made
pursuant to this subparagraph C(1) shall become effective
retroactively to the record date in the case of a dividend and shall
become effective on the effective date in the case of a subdivision or
combination.
(2) In case the Corporation shall issue rights or warrants to
all holders of shares of Common Stock for the purpose of entitling
them (for a period not exceeding 45 days from the date of issuance) to
subscribe for or purchase shares of Common Stock at a price per share
less than the average market price per share (determined as provided
below) of the Common Stock on the record date for the determination of
the stockholders entitled to receive such rights or warrants, then in
each such case unless the holders of shares of the Series E Cumulative
Convertible Preferred Stock shall be permitted to subscribe for or
purchase shares of Common Stock on the same basis as though such
shares of Series E Cumulative Convertible Preferred Stock had been
converted into shares of Common Stock immediately prior to such record
date, the number of shares of Common Stock into which each share of
the Series E Cumulative Convertible Preferred Stock shall thereafter
be convertible shall be determined by multiplying the number of shares
of Common Stock into which each share of Series E Cumulative
Convertible Preferred Stock was convertible on the day immediately
preceding such record date by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding on such
record date and the number of additional shares of Common Stock so
offered for subscription or purchase, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding
on such record date and the number of shares of Common Stock which the
aggregate offering price of the total number of shares so offered
would purchase at such average market price. Such adjustment shall
become effective retroactively immediately after such record date.
For purpose of any computation under this subparagraph 2, the average
market price per share of Common Stock on any date shall be the
average of the current market price for each of the 30 consecutive
trading days ("Trading Days") commencing 45 Trading Days before the
date in question. The "current market price" of publicly traded
shares of Common Stock for any day shall mean the last reported sales
price, regular way on such day, or, if no sale takes place on such
day, the average of the reported closing bid and asked prices on such
day, regular way, in either case as reported on the New York Stock
Exchange or, if such security is not listed or admitted for trading on
the New York Stock Exchange, on the principal national securities
exchange on which such security is listed or admitted for trading or,
if not listed or admitted for trading on any national securities
<PAGE> 9
exchange, on the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or, if
such security is not quoted on such National Market System, the
average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, if bid and asked
prices for such security on such day shall not have been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any New York Stock Exchange member firm regularly making
a market in such security selected for such purpose by the Board of
Directors.
(3) In case the Corporation shall distribute to the holders of
Common Stock any assets (other than any dividend payable solely in
cash), any rights to subscribe for (other than those referred to in
subparagraph C(2) above) or any evidence of indebtedness or other
securities of the Corporation (other than Common Stock), then in each
such case the number of shares of Common Stock into which each share
of Series E Cumulative Convertible Preferred Stock shall thereafter be
convertible shall be determined by multiplying the number of shares of
Common Stock into which each share of Series E Cumulative Convertible
Preferred Stock was theretofore convertible on the day immediately
preceding the record date for the determination of the stockholders
entitled to receive such distribution by a fraction, the numerator of
which shall be the average of the current market price per share of
the Common Stock for the five Trading Days immediately preceding such
record date and the denominator of which shall be such average of the
current market price for the five Trading Days immediately preceding
such record date less the then fair market value (as determined in a
resolution adopted by the Board, which shall be conclusive evidence of
such fair market value) of the portion of the assets or evidence of
indebtedness or securities so distributed or of such subscription
rights applicable to one share of Common Stock. Such adjustment shall
become effective retroactively immediately after the record date.
(4) In case the Corporation shall pay or make a dividend or
other distribution on its Common Stock of Excess Cash, the conversion
price shall be reduced so that the same shall equal the price
determined by multiplying the conversion price in effect immediately
prior to the effectiveness of the conversion price reduction
contemplated by this subparagraph (4) by a fraction, the numerator of
which shall be the current market price of the Common Stock
immediately preceding the declaration date of such dividend or
distribution minus the amount of Excess Cash (applicable to one
outstanding share of Common Stock as of such declaration date) and the
denominator shall be such current market price of Common Stock, such
reduction to become effective immediately prior to the opening of
business on the day following the date of such distribution, provided
that no such adjustment shall be made if such dividend or distribution
is not paid. "Excess Cash" shall mean any dividend or distribution
(excluding, in all events, any dividend or distribution described in
subparagraph (3) above) consisting exclusively of cash and declared
with respect to Common Stock to the extent such dividend or
distribution when added to all other dividends or distributions on
Common Stock consisting exclusively of cash and made during the
immediately preceding twelve months (applicable to one outstanding
share of Common Stock), exceeds 15% of the current market price of the
Common Stock immediately preceding the date of declaration of such
dividend or distribution.
<PAGE> 10
(5) In case the Corporation (or any subsidiary) shall consummate
an Excess Tender Offer, the conversion price shall be reduced so that
the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the effectiveness of
the conversion price reduction contemplated by this subparagraph (5)
by a fraction, the numerator of which shall be the product of (i) the
current market price of the Common Stock immediately preceding the
first public announcement by the Corporation announcing such Excess
Tender Offer multiplied by (ii) the then outstanding number of shares
of Common Stock, which product shall be reduced by the cash
consideration paid in connection with such Excess Tender Offer and the
denominator of which shall be the product of (a) such current market
price of Common Stock multiplied by (b) the difference between (x)
then outstanding shares of Common Stock minus the (y) number of shares
of Common Stock repurchased in such Excess Tender Offer, such
reduction to become effective immediately prior to the opening of
business on the day following the date of the expiration of such
Excess Tender Offer, provided, that no such adjustment shall be made
to the extent such Excess Tender Offer has not been consummated.
"Excess Tender Offer" shall mean any publicly announced all cash
tender offer by the Corporation (or any subsidiary) for shares of
Common Stock (other than odd lot tenders) to the extent that the cash
amounts paid by the Corporation (or any subsidiary) in connection
therewith, when added to all other cash paid by the Corporation (or
any subsidiary) in connection with any other publicly announced cash
tender offer for shares of Common Stock (other than odd lot tenders)
expiring during the immediately preceding twelve months and for which
no other adjustment hereunder has been made, exceeds 15% of the
product of the number of shares of outstanding Common Stock multiplied
by the current market price of Common Stock determined as of the day
immediately preceding the date of the first public announcement by the
Corporation of the Excess Tender Offer.
(6) The Corporation from time to time (by action of the Board of
Directors) may reduce the conversion price by any amount for any
period of time if the period is at least twenty days, the reduction is
irrevocable during the period and the Board of Directors of the
Corporation shall have made a determination that such reduction would
be in the best interest of the Corporation, which determination shall
be conclusive. Whenever the conversion price is reduced pursuant to
this preceding sentence, the Corporation shall mail to holders of
record of the Series E Cumulative Convertible Preferred Stock a notice
of the reduction at least fifteen days prior to the date the reduced
conversion price takes effect, and such notice shall state the reduced
conversion price and the period it will be in effect.
(7) Whenever the conversion price or rate is adjusted, as herein
provided, the Corporation shall forthwith file with any transfer
agents for the Series E Cumulative Convertible Preferred Stock
appointed as aforesaid a certificate signed by the President or one of
the Vice-Presidents or the General Counsel of the Corporation and by
its Treasurer or an Assistant Treasurer, stating the adjusted
conversion price determined as provided in this Section 7. Such
certificate shall show in detail the facts requiring such adjustment.
Whenever the conversion price or rate is adjusted, the Corporation
shall forthwith cause a notice stating the adjustment and the
conversion price to be mailed to the respective holders of record of
Series E Cumulative Convertible Preferred Stock. Such transfer agents
shall be under no duty to make any inquiry or investigation as to the
statements contained in any such certificate or as to the manner in
<PAGE> 11
which any computation was made, but may accept such certificate as
conclusive evidence of the statements therein contained, and each
transfer agent shall be fully protected with respect to any and all
acts done or action taken or suffered by it in reliance thereon. No
transfer agent in its capacity as transfer agent shall be deemed to
have any knowledge with respect to any change of capital structure of
the Corporation unless and until it receives a notice thereof pursuant
to the provisions of this subparagraph (7) and in default of any such
notice each transfer agent may conclusively assume that there has been
no such change.
D. In the event of any capital reorganization or any
reclassification of the capital stock of the Corporation or in the event of
the consolidation or merger of the Corporation with another corporation or
in the event of any sale or conveyance of all or substantially all of the
property of Corporation, each share of Series E Cumulative Convertible
Preferred Stock shall thereafter be convertible into the number of shares
of stock or other securities or property receivable upon such capital
reorganization, reclassification of capital stock, consolidation, merger,
sale or conveyance, as the case may be, by a holder of the number of shares
of Common Stock into which such share of Series E Cumulative Convertible
Preferred Stock was convertible immediately prior to such capital
reorganization, reclassification of capital stock, consolidation, merger,
sale or conveyance; and, in any case, appropriate adjustment (as determined
by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to rights and interests thereafter
of the holders of the Series E Cumulative Convertible Preferred Stock, to
the end that the provisions set forth herein (including the specified
changes in and other adjustments of the conversion price) shall thereafter
be applicable, as near as reasonably may be, in relation to any shares of
stock or other securities or other property thereafter deliverable upon the
conversion of the Series E Cumulative Convertible Preferred Stock.
E. The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of
Common Stock held in its treasury, or both, solely for the purpose of
effecting conversion of the Series E Cumulative Convertible Preferred
Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series E Cumulative Convertible
Preferred Stock not theretofore converted. The Corporation covenants that
any shares of Common Stock issued or delivered upon conversion of the
Series E Cumulative Convertible Preferred Stock shall be validly issued,
fully paid and non-assessable. The Corporation shall from time to time, in
accordance with the laws of the State of Delaware, endeavor in good faith
to increase the authorized amount of its Common Stock if at any time the
number of shares of Common Stock remaining which are authorized but not
outstanding shall not be sufficient to permit the conversion of all the
then outstanding Series E Cumulative Convertible Preferred Stock.
F. No fractions of shares of Common Stock are to be issued upon
conversion, but in lieu thereof the Corporation will pay therefor in cash
based on the current market price of the Common Stock on the Trading Day
next preceding the day of conversion.
G. The Corporation will pay any and all issue and other taxes that
may be payable in respect of any issue or delivery of shares of Common
Stock on conversion of Series E Cumulative Convertible Preferred Stock
pursuant hereto. The Corporation shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the
<PAGE> 12
issue and delivery of Common Stock in a name other than that in which the
Series E Cumulative Convertible Preferred Stock so converted was
registered, and no such issue or delivery shall be made unless and until
the person requesting such issue has paid to the Corporation the amount of
any such tax, or has established to the satisfaction of the Corporation,
that such tax has been paid.
SECTION 8. REDEMPTION.
A. The Series E Cumulative Convertible Preferred Stock shall not be
redeemable by the Corporation prior to May 1, 1996. On or after May 1,
1996, the Corporation, at its option, may redeem the shares of Series E
Cumulative Convertible Preferred Stock, in whole or in part, as set forth
herein, subject to the provisions described below.
B. The Series E Cumulative Convertible Preferred Stock may be
redeemed, in whole or in part, at the option of the Corporation, at any
time after May 1, 1996, only if for any 20 Trading Days within any period
of 30 consecutive Trading Days, including the last Trading Day of such
period, the current market price of the Common Stock on each of such 20
Trading Days exceeds 125% of the conversion price in effect on such Trading
Day. In order to exercise its redemption option, the Corporation must
issue a press release announcing the redemption (the "Press Release") prior
to the opening of trading on the New York Stock Exchange on the second
Trading Day after the 30-day period during which the condition in the
preceding sentence has been met. The Corporation may not issue a Press
Release prior to May 1, 1996. The Press Release shall announce the
redemption and set forth the number of shares of Series E Cumulative
Convertible Preferred Stock which the Corporation intends to redeem. The
Call Date (defined below) shall be selected by the Corporation, shall be
specified in the notice to holders under paragraph E in this Section 8 and
shall not be less than 30 days or more than 60 days after the date on which
the Corporation issues the Press Release.
C. Upon redemption of Series E Cumulative Convertible Preferred
Stock by the Corporation on the date specified in the notice to holders
required under paragraph E of this Section 8 (the "Call Date"), each share
of Series E Cumulative Convertible Preferred Stock so redeemed shall be
converted into a number of shares of Common Stock equal to the Stated Value
of the shares of Series E Cumulative Convertible Preferred Stock being
redeemed divided by the conversion price as of the opening of business on
the Call Date. Upon any redemption of Series E Cumulative Convertible
Preferred Stock, the Corporation shall pay any accrued and unpaid dividends
through the Call Date, provided that, in the case of a Call Date falling
after a dividend payment record date and on or prior to the related
Quarterly Dividend Date, the holders of the Series E Cumulative Convertible
Preferred Stock at the close of business on such record date will be
entitled to receive the dividend payable on such shares on the
corresponding Quarterly Dividend Date.
D. If full cumulative dividends on the Series E Cumulative
Convertible Preferred Stock and any other class or series of stock of the
Corporation ranking, as to dividends and amounts distributable on
liquidation, dissolution or winding up, on a parity with the Series E
Cumulative Convertible Preferred Stock have not been paid or declared and
set apart for payment, the Series E Cumulative Convertible Preferred Stock
may not be redeemed in part and the Corporation may not purchase or acquire
shares of Series E Cumulative Convertible Preferred Stock, otherwise than
pursuant to a purchase or exchange offer made on the same terms to all
holders of shares of Series E Cumulative Convertible Preferred Stock.
<PAGE> 13
E. If the Corporation shall redeem shares of Series E Cumulative
Convertible Preferred Stock pursuant to this Section 8, notice of such
redemption shall be given not more than four business days after the date
on which the Corporation issues the Press Release, to each holder of record
of the shares to be redeemed. Such notice shall be provided by first class
mail, postage prepaid, at such holder's address as the same appears on the
records of the Corporation, or by publication in The Wall Street Journal or
The New York Times, or if neither such newspaper is then being published,
any other daily newspaper of national circulation. If the Corporation
elects to provide such notice by publication, it shall also promptly mail
notice of such redemption to the holders of the Series E Cumulative
Convertible Preferred Stock to be redeemed. Neither the failure to mail
any notice required by this paragraph E, nor any defect therein or in the
mailing thereof, to any particular holder, shall affect the sufficiency of
the notice or the validity of the proceedings for redemption with respect
to the other holders. Any notice which was mailed in the manner herein
provided shall be conclusively presumed to have been duly given on the date
mailed whether or not the holder receives the notice. Each such mailed or
published notice shall state, as appropriate: (1) the Call Date; (2) the
number of shares of Series E Cumulative Convertible Preferred Stock to be
redeemed, and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (3)
assuming no change in the conversion price prior to the Call Date, the
number of shares of Common Stock to be issued with respect to each share of
Series E Cumulative Convertible Preferred Stock; (4) the place or places at
which certificates for such shares are to be surrendered for certificates
representing shares of Common Stock; (5) the then current conversion price;
and (6) that dividends on the shares to be redeemed shall cease to accrue
on such Call Date. (In the event of any change in the conversion price
after the date of such notice, the Corporation shall promptly provide a
supplemental notice to each holder of record of the shares to be redeemed
(in the manner described hereinabove in this paragraph E) describing such
new conversion price and the new number of shares of Common Stock to be
issued with respect to each share of Series E Cumulative Convertible
Preferred Stock). Notice having been published or mailed as aforesaid,
from and after the Call Date (unless the Corporation shall have failed to
make available a number of shares of Common Stock or amount of cash
necessary to effect such redemption), (i) dividends on shares of the Series
E Cumulative Convertible Preferred Stock so called for redemption shall
cease to accrue, (ii) said shares shall no longer be deemed to be
outstanding, and (iii) all rights of the holders thereof as holders of
Series E Cumulative Convertible Preferred Stock of the Corporation shall
cease (except the rights to receive the shares of Common Stock and cash
payable upon such redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to receive any
dividends payable thereon). The Corporation's obligation to provide shares
of Common Stock and cash in accordance with the preceding sentence shall be
deemed fulfilled if, on or before the Call Date, the Corporation shall
deposit with a bank or trust company (which may be an affiliate of the
Corporation) that has an office in the Borough of Manhattan, City of New
York, and that has, or is an affiliate of a bank or trust company that has,
a capital and surplus of at least $50,000,000, shares of Common Stock and
any cash necessary for such redemption, in trust, with irrevocable
instructions that such shares of Common Stock and cash be applied to the
redemption of the shares of Series E Cumulative Convertible Preferred Stock
so called for redemption (subject to the Corporation's continuing
obligation to deliver additional shares of Common Stock or cash in the
event of any change in the conversion price occurring after such deposit
but prior to the determination of the conversion price as of the opening of
<PAGE> 14
business on the Call Date). At the close of business on the Call Date,
each holder of Series E Cumulative Convertible Preferred Stock to be
redeemed (unless the Corporation defaults in the delivery of the shares of
Common Stock or cash payable on such Call Date) shall be deemed to be the
record holder of the number of shares of Common Stock into which such
Series E Cumulative Convertible Preferred Stock is to be redeemed,
regardless of whether such holder has surrendered the certificates
representing the Series E Cumulative Convertible Preferred Stock. No
interest shall accrue for the benefit of the holders of Series E Cumulative
Convertible Preferred Stock to be redeemed on any cash so set aside by the
Corporation. Subject to applicable escheat laws, any such cash unclaimed
at the end of two years from the Call Date shall revert to the general
funds of the Corporation, after which reversion the holders of such shares
so called for redemption shall look only to the general funds of the
Corporation for the payment of such cash.
As promptly as practicable after the surrender in accordance with said
notice of the certificates for any such shares so redeemed (properly
endorsed or assigned for transfer, if the Corporation shall so require and
the notice shall so state), such shares shall be exchanged for certificates
of shares of Common Stock and any cash (without interest thereon) for which
such shares have been redeemed. If fewer than all the outstanding shares
of Series E Cumulative Convertible Preferred Stock are to be redeemed,
shares to be redeemed shall be selected by the Corporation from outstanding
shares of Series E Cumulative Convertible Preferred Stock not previously
called for redemption by lot or pro rata (as nearly as may be) or by any
other method determined by the Corporation in its sole discretion to be
equitable. If fewer than all the shares represented by any certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares without cost to the holder thereof.
F. No fractional shares representing fractions of shares of Common
Stock shall be issued upon redemption of the Series E Cumulative
Convertible Preferred Stock. Instead of any fractional interest in a share
of Common Stock that would otherwise be deliverable upon the redemption of
a share of Series E Cumulative Convertible Preferred Stock, the Corporation
shall pay to the holder of such share an amount in cash (computed to the
nearest cent) based upon the current market price of Common Stock on the
Trading Day immediately preceding the Call Date. If more than one share
shall be surrendered for redemption at one time by the same holder, the
number of full shares of Common Stock issuable upon redemption thereof
shall be computed on the basis of the aggregate number of shares of Series
E Cumulative Convertible Preferred Stock surrendered.
G. The Corporation covenants that any shares of Common Stock issued
or delivered upon redemption of the Series E Cumulative Convertible
Preferred Stock shall be validly issued, fully paid and non-assessable.
SECTION 9. RANKING.
The Series E Cumulative Convertible Preferred Stock shall rank on a
parity with the Series A Cumulative Convertible Preferred Stock and with
the Series C Cumulative Preferred Stock and senior to the Series B Junior
Participating Preferred Stock as to dividends and rights upon liquidation,
dissolution or winding up of the Corporation, unless the terms of any such
series shall provide that such series ranks junior to the Series E
Cumulative Convertible Preferred Stock as to dividends and rights upon
liquidation, dissolution or winding up of the Corporation.
SECTION 10. LISTING OF COMMON STOCK.
<PAGE> 15
If and so long as Common Stock is listed on the New York Stock
Exchange (or on any other exchange or market on which the Common Stock is
listed or quoted for trading), the Corporation shall cause any and all
shares of Common Stock issued in connection with any conversion or
redemption of the Series E Cumulative Convertible Preferred Stock to be
listed on The New York Stock Exchange (or such other exchange or market on
which the Common Stock is listed or quoted for trading).
IN WITNESS WHEREOF, this Certificate of Designations, Preferences and
Rights of Series E Cumulative Convertible Preferred Stock has been executed
as of April 27, 1993, on behalf of Kemper Corporation by the Chairman of
the Board and Chief Executive Officer of the Corporation and attested by
the General Counsel and Corporate Secretary of the Corporation, who do
hereby affirm, under penalties of perjury, that the foregoing Certificate
is the act and deed of the Corporation and that the facts stated therein
are true.
KEMPER CORPORATION
By /s/ David B. Mathis
David B. Mathis
Chairman of the Board and
Chief Executive Officer
Attest:
/s/Kathleen A. Gallichio
Kathleen A. Gallichio
General Counsel and
Corporate Secretary
<PAGE> 1
EXHIBIT 3.1(h)
CERTIFICATE OF CORRECTION
OF
SECOND RESTATED CERTIFICATE OF INCORPORATION
OF
KEMPER CORPORATION
KEMPER CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof,
DOES HEREBY CERTIFY:
FIRST: That the Second Restated Certificate of Incorporation of
Kemper Corporation (the "Restated Certificate") was filed in the Office of
the Secretary of State of the State of Delaware on August 22, 1988.
SECOND: That Section 6 of Part I of Article Fourth in the Restated
Certificate is an inaccurate record of the Certificate of Designations,
Preferences and Relative, Participating, Optional or Other Special Rights
of the Series A Cumulative Convertible Preferred Stock of Kemper
Corporation which was filed in the office of the Secretary of State of the
State of Delaware on May 6, 1982.
THIRD: That the correct form of Section 6 of Part I of Article Fourth
in the Restated Certificate does and shall include the following provision
after the heading "Series A Cumulative Convertible Preferred Stock" and
before paragraph (a):
The Board of Directors of the Corporation at a meeting duly held
on March 4, 1982, duly adopted the following resolution, viz:
RESOLVED that, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board") by the
provisions of the Certificate of Incorporation of the Corporation, as
amended, the Board hereby creates a series of the Preferred Stock of the
Corporation to consist of 256,200 shares. The Board hereby fixes the
designations, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, of the shares of such series (in addition to the designations,
preferences and relative, participating, optional or other special rights
and the qualifications, limitations or restrictions thereof, set forth in
the Certificate of Incorporation of the Corporation which are applicable to
the Preferred Stock of all series) as follows:
FOURTH: That except as otherwise provided in the General Corporation
Law of the State of Delaware, this Certificate of Correction shall become
effective as of August 22, 1988, the date the Restated Certificate was
originally filed.
IN WITNESS WHEREOF, this Certificate of Correction has been executed
as of the 15th day of April, 1993, on behalf of Kemper Corporation by its
Chairman of the Board and Chief Executive Officer and attested by its
General Counsel and Corporate Secretary, who do hereby affirm, under
penalties of perjury, that this Certificate of Correction is the act and
deed of Kemper Corporation and the facts stated herein are true.
<PAGE> 2
KEMPER CORPORATION
By:/s/David B. Mathis
David B. Mathis
Chairman of the Board and
Chief Executive Officer
ATTEST:
By:/s/ Kathleen A. Gallichio
Kathleen A. Gallichio
General Counsel and
Corporate Secretary
C:4888K
<PAGE> 1
EXHIBIT 3.2
Amended 9/1/82
Amended 3/3/83
Amended 3/1/84
Amended 12/1/84
Amended 11/7/85
Amended 9/1/86
Amended 3/5/87
Amended 5/20/87
Amended 7/18/90
Amended 1/11/94
BYLAWS OF
KEMPER CORPORATION
LONG GROVE, ILLINOIS
STOCKHOLDER MEETINGS
1. The annual meeting of stockholders shall be held at 10:30 A.M.,
local time, on the Wednesday following the second Tuesday in May of each
year, if not a legal holiday and if a legal holiday, then on the next
business day following. A special meeting of the stockholders may be
called only in the manner set forth in the Company's Certificate of
Incorporation. Notice of an annual or special meeting of stockholders
shall be mailed at least ten (10) days prior to the meeting to each
stockholder at such address as appears on the stock record of the Company,
stating the time and place of the meeting. The notice of a special meeting
of stockholders shall state the purpose of the meeting. Meetings of
stockholders for any purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
2. Notice of any annual or special meeting of the stockholders may be
waived by any stockholder, and failure of any stockholder to receive notice
of any meeting of stockholders shall not invalidate the meeting.
3. At any meeting of the stockholders, a majority of the stock issued
and outstanding, and entitled to vote thereat, shall be requisite and shall
constitute a quorum for the transaction of business except as otherwise
provided by statute. If, however, a quorum shall not be present at any
meeting, the stockholders present may recess the meeting from time to time
by majority vote, to reconvene without notice other than announcement at
the meeting. Any resolution of recess shall state the time and place at
which the meeting shall reconvene. At any recessed meeting at which a
quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally called.
4. At any meeting of the stockholders, each stockholder shall be
entitled to vote in person or by proxy appointed by an instrument in
writing subscribed by such stockholder or by his duly authorized attorney,
and, except as stated in the Company's Certificate of Incorporation, shall
have one vote for each share of stock standing registered in his name on
the stock record of the Company. Except as otherwise provided by statute,
the Company's Certificate of Incorporation or the Company's bylaws, a
<PAGE> 2
majority of the votes cast shall be sufficient to adopt or reject any
proposal.
5. At any annual meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (i) by or at the
direction of the board of directors or (ii) by any stockholder of the
Company who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this paragraph numbered 5. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the
secretary of the Company. To be timely, a stockholder's notice must be
delivered or mailed to and received at the principal executive offices of
the Company not less than 30 days prior to the date of the annual meeting;
provided, however, that in the event that less than 40 days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, to be timely, a stockholder's notice must be so received not
later than the close of business on the tenth day following the day on
which such notice of the date of the annual meeting was mailed or such
public disclosure was made. A stockholder's notice to the secretary shall
set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear
on the Company's books, of the stockholder proposing such business, (iii)
the class and number of shares of the Company's stock that are beneficially
owned by such stockholder, and (iv) any material interest of such
stockholder in such business. Notwithstanding anything in these bylaws to
the contrary, no business shall be brought before or conducted at an annual
meeting except in accordance with the provisions of this paragraph numbered
5. The officer of the Company or other person presiding at the annual
meeting shall, if the facts so warrant, determine and declare to the
meeting that business was not properly brought before the meeting in
accordance with such provisions and, if he should so determine, he shall so
declare to the meeting and any such business so determined to be not
properly brought before the meeting shall not be transacted.
BOARD OF DIRECTORS
6. Only persons who are nominated in accordance with the procedures
set forth in these bylaws shall be eligible for election as directors.
Nominations of persons for election to the board of directors of the
Company may be made at a meeting of stockholders at which directors are to
be elected only (i) by or at the direction of the board of directors or
(ii) by any stockholder of the Company entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth
in this paragraph numbered 6. Such nominations, other than those made by
or at the direction of the board of directors, shall be made by timely
notice in writing to the secretary of the Company. To be timely, a
stockholder's notice shall be delivered or mailed to and received at the
principal executive offices of the Company not less than 30 days prior to
the date of the meeting; provided, however, that in the event that less
than 40 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. Such stockholder's notice shall
set forth (i) as to each person whom such stockholder proposes to nominate
for election or re-election as a director, all information relating to such
person that is required to be disclosed in solicitations of proxies for
<PAGE> 3
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (ii)
as to the stockholder giving the notice (x) the name and address, as they
appear on the Company's books, of such stockholder and (y) the class and
number of shares of the Company's stock that are beneficially owned by such
stockholder. At the request of the board of directors any person nominated
by the board of directors for election as a director shall furnish to the
secretary of the Company that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No
person shall be eligible for election as a director of the Company unless
nominated in accordance with the provisions of this paragraph numbered 6.
The officer of the Company or other person presiding at the meeting shall,
if the facts so warrant, determine and declare to the meeting that a
nomination was not made in accordance with such provisions and, if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
7. The board of directors shall meet and organize as soon as
practicable after the annual meeting of the stockholders. If the
organization meeting of the board of directors is held immediately after
the adjournment of the annual meeting of stockholders, no notice of such
meeting need be given to any directors.
8. The board of directors may prescribe a schedule of regular meetings
stating the times and places thereof, and when such schedule is adopted no
notice of any such meeting need be given to the directors.
9. A special meeting of the board of directors may be called by the
chairman of the board, the chairman or by the president or by the secretary
on 24 hours' notice. Such notice may be given personally, by telephone, by
telegram, or by written notice mailed or delivered to the business or
residence address of a director. Notice of meeting may be waived by any
director, and attendance of a director shall constitute a waiver of notice
of such meeting, except where such director attends the meeting for the
express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called. Neither the business to be
transacted nor the purpose of any regular or special meeting of the board
of directors need be stated in the notice or waiver of notice of such
meeting unless expressly required by statute.
10. A majority of the board of directors shall be requisite and shall
constitute a quorum for the transaction of business at any meeting of the
board of directors, but if less than a quorum be present at any meeting, a
majority of those present may recess the meeting from time to time to
reconvene without notice other than by announcement at the meeting, until a
quorum shall be present.
11. Except as otherwise provided by statute, by the Certificate of
Incorporation or by the bylaws, a majority of the votes cast by the
directors present shall be sufficient to adopt or reject any proposal.
12. (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he
or she is or was a director or officer of the Company or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
<PAGE> 4
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Company to
the fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to
provide broader indemnification rights than permitted prior thereto),
against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in
connection therewith and such indemnification shall continue as to an
indemnitee who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in paragraph
(b) hereof with respect to proceedings to enforce rights to
indemnification, the Company shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the board of
directors of the Company. The right to indemnification conferred in this
paragraph numbered 12 shall be a contract right and shall include the right
to be paid by the Company the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter an "advancement
of expenses"); provided, however, that, if the Delaware General Corporation
Law requires, an advancement of expenses incurred by an indemnitee in his
or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Company of an undertaking (hereinafter an "undertaking"),
by or on behalf of such indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision from which there
is no further rights to appeal (hereinafter a "final adjudication") that
such indemnitee is not entitled to be indemnified for such expenses under
this paragraph numbered 12 or otherwise.
(b) RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under paragraph (a)
of this paragraph numbered 12 is not paid in full by the Company within
sixty days after a written claim has been received by the Company, except
in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty days, the indemnitee may at any time
thereafter bring suit against the Company to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Company to recover an advancement of expenses pursuant
to the terms of an undertaking, the indemnitee shall be entitled to be paid
also the expense of prosecuting or defending such suit. In (i) any suit
brought by the indemnitee to enforce a right to indemnification hereunder
(but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit
by the Company to recover an advancement of expenses pursuant to the terms
of an undertaking the Company shall be entitled to recover such expenses
upon a final adjudication that, the indemnitee has not met the applicable
standard of conduct set forth in the Delaware General Corporation Law.
Neither the failure of the Company (including its board of directors,
independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Company (including its
board of directors, independent legal counsel, or its stockholders) that
<PAGE> 5
the indemnitee has not met such applicable standard of conduct, shall
create a presumption that the indemnitee has not met the applicable
standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Company to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this paragraph numbered 12 or otherwise shall be on the
Company.
(c) NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to
the advancement of expenses conferred in this paragraph numbered 12 shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, the Company's Certificate of Incorporation,
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise.
(d) INSURANCE. The Company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Company
or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Company would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
(e) INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE COMPANY. The
Company may, to the extent authorized from time to time by the board of
directors, grant rights to indemnification, and to the advancement of
expenses to any employee or agent of the Company to the fullest extent of
the provisions of this paragraph numbered 12 with respect to the
indemnification and advancement of expenses of directors and officers of
the Company.)
COMMITTEES
13. The board of directors, by resolution passed by a majority of the
whole board, may designate one or more committees, each committee to
consist of one or more directors of the corporation. The board may
designate one or more directors as alternate members of any committee who
may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in
the place of any such absent or disqualified member. Any such committee to
the extent provided in the resolution of the board of directors, or in
these bylaws, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to
all papers which may require it; but no such committee shall have the power
or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders the
dissolution of the corporation or a revocation of a dissolution, or
amending the bylaws of the corporation; and no such committee shall have
the power or authority to declare a dividend or to authorize the issuance
of stock unless the resolution creating such committee and defining its
authority, or these bylaws, or certificate of incorporation expressly so
provide.
<PAGE> 6
14. The executive committee, designated by a majority of the whole
board, shall have and exercise during the interim between the meetings of
the board of directors, all authority of the board of directors in the
management of the business and affairs of the corporation and may authorize
the seal of the corporation to be affixed to all papers which may require
it. It shall have general charge of the affairs of the corporation with
power to determine and authorize the purchase, sale, lease or exchange of
any security or property, unless such property constitutes all or
substantially all of the corporation's property and assets, and to
determine or authorize any action with respect to the liquidation of,
exchange of or the exercise of any right pursuant to any security or
property in which the corporation has an interest or which belongs to the
corporation, unless such security or assets constitutes all or
substantially all of the corporation's securities or assets. The executive
committee is specifically granted the power or authority to declare a
dividend in cash and/or in stock, and to authorize the issuance of stock,
on such terms and conditions as it deems proper.
15. The executive committee shall have power to adopt resolutions
governing the deposit of funds of the Company and the manner of withdrawal
or disbursement of such funds, and to authorize the leasing of safe deposit
boxes and to provide rules and regulations for access to any safe deposit
box. The executive committee shall have the right to repeal or amend any
resolution previously adopted by the board of directors with respect to any
banking account or deposit of funds or safe deposit box unless such
resolution shall have specifically reserved to the board of directors the
exclusive right to amend or repeal such resolution.
16. The board of directors may limit or restrict the authority of the
executive committee to any extent stated in a resolution adopted by the
board of directors.
17. The investment committee, if designated, shall have authority or
power as specified by the board of directors respecting the making of loans
and investment of the funds of the Company and the taking of any action
with respect to the custody of, the liquidation, sale or exchange of, or
the exercise of any right pertaining to any security or asset belonging to
the Company and such other powers relating to the deposit of or custody of
funds of the Company as may be stated in such resolution. The investment
committee shall consist of as many directors as may be determined by the
board of directors.
17(a). The board of directors may form an audit committee to be
composed of three outside board members, and may designate an outside board
member to serve as an alternate.
The committee shall oversee the selection and retention of an
independent auditor and shall have responsibility for the content and
oversight of the audit program, including review of the effectiveness of
the company's corporate accounting and financial practices, and the
adequacy of internal controls.
17(b). The board of directors may form a nominating committee, such
committee to be charged with the responsibility to seek, consider and
recommend to the board, qualified candidates for the board of directors to
stand for election at each special or annual meeting of the stockholders
called for such purpose, or qualified candidates to fill vacancies or newly
created directorships on the board of directors as they may occur and as
the board may request. Such committee shall be composed of all
<PAGE> 7
non-management board members who are neither standing for re-election
within one year nor serving on the executive committee, except for the
chairman of the committee who shall be selected by the board and who shall
not be subject to any eligibility requirements for membership on the
committee. The final selection of board nominees to stand for election, or
fill vacancies or newly created directorships, shall remain solely within
the discretion of the board.
OFFICERS
18. The board of directors shall elect or appoint the officers
specified or provided for in the bylaws, the members of any committee and
such other officers as it may deem advisable and determine the powers and
duties of such officers or members. The board shall have power to fix the
compensation of members of the board for their services and expenses and
shall fix or determine the manner of fixing the compensation of officers
and employees of the company. Any officer or committee member shall serve
at the pleasure of the board, except that with respect to an officer of the
Company the board of directors shall have power to authorize a contract
containing such provisions as to term or conditions of service as it may
deem advisable. One person may hold two or more offices. Any vacancy in
any office may be filled by the board of directors. Interim or temporary
appointments may be made at any time by the executive committee. Any such
appointment by the executive committee shall be reported to and confirmed
by the board of directors at the next meeting.
19. Principal Officers. The principal officers shall be the chairman
of the board, the chairman and the president.
The chairman shall exercise general supervision, direction and
management of the business of the Company.
The chairman of the board, the chairman or president shall preside at
meetings of stockholders of the Company and shall preside at meetings of
the board of directors.
Each of such principal officers shall have regular duties and
responsibilities as shall be prescribed by the board of directors,
executive committee or the chairman.
20. Vice Presidents, Treasurer and Secretary. A vice president, the
treasurer or a secretary shall have such duties and responsibilities as may
be prescribed by the board of directors, the executive committee or by the
chairman.
STOCKHOLDERS
21. The certificate of stock of the Company shall be numbered and
shall be entered in the books of the Company as they are issued. They
shall show the holder's name and number of shares and shall be signed by
the chairman or the president or a vice president and by the treasurer or
an assistant treasurer or a secretary or an assistant secretary.
22. A transfer of stock shall be made on the record of the Company
only by the person named in the certificate or by his attorney lawfully
constituted in writing, and upon surrender of the certificate therefor.
23(a). In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
<PAGE> 8
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect to any change, conversion or exchange of stock or for the purpose
of any other lawful action, the board of directors may fix, in advance, a
record date, which shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any
other action.
(b). If no record date is fixed:
(1) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.
(2) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
(c) A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
24. The Company shall be entitled to treat the holder of record of any
shares of stock as the holder in fact thereof and accordingly shall not be
bound to recognize any equitable or other claim to, or interest in, such
shares on the part of any other person, whether or not the Company shall
have express or other notice thereof, except as expressly provided by the
laws of Delaware.
25. The board of directors may direct a new certificate of stock to be
issued in the place of any certificate of stock theretofore issued by the
Company alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. The board of directors when directing such issuance of a new
certificate of stock, in its discretion and as a condition precedent to the
issuance thereof, may require the owner of such lost or destroyed
certificate to give the Company a bond in such sum as the board of
directors may determine as indemnity against any claim that may be made
against the Company on account of such certificate of stock.
26. Dividends upon the capital stock of the Company may be declared by
the board of directors in its discretion at any regular or special meeting.
Dividends may be paid in cash, property, shares of capital stock, or in any
other form or manner permitted by law, as determined by the board of
directors.
27. Before payment of any dividend there may be set aside out of any
funds of the Company available for dividends such sum or sums as the board
of directors from time to time, in its discretion, deems proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Company, or for such other
purpose as the board of directors shall deem conducive to the interests of
the Company.
MISCELLANEOUS
<PAGE> 9
28. The fiscal year shall begin the first day of January in each
year.
29. Any officer of the Company shall furnish a fidelity bond or a bond
guaranteeing the faithful performance of his duties for such an amount as
may be determined by the board of directors, and the cost of such bond
shall be paid by the Company.
30. The form of the corporate seal may be determined from time to time
by the board of directors.
31. Subject to the provisions of the Certificate of Incorporation,
these bylaws may be amended or repealed at any regular meeting of the
stockholders (or at any special meeting thereof duly called for that
purpose) by a majority vote of the shares represented and entitled to vote
at such meeting at which a quorum is present; provided that in the notice
of such special meeting notice of such purpose shall be given. Subject to
the laws of the State of Delaware, the Certificate of Incorporation and
these bylaws, the board of directors may by a majority vote of those
present at any meeting at which a quorum is present amend these bylaws, or
adopt such other bylaws as in their judgment may be advisable for the
regulation of the conduct of the affairs of the Company.
<PAGE> 1
EXHIBIT 4.1(c)
Kemper Corporation
To
The First National Bank of Chicago, as Trustee
____________________________
Indenture
Dated as of September 15, 1993
____________________________
Kemper Corporation
Reconciliation and tie between Trust
Indenture Act of 1939 and Indenture,
dated as of September 15, 1993
Trust Indenture Indenture
Act Section Section
310(a)(1) 609
(a)(2) 609
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 608, 110
311(a) 613
(b) 613
312(a) 701, 702(a)
(b) 702(b)
(c) 702(c)
313(a) 703(a)
(b) 703(a)
(c) 703(a)
<PAGE> 2
(d) 703(b)
314(a) 704
(b) Not Applicable
(c)(1) 102
(c)(2) 102
(c)(3) Not Applicable
(d) Not Applicable
(e) 102
315(a) 601
(b) 602
(c) 601
(d) 601
(e) 514
316(a) 101
(a)(1)(A) 502, 512
(a)(1)(B) 513
(a)(2) Not Applicable
(b) 508
317(a)(1) 503
(a)(2) 504
(b) 1003
318(a) 108
___________________
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture
Table of Contents
Section Heading Page
Parties 1
Recitals 1
Article One Definitions and other Provisions of General
Application 1
Section 101. Definitions 1
Act 2
Affiliate 2
Authenticating Agent 2
Authorized Newspaper 2
Bearer Security 2
Board of Directors 2
Board Resolution 2
Business Day 2
Commission 2
Company 3
Company Request or Company Order 3
Corporate Trust Office 3
corporation 3
coupon 3
Debt 3
Defaulted Interest 3
Depositary 3
Dollar or $ 3
<PAGE> 3
Event of Default 3
Holder 3
Indenture 4
interest 4
Interest Payment Date 4
Internal Revenue Code 4
Maturity 4
Mortgage 4
Officers' Certificate 4
Opinion of Counsel 4
Original Issue Discount Security 4
Outstanding 5
Paying Agent 5
Person 6
Place of Payment 6
Predecessor Security 6
Redemption Date 6
Redemption Price 6
Registered Security 6
Regular Record Date 6
Responsible Officer 6
Restricted Subsidiary 7
Restricted Insurance Subsidiary 7
Securities 7
Security Register and Security Registrar 7
Special Record Date 7
Stated Maturity 7
Subsidiary 7
Trustee 8
Trust Indenture Act 8
U.S. Government Obligations 8
United States 8
United States Alien 8
Vice President 8
Section 102. Compliance Certificates and Opinions 8
Section 103. Form of Documents Delivered to Trustee 9
Section 104. Acts of Holders 9
Section 105. Notices, Etc., to Trustee and Company 11
Section 106. Notice to Holders of Securities; Waiver 11
Section 107. Language of Notices, Etc 12
Section 108. Conflict with Trust Indenture Act 12
Section 109. Effect of Headings and Table of Contents 13
Section 110. Successors and Assigns 13
Section 111. Separability Clause 13
Section 112. Benefits of Indenture 13
Section 113. Governing Law 13
Section 114. Legal Holidays 13
Article Two Security Forms 13
Section 201. Forms Generally 13
Section 202. Form of Registered Security 14
Section 203. Forms of Bearer Security and Coupon 24
Section 204. Form of Trustee's Certificate of Authentication 37
Article Three The Securities 37
Section 301. Amount Unlimited; Issuable in Series 37
Section 302. Denominations 40
Section 303. Execution, Authentication, Delivery and Dating 40
<PAGE> 4
Section 304. Temporary Securities 42
Section 305. Registration, Registration of Transfer and
Exchange 44
Section 306. Mutilated, Destroyed, Lost and Stolen Securities
and Coupons 48
Section 307. Payment of Interest; Interest Rights Preserved 49
Section 308. Persons Deemed Owners 51
Section 309. Cancellation 51
Section 310. Computation of Interest 52
Section 311. Forms of Certification 52
Article Four Satisfaction and Discharge 57
Section 401. Satisfaction and Discharge of Indenture 57
Section 402. Application of Trust Money 58
Section 403. Satisfaction, Discharge and Defeasance of
Securities of Any Series 59
Article Five Remedies 61
Section 501. Events of Default 61
Section 502. Acceleration of Maturity; Rescission and
Annulment 63
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee 64
Section 504. Trustee May File Proofs of Claim 64
Section 505. Trustee May Enforce Claims Without Possession of
Securities or Coupons 65
Section 506. Application of Money Collected 65
Section 507. Limitation on Suits 66
Section 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest 66
Section 509. Restoration of Rights and Remedies 67
Section 510. Rights and Remedies Cumulative 67
Section 511. Delay or Omission Not Waiver 67
Section 512. Control by Holders of Securities 67
Section 513. Waiver of Past Defaults 67
Section 514. Undertaking for Costs 68
Section 515. Waiver of Stay or Extension Laws 68
Article Six The Trustee 68
Section 601. Certain Duties and Responsibilities 68
Section 602. Notice of Defaults 68
Section 603. Certain Rights of Trustee 69
Section 604. Not Responsible for Recitals or Issuance of
Securities 70
Section 605. May Hold Securities 70
Section 606. Money Held in Trust 70
Section 607. Compensation and Reimbursement 70
Section 608. Disqualification; Conflicting Interests 71
Section 609. Corporate Trustee Required; Eligibility 71
Section 610. Resignation and Removal; Appointment of
Successor 71
Section 611. Acceptance of Appointment by Successor 73
Section 612. Merger, Conversion, Consolidation or Succession
to Business 74
Section 613. Preferential Collection of Claims Against
Company 74
Section 614. Appointment of Authenticating Agent 74
<PAGE> 5
Article Seven Holders' List and Reports by Trustee and Company 76
Section 701. Company to Furnish Trustee Names and Addresses
of Holders 76
Section 702. Preservation of Information; Communications to
Holders 76
Section 703. Reports by Trustee 77
Section 704. Reports by Company 77
Article Eight Consolidation, Merger, Conveyance, Transfer or
Lease 78
Section 801. Company May Consolidate, Etc., Only on Certain
Terms 78
Section 802. Successor Corporation Substituted 79
Article Nine Supplemental Indentures 79
Section 901. Supplemental Indentures Without Consent of
Holders 79
Section 902. Supplemental Indentures With Consent of Holders 80
Section 903. Execution of Supplemental Indentures 81
Section 904. Effect of Supplemental Indentures. 81
Section 905. Conformity with Trust Indenture Act 81
Section 906. Reference in Securities to Supplemental
Indentures 81
Article Ten Covenants 82
Section 1001. Payment of Principal, Premium and Interest 82
Section 1002. Maintenance of Office or Agency 82
Section 1003. Money for Securities Payments to Be Held in
Trust 83
Section 1004. Additional Amounts 85
Section 1005. Corporate Existence 85
Section 1006. Maintenance of Properties 86
Section 1007. Payment of Taxes and other Claims 86
Section 1008. Restrictions on Secured Debt 86
Section 1009. Restrictions on Sales of Capital Stock of
Restricted Subsidiaries 88
Section 1011. Waiver of Certain Covenants 88
Section 1012. Defeasance of Certain Obligations 88
Article Eleven Redemption of Securities 90
Section 1101. Applicability of Article 90
Section 1102. Election to Redeem; Notice to Trustee 90
Section 1103. Selection by Trustee of Securities to Be
Redeemed 90
Section 1104. Notice of Redemption 91
Section 1105. Deposit of Redemption Price 91
Section 1106. Securities Payable on Redemption Date 91
Section 1107. Securities Redeemed in Part 92
Article Twelve Sinking Funds 93
Section 1201. Applicability of Article 93
Section 1202. Satisfaction of Sinking Fund Payments with
Securities 93
<PAGE> 6
Section 1203. Redemption of Securities for Sinking Fund 93
Article Thirteen Meetings of Holders of Securities 94
Section 1301. Purposes for which Meetings May Be Called 94
Section 1302. Call, Notice and Place of Meetings 94
Section 1303. Persons Entitled to Vote at Meetings 94
Section 1304. Quorum; Action 94
Section 1305. Determination of Voting Rights, Conduct and
Adjournment of Meetings 95
Section 1306. Counting Votes and Recording Action of Meetings 96
Signature Page 97
Indenture, dated as of September 15, 1993, between Kemper
Corporation, a corporation duly organized and existing under the laws of
the State of Delaware (herein called the "Company"), having its principal
office at Kemper Center, Long Grove, Illinois 60049, and The First
National Bank of Chicago, One First National Plaza, Suite 0126, Chicago,
Illinois, 60670-0126, a national banking association duly organized and
existing under the laws of the United States of America, as Trustee
(herein called the "Trustee").
Recitals of the Company
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture
provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
Now, therefore, this Indenture witnesseth:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the Securities
or of series thereof, as follows:
Article One
Definitions and other Provisions
of General Application
Section 101. Definitions. For all purposes of
this Indenture, except as otherwise expressly provided or unless the
context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as
the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
<PAGE> 7
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles in the United States of America, and, except
as otherwise herein expressly provided, the term "generally accepted
accounting principals" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are
generally accepted in the United States of America at the date of
such computation; and
(4) the words "herein, "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not
to any particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act", when used with respect to any Holder of a Security, has
the meaning specified in Section 104.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authenticating Agent" means any Person
authorized by the Trustee to act on behalf to the trustee to authenticate
Securities of one or more series.
"Authorized Newspaper" means a newspaper, in an
official language of the country of publication or in the English
language, customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays, and of general circulation
in the place in connection with which the term is used or in the
financial community of such place. Where successive publications are
required to be made in Authorized Newspapers, the successive publications
may be made in the same or in different newspapers in the same city
meeting the foregoing requirements and in each case on any Business Day.
"Bearer Security" means any Security in the form set
forth in Section 203 or established pursuant to Section 201 which is
payable to bearer.
"Board of Directors" means either the board of
directors of the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the Company to
have been duly adopted by the Board of Directors and to be in full force
and effect on the date of such certification, and delivered to the
Trustee.
"Business Day", when used with respect to any Place of
Payment or any other particular location referred to in this Indenture or
in the Securities, means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in that Place of
Payment or other location are authorized or obligated by law or executive
<PAGE> 8
order to close.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted, created under the Securities Exchange
Act of 1934, or, if at any time after the execution of this instrument
such Commission is not existing and performing the duties now assigned to
it under the Trust Indenture Act, then the body performing such duties at
such time.
"Company" means the Person named as the "Company" in the
first paragraph of this instrument until a successor corporation shall
have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Company" shall mean such successor corporation.
"Company Request" or "Company Order"
means a written request or order signed in the name of the Company by any
two if its Responsible Officers, and delivered to the Trustee.
"Corporate Trust Office" means, with respect
to the original Trustee, the principal office of the Trustee in Chicago,
Illinois, at which at any particular time its corporate trust business
shall be administered, except that with respect to presentation of
Securities for payment or for registration of transfer or exchange in the
location of the Security Register, such term shall mean the office or
agency of the Trustee in Chicago, Illinois at which, at any particular
time, its corporate agency business shall be conducted. The Corporate
Trust Office of any successor Trustee shall be designated at the time of
such succession.
"corporation" includes corporations, associations,
companies and business trusts.
"coupon" means any interest coupon appertaining to a Bearer
Security.
"Debt" has the meaning specified in Section 1008.
"Defaulted Interest" has the meaning specified in
Section 307.
"Depositary" means with respect to the Securities of any
series issuable or issued in whole or in part in global form, the Person
designated as Depositary by the Company pursuant to Section 301 until a
successor Depositary shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Depositary" shall mean or
include each Person who is then a Depositary hereunder, and if at any
time there is more than one such Person, "Depositary" as used with
respect to the Securities of any such series shall mean the "Depositary"
with respect to the Securities of that series.
"Dollar" or "$" means a dollar or other equivalent unit
in such coin or currency of the United States of America as at the time
shall be legal tender for the payment of public and private debts.
"Event of Default" has the meaning specified in
Section 501.
"Holder", when used with respect to any Security, means in the
case of a Registered Security the Person in whose name the Security is
registered in the Security Register and in the case of a Bearer Security
<PAGE> 9
(or any temporary global Security) the bearer thereof and, when used with
respect to any coupon, means the bearer thereof.
"Indenture" means this instrument as originally executed or
as it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof and shall include the terms of particular series of
Securities established as contemplated by Section 301; provided, however,
that if at any time more than one Person is acting as Trustee under this
Indenture due to the appointment of one or more separate Trustees for any
one or more separate series of Securities, "Indenture" shall mean, with
respect to such series of Securities for which any such Person is
Trustee, this instrument as originally executed or as it may from time to
time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and
shall include the terms of particular series of Securities for which such
person is Trustee established as contemplated by Section 301, exclusive,
however, of any provisions or terms which relate solely to other series
of Securities for which such Person is not Trustee, regardless of when
such terms or provisions were adopted, and exclusive of any provisions or
terms adopted by means of one or more indentures supplemental hereto
executed and delivered after such Person had become such Trustee, but to
which such Person, as such Trustee, was not a party.
"interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity,
means interest payable after Maturity.
"Interest Payment Date", when used with respect
to any Security, means the Stated Maturity of an installment of interest
on such Security.
"Internal Revenue Code" shall mean the Internal
Revenue Code of 1986 (or any successor legislation) as amended from time
to time.
"Maturity", when used with respect to any Security, means
the date on which the principal of such Security or an installment of
principal becomes due and payable as therein or herein provided, whether
at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Mortgage" has the meaning specified in Section 1008.
"Officers' Certificate" means a certificate
signed by any two of the Company's Responsible Officers, and delivered to
the Trustee.
"Opinion of Counsel" means a written opinion of
counsel, who may be counsel for the Company, and who shall be reasonably
acceptable to the Trustee.
"Original Issue Discount Security"
means any Security which provides for an amount less than the principal
amount thereto to be due and payable upon a declaration of acceleration
of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities,
means, as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
<PAGE> 10
(i) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities and any coupons
thereto appertaining; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has
been made;
(iii) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture; and
(iv) Securities of any series the indebtedness in respect of
which has been discharged in accordance with Section 403;
provided, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder or are present at a meeting of Holders of Securities for quorum
purposes, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall
be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or
waiver, or upon any such determination as to the presence of a quorum,
only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to
such Securities and that the pledgee is not the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such
other obligor. In determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, or
are present at a meeting of Holders of Securities for quorum purposes,
the principal amount of an Original Issue Discount Security that shall be
deemed to be Outstanding for such purposes shall be the portion of the
principal amount thereof that would be due and payable as of the date of
such determination upon a declaration of acceleration of the Maturity
thereof pursuant to Section 502.
"Paying Agent" means any Person authorized by the
Company to pay the principal of (and premium, if any) or interest on any
Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the
Securities of any series, means the place or places where, subject to the
provisions of Section 1002, the principal of (and premium, if any) and
any interest on the Securities of that series are payable as specified as
<PAGE> 11
contemplated by Section 301.
"Predecessor Security" of any particular
Security means every previous Security evidencing all or a portion of the
same debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and delivered
under Section 306 in exchange for or in lieu of a mutilated, destroyed,
lost or stolen Security or a Security to which a mutilated, destroyed,
lost or stolen coupon appertains shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Security or the Security
to which the mutilated, destroyed, lost or stolen coupon appertains, as
the case may be.
"Redemption Date", when used with respect to any
Security to be redeemed, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any
Security to be redeemed, means the price at which it is to be redeemed
pursuant to this Indenture.
"Registered Security" means any Security in the
form set forth in Section 202 or established pursuant to Section 201
which is registered in the Security Register.
"Regular Record Date" for the interest payable on
any Interest Payment Date on the Registered Securities of any series
means the date specified for that purpose as contemplated by Section 301.
"Responsible Officer", (i) when used with respect
to the Company, means the Chairman or any Vice Chairman of the Board of
Directors, the Chairman or any Vice Chairman of the executive committee
of the Board of Directors, the President, any Vice President, the
Corporate Secretary, the Treasurer, the Controller, any Assistant
Secretary or Assistant Treasurer or any other officer of the Company
customarily performing functions similar to those performed by any of the
above designated officers and also means any other officer of the Company
who may be designated as a "Responsible Officer" by the Board of
Directors, and (ii) when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or
any vice-chairman of the executive committee of the board of directors,
the chairman of the trust committee, the president, any vice president,
the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller or any assistant controller or
any other officer of the Trustee customarily performing functions similar
to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Subsidiary" means a Subsidiary
which is incorporated in any state of the United States or in the
District of Columbia and which is either a regulated insurance company or
a regulated broker-dealer, provided, however, that no such Subsidiary
shall be a Restricted Subsidiary if either
(i) (a) the total assets of such Subsidiary are less than 10%
of the total assets of the Company and its consolidated Subsidiaries
(including such Subsidiary), in each case set forth on the most
<PAGE> 12
recent fiscal year-end balance sheets of such Subsidiary and the
Company and its consolidated Subsidiaries, respectively, computed in
accordance with generally accepted accounting principles, and (b) in
the case of Kemper Financial Services, Inc. ("KFS"), such Subsidiary
contributed less than 10% to the gross revenue of the Company and
its consolidated Subsidiaries (including KFS) during the immediately
preceding fiscal year of the Company as set forth on the most recent
fiscal year-end statements of operations of KFS and the Company and
its consolidated Subsidiaries, respectively, computed in accordance
with generally accepted accounting principles; or
(ii) in the judgment of the Board of Directors, as evidenced by
a Board Resolution, such Subsidiary is not material to (a) the
financial condition of the Company and its consolidated Subsidiaries
taken as a whole and (b) the Company's ability to repay any
Securities Outstanding.
"Restricted Insurance Subsidiary" has
the meaning specified in Section 1008.
"Securities" has the meaning stated in the first recital
of this Indenture and more particularly means any Securities
authenticated and delivered under this Indenture; provided, however, that
if at any time more than one Person is acting as Trustee under this
Indenture, "Securities" with respect to the Indenture as to which such
Person is Trustee shall have the meaning stated in the first recital of
this Indenture and shall more particularly mean Securities authenticated
and delivered under this Indenture, exclusive, however, of Securities of
any series as to which such Person is not Trustee.
"Security Registrar" and
"Security Registrar;" have the respective meanings specified in
Section 305.
"Special Record Date" for the payment of any
Defaulted Interest on the Registered Securities of any series means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any
Security or any installment of principal thereof or interest thereon,
means the date specified in such Security or a coupon representing such
installment of interest as the fixed date on which the principal of such
Security or such installment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by
the Company or by one or more other Subsidiaries, or by the Company and
one or more other Subsidiaries. For the purposes of this definition,
"voting stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this instrument until a successor Trustee shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean or include each Person who is then a
Trustee hereunder, and if any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean
the Trustee with respect to Securities of that series.
<PAGE> 13
"Trust Indenture Act" means the Trust Indenture
Act of 1939 as in force at the date as of which this instrument was
executed, except as provided in Section 905; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939, as so amended.
"U.S. Government Obligations" has the
meaning specified in Section 402.
"United States" means the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction.
"United States Alien" means any Person who, for
United States Federal income tax purposes, is a foreign corporation, a
non-resident alien individual, a non-resident alien fiduciary of a
foreign estate or trust, or a foreign partnership one or more of the
members of which is, for United States Federal income tax purposes, a
foreign corporation, a non-resident alien individual or a non-resident
alien fiduciary of a foreign estate or trust.
"Vice President", when used with respect to the
Company or the Trustee, means any vice president, whether or not
designated by a number or a word or words added before or after the title
"vice president".
Section 102. Compliance
Certificates and Opinions. Except as otherwise expressly provided by
this Indenture, upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating
that all conditions precedent, if any, provided for in this Indenture
related to the proposed action have been complied with and an Opinion of
Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of
any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he or she has made such examination or investigation as is necessary
to enable such individual to express an informed opinion as to
whether or not such covenant or condition has been complied with;
and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
<PAGE> 14
Section 103. Form of
Documents Delivered to Trustee. In any case where several matters are
required to be certified by, or covered by an opinion of, any specified
Person, it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may
certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which such
officer's certificate or opinion is based are erroneous. Any such
certificate or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by,
an officer or officers of the Company stating that the information with
respect to such factual matters is in the possession of the Company,
unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
Section 104. Acts of Holders. (a) Any
request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by Holders
may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an
agent duly appointed in writing. If Securities of a series are issuable
as Bearer Securities, any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be
given or taken by Holders may, alternatively, be embodied in and
evidenced by the record of Holders of Securities voting in favor thereof,
either in person or by proxies duly appointed in writing, at any meeting
of Holders of Securities duly called and held in accordance with the
provisions of Article Thirteen, or a combination of such instruments and
any such record. Except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments or
record or both are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments and
any such record (and the action embodied therein and evidenced thereby)
are herein sometimes referred to as the "Act" of the Holders signing such
instrument or instruments and so voting at any such meeting. Proof of
execution of any such instrument or of a writing appointing any such
agent, or of the holding by any Person of a Security, shall be sufficient
for any purpose of this Indenture and (subject to Section 601) conclusive
in favor of the Trustee and the Company, if made in the manner provided
in this Section. The record of any meeting of Holders of Securities
shall be proved in the manner provided in Section 1306.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
<PAGE> 15
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to such
witness, notary public or officer authorized by law the execution
thereof. Where such execution is by a signer acting in a capacity other
than such signer's individual capacity, such certificate or affidavit
shall also constitute sufficient proof of such signer's authority.
(c) The principal amount and serial numbers of Registered
Securities held by any Person, and the date of holding the same, shall be
proved by the Security Register. The Company may fix any day as the
record date for the purpose of determining the Holders of Securities of
any series entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action, or to vote on any
action, authorized or permitted to be given or taken by Holders of
Securities of such series. If not set by the Company prior to the first
solicitation of a Holder of Securities of such series made by any Person
in respect of any such action, or, in the case of any such vote, prior to
such vote, the record date for any such action or vote shall be the 30th
day (or, if later, the date of the most recent list of Holders required
to be provided pursuant to Section 701) prior to such first solicitation
or vote, as the case may be. With regard to any record date for action
to be taken by the Holders of one or more series of Securities, only the
Holders of Securities of such series on such date (or their duly
designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The principal amount and serial numbers of Bearer Securities
held by any Person, and the date of holding the same, may be proved by
the production of such Bearer Securities or by a certificate executed, as
depositary, by any trust company, bank, banker or other depositary,
wherever situated, if such certificate shall be deemed by the Trustee to
be satisfactory, showing that at the date therein mentioned such Person
had on deposit with such depositary, or exhibited to it, the Bearer
Securities therein described; or such facts may be proved by the
certificate or affidavit of the Person holding such Bearer Securities, if
such certificate or affidavit is deemed by the Trustee to be
satisfactory. The Trustee and the Company may assume that such ownership
of any Bearer Security continues until (1) another certificate or
affidavit bearing a later date issued in respect of the same Bearer
Security is produced, or (2) such Bearer Security is produced to the
Trustee by some other Person, or (3) such Bearer Security is surrendered
in exchange for a Registered Security, or (4) such Bearer Security is no
longer Outstanding.
(e) The fact and date of execution of any such instrument or
writing, the authority of the Person executing the same and the principal
amount and serial numbers of Bearer Securities held by the Person so
executing such instrument or writing and the date of holding the same may
also be proved in any other manner which the Trustee deems sufficient;
and the Trustee may in any instance require further proof with respect to
any of the matters referred to in this Section.
(f) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by
the Trustee or the Company in reliance thereon, whether or not notation
of such action is made upon such Security.
<PAGE> 16
Section 105. Notices,
Etc., to Trustee and Company. Any request, demand, authorization,
direction, notice, consent, waiver or Act of Holders or other document
provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust
Office, Attention: Corporate Trust Services Division, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this
instrument, to the attention of its Secretary, or at any other
address previously furnished in writing to the Trustee by the
Company.
Section 106. Notice
to Holders of Securities; Waiver. Except as otherwise expressly provided
herein, where this Indenture provides for notice to Holders of Securities
of any event,
(1) such notice shall be sufficiently given to Holders of
Registered Securities if in writing and mailed, first-class postage
prepaid, to each Holder of a Registered Security affected by such
event, at such Holder's address as it appears in the Security
Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such Notice; and
(2) such notice shall be sufficiently given to Holders of
Bearer Securities if published in an Authorized Newspaper in The
City of New York and, if the Securities of such series are then
listed on The Stock Exchange of the United Kingdom and the Republic
of Ireland and such stock exchange shall so require, in London and,
if the Securities of such series are then listed on the Luxembourg
Stock Exchange and such stock exchange shall so require, in
Luxembourg and, if the Securities of such series are then listed on
any other stock exchange and such stock exchange shall so require,
in any other required city outside the United States or, if not
practicable, elsewhere in Europe on a Business Day at least twice,
the first such publication to be not earlier than the earliest date,
and not later than the latest date, prescribed for the giving of
such notice.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice
to Holders of Registered Securities by mail, then such notification as
shall be made with the approval of the Trustee shall constitute a
sufficient notification for every purpose hereunder. In any case where
notice to Holders of Registered Securities is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to
any particular Holder of a Registered Security shall affect the
sufficiency of such notice with respect to other Holders of Registered
Securities or the sufficiency of any notice by publication to Holders of
Bearer Securities given as provided above.
In case by reason of the suspension of publication of any Authorized
<PAGE> 17
Newspaper or Authorized Newspapers or by reason of any other cause it
shall be impracticable to publish any notice to Holders of Bearer
Securities as provided above, then such notification to Holders of Bearer
Securities as shall be given with the approval of the Trustee shall
constitute sufficient notice to such Holders for every purpose hereunder.
Neither the failure to give notice by publication to Holders of Bearer
Securities as provided above, nor any defect in any notice so published,
shall affect the sufficiency of any notice mailed to Holders of
Registered Securities as provided above.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent
of such notice. Waivers of notice by Holders of Securities shall be
filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such
waiver.
Section 107. Language of Notices,
Etc. Any request, demand, authorization, direction, notice, consent or
waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language
of the country of publication.
Section 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or
conflicts with a provision of the Trust Indenture Act that is required
under such Act to be a part of and govern this Indenture, the latter
provision shall control. If any provision of this Indenture modifies or
excludes any provision of the Trust Indenture Act that may be so modified
or excluded, the latter provision shall be deemed to apply to this
Indenture as so modified or to be excluded, as the case may be.
Section 109. Effect of Headings and Table of Contents.
The Article and Section headings
herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
Section 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
Section 111. Separability Clause.
In case any provision in this Indenture or the Securities or coupons shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 112. Benefits of Indenture.
Nothing in this Indenture or the Securities or coupons, express or
implied, shall give to any Person, other than the parties hereto and
their successors hereunder, any Authenticating Agent, Paying Agent,
Security Registrar and the Holders of Securities and coupons, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
Section 113. Governing Law. This Indenture
and the Securities and coupons shall be governed by and construed in
accordance with the laws of the State of Illinois.
Section 114. Legal Holidays. Unless
<PAGE> 18
otherwise provided in any Security of any series, in any case where any
Interest Payment Date, Redemption Date or Stated Maturity of any Security
shall not be a Business Day at any Place of Payment, then
(notwithstanding any other provision of this Indenture or of the
Securities or coupons) payment of interest or principal (and premium, if
any) need not be made at such Place of Payment on such date, but may be
made on the next succeeding Business Day at such Place of Payment with
the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity, provided that no interest
shall accrue on the amount so payable for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the case
may be.
Article Two
Security Forms
Section 201. Forms Generally. The
Registered Securities, if any, of each series and the Bearer Securities,
if any, of each series and related coupons shall be in substantially the
forms set forth in this Article, or in such other form as shall be
established by or pursuant to a Board Resolution or in one or more
indentures supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required
or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Securities or coupons, as evidenced by their execution of
the Securities or coupons. If temporary Securities of any series are
issued in global form as permitted by Section 304, the form thereof also
shall be established as provided in the preceding sentence. If the forms
of Securities or coupons of any series (or any such temporary global
Security) are established by action taken pursuant to a Board Resolution,
a copy of an appropriate record of such action shall be certified by the
Secretary or an Assistant Secretary of the Company and delivered to the
Trustee at or prior to the delivery of the Company Order contemplated by
Section 303 for the authentication and delivery of such Securities (or
any such temporary global Security) or coupons.
The Trustee's certificates of authentication shall be in
substantially the form set forth in this Article.
Unless otherwise provided as contemplated by Section 301 with
respect to any series of Securities, the Securities of each series shall
be issuable in registered form without coupons. If so provided as
contemplated by Section 301, the Securities of a series shall be issuable
solely in bearer form, or in both registered form and bearer form.
Unless otherwise specified as contemplated by Section 301, Securities in
bearer form shall have interest coupons attached.
The definitive Securities and coupons, if any, shall be printed,
lithographed or engraved on steel engraved borders or may be produced in
any other manner, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities or
coupons.
Section 202. Form of Registered Secuirity.
<PAGE> 19
[Form of Face]
[Insert any legend required by the Internal Revenue Code and the
regulations thereunder].
Kemper Corporation
___________________________
_____________________________________________
No. ________ U.S. $___________
Kemper Corporation, a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company", which
term includes any successor corporation under the Indenture referred to
on the reverse hereof), for value received, hereby promises to pay to
___________________________________________________ or registered
assigns, the principal sum of __________________________________________
United States Dollars on ______________________________ [If the Security
is interest-bearing, insert_, and to pay interest thereon from _________,
or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, [semi-annually in arrears on ____________ and
____________ in each year] [annually in arrears on ____________ in each
year], commencing ____________, at the rate of ______% per annum, until
the principal hereof is paid or made available for payment [If
applicable, insert_, and (to the extent that the payment of such interest
shall be legally enforceable) at the rate of ______% per annum on any
overdue principal and premium and on any overdue installment of
interest]. The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be
paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, which shall be the ____________
[or ______________] (whether or not a Business Day) [, as the case may
be,] next preceding such Interest Payment Date. Except as otherwise
provided in the Indenture, any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior
to such Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in
said Indenture].
[If the Security is not to bear interest prior to Maturity,
insert_The principal of this Security shall not bear interest except in
the case of a default in payment of principal upon acceleration, upon
redemption or at Stated Maturity and in such case the overdue principal
of this Security shall bear interest at the rate of ______% per annum (to
the extent that the payment of such interest shall be legally
enforceable), which shall accrue from the date of such default in payment
to the date payment of such principal has been made or duly provided for.
Interest on any overdue principal shall be payable on demand. Any such
interest on any overdue principal that is not so paid on demand shall
bear interest at the rate of ______% per annum (to the extent that the
<PAGE> 20
payment of such interest shall be legally enforceable), which shall
accrue from the date of such demand for payment to the date payment of
such interest has been made or duly provided for, and such interest shall
also be payable on demand.] Payment of the principal of (and premium, if
any) and [If applicable, insert_any such] interest on this Security will
be made at the offices or agency of the Company maintained for that
purpose in ______________________, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment
of public and private debts [If applicable, insert_; provided, however,
that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register]] [the option of the Holder
(a) at [the Corporate Trust Office of the Trustee], or at such other
office or agency of the Company as may be designated by it for such
purpose in Chicago, Illinois, in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts or (b) subject to any laws or
regulations applicable thereto and to the right of the Company (limited
as provided in the Indenture) to rescind the designation of any such
Paying Agent, at the [main] offices of ________________ in
________________, ________________ in ________________, ________________
in ________________, ________________ in ________________ and
________________ in ________________, or at such other offices or
agencies as the Company may designated, by United States dollar check
drawn on, or transfer to a United States dollar account maintained by the
payee with, a bank in Chicago, Illinois [If applicable, insert_;
provided, however, that at the option of the Company payment of interest
on this Security may be made by United States dollars check mailed to the
address of the Person entitled thereto as such address shall appear in
the Security Register].]
[If Securities of the series may be offered to United States Aliens,
insert_The Company will pay to the Holder of this Security who is a
United States Alien (as defined below) such additional amounts as may be
necessary in order that [If the Security is interest bearing,
insert_every net payment of the principal of, and premium, if any, and
interest on this Security] [If the Security is not to bear interest prior
to Maturity, insert_: (i) the net payment of principal of (and interest
on overdue principal, if any, on) this Security and (ii) the net proceeds
from the sale or exchange of this Security, including, in each case,
amounts received in respect of original issue discount], after deduction
or withholding for or on account of any present or future tax, assessment
or governmental charge imposed upon or as a result of such payment [If
the Security is not to bear interest prior to Maturity, insert_or as a
result of such sale or exchange] by the United States (as defined below)
or any political subdivision or taxing authority thereof or therein, will
not be less than the amount provided for in this Security to be then due
and payable [If the Security is not to bear interest prior to Maturity,
insert_or, in the case of a sale or exchange, the amount of the net
proceeds from the sale or exchange before any such tax, assessment or
other governmental charge]; provided, however, that the foregoing
obligation to pay additional amounts will not apply to any one or more of
the following:
(a) any tax, assessment or other governmental charge which
would not have been so imposed but for (i) the existence of any
present or former connection between such Holder (or between a
fiduciary, settlor, beneficiary or member of such Holder, if such
Holder is an estate, a trust or a partnership) and the United
States, including, without limitation, such Holder (or such
<PAGE> 21
fiduciary, settlor, beneficiary or member) being or having been a
citizen or resident or treated as a resident thereof, or being or
having been engaged in trade or business or present therein, or
having or having had a permanent establishment therein, or (ii) such
Holder's present or former status as a personal holding company, a
foreign personal holding company, a controlled foreign corporation
for United States tax purposes or a corporation which accumulates
earnings to avoid United States Federal income tax;
(b) any tax, assessment or other governmental charge which
would not have been so imposed but for the presentation by the
Holder of this Security for payment on a date more than 15 days
after the date on which such payment became due and payable or the
date on which payment thereof is duly provided for, whichever occurs
later;
(c) any estate, inheritance, gift, sales, transfer, personal
property or any similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which
would not have been imposed but for the failure to comply with any
certification, identification or other reporting requirements
concerning the nationality, residence, identity or connection with
the United States of the Holder or beneficial owner of this
Security, if compliance is required by statute or by regulation of
the United States Treasury Department as a precondition to exemption
from such tax, assessment or other governmental charge;
(e) any tax, assessment or other governmental charge which is
payable otherwise than by deduction or withholding from payments of
[If the Security is interest bearing, insert_principal of (and
premium, if any) or interest on this Security] [If the Security is
not to bear interest prior to Maturity, insert_principal of (or
interest on overdue principal, if any, on) this Security or from
payments from the proceeds of a sale or exchange of this Security];
or
(f) any tax, assessment or other governmental charge imposed
[If the Security is interest bearing, insert_on interest received by
a Person holding, actually or constructively, 10% or more of the
total combined voting power of all classes of stock of the Company
entitled to vote] [If the Security is not to bear interest prior to
Maturity, insert_by reason of such Holder's past or present status
as the actual or constructive owner of 10% or more of the total
combined voting power of all classes of stock of the Company
entitled to vote];
nor will additional amounts be paid with respect to any payment of [If
the Security is interest bearing, insert_principal of [(and premium, if
any)] or interest on this Security] [If the Security is not to bear
interest prior to Maturity, insert_principal of (or interest on overdue
principal, if any, on) this Security or of the proceeds of any sale or
exchange of this Security] to any United States Alien who is a fiduciary
or partnership or other than the sole beneficial owner of any such
payment to the extent that a beneficiary or settlor with respect to such
fiduciary, a member of such a partnership or the beneficial owner would
not have been entitled to the additional amounts had such beneficiary,
settlor, member or beneficial owner been the Holder of this Security.
The term "United States Alien" means any Person who, for United
<PAGE> 22
States Federal income tax purposes, is a foreign corporation, a non-
resident alien individual, a non-resident alien fiduciary of a foreign
estate or trust or a foreign partnership one or more of the members of
which is, for United States Federal income tax purposes, a foreign
corporation, a non-resident alien individual or a non-resident alien
fiduciary of a foreign estate or trust, and the term "United States"
means the United States of America (including the States and the District
of Columbia), its territories, its possessions and other areas subject to
its jurisdiction.]
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof, directly or through an
Authenticating Agent, by manual signature of an authorized signatory,
this Security shall not be entitled to any benefit under the Indenture or
be valid or obligatory for any purpose.
In Witness Whereof, the Company has caused this instrument to be
duly executed under its corporate seal.
Dated: ___________________
____________________________________
__
By
[Seal]
Attest:
[Form of Reverse]
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one
or more series under an Indenture, dated as of September 15, 1993 (herein
called the "Indenture"), between the Company and The First National Bank
of Chicago, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereof reference is hereby made for a statement
of the respective rights, limitation of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities
[and any coupons appertaining thereto] and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof [, limited in
aggregate principal amount to [U.S.] $____________]. [The Securities of
this series are issuable as Bearer Securities [, with interest coupons
attached,] in the denomination of U.S.$____________, and as Registered
Securities, without coupons, in denominations of U.S.$___________ and any
integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Bearer Securities and Registered
Securities of this series are exchangeable for a like aggregate principal
amount of Registered Securities of this series and of like tenor of any
<PAGE> 23
authorized denominations, as requested by the Holder surrendering the
same, upon surrender of the Security or Securities to be exchanged at any
office or agency described below where Registered Securities of this
series may be presented for registration of transfer. Bearer Securities
may not be issued in exchange for Registered Securities.]
[If applicable, insert_The Securities of this series are subject to
redemption (1) [If applicable, insert_on _____________ in any year
commencing with the year ___ and ending with the year ____ through
operation of the sinking fund for this series at a Redemption Price equal
to 100% of the principal amount, [and] (2)] [If applicable, insert_at any
time [on or after __________], as a whole or in part, at the election of
the Company, at the following Redemption Prices (expressed as percentages
of the principal amount): If redeemed [on or before ___________,
_______%, and if redeemed] during the 12-month period beginning
____________ of the years indicated,
Redemption Redemption
Year Price Year Price
and thereafter at a Redemption Price equal to _______% of the principal
amount,] [If applicable, insert_[and (___)] under the circumstances
described in the [next] succeeding paragraph at a Redemption Price equal
to [If the Security is not an Original Issue Discount Security,
insert_100% of the principal amount,] [If the Security is an Original
Issue Discount Security, insert formula for determining the amount.] [If
the Security is interest-bearing, insert_together in the case of any such
redemption [If applicable, insert_(whether through operation of the
sinking fund or otherwise)] with accrued interest to the Redemption Date;
provided, however, that installments of interest on this Security whose
Stated Maturity is on or prior to such Redemption Date will be payable to
the Holder of this Security, or one or more Predecessor Securities, of
record at the close of business on the relevant Record Dates referred to
on the face hereof, all as provided in the Indenture].]
[If applicable, insert_The Securities of this series are subject to
redemption (1) on _____________ in any year commencing with the year
_____ and ending with the year _____ through operation of the sinking
fund for this series at the Redemption Prices for redemption through
operation of the sinking fund (expressed as percentages of the principal
amount) set forth in the table below, and (2) at any time [on or after
___________], as a whole or in part, at the election of the Company, at
the Redemption Prices for redemption otherwise than through operation of
the sinking fund (expressed as percentages of the principal amount) set
forth in the table below; If redeemed during the 12-month period
beginning ______________ of the years indicated,
Year Redemption Price Redemption Price for
for Redemption Redemption Otherwise
Through Operation Than Through Operation
of the Sinking Fund of the Sinking Fund
<PAGE> 24
and thereafter at a Redemption Price equal to ________% of the principal
amount, [If applicable, insert_and (3) under the circumstances described
in the [next] succeeding paragraph at a Redemption Price equal to [If the
Security is not an Original Issue Discount Security, insert_100% of the
principal amount,] [If the Security is an Original Issue Discount
Security, insert formula for determining the amount] [If the Security is
interest-bearing. insert_together in the case of any such redemption
(whether through operation of the sinking fund or otherwise) with accrued
interest to the Redemption Date; provided, however, that installments of
interest on this Security whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holder of this Security, or one or
more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in
the Indenture].]
[Partial redemptions must be in an amount not less than
[U.S.]$1,000,000 principal amount of Securities.]
[Notwithstanding the foregoing, the Company may not, prior to
______________, redeem any Securities of this series as contemplated by
[Clause (2)] above as a part of, or in anticipation of, any refunding
operation by the application, directly or indirectly, of moneys borrowed
having an interest cost to the Company (calculated in accordance with
generally accepted financial practice) of less than _________% per
annum.]
[If Securities of the series may be offered to United States Aliens,
insert_The Securities may be redeemed, as a whole but not in part, at the
option of the Company, upon not less than 30 nor more than 60 days' prior
notice as described below, at a redemption price equal to 100% of their
principal amount [If the Security is interest-bearing, insert_, together
with interest accrued to the date fixed for redemption,] if, as a result
of any amendment to, or change in, the laws or regulations of the United
States or any political subdivision or taxing authority thereof or
therein affecting taxation, or any amendment to or change in an official
interpretation or application of such laws or regulations, which
amendment or change is effective on or after ___________, the Company
will become obligated to pay additional amounts (as described on the face
hereof) [If the Security is interest-bearing, insert_on the next
succeeding Interest Payment Date] [If the Security is not to bear
interest prior to Maturity, insert_at Maturity or upon the sale or
exchange of any Security]; provided that, at the time such notice is
given, such obligation to pay such additional amounts remains in effect.]
[If the Securities of the series are also issuable as Bearer
Securities and are interest-bearing, insert_In addition, if the Company
determines, based upon a written opinion of independent counsel, that any
payment made outside the United States by the Company or any of its
Paying Agents of the full amount of principal, premium, if any, or
interest due with respect to any Bearer Security or coupon would, under
any present or future laws or regulations of the United States, be
subject to any certification, identification or other information
reporting requirement of any kind, the effect of which requirement is the
disclosure to the Company, any Paying Agent or any governmental authority
<PAGE> 25
of the nationality, residence or identity of a beneficial owner of such
Bearer Security or coupon who is a United States Alien (as defined on the
face hereof) (other than such a requirement (a) which would not be
applicable to a payment made by the Company or any one of its Paying
Agents (i) directly to the beneficial owner or (ii) to any custodian,
nominee or other agent of the beneficial owner, or (b) which can be
satisfied by the custodian, nominee or other agent certifying that the
beneficial owner is a United States Alien, provided that in each case
referred to in clauses (a)(ii) and (b) payment by such custodian, nominee
or other agent of such beneficial owner is not otherwise subject to any
such requirement), the Company at its election will either (x) redeem the
Securities, as a whole but not in part, upon not less than 30 nor more
than 60 days' prior notice as described below, at a Redemption Price
equal to 100% of their principal amount, together with interest accrued
to the date fixed for redemption, or (y) if and so long as any such
certification, identification or other information reporting requirement
would be fully satisfied by payment of a backup withholding tax or
similar charge, pay to the Holders of Bearer Securities who are United
States Aliens certain additional amounts specified in the Bearer
Securities of this series. The Company will make such determination and
election and notify the Trustee thereof as soon as practicable, and the
Trustee will promptly give notice of such determination in the manner
described below (the "Determination Notice"), in each case stating the
effective date of such certification, identification or information
reporting requirement, whether the Company will redeem the Securities or
will pay to the Holders of Bearer Securities who are United States Aliens
the additional amounts specified in the Bearer Securities of this series
and (if applicable) the last date by which the redemption of the
Securities must take place. If the Company elects to redeem the
Securities, such redemption shall take place on such date, not later than
one year after publication of the Determination Notice, as the Company
elects by notice to the Trustee at least 75 days before such date, unless
shorter notice is acceptable to the Trustee. Notwithstanding the
foregoing, the Company will not so redeem the Securities if the Company,
based upon an opinion of independent counsel, subsequently determines,
not less than 30 days prior to the date fixed for redemption, that
subsequent payments would not be subject to any such requirement, in
which case the Company will notify the Trustee, which will promptly give
notice of that determination in the manner described below and any
earlier redemption notice will thereupon be revoked and of no further
effect. If the Company elects as provided in clause (y) above to pay
such additional amounts to the Holders of Bearer Securities who are
United States Aliens, and as long as the Company is obligated to pay such
additional amounts to such Holders, the Company may subsequently redeem
the Securities, at any time, as a whole but not in part, upon not less
than 30 nor more than 60 days' prior notice given in the manner described
below, at a Redemption Price equal to 100% of their principal amount,
together with interest accrued to the date fixed for redemption, but
without reduction for applicable United States withholding taxes.]
[The Indenture contains provisions for defeasance at any time of
(a) the entire indebtedness of this Security and (b) certain restrictive
covenants, in each case upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Security.]
[The sinking fund for this series provides for the redemption on
____________ in each year beginning with the year ____ and ending with
the year ____ of [not less than] [U.S.]$__________ [("mandatory sinking
fund") and not more than [U.S.]$________] aggregate principal amount of
Securities of this series.] [Securities of this series acquired or
<PAGE> 26
redeemed by the Company otherwise than through [mandatory] sinking fund
payments may be credited against subsequent [mandatory] sinking fund
payments otherwise required to be made_in the inverse order in which they
become due.]
Notice of redemption will be given [by publication in an Authorized
Newspaper in The City of New York and, if the Securities of this series
are then listed on [The Stock Exchange of the United Kingdom and the
Republic of Ireland] [the Luxembourg Stock Exchange] [or] any [other]
stock exchange located outside the United States and such stock exchange
shall so require, in [London] [Luxembourg], [or] in any [other] required
city outside the United States, or, if not practicable, elsewhere in
Europe, and] by mail to Holders of [Registered] Securities, not less than
30 nor more than 60 days prior to the date fixed for redemption, all as
provided in the Indenture.
In the event of redemption of this Security in part only, a new
[Registered] Security or Securities of this series and of like tenor for
the unredeemed portion hereof will be issued in the name of the Holder
hereof upon the cancellation hereof.
[The Company shall not be required (i) to issue, register the
transfer or exchange Securities of this series during a period beginning
at the opening of business 15 days before any selection of Securities of
this series to be redeemed and ending at the close of business on the day
of the first publication of the relevant notice of redemption or, if
there is no publication, the mailing of the relevant notice of
redemption, or (ii) to register the transfer of or exchange any
Registered Security so selected for redemption, in whole or in part,
except the unredeemed portion of any Security being redeemed in part, or
(iii) to exchange any Bearer Security so selected for redemption except
that such a Bearer Security may be exchanged for a Registered Security of
this series and like tenor, provided that such Registered Security shall
be simultaneously surrendered for redemption.]
[If the Securities of the series are to be listed on The Stock
Exchange of the United Kingdom and the Republic of Ireland, insert_The
Company will not, and will not permit any of its Subsidiaries to,
purchase any Securities of this series by private treaty at a price
(exclusive of expenses and accrued interest) which, if the Securities are
then listed on The Stock Exchange of the United Kingdom and the Republic
of Ireland and such stock exchange shall so require, exceeds [120%] of
the mean of the nominal quotations of the Securities as shown in The
Stock Exchange Daily Official List for the last trading day preceding the
date of purchase.]
[If the Security is not an Original Issue Discount Security,
insert_If an Event of Default with respect to Securities of this series
shall occur and be continuing, the principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert_If
an Event of Default with respect to Securities of this series shall occur
and be continuing, an amount of principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture. Such amount shall be equal to_insert formula
for determining the amount. Upon payment (i) of the amount of principal
so declared due and payable and (ii) of interest on any overdue principal
and overdue interest (in each case to the extent that the payment of such
<PAGE> 27
interest shall be legally enforceable), all of the Company's obligations
in respect of the payment of the principal of and interest, if any, on
the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations
of the Company and the rights of the Holders of the Securities of each
series to be affected [and any related coupons] under the Indenture at
any time by the Company and the Trustee with the consent of the Holders
of a majority in principal amount of the Securities at the time
Outstanding of each series to be affected and, for certain purposes,
without the consent of the Holders of Securities at the time Outstanding.
The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each
series at the time Outstanding, on behalf of the Holders of all
Securities of such series [and any related coupons], to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of
(and premium, if any) and [any] interest [(including additional amounts,
as described on the face hereof)] on this Security at the times, place[s]
and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the
Security Register, upon surrender of this Security for registration of
transfer at the [office or agency of the Company in any place where the
principal of (and premium, if any) and [any] interest on this Security
are payable] [Chicago, Illinois, or, subject to any laws or regulations
applicable thereto and to the right of the Company (limited as provided
in the Indenture) to rescind the designation of any such transfer agent,
at the [main] offices of ____________ in _____________ and _____________
in _______________ or at such other offices or agencies as the Company
may designate], duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new [Registered]
Securities of this series and of like tenor, of authorized denominations
and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
[The Securities of this series are issuable only in registered form,
without coupons, in denominations of $___________ and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable
for a like aggregate principal amount of Securities of this series and of
like tenor of a different authorized denomination, as requested by the
Holder surrendering the same.]
No service charge shall be made for any such registration to
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
<PAGE> 28
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered as
the owner hereof for all purposes, whether or not this Security be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
[The Indenture, the Securities and any coupons appertaining thereto
shall be governed by and construed in accordance with the laws of the
State of Illinois.]
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
Section 203. Forms of Bearer Security and Coupon.
[Form of Face]
[Insert any legend required by the Internal Revenue Code and the
regulations thereunder].
Kemper Corporation
_________________________________________
No. B-_____ U.S.$___________
Kemper Corporation, a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company", which
term includes any successor corporation under the Indenture referred to
on the reverse hereof), for value received, hereby promises to pay to
bearer upon presentation and surrender of this Security the principal sum
of _________________________ United States Dollars on ________________
[If the Security is interest-bearing, insert_, and to pay interest
thereon, from the date hereof, [semi-annually in arrears on _____________
and _____________ in each year] [annually in arrears on _____________ in
each year], commencing _____________, at the rate of _______% per annum,
until the principal hereof is paid or made available for payment [If
applicable, insert_, and (to the extent that the payment of such interest
shall be legally enforceable) at the rate of _______% per annum on any
overdue principal and premium and on any overdue installment of
interest]].
[If the Security is not to bear interest prior to Maturity,
insert_The principal of this Security shall not bear interest except in
the case of a default in payment of principal upon acceleration, upon
redemption or at Stated Maturity and in such case the overdue principal
of this Security shall bear interest at the rate of ______% per annum (to
the extent that the payment of such interest shall be legally
enforceable), which shall accrue from the date of such default in payment
to the date payment of such principal has been made or duly provided for.
Interest on any overdue principal shall be payable on demand. Any such
interest on any overdue principal that is not so paid on demand shall
bear interest at the rate of _______% per annum (to the extent that the
payment of such interest shall be legally enforceable) which shall accrue
from the date of such demand for payment to the date payment of such
<PAGE> 29
interest has been made or duly provided for, and such interest shall also
be payable on demand.] Such payments (including premium, if any) shall
be made, subject to any laws or regulations applicable thereto and to the
right of the Company (limited as provided in the Indenture) to rescind
the designation of any such Paying Agent, at the [main] offices of
____________ in ____________, ____________ in ____________, ___________
in ____________, ____________ in ____________ and ____________ in
____________, or at such other offices or agencies outside the United
States (as defined below) as the Company may designate, at the option of
the Holder, by United States dollar check drawn on a bank in Chicago,
Illinois or by transfer of United States dollars to an account maintained
by the payee with a bank located outside the United States. [If the
Security is to bear interest prior to Maturity, insert_Interest on this
Security due on or before Maturity shall be payable only upon
presentation and surrender at such an office or agency of the interest
coupons hereto attached as they severally mature.] No payment of
principal[, or] premium [or interest] on this Security shall be made at
any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States [If Security is
denominated and payable in United States dollars, insert_; provided,
however, that payment of principal of (and premium, if any) and [any]
interest on this Security (including any additional amounts which may be
payable as provided below) shall be made at the office of the Company's
Paying Agent in Chicago, Illinois if (but only if) payment in United
States dollars of the full amount of such principal, premium, interest or
additional amounts, as the case may be, at all offices or agencies
outside the United States maintained for the purpose by the Company in
accordance with the Indenture is illegal or effectively precluded by
exchange controls or other similar restrictions].
The Company will pay to the Holder of this Security [If the Security
is interest-bearing, insert_or any coupon appertaining hereto] who is a
United States Alien (as defined below) such additional amounts as may be
necessary in order that [If the Security is interest-bearing,
insert_every net payment of the principal of (and premium, if any) and
interest on this Security,] [If the Security is not to bear interest
prior to Maturity, insert_(i) the net payment of principal of (and
interest on overdue principal, if any, on) this Security and (ii) the net
proceeds from the sale or exchange of this Security, including, in each
case, amounts received in respect of original issue discount,] after
deduction or withholding for or on account of any present or future tax,
assessment or governmental charge imposed upon or as a result of such
payment [If the Security is not to bear interest prior to Maturity,
insert_or as a result of such sale or exchange] by the United States or
any political subdivision or taxing authority thereof or therein, will
not be less than the amount provided for in this Security [If the
Security is interest-bearing, insert_or in such coupon] to be then due
and payable [If the Security is not to bear interest prior to Maturity,
insert_or, in the case of a sale or exchange, the amount of the net
proceeds from the sale or exchange before any such tax, assessment or
other governmental charge]; provided, however, that the foregoing
obligation to pay additional amounts will not apply to any one or more of
the following:
(a) any tax, assessment or other governmental charge which
would not have been so imposed but for (i) the existence of any
present or future connection between such Holder (or between a
fiduciary, settlor, beneficiary or member of such Holder, if such
Holder is an estate, a trust or a partnership) and the United
<PAGE> 30
States, including, without limitation, such Holder (or such
fiduciary, settlor, beneficiary or member) being or having been a
citizen or resident or treated as a resident thereof, or being or
having been engaged in trade or business or present therein, or
having or having had a permanent establishment therein, or (ii) such
Holder's present or former status as a personal holding company, a
foreign personal holding company, a controlled foreign corporation
for United States tax purposes or a corporation which accumulates
earnings to avoid United States Federal income tax;
(b) any tax, assessment or other governmental charge which
would not have been so imposed but for the presentation by the
Holder of this Security [If the Security is interest-bearing,
insert_or any coupon appertaining hereto] for payment on a date more
than 15 days after the date on which such payment became due and
payable or the date on which payment thereof is duly provided for,
whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal
property or any similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which
would not have been imposed but for the failure to comply with any
certification, identification or other reporting requirements
concerning the nationality, residence, identity or connection with
the United States of the Holder or beneficial owner of this Security
[If the Security is interest-bearing insert_or any coupon
appertaining hereto], if compliance is required by statute or by
regulation of the United States Treasury Department as a
precondition to exemption from such tax, assessment or other
governmental charge;
(e) any tax, assessment or other governmental charge which is
payable otherwise than by deduction or withholding from payments of
[If the Security is interest-bearing, insert_principal of (and
premium, if any) or interest on this Security] [If the Security is
not to bear interest prior to Maturity, insert_principal of (or
interest on overdue principal, if any, on) this Security or from
payments from the proceeds of a sale or exchange of this Security];
or
(f) any tax, assessment or other governmental charge imposed
[If the Security is interest-bearing, insert_on interest received by
a Person holding, actually or constructively, 10% or more of the
total combined voting power of all classes of stock of the Company
entitled to vote] [If the Security is not to bear interest prior to
Maturity, insert_by reason of such holder's past or present status
as the actual or constructive owner of 10% or more of the total
combined voting power of all classes of stock of the Company
entitled to vote];
nor will additional amounts be paid with respect to any payment of [If
the Security is interest-bearing, insert_principal of (and premium, if
any) or interest on this Security] [If the Security is not to bear
interest prior to Maturity, insert_principal of (or interest on overdue
principal, if any) this Security or of the proceeds of any sale or
exchange of this Security] to any United States Alien who is a fiduciary
or partnership or other than the sole beneficial owner of any such
payment to the extent that a beneficiary or settlor with respect to such
fiduciary, a member of such a partnership or the beneficial owner would
<PAGE> 31
not have been entitled to the additional amounts had such beneficiary,
settlor, member or beneficial owner been the Holder of this Security [If
the Security is interest bearing, insert_or any coupon appertaining
hereto].
The term "United States Alien" means any Person who, for United
States Federal income tax purposes, is a foreign corporation, a non-
resident alien individual, a non-resident alien fiduciary of a foreign
estate or trust or a foreign partnership one or more of the members of
which is, for United States Federal income tax purposes, a foreign
corporation, a non-resident alien individual or a non-resident alien
individual or a non-resident alien fiduciary of a foreign estate or
trust, and the term "United States" means the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction.
Notwithstanding the foregoing, if and so long as a certification,
identification or other information reporting requirement referred to in
the [fourth] [fifth] paragraph on the reverse hereof would be fully
satisfied by payment of a backup withholding tax or similar charge, the
Company may elect, by so stating in the Determination Notice (as defined
in such paragraph), to have the provisions of this paragraph apply in
lieu of the provisions of such paragraph. In such event, the Company
will pay as additional amounts such amounts as may be necessary so that
every net payment made following the effective date of such requirements
outside the United States by the Company or any of its Paying Agents [If
the Security is interest-bearing, insert_of principal (and premium, if
any), or interest] due in respect of any Bearer Security [If the Security
is interest-bearing, insert_or any coupon] of which the beneficial owner
is a United States Alien (but without any requirement that the
nationality, residence or identity of such beneficial owner be disclosed
to the Company, any Paying Agent or any governmental authority), after
deduction or withholding for or on account of such backup withholding tax
or similar charge other than a backup withholding tax or similar charge
which is (i) the result of a certification, identification or information
reporting requirement described in the second parenthetical clause of
such paragraph, or (ii) imposed as a result of the fact that the Company
or any of its Paying Agents has actual knowledge that the beneficial
owner of such Bearer Security [If the Security is interest-bearing,
insert_or coupon] is within the category of Persons described in clause
(a) of the third paragraph of this Security, or (iii) imposed as a result
of presentation of such Bearer Security [If the Security is interest-
bearing, insert_or coupon] for payment more than 15 days after the date
on which such payment becomes due and payable or on which payment thereof
is duly provided for, whichever occurs later, will not be less than the
amount provided for in such Bearer Security [If the Security is interest-
bearing, insert_or coupon] to be then due and payable.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof, directly or through an
Authenticating Agent, by manual signature of an authorized signatory,
neither this Security, nor any coupon appertaining hereto, shall be
entitled to any benefit under the Indenture or be valid or obligatory for
any purpose.
In Witness Whereof, the Company has caused this instrument to be
<PAGE> 32
duly executed under its corporate seal and coupons bearing the facsimile
signature of [its Treasurer] [one of its Assistant Treasurers] to be
annexed hereto.
Dated as of ______________________
By
[Seal]
Attest:
[Form of Reverse]
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one
or more series under an Indenture, dated as of September 15, 1993 (herein
called the "Indenture"), between the Company and The First National Bank
of Chicago, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement
of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities
and any coupons appertaining thereto and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereto [, limited in
aggregate principal amount to U.S. $____________]. The Securities of
this series are issuable as Bearer Securities, with interest coupons
attached, in the denomination of U.S. $___________ [, and as Registered
Securities, without coupons, in denominations of U.S. $__________ and any
integral multiples thereof]. [As provided in the Indenture and subject
to certain limitations therein set forth, Bearer Securities and
Registered Securities of this series are exchangeable for a like
aggregate principal amount of Registered Securities of this series and of
like tenor of any authorized denominations, as requested by the Holder
surrendering the same, upon surrender of the Security or Securities to be
exchanged, with all unmatured coupons and all matured coupons in default
thereto appertaining, at any office or agency described below where
registered Securities of this series may be presented for registration of
transfer, or at such other offices or agencies as the Company may
designate; provided, however, that Bearer Securities surrendered in
exchange for Registered Securities between a Record Date and the relevant
Payment Date shall be surrendered without the coupon relating to such
Interest Payment Date. Bearer Securities may not be issued in exchange
for Registered Securities.]
[If applicable, insert_The Securities of this series are subject to
redemption [If applicable, insert_(1) on _____________ in any year
commencing with the year _______ and ending with the year _______ through
operation of the sinking fund for this series at a Redemption Price equal
to 100% of the principal amount, and (2)] [If applicable, insert_at any
time [on or after ____________], as a whole or in part, at the election
<PAGE> 33
of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [on or before
___________, _____%, and if redeemed] during the 12-month period
beginning __________ of the years indicated.
Redemption Redemption
Year Price Year Price
and thereafter at a Redemption Price equal to _______% of the principal
amount,] [and (____)] under the circumstances described in the [next]
succeeding paragraph at a Redemption Price equal to [If the Security is
not an Original Issue Discount Security, insert _100% of the principal
amount.] [If the Security is an Original Issue Discount Security, insert
formula for determining the amount] [If the Security is interest-bearing,
insert_together in the case of any such redemption [If applicable,
insert_(whether through operation of the sinking fund or otherwise)] with
accrued interest to the Redemption Date; provided, however, that interest
installments on this Security whose Stated Maturity is on or prior to
such Redemption Date will be payable only upon presentation and surrender
of coupons for such interest (at an office or agency located outside the
United States, except as herein provided otherwise)].]
[If applicable, insert_The Securities of this series are subject to
redemption (1) on ___________ in any year commencing with the year _____
and ending with the year ______ through operation of the sinking fund for
this series at the Redemption Prices for redemption through operation of
the sinking fund (expressed as percentages of the principal amount) set
forth in the table below, and (2) at any time [on or after _________], as
a whole or in part, at the election of the Company, at the Redemption
Prices for redemption otherwise than through operation of the sinking
fund (expressed as percentages of the principal amount) set forth in the
table below: If redeemed during the 12-month period beginning ________
of the years indicated,
Redemption Price for
Redemption Price for Redemption Otherwise
Redemption Through Than Through Operation
Operation of the of the Sinking Fund
Year Sinking Fund
<PAGE> 34
and thereafter at a Redemption Price equal to ____% of the principal
amount, and (3) under the circumstances described in the [next]
succeeding paragraph at a Redemption Price equal to [If the Security is
not an Original Issue Discount Security, insert_100% of the principal
amount,] [If the Security is an Original Issue Discount Security, insert
formula for determining the amount] [If the Security is interest-bearing,
insert_together in the case of any such redemption (whether through
operation of the sinking fund or otherwise) with accrued interest to the
Redemption Date; provided, however, that interest installments on this
Security whose Stated Maturity is on or prior to such Redemption Date
will be payable only upon presentation and surrender of coupons for such
interest (at an office or agency located outside the United States,
except as herein provided otherwise)].]
[Partial redemptions must be in an amount not less than
U.S.$1,000,000 principal amount of Securities.]
[Notwithstanding the foregoing, the Company may not, prior to
________ redeem any Securities of this series as contemplated by [Clause
(2)] above as a part of, or in anticipation of, any refunding operation
by the application, directly or indirectly, of moneys borrowed having an
interest cost to the Company (calculated in accordance with generally
accepted financial practice) of less than _____% per annum.]
The Securities may be redeemed, as a whole but not in part, at the
option of the Company, upon not more than 60 nor less than 30 days' prior
notice as described below, at a Redemption Price equal to 100% of their
principal amount [If the Security is interest-bearing, insert_together
with interest accrued to the date fixed for redemption,] if, as a result
of any amendment to, or change in, the laws or regulations of the United
States or any political subdivision or taxing authority thereof or
therein affecting taxation, or any amendment to or change in an official
interpretation or application of such laws or regulations, which
amendment or change is effective on or after _________, the Company will
become obligated to pay additional amounts (as described on the face
hereof) [If the Security is interest-bearing, insert_on the next
succeeding Interest Payment Date] [If the Security is not to bear
interest prior to Maturity, insert_at Maturity or upon the sale or
exchange of any Security]; provided that, at the time such notice is
given, such obligation to pay such additional amounts remains in effect.
[If the Security is interest-bearing, insert_In addition, if the
Company determines, based upon a written opinion of independent counsel,
that any payment made outside the United States by the Company or any of
its Paying Agents of the full amount of principal, premium, if any, or
interest due with respect to any Bearer Security or coupon would, under
any present or future laws or regulations of the United States, be
subject to any certification, identification or other information
reporting requirement of any kind, the effect of which requirement is the
disclosure to the Company, any Paying Agent or any governmental authority
of the nationality, residence or identity of a beneficial owner of such
Bearer Security or coupon who is a United States Alien (as defined on the
face hereof) (other than such a requirement (a) which would not be
applicable to a payment made by the Company or any one of its Paying
Agents (i) directly to the beneficial owner or (ii) to any custodian,
nominee or other agent of the beneficial owner, or (b) which can be
satisfied by the custodian, nominee or other agent certifying that the
beneficial owner is a United States Alien, provided that in each case
referred to in clauses (a)(ii) and (b) payment by such custodian, nominee
or other agent of such beneficial owner is not otherwise subject to any
<PAGE> 35
such requirement), the Company at its election will either (x) redeem the
Securities, as a whole but not in part, upon not less than 30 nor more
than 60 days' prior notice as described below, at a Redemption Price
equal to 100% of their principal amount, together with interest accrued
to the date fixed for redemption, or (y) if and so long as the conditions
of the fifth paragraph on the face of this Security are satisfied, pay
the additional amounts specified in such paragraph. The Company will
make such determination and election and notify the Trustee thereof as
soon as practicable, and the Trustee will promptly give notice of such
determination in the manner described below (the "Determination Notice"),
in each case stating the effective date of such certification,
identification or information reporting requirement, whether the Company
will redeem the Securities or will pay the additional amounts specified
in such paragraph and (if applicable) the last date by which the
redemption of the Securities must take place. If the Company elects to
redeem the Securities, such redemption shall take place on such date, not
later than one year after publication of the Determination Notice, as the
Company elects by notice to the Trustee at least 75 days before such date
unless shorter notice is acceptable to the Trustee. Notwithstanding the
foregoing, the Company will not so redeem the Securities if the Company,
based upon an opinion of independent counsel, subsequently determines,
not less than 30 days prior to the date fixed for redemption, that
subsequent payments would not be subject to any such requirement, in
which case the Company will notify the Trustee, which will promptly give
notice of that determination in the manner described below and any
earlier redemption notice will thereupon be revoked and of no further
effect. If the Company elects as provided in clause (y) above to pay
additional amounts, and as long as the Company is obligated to pay such
additional amounts, the Company may subsequently redeem the Securities,
at any time, as a whole but not in part, upon not less than 30 nor more
than 60 days' prior notice given in the manner described below, at a
Redemption Price equal to 100% of their principal amount, together with
interest accrued to the date fixed for redemption, but without reduction
for applicable United States withholding taxes.] [If the Security is not
to bear interest prior to Maturity, insert_In addition, if the Company
determines, based upon a written opinion of independent counsel, that any
payment made outside the United States by the Company or any of its
Paying Agents of the full amount due with respect to any Bearer Security
would, under any present or future laws or regulations of the United
States, be subject to any certification, identification or other
information reporting requirement of any kind, the effect of which
requirement is the disclosure to the Company, any Paying Agent or any
governmental authority of the nationality, residence or identity of a
beneficial owner of such Bearer Security who is a United States Alien (as
defined on the face hereof) (other than such a requirement (a) which
would not be applicable to a payment made by the Company or any one of
its Paying Agents (i) directly to the beneficial owner or (ii) to any
custodian, nominee or other agent of the beneficial owner, or (b) which
can be satisfied by such custodian, nominee or other agent certifying to
the effect that such beneficial owner is a United States Alien, provided
that in each case referred to in clauses (a)(ii) and (b) payment by such
custodian, nominee or other agent of such beneficial owner is not
otherwise subject to any such requirement), the Company at its election
will either (x) permit any Holder of a Bearer Security to present such
Bearer Security for redemption within 90 days of notice of such
redemption, at the Redemption Price set forth in [Clause (___) of] the
second paragraph on the reverse of this Security, or (y) if and so long
as the conditions of the fifth paragraph on the face of this Security are
satisfied, pay the additional amounts specified in such paragraph. The
Company will make such determination and election and notify the Trustee
<PAGE> 36
thereof as soon as practicable, and the Trustee will promptly give notice
of such determination in the manner described below (the "Determination
Notice"), in each case stating the effective date of such certification,
identification or information reporting requirement, whether the Company
has elected to permit redemption of the Bearer Securities or to pay the
additional amounts specified in such paragraph and (if applicable) the
last day by which the Company may publish any notice of redemption. If
the Company elects to permit redemption of the Bearer Securities, notice
of the redemption will be given not more than 268 days following the
Determination Notice and will specify the date fixed for redemption. The
Bearer Securities will be redeemed on the day 97 days after notice of the
redemption has been given. Notwithstanding the foregoing, the Company
will not permit redemption of the Bearer Securities if the Company, based
upon an opinion of independent counsel, subsequently determines, not less
than 30 days prior to the date fixed for redemption, that no payment
would be subject to any such requirement, in which case the Company will
promptly notify the Trustee, which will promptly give notice of that
determination in the manner described below, and any earlier redemption
notice will thereupon be revoked and of no further effect.]
[The Indenture contains provisions for defeasance at any time of
(a) the entire indebtedness of this Security and (b) certain restrictive
covenants, in each case upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Security.]
[The sinking fund for this series provides for the redemption on
__________ in each year beginning with the year ____ and ending with the
year _____ of [not less than] U.S. $________ [("mandatory sinking fund")
and not more than U.S. $________] aggregate principal amount of
Securities of this series. [Securities of this series acquired or
redeemed by the Company otherwise than through [mandatory] sinking fund
payments may be credited against subsequent [mandatory] sinking fund
payments otherwise required to be made_in the inverse order in which they
become due.]]
Notice of redemption will be given by publication in an Authorized
Newspaper in The City of New York and, if the Securities of this series
are then listed on [The Stock Exchange of the United Kingdom and the
Republic of Ireland] [the Luxembourg Stock Exchange] [or] any [other]
stock exchange located outside of the United States and such stock
exchange shall so require, in [London] [Luxembourg], [or] in any [other]
required city outside the United States or, if not practicable, elsewhere
in Europe, [and by mail to Holders of Registered Securities,] not less
than 30 nor more than 60 days prior to the date fixed for redemption, all
as provided in the Indenture.
[The Company shall not be required (i) to issue, register the
transfer of or exchange Securities of this series during a period
beginning at the opening of business 15 days before any selection of
Securities of this series to be redeemed and ending at the close of
business on the day of the first publication of the relevant notice of
redemption or, if there is no publication, the mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any
Registered Security so selected for redemption, in whole or in part, or
(iii) to exchange any Bearer Securities so selected for redemption except
that such a Bearer Security may be exchanged for a Registered Security of
this series and of like tenor, provided that such Registered Security
shall be simultaneously surrendered for redemption.]
[If the Securities of the series are to be listed on The Stock
<PAGE> 37
Exchange of the United Kingdom and the Republic of Ireland, insert_The
Company will not, and will not permit any of its Subsidiaries to,
purchase any Securities of this series by private treaty at a price
(exclusive of expenses and accrued interest) which, if the Securities are
then listed on The Stock Exchange of the United Kingdom and the Republic
of Ireland and such stock exchange shall so require, exceeds [120%] of
the mean of the nominal quotations of the Securities as shown in The
Stock Exchange Daily Official List for the last trading day preceding the
date of purchase.]
[If the Security is not an Original Issue Discount Security,
insert_If an Event of Default with respect to Securities of this series
shall occur and be continuing, the principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert_If
an Event of Default with respect to Securities of this series shall occur
and be continuing, an amount of principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture. Such amounts shall be equal to_insert formula
for determining the amount. Upon payment (i) of the amount of principal
so declared due and payable and (ii) of interest on any overdue principal
and overdue interest (in each case to the extent that the payment of such
interest shall be legally enforceable), all of the Company's obligations
in respect of the payment of the principal of and interest, if any, on
the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations
of the Company and the rights of the Holders of the Securities of each
series to be affected and any related coupons under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of a
majority in principal amount of the Securities at the time Outstanding of
each series to be affected and, for certain purposes, without the consent
of the Holders of Securities at the time Outstanding. The Indenture also
contains provisions permitting the Holders of specified percentages in
principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series
and any related coupons, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and any coupon appertaining hereto and of
any Security issued in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of
(and premium, if any) and [any] interest (including additional amounts,
as described on the face hereof) on this Security at the times, places
and rate, and in the coin or currency, herein prescribed.
Title to [Bearer] Securities and coupons shall pass by delivery.
[As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of Registered Securities is registrable in the
Security Register, upon surrender of a Registered Security for
registration of transfer at the [Corporate Trust Office_______________]
of [the Trustee_________] in Chicago, Illinois or, subject to any laws or
<PAGE> 38
regulations applicable thereto and to the right of the Company (limited
as provided in the Indenture) to rescind the designation of any such
transfer agent at the [main] offices of _________ in ____________ and
__________ in ____________ or at such other offices or agencies as the
Company may designate, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder thereof or his attorney
duly authorized in writing, and thereupon one or more new Registered
Securities of this series and of like tenor, of authorized denominations
and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.]
[No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in
connection therewith.]
The Company, the Trustee and any agent of the Company or the Trustee
may treat the bearer of a Bearer Security of any series and any coupon
appertaining thereto [, and prior to due presentment of a Registered
Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name
such Security is registered,] as the owner thereof for all purposes,
whether or not such Security or such coupon be overdue, and neither the
Company, the Trustee nor any such agent shall be affected by notice to
the contrary.
The Indenture, the Securities and any coupons appertaining thereto
shall be governed by and construed in accordance with the laws of the
State of Illinois.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
[Form of Face of Coupon]
Any United States Person who holds this Obligation will be subject
to limitations under the United States Income Tax Laws, including the
limitations provided in Sections 165(j) and 1287(a) of the Internal
Revenue Code.
[R-]* _______
Kemper Corporation U.S.$________
Due ______________
[______________________________]
Unless the Security to which this coupon appertains shall have been
called for previous redemption and payment thereof duly provided for on
the date set forth hereon, Kemper Corporation (herein called the
"Company") will pay to bearer, upon surrender hereof, the amount shown
hereon (together with any additional amounts in respect thereof which the
Company may be required to pay according to the terms of said Security
and the Indenture referred to therein) at the Paying Agents set out on
the reverse hereof or at such other offices or agencies (which, except as
otherwise provided in the Security to which this coupon appertains, shall
be located outside the United States of America (including the States and
the District of Columbia), its territories, its possessions and other
areas subject to its jurisdiction (the "United States")) as the Company
<PAGE> 39
may designate from time to time, at the option of the Holder, by United
States dollar check drawn on a bank in Chicago, Illinois or by transfer
of United States dollars to an account maintained by the payee with a
bank located outside the United States, being [one year's] interest then
payable on said Security.
Kemper Corporation
By
[Reverse of Coupon]
*
_____________________________
_____________________________
_____________________________
_____________________________
_____________________________
Section 204. Form of Trustees Certificate of Authentication.
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
a
as Trustee
By
Authorized Signatory
Article Three
The Securities
Section 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of
Securities which may be authenticated and delivered under this Indenture
is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and, subject to
Section 303, set forth, or determined in the manner provided, in an
Officers' Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered
under this Indenture (except for Securities authenticated and
<PAGE> 40
delivered upon registration of transfer of, or in exchange for, or
in lieu of, other Securities of the series pursuant to Section 304,
305, 306, 906 or 1107 and, if applicable, except for Securities
which, pursuant to Section 303, are deemed never to have been
authenticated and delivered hereunder);
(3) whether Bearer Securities of the series are to be
issuable, whether Bearer Securities of the series shall comply with
requirements in the Internal Revenue Code and regulations
promulgated thereunder for the deduction of interest paid by the
Company thereon, and, if Bearer Securities of the series are to be
issuable, whether Registered Securities of the series also are to be
issuable;
(4) whether Securities of the series may be issued in whole or
in part in global form and, if so, the identity of the Depositary
for such Securities in global form, and the terms and condition, if
any, upon which interests in such Securities in global form may be
exchanged, in whole or in part, for the individual Securities
represented thereby;
(5) the Person to whom any interest on any Registered Security
of the series shall be payable if other than the Person in whose
name that Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for
such interest and the manner in which, or the Person to whom, any
interest on any Bearer Security of the series shall be payable if
otherwise than upon presentation and surrender of the coupons
appertaining thereto as they severally mature;
(6) the date or dates on which the principal of the Securities
of the series is payable;
(7) the rate or rates at which the Securities of the series
shall bear interest, if any, and the method or methods by which such
rates shall be determined; the date or dates from which any such
interest shall accrue; each Interest Payment Date on which any such
interest shall be payable; the Regular Record Date for any interest
payable on any Registered Securities on any Interest Payment Date;
and the extent to which, or the manner in which, any interest
payable on a temporary global Security on an Interest Payment Date
will be paid if other than in the manner provided in Section 307;
(8) the place or places where, subject to the provisions of
Section 1002, the principal of (and premium, if any) and any
interest on Securities of the series shall be payable and, in the
case of any series of Securities which may be issuable as Bearer
Securities, if different, the places where, subject to the
provisions of Section 1002, any Registered Securities of the series
may be surrendered for registration of transfer, where Securities of
the series may be surrendered for exchange and where notices and
demands to or upon the Company in respect of the Securities of the
series and this Indenture may be served;
(9) the period or periods within which, the price or prices at
which and the terms and conditions upon which Securities of the
series may be redeemed, in whole or in part, at the option of the
Company;
(10) the obligation, if any, of the Company to redeem or
<PAGE> 41
purchase Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof and the
period or periods within which, the price or prices at which and the
terms and conditions upon which Securities of the series shall be
redeemed or purchased, in whole or in part, pursuant to such
obligation;
(11) the denominations in which Registered Securities of the
series, if any, shall be issuable if other than denominations of
$1,000 and any integral multiple thereof, and the denomination or
denominations in which Bearer Securities of the series, if any,
shall be issuable if other than the denomination of $5,000;
(12) the currency or currencies, including composite
currencies, in which payment of the principal of (and premium, if
any) and any interest on the Securities of the series shall be
payable if other than the currency of the United States of America;
(13) if the amount of payments of principal of (and premium, if
any) or any interest on the Securities of the series may be
determined with reference to an index, the manner in which such
amounts shall be determined;
(14) if other than the principal amount thereof, the portion of
the principal amount of Securities of the series which shall be
payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 502;
(15) the date as of which any Bearer Securities of the series
and any temporary global Security representing Outstanding
Securities of the series shall be dated if other than the date of
original issuance of the first Security of the series to be issued;
(16) the application, if any, of Section 403;
(17) the application, if any, of Section 1012; and
(18) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series and the coupons appertaining to
Bearer Securities of such series, if any, shall be substantially
identical except, in the case of Registered Securities, as to
denomination and except as may otherwise be provided in or pursuant to
such Board Resolution and (subject to Section 303) set forth in such
Officers' Certificate or in any such indenture supplemental hereto.
At the option of the Company, interest on any Registered Securities
of any series which bear interest may be paid by mailing a check to the
address of the person entitled thereto as such address shall appear in
the Security Register.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of
the Company and delivered to the Trustee at or prior to the delivery of
the Officers' Certificate setting forth the terms of the series.
Section 302. Denominations. Unless otherwise
provided as contemplated by Section 301 with respect to any series of
<PAGE> 42
Securities, the Registered Securities of each series shall be issuable in
denominations of $1,000 and any integral multiple thereof and the Bearer
Securities of each series, if any, shall be issuable in the denomination
of $5,000.
Section 303. Execution, Authentication, Delivery and Dating. The
Securities shall be executed on behalf of the Company by its Chairman of
the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the
Securities may be manual or facsimile. Coupons shall bear the facsimile
signature of the Treasurer or any Assistant Treasurer of the Company.
Securities and coupons bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the authentication and delivery
of such Securities or did not hold such offices at the date of such
Securities.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities of any series,
together with any coupons appertaining thereto, executed by the Company
to the Trustee or, if the Trustee is required to appoint an
Authenticating Agent pursuant to Section 614, any such Authenticating
Agent for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee or any
such Authenticating Agent in accordance with the Company Order shall
authenticate and deliver such Securities; provided, however, that, in
connection with its original issuance, no Bearer Security shall be mailed
or otherwise delivered to any location in the United States; and
provided, further, that a Bearer Security may be delivered in connection
with its original issuance only if the Person entitled to receive such
Bearer Security shall have delivered to the Trustee, or such other Person
as shall be specified in a temporary global Security delivered pursuant
to Section 304, a certificate in the form required by Section 311(a).
If the forms or terms of the Securities of the series have been
established in or pursuant to one or more Board Resolutions as permitted
by Sections 201 and 301, in authenticating such Securities, and accepting
the additional responsibilities under this Indenture in relation to such
Securities, the Trustee shall be entitled to receive, and (subject to
Section 601) shall be fully protected in relying upon, an Opinion of
Counsel stating,
(a) if the forms of such Securities and coupons, if any, have
been established by or pursuant to Board Resolution as permitted by
Section 201, that such forms have been established in conformity
with the provisions of this Indenture;
(b) if the terms of such Securities have been established by
or pursuant to Board Resolution as permitted by Section 301, that
such terms have been established in conformity with the provisions
of this Indenture;
(c) that such Securities, together with the coupons, if any,
appertaining thereto, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute
<PAGE> 43
valid and legally binding obligations of the Company, enforceable in
accordance with their terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting the enforcement of creditors'
rights and to general equity principles;
(d) that the authentication and delivery of such Securities
and the execution and delivery of the supplemental indenture, if
any, by the Trustee will not violate the terms of the Indenture; and
(e) that the issuance of such Securities will not result in
any violation of any of the terms or provisions of any applicable
law or regulation.
If such forms or terms have been so established, the Trustee shall not be
required to authenticate such Securities if (i) the issue of such
Securities pursuant to this Indenture will affect the Trustee's own
rights, duties or immunities under the Securities and this Indenture or
otherwise in a manner which is not reasonably acceptable to the Trustee
or (ii) the Trustee receives advice from legal counsel (which may be its
own legal counsel) to the effect that such action cannot be lawfully
taken.
Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued
at one time, it shall not be necessary to deliver the Officers'
Certificate otherwise required pursuant to Section 301 or the Company
Order and Opinion of Counsel otherwise required pursuant to such
preceding paragraph at or prior to the time of authentication of each
Security of such series if such documents are delivered at or prior to
the time of authentication upon original issuance of the first Security
of such series to be issued.
Each Registered Security shall be dated the date of its
authentication; and unless otherwise specified as contemplated by Section
301, each Bearer Security and any temporary global Security referred to
in Section 304 shall be dated as of the date of original issuance of the
first Security of such series to be issued.
No Security or coupon shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears
on such Security a certificate of authentication substantially in the
form provided for herein executed by the Trustee by manual signature, and
such certificate upon any Security shall be conclusive evidence, and the
only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
Notwithstanding the foregoing, if any Security shall have been duly
authenticated and delivered hereunder but never sold by the Company, and
the Company shall deliver to the Trustee, and, if the Trustee is required
to appoint an Authenticating Agent pursuant to Section 614, any such
Authenticating Agent, a written statement (which need not comply with
Section 102) signed on behalf of the Company, specifically identifying
such Security by series and number and stating that such Security has
never been sold by the Company, for all purposes of this Indenture such
Security shall be deemed never to have been authenticated and delivered
hereunder, shall never be entitled to the benefits of this Indenture and
shall be destroyed by the Trustee or any such Authenticating Agent as
contemplated by the last sentence of Section 309. Except as permitted by
Section 306 or 307, the Trustee shall not authenticate and deliver any
Bearer Security unless all appurtenant coupons for interest then matured
<PAGE> 44
have been detached and cancelled.
Section 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee or, if the
Trustee is required to appoint an Authenticating Agent pursuant to
Section 614, any such Authenticating Agent shall authenticate and
deliver, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in
lieu of which they are issued, in registered form or, if authorized, in
bearer form with one or more coupons or without coupons, and with such
appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as evidenced by
their execution of such Securities. In the case of any series which may
be issuable as Bearer Securities, such temporary Securities may be in
global form, representing such of the Outstanding Securities of such
series as shall be specified therein.
Except in the case of temporary Securities in global form, each of
which shall be exchanged in accordance with the provisions of the
following paragraphs, if temporary Securities of any series are issued,
the Company will cause definitive Securities of that series to be
prepared without unreasonable delay. After the preparation of definitive
Securities of such series, the temporary Securities of such series shall
be exchangeable for definitive Securities of such series upon surrender
of the temporary Securities of such series at the office or agency of the
Company maintained pursuant to Section 1002 in a Place of Payment for
such series for the purpose of exchanges of Securities of such series,
without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series (accompanied by any unmatured
coupons appertaining thereto) the Company shall execute and the Trustee
or any such Authenticating Agent shall authenticate and deliver in
exchange therefor a like principal amount of definitive Securities of the
same series and of like tenor of authorized denominations; provided,
however, that no definitive Bearer Security shall be delivered in
exchange for a temporary Registered Security; and provided, further, that
a definitive Bearer Security shall be delivered in exchange for a
temporary Bearer Security only in compliance with the conditions set
forth in Section 303. Until so exchanged the temporary Securities of any
series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series.
If temporary Securities of any series are issued in global form, any
such temporary global Security shall, unless otherwise provided in such
temporary global Security, be delivered to the London office of a
depositary or common depositary (the "Common Depositary"), for the
benefit of the operator of the Euro-clear System ("Euro-clear") and Cedel
S.A., for credit to the respective accounts or the beneficial owners of
such Securities (or to such other accounts as they may direct). Upon
receipt of written instructions (which need not comply with Section 102)
signed on behalf of the Company by any Person authorized to give such
instructions, the Trustee or any such Authenticating Agent shall endorse
such temporary global Security to reflect the initial principal amount,
or an increase in the principal amount, of Outstanding Securities
represented thereby. Until such initial endorsement, such temporary
global Security shall not evidence any obligation of the Company. Such
temporary global Security shall at any time represent the aggregate
principal amount of Outstanding Securities theretofore endorsed thereon
as provided above, subject to reduction to reflect exchanges as described
<PAGE> 45
below.
Unless otherwise specified in such temporary global Security, and
subject to the second proviso in the following paragraph, the interest of
a beneficial owner of Securities of a series in a temporary global
Security shall be exchanged for definitive Securities of such series and
of like tenor following the Exchange Date (as defined below) when the
account holder instructs Euro-clear or Cedel S.A., as the case may be, to
request such exchange on his behalf and delivers to Euro-clear or Cedel
S.A., as the case may be, a certificate in the form required by
Section 311(a), dated no earlier than 15 days prior to the Exchange Date,
copies of which certificate shall be available from the offices of Euro-
clear and Cedel S.A., the Trustee, any Authenticating Agent appointed for
such series of Securities and each Paying Agent. Unless otherwise
specified in such temporary global Security, any such exchange shall be
made free of charge to the beneficial owners of such temporary global
Security, except that a Person receiving definitive Securities must bear
the cost of insurance, postage, transportation and the like in the event
that such person does not take delivery of such definitive Securities in
person at the offices of Euro-clear or Cedel S.A.
Without unnecessary delay but in any event not later than the date
specified in, or determined pursuant to the terms of, any such temporary
global Security (the "Exchange Date"), the Company shall deliver to the
Trustee, or, if the Trustee is required to appoint an Authenticating
Agent pursuant to Section 614, to any such Authenticating Agent,
definitive Securities in an aggregate principal amount equal to the
principal amount of such temporary global Security, executed by the
Company. Unless otherwise specified as contemplated by Section 301, such
definitive Securities shall be in the form of Bearer Securities or
Registered Securities, or any combination thereof, as may be specified by
the Trustee or any such Authenticating Agent. On or after the Exchange
Date such temporary global Security shall be surrendered by the Common
Depositary to the Trustee or any such Authenticating Agent, as the
Company's agent for such purpose, to be exchanged, in whole or from time
to time in part, for definitive Securities without charge and the Trustee
or any such Authenticating Agent shall authenticate and deliver, in
exchange for each portion of such temporary global Security, an equal
aggregate principal amount of definitive Securities of the same series of
authorized denominations and of like tenor as the portion of such
temporary global Security to be exchanged, which, except as otherwise
specified as contemplated by Section 301, shall be in the form of Bearer
Securities or Registered Securities, or any combination thereof, as shall
be specified by the beneficial owner thereof; provided, however, that,
unless otherwise specified in such temporary global Security, upon such
presentation by the Common Depositary, such temporary global Security is
accompanied by a certificate dated the Exchange Date or a subsequent date
and signed by Euro-clear as to the portion of such temporary global
Security held for its account then to be exchanged and a certificate
dated the Exchange Date or a subsequent date and signed by Cedel S.A. as
to the portion of such temporary global Security held for its account
then to be exchanged, each in the form required by Section 311(b); and
provided, further, that a definitive Bearer Security shall be delivered
in exchange for a portion of a temporary global Security only in
compliance with the conditions set forth in Section 303.
Upon any exchange of a portion of any such temporary global
Security, such temporary global Security shall be endorsed by the Trustee
or any such Authenticating Agent, as the case may be, to reflect the
reduction of the principal amount evidenced thereby whereupon its
<PAGE> 46
remaining principal amount shall be reduced for all purposes by the
amount so exchanged. Until so exchanged in full, such temporary global
Security shall in all respects be entitled to the same benefits under
this Indenture as definitive Securities of such series authenticated and
delivered hereunder, except that, unless otherwise specified as
contemplated by Section 301, interest payable on such temporary global
Security on an Interest Payment Date for Securities of such series
occurring prior to the applicable Exchange Date shall be payable, without
interest, to Euro-clear and Cedel S.A. on such interest Payment Date upon
delivery by Euro-clear and Cedel S.A. to the Trustee or such
Authenticating Agent, as the case may be, of a certificate or
certificates in the form required by Section 311(c), for credit on or
after such Interest Payment Date to the respective accounts of the
Persons who are the beneficial owners of such temporary global Security
on such Interest Payment Date and who have each delivered to Euro-clear
or Cedel S.A., as the case may be, a certificate in the form required by
Section 311(d).
Section 305. Registration, Registration of Transfer and Exchange.
With respect to Registered Securities of any series, the Company shall
cause to be kept at the Corporate Trust Office of the Trustee, or at the
Company's option, at an office or agency to be maintained by the Company
in accordance with Section 1002, a register (being the combined register
of the Security Registrar and all transfer agents designated pursuant to
Section 1002 for the purpose of registration of transfer of Securities of
such series and sometimes collectively referred to as the "Security
Register") which may be kept in electronic form and in which, subject to
such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Registered Securities and the
registration of transfers of Registered Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering
Registered Securities and transfers of Registered Securities as herein
provided. The Security Registrar shall comply with such instructions as
it may receive from the Trustee or any Authenticating Agent pursuant to
the last sentence of Section 309.
Upon surrender for registration of transfer of any Registered
Security of any series at the office or agency of the Company maintained
pursuant to Section 1002 for such purpose in a Place of Payment for such
series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or
more new Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, Registered Securities of any series may
be exchanged for other Registered Securities of the same series of any
authorized denominations and of a like aggregate principal amount and
tenor, upon surrender of the Securities to be exchanged at any such
office or agency. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate
and deliver, the Securities which the Holder making the exchange is
entitled to receive.
If the Company shall establish pursuant to Section 301 that
Securities of a series may be issued in whole or in part in global form,
then the Company shall execute and the Trustee shall, in accordance with
this Section and the Company Order with respect to such series,
authenticate and deliver one or more Securities in global form that (i)
shall represent and shall be denominated in an authorized aggregate
<PAGE> 47
amount equal to the aggregate principal amount of the Outstanding
Securities of such series and tenor to be represented by one or more
Securities in global form, (ii) shall be registered, if in registered
form, in the name of the Depositary for such Security or Securities in
global form or the nominee of such Depositary, (iii) shall be delivered
to such Depositary or pursuant to such Depositary's instruction and (iv)
shall bear such legend as may be required by such Depositary. Each
Depositary designated pursuant to Section 301 for a Registered Security
in global form must, at the time of its designation and at all times
while it serves as Depositary, be a clearing agency registered under the
Securities Exchange Act of 1934 and any other applicable statute or
regulation.
If at any time the Depositary for the Securities of a series
notifies the Company that it is unwilling or unable to continue as
Depositary for the Securities of such series or if at any time the
Depositary for the Securities of such series shall no longer be eligible
under Section 303, the Company, by Company Order, shall appoint a
successor Depositary with respect to the Securities of such series. If a
successor Depositary for the Securities of such series is not appointed
by the Company within 90 days after the Company receives such notice or
becomes aware of such ineligibility, the Company's election pursuant to
Section 301(4) shall no longer be effective with respect to the
Securities of such series and the Company will execute, and the Trustee,
upon receipt of a Company Order for the authentication and delivery of
definitive Securities of such series, will authenticate and deliver,
Securities of such series in definitive form in an aggregate principal
amount and like terms and tenor equal to the principal amount of the
Security or Securities in global form representing such series in
exchange for such Security or Securities in global form.
The Company may at any time and in its sole discretion determine
that individual Securities of any series issued in global form shall no
longer be represented by such Security or Securities in global form. In
such event the Company will execute, and the Trustee, upon receipt of a
Company Order for the authentication and delivery of individual
definitive Securities of such series and of the same terms and tenor,
will authenticate and deliver individual Securities of such series in
definitive form in authorized denominations and in an aggregate principal
amount equal to the principal amount of the Security or Securities in
global form representing such series in exchange for such Security or
Securities in global form.
If specified by the Company pursuant to Section 301 with respect to
a series of Securities, the Depositary for such series of Securities may
surrender a Security in global form for such series of Securities in
exchange in whole or in part for individual Securities of such series in
definitive form and of like terms and tenor on such terms as are
acceptable to the Company, the Trustee and such Depositary. Thereupon,
the Company shall execute, and the Trustee upon receipt of a Company
Order for the authentication and delivery of individual definitive
Securities of such series, shall authenticate and deliver, without
service charge:
(a) to the Depositary or to each Person specified by such
Depositary a new individual Security or Securities of the same
series and of the same tenor, of authorized denominations, in
aggregate principal amount equal to and in exchange for such
Person's beneficial interest in the Security in global form; and
<PAGE> 48
(b) to such Depositary a new Security in global form in a
denomination equal to the difference, if any, between the principal
amount of the surrendered Security in global form and the aggregate
principal amount of the individual Securities delivered to Holders
thereof.
In any exchange provided for in any of the preceding three
paragraphs, the Company will execute and the Trustee pursuant to a
Company Order will authenticate and deliver individual Securities (i) in
definitive registered form in authorized denominations if the Securities
of such series are issuable as Registered Securities, (ii) in definitive
bearer form in authorized denominations, with coupons attached, if the
Securities of such series are issuable as Bearer Securities or (iii) as
either Registered or Bearer Securities, if the Securities of such series
are issuable in either form: provided, however, that no definitive Bearer
Security shall be delivered in exchange for a temporary Security in
global form unless the Company or its agent shall have received from the
Person entitled to receive the definitive Bearer Security a certificate
substantially in the form set forth in Section 311(a); and provided
further that delivery of a Bearer Security shall occur only outside the
United States; and provided further that no definitive Bearer Security
will be issued if the Company knows or has reason to know that any such
certificate is false.
Upon the exchange of a Security in global form for Securities in
definitive form, such Security in global form shall be cancelled by the
Trustee. Registered Securities issued in exchange for a Security in
global form pursuant to this Section shall be registered in such names
and in such authorized denominations as the Depositary for such Security
in global form, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee in writing. The
Trustee shall deliver such Registered Securities to the persons in whose
names such Securities are so registered or to the Depositary. The
Trustee shall deliver Bearer Securities issued in exchange for a Security
in global form pursuant to this Section to the Depositary or to the
persons, and in such authorized denominations, as the Depositary for such
Security in global form, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee in
writing; provided, however, that no definitive Bearer Security shall be
delivered in exchange for a temporary Security in global form unless the
Company or its agent shall have received from the Person entitled to
receive the definitive Bearer Security a certificate substantially in the
form set forth in Section 311(a); and provided further that delivery of a
Bearer Security shall occur only outside the United States; and provided
further that no definitive Bearer Security will be issued if the Company
knows or has reason to know that any such certificate is false.
At the option of the Holder, except as otherwise specified as
contemplated by Section 301(4) with respect to a Security in global form
representing Bearer Securities, Bearer Securities of any series may be
exchanged for Registered Securities of the same series of any authorized
denominations and of a like aggregate principal amount and tenor, upon
surrender of the Bearer Securities to be exchanged at any such office or
agency, with all unmatured coupons and all matured coupons in default
thereto appertaining. If the Holder of a Bearer Security is unable to
produce any such unmatured coupon or coupons or matured coupon or coupons
in default, such exchange may be effected if the Bearer Securities are
accompanied by payment in funds acceptable to the Company in an amount
equal to the face amount of such missing coupon or coupons, or the
surrender of such missing coupon or coupons may be waived by the Company
<PAGE> 49
and the Trustee if there be furnished to them such security or indemnity
as they may require to save each of them and any Paying Agent harmless.
If thereafter the Holder of such Security shall surrender to any Paying
Agent any such missing coupon in respect of which such a payment shall
have been made, such Holder shall be entitled to receive the amount of
such payment; provided, however, that, except as otherwise provided in
Section 1002, interest represented by coupons shall be payable only upon
presentation and surrender of those coupons at an office or agency
located outside the United States. Notwithstanding the foregoing, in
case a Bearer Security of any series is surrendered at any such office or
agency in exchange for a Registered Security of the same series and like
tenor after the close of business at such office or agency on (i) any
Regular Record Date and before the opening of business at such office or
agency on the relevant Interest Payment Date, or (ii) any Special Record
Date and before the opening of business at such office or agency on the
related date for payment of Defaulted Interest, such Bearer Security
shall be surrendered without the coupon relating to such Interest Payment
Date or proposed date for payment, as the case may be.
Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as
the Securities surrendered upon such registration of transfer or
exchange.
Every Registered Security presented or surrendered for registration
of transfer or for exchange shall (if so required by the Company or the
Trustee or any transfer agent) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the Company and
the Security Registrar or any transfer agent duly executed, by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 304, 906 or 1107 not
involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange Securities of any series during a period
beginning at the opening of business 15 days before any selection of
Securities of that series to be redeemed and ending at the close of
business on (A) if Securities of the series are issuable only as
Registered Securities, the day of the mailing of the relevant notice of
redemption and (B) if Securities of the series are issuable as Bearer
Securities, the day of the first publication of the relevant notice of
redemption or, if Securities of the series are also issuable as
Registered Securities and there is no publication, the mailing of the
relevant notice of redemption, or (ii) to register the transfer of or
exchange any Registered Security so selected for redemption, in whole or
in part, except the unredeemed portion of any Security being redeemed in
part, or (iii) to exchange any Bearer Security so selected for redemption
except that such a Bearer Security may be exchanged for a Registered
Security of that series and like tenor, provided that such Registered
Security shall be simultaneously surrendered for redemption.
<PAGE> 50
Section 306. Mutilated, Destroyed, Lost and Stolen Securities and
Coupons. If any mutilated Security or a Security with a mutilated coupon
appertaining to it is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and
principal amount and bearing a number not contemporaneously outstanding,
with coupons corresponding to the coupons, if any, appertaining to the
surrendered Security.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security or coupon and (ii) such security or indemnity as may be required
by them to save each of them and any agent of either of them harmless,
then, in the absence of notice of the Company or the Trustee that such
Security or coupon has been acquired by a bona fide purchaser, the
Company shall execute and upon its request the Trustee shall authenticate
and deliver, in lieu of any such destroyed, lost or stolen Security or in
exchange for the Security to which a destroyed, lost or stolen coupon
appertains (with all appurtenant coupons not destroyed, lost or stolen),
a new Security of the same series and of like tenor and principal amount
and bearing a number not contemporaneously outstanding, with coupons
corresponding to the coupons, if any, appertaining to such destroyed,
lost or stolen Security or to the Security to which such destroyed, lost
or stolen coupon appertains.
In case any such mutilated, destroyed, lost or stolen Security or
coupon has become or is about to become due and payable, the Company in
its discretion may, instead of issuing a new Security, pay such Security
or coupon; provided, however, that payment of principal of (and premium,
if any) and any interest on Bearer Securities shall, except as otherwise
provided in Section 1002, be payable only at an office or agency located
outside the United States, and, in the case of interest, unless otherwise
specified as contemplated by Section 301, only upon presentation and
surrender of the coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Security of any series, with its coupons, if any, issued
pursuant to this Section in lieu of any destroyed, lost or stolen
Security or in exchange for a Security to which a destroyed, lost or
stolen coupon appertains, shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost
or stolen Security and its coupons, if any, or the destroyed, lost or
stolen coupon shall be at any time enforceable by anyone, and any such
new Security and coupons, if any, shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other
Securities of that series and their coupons, if any, duly issued
hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities
or coupons.
<PAGE> 51
Section 307. Payment of Interest; Interest Rights Preserved.
Unless otherwise provided as contemplated by Section 301 with respect to
any series of Securities, interest on any Registered Security which is
payable, and is punctually paid or duly provided for, on any Interest
Payment Date shall be paid to the Person in whose name that Security (or
one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest. Unless otherwise
specified as contemplated by Section 301, in case a Bearer Security of
any series is surrendered in exchange for a Registered Security of such
series after the close of business (at an office or agency referred to in
Section 305) on any Regular Record Date and before the opening of
business on the next succeeding Interest Payment Date, such Bearer
Security shall be surrendered without the coupon relating to such
Interest Payment Date and interest will not be payable on such Interest
Payment Date in respect of the Registered Security issued in exchange for
such Bearer Security, but will be payable only to the Holder of such
coupon when due in accordance with the provisions of this Indenture.
Any interest on any Registered Security of any series which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith cease
to be payable to the Holder on the relevant Regular Record Date by virtue
of having been such Holder, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in Clause (1) or
(2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Securities of
such series (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing
of the amount of Defaulted Interest proposed to be paid on each
Registered Security of such series and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder of Registered
Securities of such series at the address of such Holder as it
appears in the Security Register, not less than 10 days prior to
such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been
so mailed, such Defaulted Interest shall be paid to the Persons in
whose names the Registered Securities of such series (or their
respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2). In case a Bearer Security of
<PAGE> 52
any series is surrendered at the office or agency in a Place of
Payment for such series in exchange for a Registered Security of
such series after the close of business at such office or agency on
any Special Record Date and before the opening of business at such
office or agency on the related proposed date for payment of
Defaulted Interest, such Bearer Security shall be surrendered
without the coupon relating to such proposed date for payment and
Defaulted Interest will not be payable on such proposed date for
payment in respect of the Registered Security issued in exchange for
such Bearer Security, but will be payable only to the Holder of such
coupon when due in accordance with the provisions of this Indenture.
(2) The Company may make payment of any Defaulted Interest on
the Registered Securities of any series in any other lawful manner
not inconsistent with the requirements of any securities exchange on
which such Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this Clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such
other Security.
Section 308. Persons Deemed Owners.
Title to any Bearer Security, any coupons appertaining thereto and any
temporary global Security shall pass by delivery.
Prior to due presentment of a Registered Security for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name such Registered Security is
registered as the owner of such Registered Security for the purpose of
receiving payment of principal of (and premium, if any) and (subject to
Section 307) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the bearer of any Bearer Security and the bearer of any coupon
as the absolute owner of such Security or coupon for the purpose of
receiving payment thereof or on account thereof and for all other
purposes whatsoever, whether or not such Security or coupon be overdue,
and neither the Company, the Trustee nor any agent of the Company or the
Trustee shall be affected by notice to the contrary.
Section 309. Cancellation. All Securities and
coupons surrendered for payment, redemption, registration of transfer or
exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the
Trustee or, if the Trustee is required to appoint an Authenticating Agent
pursuant to Section 614, any such Authenticating Agent. All Registered
Securities and matured coupons so delivered shall be promptly cancelled
by the Trustee or any such Authenticating Agent. All Bearer Securities
and unmatured coupons so delivered shall be held by the Trustee or any
such Authenticating Agent and, upon instruction by a Company Order, shall
be cancelled or held for reissuance. Bearer Securities and unmatured
coupons held for reissuance may be reissued only in exchange for Bearer
<PAGE> 53
Securities of the same series and like tenor pursuant to Section 305 or
in replacement of mutilated, lost, stolen or destroyed Bearer Securities
of the same series and like tenor or the related coupons pursuant to
Section 306. All Bearer Securities and unmatured coupons held by the
Trustee or any such Authenticating Agent pending such cancellation or
reissuance shall be deemed to be delivered for cancellation for all
purposes of this Indenture and the Securities. The Company may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired
in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated
in lieu of or in exchange for any Securities cancelled as provided in
this Section, except as expressly permitted by this Indenture. All
cancelled Securities and coupons held by the Trustee or any such
Authenticating Agent shall be disposed of as directed by a Company Order.
Each Security, together with any coupons appertaining thereto, which,
pursuant to Section 303, is deemed never to have been authenticated and
delivered hereunder shall be delivered to the Trustee or, if the Trustee
is required to appoint an Authenticating Agent pursuant to Section 614,
any such Authenticating Agent and destroyed by the Trustee or such
Authenticating Agent, as the case may be; and the Trustee or such
Authenticating Agent, as the case may be, shall promptly notify the
Security Registrar that, pursuant to Section 303, such Security is deemed
never to have been authenticated and delivered hereunder and shall
instruct the Security Registrar to make or cause to be made the necessary
notations in the Security Register to reflect the foregoing.
Section 310. Computation of
Interest. Except as otherwise specified as contemplated by Section 301
for Securities of any series, interest on the Securities of each series
shall be computed on the basis of a 360-day year of twelve 30-day months.
Section 311. Forms of Certification.
(a) Whenever any provision of this Indenture or the forms of Security
contemplate that certification be given by a Person entitled to receive a
Bearer Security, such certification shall be provided substantially in
the form of the following certificate, with only such changes as shall be
approved by the Company (including any changes necessary to comply with
certification or other requirements under the Internal Revenue Code and
regulations promulgated thereunder):
[Form of Certificate to Be Given by
Person Entitled to Receive Bearer Security]
Certificate
___________________________________
[Insert title or sufficient description
of Securities to be delivered]
This is to certify that the above-captioned Securities are either
(i) not owned by, for or on behalf of a person that is a United States
person; (ii) owned by a United States person described in Treas. Reg.
Section 1.163-5(c)(2)(i)(D)(6); or (iii) owned by a financial
institution, as described in Treas. Reg. Section 1.164-12(c)(i)(v), for
<PAGE> 54
purposes of resale during the forty day period beginning on [the earlier
of the closing date (or the date on which the issuer receives the loan
proceeds, if there is no closing with respect to such Securities)] and
such Securities have not been acquired for purposes of resale directly or
indirectly to a United States person or to a person within the United
States. The undersigned is either the owner of the above-captioned
Securities or a financial institution or clearing organization through
which the owner holds such Securities, directly or indirectly. If the
undersigned is a dealer, the undersigned agrees to obtain a similar
certificate from each person entitled to delivery of any of the above-
captioned Securities in bearer form purchased from it; provided, however,
that, if the undersigned has actual knowledge that the information
contained in such a certificate is false, the undersigned will not
deliver a Security in temporary or definitive bearer form to the person
who signed such certificate notwithstanding the delivery of such
certificate to the undersigned.
As used herein, "United States person" means any citizen or resident
of the United States, any corporation, partnership or other entity
created or organized in or under the laws of the United States and any
estate or trust the income of which is subject to United States Federal
income taxation regardless of its source, and "United States" means the
United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to
its jurisdiction.
We undertake to advise you by telex if the above statement as to
beneficial ownership is not correct on the date of delivery of the above-
captioned Securities in bearer form as to all such Securities.
We understand that this certificate is required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to
produce this certificate or a copy thereof to any interested party in
such proceedings.
Dated: _________________________ [Name of Person Entitled to Receive
Bearer Security]
(Authorized Signatory)
Name:
Title:
(b) Whenever any provision of this Indenture or the forms of
Security contemplate that certification be given by Euro-clear and Cedel
S.A. in connection with the exchange of a portion of a temporary global
Security, such certification shall be provided substantially in the form
of the following certificate, with only such changes as shall be approved
by the Company (including any changes necessary to comply with
certification or other requirements under the Internal Revenue Code and
regulations promulgated thereunder):
[Form of Certificate to Be Given by
Euro-clear and Cedel S.A.
in Connection with the Exchange of a
Portion of a Temporary Global Security]
<PAGE> 55
Certificate
________________________________
[Insert title or sufficient description
of Securities to be delivered]
This is to certify with respect to $_______________ principal amount
of the above-captioned Securities (i) that we have received from each of
the persons appearing in our records as persons entitled to a portion of
such principal amount (our "Qualified Account Holders") a certificate
with respect to such portion substantially in the form attached hereto
[Form of Certificate in Section 311(a) hereof], and (ii) that we are not
submitting herewith for exchange any portion of the temporary global
Security representing the above-captioned Securities excepted in such
certificates. Any certificates received from member organizations shall
be retained by us for a period of four calendar years following the year
in which the certificate is received.
We further certify that as of the date hereof we have not received
any notification from any of our Qualified Account Holders to the effect
that the statements made by such Qualified Account Holders with respect
to any portion of the part submitted herewith for exchange are no longer
true and cannot be relied upon as of the date hereof:
Date: _______________________
[To be dated no earlier than
the Exchange Date]
[Morgan Guaranty Trust Company of New
York, Brussels Office, as Operator
of the Euro-clear System]
[Cedel S.A.]
By
(c) Whenever any provision of the Indenture or the forms of
Security contemplate that certification be given by Euro-clear and Cedel
S.A. in connection with payment of interest with respect to a temporary
global Security prior to the related Exchange Date, such certification
shall be provided substantially in the form of the following certificate,
with only such changes as shall be approved by the Company (including any
changes necessary to comply with certification or other requirements
under the Internal Revenue Code and regulations promulgated thereunder):
[Form of Certificate to Be Given by Euro-clear
and Cedel S.A. to Obtain Interest Prior
to an Exchange Date]
Certificate
________________________________
<PAGE> 56
[Insert title or sufficient description of Securities]
This is to certify that, as of the Interest Payment Date on [Insert
Date], the undersigned, which is a holder of an interest in the temporary
global Security representing the above Securities, is not a United States
person.
As used herein, "United States person" means any citizen or resident
of the United States, any corporation, partnership or other entity
created or organized in or under the laws of the United States and any
estate or trust the income of which is subject to United States Federal
income taxation regardless of its source, and "United States" means the
United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to
its jurisdiction.
We confirm that the interest payable on such Interest Payment Date
will be paid to each of the persons appearing in our records as being
entitled to interest to be paid on the above date from whom we have
received a written certification dated not earlier than 15 days prior to
such Interest Payment Date to the effect that the above-captioned
Securities are either (i) not owned by, for or on behalf of a person that
is a United States person; (ii) owned by a United States person described
in Treas. Reg. Section 1.163-5(c)(2)(i)(D)(6); or (iii) owned by a
financial institution, as described in Treas. Reg.
Section 1.165-12(c)(i)(v), for purposes of resale during the forty day
period beginning on [the earlier of the closing date (or the date on
which the issuer receives the loan proceeds, if there is no closing with
respect to such Securities)] and such Securities have not been acquired
for purposes of resale directly or indirectly to a United States person
or to a person within the United States. If the owner is a United States
person described in the preceding sentence, such owner has provided an
Internal Revenue Service Form W-9 or is an exempt recipient as defined in
United States Treasury Regulations 1.6049-4(c)(1)(ii). We undertake to
retain certificates received from our member organizations in connection
herewith for four years from the end of the calendar years in which such
certificates are received.
The foregoing reflects any advice received subsequent to the date of
any certificate stating that the statements contained in such certificate
are no longer correct.
Dated: ________________________
[To be dated on or after the relevant
Interest Payment Date]
[Morgan Guaranty Trust Company of New
York, Brussels Office, as Operator
of the Euro-clear System]
[Cedel S.A. ]
By
(d) Whenever any provision of the Indenture or the forms of
Security contemplate that certification be given by a beneficial owner of
a portion of a temporary global Security in connection with payment of
interest with respect to a temporary global Security prior to the related
Exchange Date, such certification shall be provided substantially in the
form of the following certificate, with only such changes as shall be
<PAGE> 57
approved by the Company (including any changes necessary to comply with
certification or other requirements under the Internal Revenue Code and
regulations promulgated thereunder):
[Form of Certificate to Be Given by
Beneficial Owners to Obtain Interest
Prior to an Exchange Date]
Certificate
________________________________
[Insert title or sufficient description of Securities]
This is to certify that as of the date hereof, no portion of the
temporary global Security representing the above-captioned Securities and
held by you for our account is owned by, for or on behalf of a person
that is a United States person, unless (i) it is owned by a United States
person described in Treas. Reg. Section 1.163-5(c)(2)(i)(D)(6) or (ii) it
is owned by a financial institution, as described in Treas. Reg.
Section 1.165-12(c)(i)(v), for purposes of resale during the forty day
period beginning on [the earlier of the closing date (or the date on
which the issuer receives the loan proceeds, if there is no closing with
respect to such Securities)] and such Securities have not been acquired
for purposes of resale directly or indirectly to a United States person
or to a person within the United States. If owned by a United States
person described in the preceding sentence, such owner certifies that
either it has provided an Internal Revenue Service Form W-9 or is an
exempt recipient as defined in Section 1.6049(c)(1)(ii) of the United
States Treasury regulations.
As used herein, "United States person" means any citizen or resident
of the United States, any corporation, partnership or other entity
created or organized in or under the laws of the United States and any
estate or trust the income of which is subject to United States Federal
income taxation regardless of its source, and "United States" means the
United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to
its jurisdiction.
We undertake to advise you by telex if the above statement as to
beneficial ownership is not correct on the Interest Payment Date on
[Insert Date] as to any such portion of such temporary global Security.
We understand that this certificate is required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to
produce this certificate or a copy thereof to any interested party in
such proceedings.
Dated: ______________________
[To be dated on or after the 15th
day before the relevant Interest
Payment Date]
<PAGE> 58
[Name of Account Holder]
____________________________________
__
(Authorized Signatory)
Name:
Title:
Article Four
Satisfaction and Discharge
Section 401. Satisfaction and Discharge of Indenture. This
Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for, and any right to
receive additional amounts, as provided in Section 1004), and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered and
all coupons, if any, appertaining thereto (other than (i) coupons
appertaining to Bearer Securities surrendered for exchange for
Registered Securities and maturing after such exchange, whose
surrender is not required or has been waived as provided in
Section 305, (ii) Securities and coupons which have been destroyed,
lost or stolen and which have been replaced or paid as provided in
Section 306, (iii) coupons appertaining to Securities called for
redemption and maturing after the relevant Redemption Date, whose
surrender has been waived as provided in Section 1107, and (iv)
Securities and coupons for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such trust,
as provided in Section 1003) have been delivered to the Trustee for
cancellation: or
(B) all such Securities and, in the case of (i) or (ii) below,
any coupons appertaining thereto not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds
in trust for the purpose an amount sufficient to pay and discharge
the entire indebtedness on such Securities and coupons not
<PAGE> 59
theretofore delivered to the Trustee for cancellation, for principal
(and premium, if any) and interest to the date of such deposit (in
the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 607, the
obligations of the Trustee to any Authenticating Agent under Section 614
and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of clause (1) of this Section or if money or obligations
shall have been deposited with or received by the Trustee pursuant to
Section 403, the obligations of the Trustee under Section 402 and the
last paragraph of Section 1003 shall survive.
Section 402. Application of Trust Money.
(a) Subject to the provisions of the last paragraph of
Section 1003, all money deposited with the Trustee pursuant to
Section 401, all money and U.S. Government Obligations deposited with the
Trustee pursuant to Section 403 and all money received by the Trustee in
respect of U.S. Government Obligations deposited with the Trustee
pursuant to Section 403 shall be held in trust and applied by it, in
accordance with the provisions of the Securities and this Indenture, to
the payment, either directly or through any Paying Agent (including the
Company acting as its own Paying Agent) as the Trustee may determine, to
the Persons entitled thereto, of the principal of (and premium, if any)
and interest for whose payment such money has been deposited with or
received by the Trustee or to make mandatory sinking fund payments or
analogous payments as contemplated by Section 403. "U.S. Government
Obligations" means securities that are (x) direct obligations of the
United States of America for the timely payment of which its full faith
and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United
States of America, the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of
1933, as amended) as custodian with respect to any such U.S. Government
Obligations or a specific payment of or interest on any such U.S.
Government Obligations held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt form any amount
received by the custodian in respect of the U.S. Government Obligations
or the specific payment of principal of or interest on the U.S.
Government Obligations evidenced by such depository receipt.
(b) The Company shall pay and shall indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against U.S.
Government Obligations deposited pursuant to Section 403 or the interest
and principal received in respect of such obligations other than any
payable by or on behalf of Holders.
<PAGE> 60
(c) The Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held
by it as provided in Section 403 which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are then in excess of the
amount which then would have been required to be deposited for the
purpose for which such money or U.S. Government Obligations were
deposited or received.
Section 403. Satisfaction, Discharge and Defeasance of Securities
of Any Series. If this Section 403 is specified, as contemplated by
Section 301, to be applicable to Securities of any series, then
notwithstanding Section 401, (i) the Company shall be deemed to have
paid and discharged the entire indebtedness on all the Outstanding
Securities of any such series; (ii) the provisions of this Indenture as
it relates to such Outstanding Securities shall no longer be in effect
(except as to the rights of Holders of Securities to receive, from the
trust fund described in subparagraph (1) below, payment of the principal
of (and premium, if any) and any installment of principal of (and
premium, if any) or interest on such Securities on the Stated Maturity of
such principal or installment of principal or interest or any mandatory
sinking fund payments or analogous payments applicable to the Securities
of that series on the day on which such payments are due and payable in
accordance with the terms of the Indenture and of such Securities, the
Company's obligations with respect to such Securities under Section 305,
306, 1002 and 1003 and the rights, powers, trusts, duties and immunities
of the Trustee hereunder, including those under Section 607 hereof); and
(iii) the Trustee, at the expense of the Company, shall, upon Company
Request, execute proper instruments acknowledging satisfaction and
discharge of such indebtedness, when
(1) either
(A) with respect to all Outstanding Securities of such series,
(i) the Company has deposited or caused to be deposited
with the Trustee as trust funds in trust for the purpose lawful
money of the United States in an amount sufficient to pay and
discharge the entire indebtedness on all Outstanding Securities
of such series for principal (and premium, if any) and interest
at the Stated Maturity or any Redemption Date as contemplated
by the third paragraph from the end of this Section 403, as the
case may be; or
(ii) the Company has deposited or caused to be deposited
with the Trustee as obligations in trust for the purpose such
amount of U.S. Government Obligations maturing as to principal
and interest in such amounts and at such times as will,
together with the income to accrue thereon, without
consideration of any reinvestment thereof, be sufficient to pay
and discharge the entire indebtedness on all Outstanding
Securities of such series for principal (and premium, if any)
and interest at the Stated Maturity or any Redemption Date as
contemplated by the third paragraph from the end of this
Section 403, as the case may be; or
(B) the Company has properly fulfilled such other means of
satisfaction and discharge as is specified, as contemplated by
<PAGE> 61
Section 301, to be applicable to the Securities of such series;
(2) the Company has paid or caused to be paid all other sums
payable with respect to the Outstanding Securities of such series;
(3) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(4) no Event of Default or event which with the giving of notice or
lapse of time, or both, would become an Event of Default with respect to
the Securities of that series shall have occurred and be continuing on
the date of such deposit and no Event of Default under Section 501(5) or
Section 501(6) or event which with the giving of notice or lapse of time,
or both, would become an Event of Default under Section 501(5) or
Section 501(6) shall have occurred and be continuing on the 91st day
after such date;
(5) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (b) since the
date of this Indenture there has been a change in applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of Securities of such
series will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal
income tax on the same amount and in the same manner and at the same
times, as would have been the case if such defeasance had not occurred;
(6) if the Securities of that series are then listed on the New
York Stock Exchange, Inc., the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that such deposit, defeasance
and discharge will not cause such Securities to be delisted; and
(7) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of the entire indebtedness on all Outstanding Securities of any such
series have been complied with.
Any deposits with the Trustee referred to in Section 403(1)(A) above
shall be irrevocable and shall be made under the terms of an escrow trust
agreement in form and substance satisfactory to the Trustee. If any
Outstanding Securities of such series are to be redeemed prior to their
Stated Maturity, whether pursuant to any optional redemption provisions
or in accordance with any mandatory sinking fund requirement, the
applicable escrow trust agreement shall provide therefor and the Company
shall make such arrangements as are satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company.
Upon the satisfaction of the conditions set forth in this
Section 403 with respect to all the Outstanding Securities of any series,
the terms and conditions of such series, including the terms and
conditions with respect thereto set forth in this Indenture, shall no
longer be binding upon, or applicable to, the Company; provided that the
Company shall not be discharged from any payment obligations in respect
of Securities of such series which are deemed not to be Outstanding under
clause (iii) of the definition thereof if such obligations continue to be
valid obligations of the Company under applicable law.
<PAGE> 62
Notwithstanding the cessation, termination and discharge of all
obligations, covenants and agreements (except as provided above in this
Section 403) of the Company under this Indenture with respect to any
series of Securities, the obligations of the Company to the Trustee under
Section 607, the obligations of the Trustee under Section 402 and the
last paragraph of Section 1003 shall survive with respect to such series
of Securities.
Article Five
Remedies
Section 501. Events of Default. "Event of
Default", wherever used herein with respect to Securities of any series,
means any one of the following events (whatever the reason for such Event
of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon any Security
of that series when it becomes due and payable, and continuance of
such default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when
and as due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with or which has expressly been
included in this Indenture solely for the benefit of series of
Securities other than that series), and continuance of such default
or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities of that series a
written notice specifying such default or breach and requiring it to
be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(5) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the
Company under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of the Company or of any substantial part of
its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief
or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
<PAGE> 63
(6) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent
by it to the entry of a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other
similar law or the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any
applicable Federal or State law, or the consent by it to the filing
of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Company or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action; or
(7) any other Event of Default provided with respect to
Securities of that series.
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series may declare the principal amount
(or, if the Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in
the terms of that series) of all of the Securities of that series to be
due and payable immediately, by a notice in writing to the Company (and
to the Trustee if given by Holders), and upon any such declaration such
principal amount (or specified amount) shall become immediately due and
payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree
for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of a majority in
principal amount of the Outstanding Securities of that series, by written
notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that
series,
(B) the principal of (and premium, if any, on) any
Securities of that series which have become due otherwise than
by such declaration of acceleration and interest thereon at the
rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate or rates
prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder
<PAGE> 64
and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that
series, other than the non-payment of the principal of Securities of
that series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit
of the Holders of such Securities and coupons, the whole amount then due
and payable on such Securities and coupons for principal (and premium, if
any) and interest and, to the extent that payment of such interest shall
be legally enforceable, interest on any overdue principal (and premium,
if any) and on any overdue interest, at the rate or rates prescribed
therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon such
Securities and collect the moneys adjudged or decreed to be payable in
the manner provided by law out of the property of the Company or any
other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the Holders of
Securities of such series and any related coupons by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect
and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to the
Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Securities shall then be
<PAGE> 65
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the
Company for the payment of overdue principal or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and
counsel) and of the Holders of Securities and coupons allowed in
such judicial proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the
same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby
authorized by each Holder of Securities and coupons to make such payments
to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders of Securities and
coupons, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under
Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Security or coupon any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or coupons or the rights of any
Holder thereof or to authorize the Trustee to vote in respect of the
claim of any Holder of a Security or coupon in any such proceeding.
Section 505. Trustee May Enforce Claims Without
Possession of Securities or Coupons. All rights of action and claims
under this Indenture or the Securities or coupons may be prosecuted and
enforced by the Trustee without the possession of any of the Securities
or coupons or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its
own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the Holders of the Securities and
coupons in respect of which such judgment has been recovered.
Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this
Article shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest, upon presentation
of the Securities or coupons, or both, as the case may be, and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid;
First: To the payment of all amounts due the Trustee under
Section 607;
<PAGE> 66
Second: To the payments of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities
and coupons in respect of which or for the benefit of which such
money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such
Securities and coupons for principal (and premium, if any) and
interest, respectively; and
Third: The balance, if any, to the Company or any other Person
or Persons entitled thereto.
Section 507. Limitation on Suits. No
Holder of any Security of any series or any related coupons shall have
any right to institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the
Securities of that series;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders
of a majority in principal amount of the Outstanding Securities of
that series;
it being understood and intended that no one or more of such Holders
shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the
rights of any other of such Holders, or to obtain or to seek to obtain
priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for
the equal and ratable benefit of all of such Holders.
Section 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest. Notwithstanding any other provision in
this Indenture, the Holder of any Security or coupon shall have the
right, which is absolute and unconditional, to receive payment of the
principal of (and premium, if any) and (subject to Section 307) interest
on such Security or payment of such coupon on the Stated Maturity or
Maturities expressed in such Security or coupon (or, in the case of
redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
<PAGE> 67
If the Trustee or any Holder of a Security or
coupon has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such
Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders of Securities and
coupons shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been
instituted.
Section 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities
or coupons in the last paragraph of Section 306, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders of
Securities or coupons is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law,
be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of
any other appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security or coupon to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every
right and remedy given by this Article or by law to the Trustee or to the
Holders of Securities or coupons may be exercised from time to time, and
as often as may be deemed expedient, by the Trustee or by the Holders of
Securities or coupons, as the case may be.
Section 512. Control by Holders of Securities.
The Holders of a majority in principal amount of
the Outstanding Securities of any series shall have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on
the Trustee, with respect to the Securities of such series, provided
that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of
the Outstanding Securities of any series may on behalf of the Holders of
all the Securities of such series and any related coupons waive any past
default hereunder with respect to the Securities of such series and its
consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of
<PAGE> 68
the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security or
coupon by such Holder's acceptance thereof shall be deemed to have
agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking
to pay the costs of such suit, and that such court may in its discretion
assess reasonable costs, including reasonable attorneys' fees, against
any party litigant in such suit, having due regard to the merits and good
faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10%
in principal amount of the Outstanding Securities of any series, or to
any suit instituted by any Holder of any Security or coupon for the
enforcement of the payment of the principal of (or premium, if any) or
interest on any Security or the payment of any coupon on or after the
Stated Maturity or Maturities expressed in such Security or coupon (or,
in the case of redemption, on or after the Redemption Date).
Section 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter in force,
which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
Article Six
The Trustee
Section 601. Certain
Duties and Responsibilities. The duties and responsibilities of the
Trustee shall be as provided by the Trust Indenture Act.
Section 602. Notice of Defaults. If a
default occurs hereunder with respect to the Securities of any series,
the Trustee shall give the Holders of Securities of such series notice of
such default as and to the extent provided by the Trust Indenture Act and
in the manner provided in Section 106; provided, however, that in the
case of any default of the character specified in Section 501(4) with
respect to Securities of such series, no such notice to Holders shall be
given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default
with respect to Securities of such series.
<PAGE> 69
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, coupon, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company
Order or as otherwise expressly provided herein and any resolution
of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e) The Trustee shall not be required to take notice or be
deemed to have notice of any default hereunder (except failure by
the Company to pay principal of or interest on any series of
Securities so long as the Trustee is also acting as Paying Agent for
such series of Securities) unless the Trustee shall be specifically
notified in writing of such default by the Company or by the Holders
of at least 25% in aggregate principal amount of all Securities then
outstanding, and all such notices or other instruments required by
this Indenture to be delivered to the Trustee must, in order to be
effective, be delivered at the principal Corporate Trust Office of
the Trustee, and in the absence of such notice so delivered the
Trustee may conclusively assume there is not default except as
aforesaid;
(f) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders of Securities of any
series or any related coupons pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request or direction;
(g) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, coupon, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company,
<PAGE> 70
personally or by agent or attorney;
(h) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder; and
(i) the Trustee shall not be liable for any action taken,
suffered or omitted by any other Trustee acting on behalf of any
other series of Securities outstanding hereunder.
Section 604. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities (except
the Trustee's certificates of authentication) and in any coupons shall be
taken as the statements of the Company, and the Trustee or any
Authenticating Agent assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of
this Indenture or of the Securities or coupons. The Trustee or any
Authenticating Agent shall not be accountable for the use or application
by the Company of Securities or the proceeds thereof.
Section 605. May Hold Securities. The
Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any
other capacity, may become the owner or pledgee of Securities and coupons
and, subject to Sections 608 and 613, may otherwise deal with the Company
with the same rights it would have if it were not Trustee, Authenticating
Agent, Paying Agent, Security Registrar or such other agent.
Section 606. Money Held in Trust. Money
held by the Trustee in trust hereunder need not be segregated from other
funds except to the extent required by law. The Trustee shall be under
no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), including, without limitation, fees and
expenses incurred upon and subsequent to the commencement of any
voluntary or involuntary bankruptcy action with respect to the
Company, except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence
or bad faith on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder,
<PAGE> 71
including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
Section 608. Disqualification; Conflicting Interests. If the
Trustee has or shall acquire any conflicting interest within the meaning
of the Trust Indenture Act with respect to the Securities of any series,
it shall either eliminate such conflicting interest or resign with
respect to the Securities of that series in the manner provided by, and
subject to the provisions of, the Trust Indenture Act and this Indenture,
and the Company shall take prompt action to have a successor Trustee with
respect to the Securities of that series appointed in the manner provided
herein.
Section 609. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder with respect to the Securities
of each series, which shall be a Person that is eligible pursuant to the
Trust Indenture Act to act as such, having a combined capital and surplus
of at least $50,000,000, subject to supervision or examination by Federal
or State authority and having its Corporate Trust Office in Chicago,
Illinois or New York, New York. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of
said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until
the acceptance of appointment by the successor Trustee in accordance with
the applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice thereof to the
Company. If the instrument of acceptance by a successor Trustee required
by Section 611 shall not have been delivered to the Trustee within
30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder of a
Security who has been a bona fide Holder of a Security for at least
six months, or
<PAGE> 72
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the
Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove
the Trustee with respect to all Securities, or (ii) subject to
Section 514, any Holder of a Security who has been a bona fide Holder of
a Security for at least six months may, on its own behalf and on behalf
of all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any
cause, with respect to the Securities of one or more series, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those series (it being
understood that any such successor Trustee may be appointed with respect
to the Securities of one or more or all of such series and that at any
time there shall be only one Trustee with respect to the Securities of
any particular series) and shall comply with the applicable requirements
of Section 611. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
of such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of
such appointment in accordance with the applicable requirements of
Section 611, become the successor Trustee with respect to the Securities
of such series and to that extent supersede the successor Trustee
appointed by the Company. If no successor Trustee with respect to the
Securities of any series shall have been so appointed by the Company or
the Holders of Securities and accepted appointment in the manner required
by Section 611, any Holder of a Security who has been a bona fide Holder
of a Security of such series for at least six months may, on its own
behalf and on behalf of all others similarly situated, petition any court
of competent jurisdiction for appointment of a successor Trustee with
respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and
each appointment of a successor Trustee with respect to the Securities of
any series by mailing written notice of such event by first-class mail,
postage prepaid, to all Holders of Registered Securities, if any, of such
series as their names and addresses appear in the Security Register and,
if Securities of such Series are issuable as Bearer Securities, by
publishing notice of such event once in an Authorized Newspaper in each
Place of Payment located outside the United States. Each notice shall
include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
Section 611. Acceptance of Appointment by Successor. (a) In case
of the appointment hereunder of a successor Trustee with respect to all
<PAGE> 73
Securities, every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee;
but, on the request of the Company or the successor Trustee, such
retiring Trustee shall, upon payment of its charges, execute and deliver
an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all) series, the
Company, the retiring Trustee and each successor Trustee with respect to
the Securities of one or more series shall execute and deliver an
indenture supplemental hereto wherein each successor Trustee shall accept
such appointment and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest in, each
successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series
to which the appointment of such successor Trustee relates, (2) if the
retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in
the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such Trustees as co-trustees of the same trust
and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and
delivery of such supplemental indenture the resignation or removal of the
retiring Trustee shall become effective to the extent provided therein
and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates;
but, on request of the Company or any successor Trustee, such retiring
Trustee shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the
appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and
trusts referred to in paragraph (a) or (b) of this Section, as the case
may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
Section 612. Merger, Conversion, Consolidation or Succession to
<PAGE> 74
Business. Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided such corporation shall
be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of
the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated with the same effect as if such successor Trustee had
itself authenticated such Securities.
Section 613. Preferential Collection of Claims Against Company. If
and when the Trustee becomes a creditor of the Company (or any other
obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor). A Trustee which has
resigned or been removed is subject to such provisions of the Trust
Indenture Act to the extent provided therein.
Section 614. Appointment
of Authenticating Agent. The Trustee may (and, if so requested in
writing (which writing need not comply with Section 102) by the Company
with respect to any series of Securities, shall) appoint an
Authenticating Agent or Agents with respect to one or more series of
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities of such series issued upon exchange, registration
of transfer or partial redemption thereof or pursuant to Section 306 and,
if the Trustee is required to appoint one or more Authenticating Agents
with respect to any series of Securities, to authenticate Securities of
such series upon original issuance and to take such other actions as are
specified in Sections 303, 304 and 309, and Securities so authenticated
shall be entitled to the benefits of this Indenture and shall be valid
and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating
Agent and a certificate of authentication executed on behalf of the
Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under
such laws to act as Authenticating Agent, having a combined capital and
surplus of not less than $5,000,000 and subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent
shall resign immediately in the manner and with the effect specified in
this Section.
<PAGE> 75
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to
the corporate agency or corporate trust business of such Authenticating
Agent, shall continue to be an Authenticating Agent, provided such
corporation shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the
Trustee or such Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in
case at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may appoint a
successor Authenticating Agent which shall be acceptable to the Company
and shall (i) mail written notice of such appointment by first-class
mail, postage prepaid, to all Holders of Registered Securities, if any,
of the series with respect to which such Authenticating Agent will serve,
as their names and addresses appear in the Security Register, and (ii) if
Securities of the series are issuable as Bearer Securities, publish
notice of such appointment at least once in an Authorized Newspaper in
the place where such successor Authenticating Agent has its principal
office if such office is located outside the United States. Any
successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of
its predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to
the provisions of Section 607.
If an appointment with respect to one or more series is made
pursuant to this Section, the Securities of such series may have endorsed
thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
The First National Bank of Chicago,
as Trustee
By
As Authenticating Agent
By
Authorized Officer
Article Seven
Holders' List and Reports by Trustee and Company
<PAGE> 76
Section 701. Company to Furnish Trustee Names and Addresses of
Holders. The Company will furnish or cause to be furnished to the
Trustee:
(a) semi-annually, not later than February 15 and August 15 in
each year, a list, in such form as the Trustee may reasonably
require, containing all the information in the possession or control
of the Company, or any of its Paying Agents other than the Trustee,
as to the names and addresses of the Holders of Securities as of the
preceding February 1 or August 1, as the case may be, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request,
a list of similar form and content as of a date not more than 15
days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the Security Registrar,
no such list shall be required to be furnished.
Section 702. Preservation of Information; Communications to
Holders. (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders of Securities
(i) contained in the most recent list furnished to the Trustee as
provided in Section 701 and (ii) received by the Trustee in its capacity
as Security Registrar. The Trustee may destroy any list furnished to it
as provided in Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and
the corresponding rights and privileges of the Trustee, shall be as
provided in the Trust Indenture Act.
(c) Every Holder of Securities or coupons, by receiving and holding
the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor any agent of either of them shall be held
accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders of Securities in accordance with
Section 702(b), regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of
mailing any material pursuant to a request made under Section 702(b).
Section 703. Reports by Trustee. (a) The
Trustee shall transmit to all Holders of Securities, as their names and
addresses appear in the Security Register, such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant
to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders of Securities, be filed by the Trustee with each
stock exchange upon which any Securities are listed, with the Commission
and with the Company. The Company will notify the Trustee when any
Securities are listed on any stock exchange.
Section 704. Reports by Company.
The Company shall:
(1) file with the Trustee, within 15 days after the Company is
<PAGE> 77
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission
may from time to time by rules and regulations prescribe) which the
Company may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934;
or, if the Company is not required to file information, documents or
reports pursuant to either of said Sections, then it shall file with
the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of
the supplementary and periodic information, documents and reports
which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and registered
on a national securities exchange as may be prescribed from time to
time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations;
(3) transmit by mail to all Holders, as their names and
addresses appear in the Security Register, within 30 days after the
filing thereof with the Trustee, such summaries of any information,
documents and reports required to be filed by the Company pursuant
to paragraphs (1) and (2) of this Section as may be required by
rules and regulations prescribed from time to time by the
Commission; and
(4) furnish to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, a
brief certificate of the Company's principal executive officer,
principal financial officer or principal accounting officer as to
his or her knowledge of the Company's compliance with all conditions
and covenants under this Indenture. For purposes of this paragraph,
such compliance shall be determined without regard to any period of
grace or requirement of notice provided under this Indenture.
Article Eight
Consolidation, Merger, Conveyance, Transfer or Lease
Section 801. Company May Consolidate, Etc., Only on Certain Terms. So
long as any Securities shall be Outstanding, the Company shall not
consolidate with or merge into any other corporation or convey, transfer
or lease its properties and assets substantially as an entirety to any
Person, unless:
(1) the corporation formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation organized and
existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual
<PAGE> 78
payment of the principal of (and premium, if any) and interest
(including all additional amounts, if any, payable pursuant to
Section 1004) on all the Securities and the performance and
observance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company
or a Subsidiary as a result of such transactions as having been
incurred by the Company or such Subsidiary at the time of such
transaction, no Event of Default, and no event which, after notice
of lapse of time or both, would become an Event of Default, shall
have happened and be continuing;
(3) if, as a result of any such consolidation or merger or
such conveyance, transfer or lease, properties or assets of the
Company would become subject to a Mortgage which would not be
permitted by this Indenture, the Company or such successor
corporation or Person, as the case may be, shall take such steps as
shall be necessary effectively to secure the Securities equally and
ratably with (or prior to) all indebtedness secured thereby; and
(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such
transaction, such supplemental indenture comply with this Article
and that all conditions precedent herein provided for relating to
such transaction have been complied with.
Section 802. Successor
Corporation Substituted. Upon any consolidation by the Company with or
merger by the Company into any other corporation or any conveyance,
transfer or lease of the properties and assets of the Company
substantially as an entirety in accordance with Section 801, the
successor corporation formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture with the same effect as if
such successor corporation had been named as the Company herein, and
thereafter, except in the case of a lease, the predecessor corporation
shall be relieved of all obligations and covenants under this Indenture
and the Securities and coupons.
Article Nine
Supplemental Indentures
Section 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Securities or coupons, the Company,
when authorized by a Board Resolution, and the Trustee, at any time and
from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following
purposes:
(1) to evidence the succession of another corporation to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
<PAGE> 79
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such
covenants are to be for the benefit of less than all series of
Securities, stating that such covenants are expressly being included
solely for the benefit of such series) or to surrender any right or
power herein conferred upon the Company; or
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this
Indenture to provide that Bearer Securities may be registrable as to
principal, to change or eliminate any restrictions on the payment of
principal (or premium, if any) or any interest on, Bearer
Securities, to permit Bearer Securities to be issued in exchange for
Registered Securities, to permit Bearer Securities to be issued in
exchange for Bearer Securities of other authorized denominations or
to permit the issuance of Securities in uncertificated form,
provided any such action shall not adversely affect the interests of
the Holders of Securities of any series or any related coupons in
any material respect; or
(5) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall become
effective only when there is no Security Outstanding or any series
created prior to the execution of such supplemental indenture which
is entitled to the benefit of such provision; or
(6) to secure the Securities pursuant to the requirements of
Section 1008 or otherwise; or
(7) to establish the form or terms of Securities of any series
and any related coupons as permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of
one or more series and to add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 611(b); or
(9) to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided such action shall
not adversely affect the interests of the Holders of Securities of
any series or any related coupons in any material respect; or
(10) to comply with any requirements of the Commission, if any,
in connection with the qualification of this Indenture under the
Trust Indenture Act.
Section 902. Supplemental Indentures With Consent of Holders. With
the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company
and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in
<PAGE> 80
any manner the rights of the Holders of Securities of such series and any
related coupons under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce
the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change any
obligation of the Company to pay additional amounts pursuant to
Section 1004 (except as contemplated by Section 801(1) and permitted
by Section 901(1)), or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to
Section 502, or change the coin or currency in which any Security or
any premium or any interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of redemption, or
on or after the Redemption Date), or
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders
is required for any such supplemental indenture, or the consent of
whose Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or reduce the
requirements of Section 1304 for quorum or voting, or
(3) change any obligation of the Company to maintain an office
or agency in the places and for the purposes specified in
Section 1002, or
(4) modify any of the provisions of this Section, Section 513
or Section 1011, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each
Outstanding Security affected thereby; provided, however, that this
clause shall not be deemed to require the consent of any Holder of a
Security or coupon with respect to changes in the references to "the
Trustee" and concomitant changes in this Section and Section 1011,
or the deletion of this proviso, in accordance with the requirements
of Sections 611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or
which modifies the rights of the Holders of Securities of such series
with respect to such covenant or other provision, shall be deemed not to
affect the rights under this Indenture of the Holders of Securities of
any other series.
It shall not be necessary for any Act of Holders of Securities under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
Section 903. Execution of Supplemental Indentures. In executing, or
accepting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
<PAGE> 81
(subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may,
but shall not be obligated to, enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise. Section 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any supplemental
Section 904. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall
form a part of this Indenture for all purposes; and every Holder of
Securities theretofore or thereafter authenticated and delivered
hereunder and of any coupons appertaining thereto shall be bound
thereby. Section 904. Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture under this Article, this Indenture.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant
to this Article shall conform to the requirements of the Trust Indenture
Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the execution
of any supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Securities of any series so modified as
to conform, in the opinion of the Trustee and the Company, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Securities of such series.
Article Ten
Covenants
Section 1001. Payment of Principal, Premium and Interest. The
Company covenants and agrees for the benefit of each series of Securities
that it will duly and punctually pay the principal of (and premium, if
any) and interest on the Securities of that series in accordance with the
terms of the Securities, any coupons appertaining thereto and this
Indenture. Unless otherwise specified as contemplated by Section 301
with respect to any series of Securities, any interest due on Bearer
Securities on or before Maturity, shall be payable only upon presentation
and surrender of the several coupons for such interest installments as
are evidenced thereby as they severally mature.
Section 1002. Maintenance of Office or Agency.
If Securities of a series are issuable only as
Registered Securities, the Company will maintain in each Place of Payment
for such series an office or agency where Securities of that series may
be presented or surrendered for payment and where Securities of that
series may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Company in respect of the
Securities of that series and this Indenture may be served. If
<PAGE> 82
Securities of a series may be issuable as Bearer Securities, the Company
will maintain (A) in Chicago, Illinois, an office or agency where any
Registered Securities of that series may be presented or surrendered for
payment, where any Registered Securities of that series may be
surrendered for registration of transfer, where Securities of that series
may be surrendered for exchange, where notices or demands to or upon the
Company in respect of the Securities of that series and this Indenture
may be served and where Bearer Securities of that series and related
coupons may be presented or surrendered for payment in the circumstances
described in the following paragraph (and not otherwise), (B) subject to
any laws or regulations applicable thereto, in a Place of Payment for
that series which is located outside the United States, an office or
agency where Securities of that series and related coupons may be
presented and surrendered for payment (including payment of any
additional amounts payable on Securities of that series pursuant to
Section 1004); provided, however, that if the Securities of that series
are listed on The Stock Exchange of the United Kingdom and the Republic
of Ireland or the Luxembourg Stock Exchange or any other stock exchange
located outside the United States and such stock exchange shall so
require, the Company will maintain a Paying Agent for the Securities of
that series in London or Luxembourg or any other required city located
outside the United States, as the case may be, so long as the Securities
of that series are listed on such exchange, and (C) subject to any laws
or regulations applicable thereto, in a Place of Payment for that series
located outside the United States an office or agency where any
Registered Securities of such series may be surrendered for registration
of transfer, where Securities of that series may be surrendered for
exchange and where notices and demands to or upon the Company in respect
of the Securities of such series and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location,
and any change in the location, of any such office or agency. If at any
time the Company shall fail to maintain any such required office or
agency in respect of any series of Securities or shall fail to furnish
the Trustee with the address thereof, such presentations, and surrenders
of Securities of that series may be made and notices and demands may be
made or served at the Corporate Trust Office of the Trustee, except that
Bearer Securities of that series and the related coupons may be presented
and surrendered for payment (including payment of any additional amounts
payable on Bearer Securities of that series pursuant to Section 1004) at
the place specified for the purpose as contemplated by Section 301.
No payment of principal, premium or interest on Bearer Securities
shall be made at any office or agency of the Company in the United States
or by check mailed to any address in the United States or by transfer to
an account maintained with a bank located in the United States; provided,
however, that, if the Securities of a series are denominated and payable
in Dollars, payment of principal of (and premium, if any) and interest on
any Bearer Security (including any additional amounts payable on
Securities of such series pursuant to Section 1004) shall be made at the
office of the Company's Paying Agent in Chicago, Illinois if (but only
if) payment in Dollars of the full amount of such principal, premium,
interest or additional amounts, as the case may be, at all offices or
agencies outside the United States maintained for the purpose by the
Company in accordance with this Indenture is illegal or effectively
precluded by exchange controls or other similar restrictions.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be
presented or surrendered for any or all such purposes and may from time
to time rescind such designations; provided, however, that no such
<PAGE> 83
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in accordance with the
requirements set forth above for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of
any such designation or rescission and of any change in the location of
any such other office or agency.
Section 1003. Money for Securities Payments to Be Held in Trust. If
the Company shall at any time act as its own Paying Agent with respect to
any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities
of that series, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming
due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action
or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of
(and premium, if any) or interest on any Securities of that series,
deposit with a Paying Agent a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such principal, premium
or interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the Trustee,
subject to the provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) or interest on Securities of that series in
trust for the benefit of the Persons entitled thereto until such
sums shall be paid to such Persons or otherwise disposed of as
herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities of that series) in the making
of any payment of principal of (and premium, if any) or interest on
the Securities of that series; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose,
pay, or by Company Order direct any Paying Agent to pay, to the Trustee
all sums held in trust by the Company or such Paying Agent, such sums to
be held by the Trustee upon the same trusts as those upon which such sums
were held by the Company or such Paying Agent; and, upon such payment by
any Paying Agent to the Trustee, such Paying Agent shall be released from
all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent or received
by the Trustee in respect of obligations deposited pursuant to
Section 403 or 1012, or then held by the Company, in trust for the
<PAGE> 84
payment of the principal of (and premium, if any) or interest on any
Security of any series and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such
Security or any coupon appertaining thereto shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof,
shall thereupon cease; provided, however, that the Trustee or such Paying
Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in an Authorized
Newspaper in each Place of payment, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
Section 1004. Additional Amounts. If the
Securities of a series provide for the payment of additional amounts, the
Company will pay to the Holder of any Security of any series or any
coupon appertaining thereto additional amounts as provided therein.
Whenever in this Indenture there is mentioned in any context, the payment
of the principal of (or premium, if any) or interest on, or in respect
of, any Security of any series or payment of any related coupon or the
net proceeds received on the sale or exchange of any Security of any
series, such mention shall be deemed to include mention of the payment of
additional amounts provided for in this Section to the extent that, in
such context, additional amounts are, were or would be payable in respect
thereof pursuant to the provisions of this Section and express mention of
the payment of additional amounts (if applicable) in any provisions
hereof shall not be construed as excluding additional amounts in those
provisions hereof where such express mention is not made.
If the Securities of a series provide for the payment of additional
amounts, at least 10 days prior to the first Interest Payment Date with
respect to that series of Securities (or if the Securities of that series
will not bear interest prior to Maturity, the first day on which a
payment of principal (and premium, if any) is made), and at least 10 days
prior to each date of payment of principal (and premium, if any) or
interest if there has been any change with respect to the matters set
forth in the below-mentioned Officers' Certificate, the Company will
furnish the Trustee and the Company's principal Paying Agent or Paying
Agents, if other than the Trustee, with an Officers' Certificate
instructing the Trustee and such Paying Agent or Paying Agents whether
such payment of principal of (and premium, if any) or interest on the
Securities of that series shall be made to Holders of Securities of that
series or any related coupons who are United States Aliens without
withholding for or on account of any tax, assessment or other
governmental charge described in the Securities of that series. If any
such withholding shall be required, then such Officers' Certificate shall
specify by country the amount, if any, required to be withheld on such
payments to such Holders of Securities or coupons and the Company will
pay to the Trustee or such Paying Agent the additional amounts required
by this Section. The Company covenants to indemnify the Trustee and any
Paying Agent for, and to hold them harmless against, any loss, liability
or expense reasonably incurred without negligence or bad faith on their
part arising out of or in connection with actions taken or omitted by any
of them in reliance on any Officers' Certificate furnished pursuant to
this Section.
<PAGE> 85
Section 1005. Corporate Existence.
So long as any Securities shall be Outstanding, subject to Article Eight,
the Company will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if
the Board of Directors shall determine that the preservation thereof is
no longer desirable in the conduct of the business of the Company and
that the loss thereof is not disadvantageous in any material respect to
the Holders.
Section 1006. Maintenance of Properties.
So long as any Securities shall be Outstanding, the Company
will cause all properties used or useful in the conduct of its business
or the business of any Restricted Subsidiary to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at
all times; provided, however, that nothing in this Section shall prevent
the Company from discontinuing the operation or maintenance of any of
such properties if such discontinuance is, in the judgment of the
Company, desirable in the conduct of its business or the business of any
Restricted Subsidiary and not disadvantageous in any material respect to
the Holders.
Section 1007. Payment of Taxes and other Claims.
So long as any Securities shall be Outstanding,
the Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or property of the Company or any
Restricted Subsidiary, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property
of the Company or any Restricted Subsidiary; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings or if failure to do so is not disadvantageous in any material
respect to the Holders.
Section 1008. Restrictions on Secured Debt.
So long as any Securities shall be Outstanding, the
Company will not, directly or indirectly, and will not permit any
Subsidiary, directly or indirectly, to, incur, issue, assume, or
guarantee any indebtedness for money borrowed, whether or not evidenced
by negotiable instruments or securities, or any notes, bonds, debentures
or other similar evidences of indebtedness for money borrowed (such
indebtedness for money borrowed, and notes, bonds, debentures or other
similar evidences of indebtedness for money borrowed, being hereinafter
called "Debt"), secured by pledge of, or mortgage or lien on, any
properties or assets of the Company or any Restricted Subsidiary which is
a regulated insurance company ("Restricted Insurance Subsidiary"), or any
shares of capital stock of or Debt of any Restricted Insurance Subsidiary
(such mortgages, pledges and liens being hereinafter called "Mortgage" or
"Mortgages"), without effectively providing that the Securities (together
with, if the Company shall so determine, any other Debt of the Company or
such Restricted Insurance Subsidiary then existing or thereafter created
which is not subordinate to the Securities) shall be secured equally and
<PAGE> 86
ratably with (or, at the option of the Company, prior to) such secured
Debt, so long as such secured Debt shall be so secured; provided,
however, that this Section 1008 shall not apply to, and there shall be
excluded from secured Debt in any computation under this Section 1008,
Debt secured by:
(1) Mortgages existing on the date hereof;
(2) Mortgages in favor of the Company or any Restricted
Subsidiary;
(3) Mortgages in favor of any governmental body to secure
progress, advance or other payments pursuant to any contract or
provision of any statute;
(4) Mortgages on real property and on any fixtures or
improvements thereon, whether or not existing at the time of
acquisition thereof (including acquisition through merger or
consolidation), provided the principal amount of Debt received
thereby does not exceed the fair value of such property as
determined by the Board of Directors;
(5) Mortgages securing obligations issued by a State,
territory or possession of the United States, any political
subdivision of any of the foregoing, or the District of Columbia, or
any instrumentality of any of the foregoing to finance the
acquisition or construction of property, and on which the interest
is not, in the opinion of tax counsel of recognized standing or in
accordance with a ruling issued by the Internal Revenue Service,
includible in gross income of the holder by reason of
Section 103(a)(1) of the Internal Revenue Code of 1986 (or any
successor to such provision) as in effect at the time of the
issuance of such obligations;
(6) Mortgages on property, shares of capital or Debt hereafter
acquired (or, in the case of property, constructed) by the Company
or any Restricted Insurance Subsidiary and created prior to, at the
time of, or within 120 days after such acquisition (or, in the case
of property, the completion of such construction or commencement of
commercial operation of such property, whichever is later) to secure
or provide for the payment of all or any part of the purchase price
(or, in the case of property, the construction price) thereof or of
all or any part of any indebtedness incurred to pay all or any part
of the purchase price (or, in the case of property, the construction
price) thereof;
(7) Mortgages on property of, or on any shares of capital
stock or Debt of, any corporation existing at the time such
corporation becomes a Restricted Insurance Subsidiary;
(8) Mortgages on property, shares of capital stock or Debt
existing at the time of acquisition thereof by the Company or any
Restricted Insurance Subsidiary (including, subject to the
provisions of Section 801, acquisition through merger or
consolidation);
(9) Mechanics', landlords', tax or other statutory liens,
including liens and deposits required or provided for under state
insurance laws and similar regulatory statutes; and
<PAGE> 87
(10) Any extension, renewal or replacement (or successive
extensions, renewals or replacements), as a whole or in part, of any
Mortgage referred to in the foregoing clauses (1) to (9), inclusive;
provided, however, that such extension, renewal or replacement
Mortgage shall be limited to all or part of the same property,
assets, shares of capital stock or Debt that secured the Mortgage
extended, renewed or replaced (plus improvements on such property).
Section 1009. Restrictions on Sales of Capital Stock of
Restricted Subsidiaries. So long as any Securities shall be Outstanding,
the Company will not, directly or indirectly, sell, transfer or otherwise
dispose of (except to a Subsidiary), and it will not permit any
Subsidiary, directly or indirectly, to issue, sell, transfer or otherwise
dispose of (except to the Company or to a Subsidiary), any shares of
capital stock of a Restricted Subsidiary unless such issuance, sale,
transfer or other disposition is either:
(i) to employees of any Subsidiary pursuant to a plan or
agreement approved in a Board Resolution, or
(ii) for a consideration which in a Board Resolution is
declared to be at least equal to the fair value thereof.
The foregoing provisions shall not preclude any sale, transfer or other
disposition by the Company or any Subsidiary of assets other than assets
consisting of the capital stock of any Restricted Subsidiary.
Section 1010. Statement by Officers as to Default. So long as any
Securities shall be Outstanding, the Company will deliver to the Trustee,
within 120 days after the end of each fiscal year of the Company ending
after the date hereof, an Officers' Certificate, stating whether or not
to the best knowledge of the signers thereof the Company is in default in
the performance and observance of any of the terms, provisions and
conditions of Sections 1008 and 1009, and if the Company shall be in
default, specifying all such defaults and the nature and status thereof
of which they may have knowledge.
Section 1011. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply
with any term, provision or condition set forth in Sections 1005 to 1009,
inclusive, with respect to the Securities of any series if before the
time for such compliance the Holders of at least a majority in principal
amount of the Outstanding Securities of such series shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver
shall extend to or affect such term, provision or condition except to the
extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee
in respect of any such term, provision or condition shall remain in full
force and effect.
Section 1012. Defeasance of Certain Obligations.
If this Section 1012 is specified, as
contemplated by Section 301, to be applicable to Securities of any
series, the Company may omit to comply with any term, provision or
condition set forth in Sections 1008 and 1009 and any such omission with
respect to Sections 1008 and 1009 shall not be an Event of Default, in
each case with respect to the Securities of that series, provided that
the following conditions have been satisfied:
<PAGE> 88
(1) with reference to this Section 1012, the Company has
deposited or caused to be deposited with the Trustee (or another
trustee satisfying the requirements of Section 609) irrevocably (but
subject to the provisions of Section 402(c) and the last paragraph
of Section 1003), as trust funds in trust, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of
the Securities of that series, (A) lawful money of the United States
in an amount, or (B) U.S. Government Obligations which through the
payment of interest and principal in respect thereof in accordance
with their terms will provide not later than the opening of business
on the due dates of any payment referred to in clause (i) or (ii) of
this subparagraph (1) lawful money of the United States in an
amount, or (C) a combination thereof, sufficient, in the opinion of
a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, to pay and discharge (i) the principal of (and premium, if
any) and each installment of principal (and premium, if any) and
interest on the Outstanding Securities of that series on the Stated
Maturity of such principal or installment of principal or interest
and (ii) any mandatory sinking fund payments or analogous payments
applicable to Securities of such series on the day on which such
payments are due and payable in accordance with the terms of this
Indenture and of such Securities;
(2) such deposit shall not cause the Trustee with respect to
the Securities of that series to have a conflicting interest as
defined in Section 608 and for purposes of the Trust Indenture Act
with respect to the Securities of any series;
(3) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement
or instrument to which the Company is a party or by which it is
bound;
(4) no Event of Default or event which with the giving of
notice or lapse of time, or both, would become an Event of Default
with respect to the Securities of that series shall have occurred
and be continuing on the date of such deposit and no Event of
Default under Section 501(5) or Section 501(6) or event which with
the giving of notice or lapse of time, or both, would become an
Event of Default under Section 501(5) or 501(6) shall have occurred
and be continuing on the 91st day after such date;
(5) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that Holders of the Securities of such series
will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain
obligations and will be subject to federal income tax on the same
amount and in the same manner and at the same times, as would have
been the case if such deposit and defeasance had not occurred;
(6) if the Securities of that series are then listed on the
New York Stock Exchange, Inc., the Company has delivered to the
Trustee an Opinion of Counsel to the effect that such deposit and
defeasance will not cause such Securities to be delisted; and
(7) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the defeasance
<PAGE> 89
contemplated in this Section have been complied with.
Article Eleven Redemption of Securities Article Eleven
Redemption of Securities
Section 1101. Applicability of Article.
Securities of any series which are redeemable before their
Stated Maturity shall be redeemable in accordance with their terms and
(except as otherwise specified as contemplated by Section 301 for
Securities of any series) in accordance with this Article.
Section 1102. Election to Redeem; Notice to Trustee. The election
of the Company to redeem any Securities shall be evidenced by a Board
Resolution. In the case of any redemption at the election of the Company
of less than all the Securities of any series, the Company shall, at
least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee
of such Redemption Date, of the principal amount of Securities of such
series to be redeemed and, if applicable, of the tenor of the Securities
to be redeemed. In the case of any redemption of Securities (i) prior to
the expiration of any restriction on such redemption provided in the
terms of such Securities or elsewhere in this Indenture, or (ii) pursuant
to an election of the Company which is subject to a condition specified
in the terms of such Securities, the Company shall furnish the Trustee
with an Officers' Certificate evidencing compliance with such restriction
or condition.
Section 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed (unless
all of the Securities of a specified tenor are to be redeemed), the
particular Securities to be redeemed shall be selected not more than
60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for redemption, by such
method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to the
minimum authorized denomination for Securities of such series or any
integral multiple thereof) of the principal amount of Registered
Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series or of the principal
amount of global Securities of such series. If less than all of the
Securities of such series and of a specified tenor are to be redeemed,
the particular Securities to be redeemed shall be selected not more than
60 days prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series and specified tenor not previously called for
redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall
relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has
not been or is to be redeemed.
<PAGE> 90
Section 1104. Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section 106
to the Holders of Securities to be redeemed not less than 30 nor more
than 60 days prior to the Redemption Date.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series
are to be redeemed, the identification (and, in the case of partial
redemption of any Securities, the principal amounts) of the
particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and,
if applicable, that interest thereon will cease to accrue on and
after said date,
(5) the place or places where such Securities, together in the
case of Bearer Securities with all coupons appertaining thereto, if
any, maturing after the Redemption Date, are to be surrendered for
payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the
case.
A notice of redemption published as contemplated by Section 106 need not
identify particular Registered Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request,
by the Trustee in the name and at the expense of the Company.
Section 1105. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as provided
in Section 1003) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment
Date) accrued interest on, all the Securities which are to be redeemed on
that date.
Section 1106. Securities Payable on Redemption Date. Notice of
redemption having been given as aforesaid, the Securities so to be
redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless
the Company shall default in the payment of the Redemption Price and
accrued interest) such Securities shall cease to bear interest on the
coupons for such interest appertaining to any Bearer Securities so to be
redeemed, except to the extent provided below, shall be void. Upon
surrender of any such Security for redemption in accordance with said
notice, together with all coupons, if any, appertaining thereto maturing
after the Redemption Date, such Security shall be paid by the Company at
the Redemption Price, together with accrued interest to the Redemption
Date; provided however, that installments of interest on Bearer
Securities whose Stated Maturity is on or prior to the Redemption Date
<PAGE> 91
shall be payable only upon presentations and surrender of coupons for
such interest at an office or agency located outside the United States
(except as otherwise provided in Section 1002), and, unless otherwise
specified as contemplated by Section 301 and provided, further, that,
unless otherwise specified as contemplated by Section 301, installments
of interest on Registered Securities whose Stated Maturity is on or prior
to the Redemption Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption
Date, such Security may be paid after deducting from the Redemption Price
an amount equal to the face amount of all such missing coupons, or the
surrender of such missing coupon or coupons may be waived by the Company
and the Trustee if there be furnished to them such security or indemnity
as they may require to save each of them and any Paying Agent harmless.
If thereafter the Holder of such Security shall surrender to the Trustee
or any Paying Agent any such missing coupon in respect of which a
deduction shall have been made from the Redemption Price, such Holder
shall be entitled to receive the amount so deducted; provided, however,
that interest represented by coupons shall be payable only at an office
or agency located outside the United States (except as otherwise provided
in Section 1002) and unless otherwise specified as contemplated by
Section 301, only upon presentation and surrender of those coupons.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any)
shall, until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
Section 1107. Securities Redeemed in Part.
Any Registered Security which is to be redeemed only
in part shall be surrendered at a Place of Payment therefor (with, if the
Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without
service charge, a new Registered Security or Securities of the same
series and of like tenor, of any authorized denomination and of like
tenor as requested by such Holder, in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the
Security so surrendered.
Article Twelve
Sinking Funds
Section 1201. Applicability of Article.
The provisions of this Article shall be applicable to any
sinking fund for the retirement of Securities of a series except as
otherwise specified as contemplated by Section 301 for Securities of such
series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory
sinking fund payment", and any payment in excess of such minimum amount
provided for by the terms of Securities of any series is herein referred
<PAGE> 92
to as an "optional sinking fund payment". If provided for by the terms
of Securities of any series, the cash amount of any sinking fund payment
may be subject to reduction as provided in Section 1202. Each sinking
fund payment shall be applied to the redemption of Securities of any
series as provided for by the terms of Securities of such series.
Section 1202. Satisfaction of Sinking Fund Payments with
Securities. The Company (1) may deliver Outstanding Securities of a
series (other than any previously called for redemption), together in the
case of any Bearer Securities of such series with all unmatured coupons
appertaining thereto, and (2) may apply as a credit Securities of a
series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any
sinking fund payment with respect to the Securities of such series
required to be made pursuant to the terms of such Securities as provided
for by the terms of such series; provided that such Securities have not
been previously so credited. Such Securities shall be received and
credited for such purpose by the Trustee at the Redemption Price
specified in such Securities for redemption through operation of the
sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.
Section 1203. Redemption of Securities for Sinking Fund. Not less than
45 days prior to each sinking fund payment date for any series of
Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund
payment for that series pursuant to the terms of that series, the portion
thereof, if any, which is to be satisfied by payment of cash and the
portion thereof, if any, which is to be satisfied by delivering and
crediting Securities of that series pursuant to Section 1202 and will
also deliver to the Trustee any Securities to be so delivered. Not less
than 30 days before each such sinking fund payment date the Trustee shall
select the Securities to be redeemed upon such sinking fund payment date
in the manner specified in Section 1103 and cause notice of the
redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been
duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Sections 1106 and 1107.
Article Thirteen
Meetings of Holders of Securities
Section 1301. Purposes for which Meetings May Be Called. If
Securities of a series are issuable as Bearer Securities, a meeting of
Holders of Securities of such series may be called at any time and from
time to time pursuant to this Article to make, give or take any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be made, given or taken by Holders of
Securities of such series.
Section 1302. Call, Notice and Place of Meetings.
(a) The Trustee may at any time call a
meeting of Holders of Securities of any series for any purpose specified
in Section 1301, to be held at such time and at such place in Chicago,
<PAGE> 93
Illinois, or in London as the Trustee shall determine. Notice of every
meeting of Holders of Securities of any series, setting forth the time
and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be given, in the manner provided in
Section 106, not less than 21 nor more than 180 days prior to the date
fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board
Resolution, or the Holders of at least 25% in principal amount of the
Outstanding Securities of any series shall have requested the Trustee to
call a meeting of the Holders of Securities of such series for any
purpose specified in Section 1301, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have made the first publication of the notice of such
meeting within 21 days after receipt of such request or shall not
thereafter proceed to cause the meeting to be held as provided herein,
then the Company or the Holders of Securities of such series in the
amount above specified, as the case may be, may determine the time and
the place in Chicago, Illinois, or in London for such meeting and may
call such meeting for such purposes by giving notice thereof as provided
in subsection (a) of this Section.
Section 1303. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of
Holders of Securities of any series, a Person shall be (1) a Holder of
one or more Outstanding Securities of such series, or (2) a Person
appointed by an instrument in writing as proxy for a Holder or Holders of
one or more Outstanding Securities of such series by such Holder or
Holders. The only Persons who shall be entitled to be present or to
speak at any meeting of Holders of Securities of any series shall be the
Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of
the Company and its counsel.
Section 1304. Quorum; Action. The Persons
entitled to vote a majority in principal amount of the Outstanding
Securities of a series shall constitute a quorum for a meeting of Holders
of Securities of such series. In the absence of a quorum within 30
minutes of the time appointed for any such meeting, the meeting shall, if
convened at the request of Holders of Securities of such series, be
dissolved. In any other case the meeting may be adjourned for a period
of not less than 10 days as determined by the chairman of the meeting
prior to the adjournment of such meeting. In the absence of a quorum at
any such adjourned meeting, such adjourned meeting may be further
adjourned for a period of not less than 10 days as determined by the
chairman of the meeting prior to the adjournment of such adjourned
meeting. Notice of the reconvening of any adjourned meeting shall be
given as provided in Section 1302(a), except that such notice need be
given only once not less than five days prior to the date on which the
meeting is scheduled to be reconvened. Notice of the reconvening of an
adjourned meeting shall state expressly the percentage, as provided
above, of the principal amount of the Outstanding Securities of such
series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a
quorum is present as aforesaid may be adopted only by the affirmative
vote of the Holders of a majority in principal amount of the Outstanding
Securities of that series; provided, however, that, except as limited by
the proviso to Section 902, any resolution with respect to any request,
<PAGE> 94
demand, authorization, direction, notice, consent, waiver or other action
which this Indenture expressly provides may be made, given or taken by
the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities of a series may be adopted
at a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid by the affirmative vote of the Holders of
such specified percentage in principal amount of the Outstanding
Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall
be binding on all the Holders of Securities of such series and the
related coupons, whether or not present or represented at the meeting.
Section 1305. Determination of Voting Rights, Conduct and
Adjournment of Meetings. (a) Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations as it
may deem advisable for any meeting of Holders of Securities of such
series in regard to proof of the holding of Securities of such series and
of the appointment of proxies and in regard to the appointment and duties
of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such
regulations, the holding of Securities shall be proved in the manner
specified in Section 104 and the appointment of any proxy shall be proved
in the manner specified in Section 104 or by having the signature of the
person executing the proxy witnessed or guaranteed by any trust company,
bank or banker authorized by Section 104 to certify to the holding of
Bearer Securities. Such regulations may provide that written instruments
appointing proxies, regular on their face, may be presumed valid and
genuine without the proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by Holders of Securities as provided in
Section 1302(b), in which case the Company or the Holders of Securities
of the series calling the meeting, as the case may be, shall in like
manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the
Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or
proxy shall be entitled to one vote for each $1,000 principal amount of
Securities of such series held or represented by him; provided, however,
that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not Outstanding and ruled by the chairman of the
meeting to be not Outstanding. The chairman of the meeting shall have no
right to vote, except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1302 at which a quorum is present may be adjourned
from time to time by Persons entitled to vote a majority in principal
amount of the Outstanding Securities of such series represented at the
meeting; and the meeting may be held as so adjourned without further
notice.
<PAGE> 95
Section 1306. Counting Votes and Recording Action of Meetings. The
vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or
of their representatives by proxy and the principal amounts and serial
numbers of the Outstanding Securities of such series held or represented
by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or
against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in triplicate of all votes
cast at the meeting. A record, at least in triplicate, of the
proceedings of each meeting of Holders of Securities of any series shall
be prepared by the secretary of the meeting and there shall be attached
to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was given as provided in Section 1302 and,
if applicable, Section 1304. Each copy shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and
one such copy shall be delivered to the Company, and another to the
Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting. Any record so signed and
verified shall be conclusive evidence of the matters therein stated.
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
Kemper Corporation
By /s/ J. H. Fitzpatrick
Title: Executive Vice President and
Chief Financial Officer
By /s/ J. W. Burns
Title: Treasurer
Attest:
/s/ KATHLEEN A. GALLICHIO
________________________________
Corporate Secretary
The First National Bank of Chicago,
Trustee
By /s/ JOHN R. PRENDIVILLE
Title: Vice President
<PAGE> 96
Attest:
/s/ PATRICIA MORUM TRLAK
_________________________________
Trust Officer
State of Illinois )
) SS
County of Lake )
On the 22nd day of September, 1993, before me personally came John H.
Fitzpatrick and John W. Burns, to me known, who, being by me duly sworn,
did depose and say that such persons are the Executive Vice
President/Chief Financial Officer and Treasurer, respectively, of Kemper
Corporation, one of the corporations described in and which executed the
foregoing instrument; that such persons know the seal of said
corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of
said corporation, and that such persons signed their names thereto by
like authority.
/s/ KERRY MICHELOTTI
____________________________________
My Commission Expires: 11-4-96
State of Illinois )
) SS
County of Cook )
On the 22nd day of September, 1993, before me personally came John
R. Prendiville, to me known, who, being by me duly sworn, did depose and
say that he is a Vice President of The First National Bank of Chicago,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that is was so affixed
by authority of the Board of Directors of said corporation, and that he
signed his name thereto by like authority.
/s/ SOMRI HILMER
____________________________________
My Commission Expires: 1-14-95
<PAGE> 1
EXHIBIT 4.3(d)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH
RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO
AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY WAS ORIGINALLY ISSUED ON SEPTEMBER 22, 1993 WITH ORIGINAL
ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES. FOR PURPOSES OF
SECTION 1275 OF THE INTERNAL REVENUE CODE AND PROPOSED TREASURY REG.
SECTION 1.1275-3(a), THE FOLLOWING INFORMATION IS PROVIDED: (i) THE ISSUE
PRICE OF EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY IS $982.61; (ii) THE
AMOUNT OF OID ON EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY IS $17.39;
and (iii) THE ANNUAL YIELD TO MATURITY ON THIS SECURITY IS 7.1217%.
KEMPER CORPORATION
6.875% NOTE DUE 2003
_____________________________________________
No. ________ U.S. $___________
CUSIP NO. 488396 AD 4
KEMPER CORPORATION, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to
or registered assigns, the principal sum of
United States Dollars on September 15, 2003, and to pay interest thereon
from September 15, 1993, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually in arrears
on March 15 and September 15 in each year, commencing March 15, 1994, at
the rate of 6.875% per annum, subject to adjustment as set forth on the
reverse hereof, until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be
<PAGE> 2
paid to the Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on the Regular Record Date
for such interest, which shall be the March 1 or September 1 (whether or
not a Business Day), as the case may be, next preceding such Interest
Payment Date. Except as otherwise provided in the Indenture, any such
interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Note (or one or more Predecessor
Securities) is registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Securities of this series not
less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
Payment of the principal of and interest on this Note will be made at the
offices or agency of the Company maintained for that purpose in Chicago,
Illinois and New York, New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register, or at such other office or agency of the Company as may be
designated by it for such purpose in Chicago, Illinois or New York, New
York in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have
the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof, directly or through an
Authenticating Agent, by manual signature of an authorized signatory, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
KEMPER CORPORATION
By___________________________
Title:
[SEAL]
ATTEST:
- ----------------------------
Corporate Secretary
<PAGE> 3
This is one of the Notes of the series designated therein referred to in
the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO, as
Trustee
By______________________________
Authorized Signatory
REVERSE
This Note is one of a duly authorized issue of securities of the Company
(herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of September 15, 1993 (herein called
the "Indenture"), between the Company and The First National Bank of Chicago,
as trustee (herein called the "Trustee," which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereof reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Note is one
of the series designated on the face hereof.
The Notes are not subject to redemption prior to maturity.
The initial interest rate on this Note shall be increased by 0.50% per
annum from 6.875% per annum (the "Initial Interest Rate") to 7.375% per
annum (the "Step-Up in Interest Rate") in the event that on or prior to
March 15, 1994 either (i) the Company has not consummated a registered
exchange offer (the "Exchange Offer") in accordance with that certain
Exchange and Registration Agreement dated September 22, 1993 (the
"Registration Agreement"), pursuant to which this Note, at the option of
the Holder hereof, may be exchanged for a Security of a separate series
substantially identical to this Note (except that such Security will not
contain the legend set forth on the face of this Note restricting
transfers) or (ii) the Company has not caused a registration statement
covering resales of the Notes of this series (the "Registration Statement")
to be filed and declared or become effective under the Securities Act of
1933, as amended, in accordance with the Registration Agreement. The Step-
Up in Interest Rate, if any, shall accrue from March 15, 1994 and shall be
payable on September 15, 1994 and on each Interest Payment Date thereafter.
However, if after the Company becomes obligated to pay the Step-Up in
Interest Rate, either the Exchange Offer is consummated or the Registration
Statement is declared or becomes effective in accordance with the
Registration Agreement, then, upon the happening of either of such events,
the Step-Up in Interest Rate on this Note will be permanently rescinded and
the Initial Interest Rate shall be reinstated as of the date of either of
such events.
The Company is not obligated under the Registration Agreement to effect
the Exchange Offer or to register the resale of this Note pursuant to the
Registration Statement. The Holder hereof will be required to comply with
the terms of the Registration Agreement in order to exchange this Note
pursuant to the Exchange Offer, if any, or resell this Note pursuant to the
Registration Statement, if any. A copy of the Registration Agreement is
<PAGE> 4
available upon request from the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of this Note and (b) certain restrictive covenants, in
each case upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Note.
In addition to the Events of Default set forth in the Indenture, the
following event shall also constitute an Event of Default with respect to the
Notes of this series: an event of default, as defined in any indentures or
instruments under which the Company shall have outstanding at least $25,000,000
aggregate principal amount of indebtedness for money borrowed, shall happen
and be continuing and either
(i) such default results from the failure to pay principal upon final
maturity of such indebtedness after expiration of any applicable grace
period or
(ii) such indebtedness shall, as a result thereof, have been
accelerated so that the same shall be or become due and payable prior to
the date on which the same would otherwise have become due and payable,
and such acceleration shall not be rescinded or annulled within 10 days
after notice thereof shall have been given, by registered or certified
mail, to the Company by the Trustee, or to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the Notes of
this series at the time Outstanding;
provided, however, that if such event of default under such indentures or
instruments shall be remedied or cured by the Company or waived by the
holders of such indebtedness, then even if the Notes of this series shall
have been accelerated as provided under the Indenture and provided that the
Notes of this series shall not have been repaid, such Event of Default
shall be deemed likewise to have been thereupon remedied, cured or waived
and such acceleration rescinded without further action upon the part of
either the Trustee or any Holder of the Notes of this series.
If an Event of Default with respect to Notes of this series shall occur
and be continuing, the principal of the Notes of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to
be affected under the Indenture at any time by the Company and the Trustee
with the consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding of each series to be affected and, for
certain purposes, without the consent of the Holders of Securities at the
time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of
each series at the time Outstanding, on behalf of the Holders of all
Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
<PAGE> 5
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
Note at the times, places and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable in the Security
Register, upon surrender of this Note for registration of transfer at the
office or agency of the Company in any place where the principal of and
interest on this Note are payable in Chicago, Illinois and New York,
New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar
duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Registered Securities of this
series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee
or transferees.
The Notes of this series are issuable only in registered form, without
coupons, in denominations of $100,000 and any integral multiple of $1,000
in excess thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Notes of this series are exchangeable for a
like aggregate principal amount of Notes of this series and of like tenor
of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration to transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
To the extent that this Note is held by The Depositary Trust Corporation
("DTC"), as Depositary, the beneficial owners of any portion hereof may
exchange their respective interests in this Note for other Notes of this
series in definitive, fully registered form without coupons in
denominations of $100,000 and integral multiples of $1,000 in excess
thereof, but only upon 10 days' prior written notice to the Trustee given
in accordance with DTC's customary procedures.
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of Illinois.
All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto___________________________________________________________________________
[please insert social security or other identifying number of assignee]
_______________________________________________________________________________
[please print or typewrite name and address of assignee]
the within Note of KEMPER CORPORATION and does hereby irrevocably
constitute and appoint________________________________________________________,
<PAGE> 6
Attorney, to transfer said Note on the books of the within-mentioned
Company, with full power of substitution in the premises.
Dated: _________________
-----------------------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Note in every particular,
without alteration or enlargement or any
change whatever.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH
RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO
AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
THIS SECURITY WAS ORIGINALLY ISSUED ON SEPTEMBER 22, 1993 WITH ORIGINAL
ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES. FOR PURPOSES OF
SECTION 1275 OF THE INTERNAL REVENUE CODE AND PROPOSED TREASURY REG.
SECTION 1.1275-3(a), THE FOLLOWING INFORMATION IS PROVIDED: (i) THE ISSUE
PRICE OF EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY IS $982.61; (ii) THE
AMOUNT OF OID ON EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY IS $17.39;
and (iii) THE ANNUAL YIELD TO MATURITY ON THIS SECURITY IS 7.1217%.
KEMPER CORPORATION
6.875% NOTE DUE 2003
___________________________________________
No. ________ U.S. $___________
CUSIP NO. 488396 AD 4
KEMPER CORPORATION, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to
or its registered assigns, the principal sum of
United States Dollars on September 15, 2003, and to pay interest thereon
from September 15, 1993, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually in arrears
on March 15 and September 15 in each year, commencing March 15, 1994, at
the rate of 6.875% per annum, subject to adjustment as set forth on the
reverse hereof, until the principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be
<PAGE> 7
paid to the Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on the Regular Record Date
for such interest, which shall be the March 1 or September 1 (whether or
not a Business Day), as the case may be, next preceding such Interest
Payment Date. Except as otherwise provided in the Indenture, any such
interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Note (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Securities of this series not
less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
Payment of the principal of and interest on this Note will be made at the
offices or agency of the Company maintained for that purpose in Chicago,
Illinois and New York, New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register, or at such other office or agency of the Company as may be
designated by it for such purpose in Chicago, Illinois or New York, New
York in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have
the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof, directly or through an Authenticating
Agent, by manual signature of an authorized signatory, this Note shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
KEMPER CORPORATION
By_________________________
[SEAL] Title:
ATTEST:
- ----------------------------
Corporate Secretary
This is one of the Notes of the series designated therein referred to in
the within-mentioned Indenture.
<PAGE> 8
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By_____________________________
Authorized Signatory
REVERSE
This Note is one of a duly authorized issue of securities of the Company
(herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of September 15, 1993 (herein called
the "Indenture"), between the Company and The First National Bank of
Chicago, as trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereof reference is hereby made for a statement of
the respective rights, limitation of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities
and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Note is one of the series designated on
the face hereof.
The Notes are not subject to redemption prior to maturity.
The initial interest rate on this Note shall be increased by 0.50% per
annum from 6.875% per annum (the "Initial Interest Rate") to 7.375% per
annum (the "Step-Up in Interest Rate") in the event that on or prior to
March 15, 1994 either (i) the Company has not consummated a registered
exchange offer (the "Exchange Offer") in accordance with that certain
Exchange and Registration Agreement dated September 22, 1993 (the
"Registration Agreement"), pursuant to which this Note, at the option of
the Holder hereof, may be exchanged for a Security of a separate series
substantially identical to this Note (except that such Security will not
contain the legend set forth on the face of this Note restricting
transfers) or (ii) the Company has not caused a registration statement
covering resales of the Notes of this series (the "Registration Statement")
to be filed and declared or become effective under the Securities Act of
1933, as amended, in accordance with the Registration Agreement. The Step-
Up in Interest Rate, if any, shall accrue from March 15, 1994 and shall be
payable on September 15, 1994 and on each Interest Payment Date thereafter.
However, if after the Company becomes obligated to pay the Step-Up in
Interest Rate, either the Exchange Offer is consummated or the Registration
Statement is declared or becomes effective in accordance with the
Registration Agreement, then, upon the happening of either of such events,
the Step-Up in Interest Rate on this Note will be permanently rescinded and
the Initial Interest Rate shall be reinstated as of the date of either of
such events.
The Company is not obligated under the Registration Agreement to effect
the Exchange Offer or to register the resale of this Note pursuant to the
Registration Statement. The Holder hereof will be required to comply with
the terms of the Registration Agreement in order to exchange this Note
pursuant to the Exchange Offer, if any, or resell this Note pursuant to the
Registration Statement, if any. A copy of the Registration Agreement is
available upon request from the Company.
The Indenture contains provisions for defeasance at any time of (a) the
<PAGE> 9
entire indebtedness of this Note and (b) certain restrictive covenants, in
each case upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Note. In addition to the Events of
Default set forth in the Indenture, the following event shall also
constitute an Event of Default with respect to the Notes of this series:
an event of default, as defined in any indentures or instruments under
which the Company shall have outstanding at least $25,000,000 aggregate
principal amount of indebtedness for money borrowed, shall happen and be
continuing and either
(i) such default results from the failure to pay principal
upon final maturity of such indebtedness after expiration of
any applicable grace period or
(ii) such indebtedness shall, as a result thereof, have been
accelerated so that the same shall be or become due and payable prior
to the date on which the same would otherwise have become due and
payable, and such acceleration shall not be rescinded or annulled within
10 days after notice thereof shall have been given, by registered or
certified mail, to the Company by the Trustee, or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of
the Notes of this series at the time Outstanding;
provided, however, that if such event of default under such indentures or
instruments shall be remedied or cured by the Company or waived by the
holders of such indebtedness, then even if the Notes of this series shall
have been accelerated as provided under the Indenture and provided that the
Notes of this series shall not have been repaid, such Event of Default
shall be deemed likewise to have been thereupon remedied, cured or waived
and such acceleration rescinded without further action upon the part of
either the Trustee or any Holder of the Notes of this series.
If an Event of Default with respect to Notes of this series shall occur
and be continuing, the principal of the Notes of this series may be declared
due and payable in the manner and with the effect provided in the
Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to
be affected under the Indenture at any time by the Company and the Trustee
with the consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding of each series to be affected and, for
certain purposes, without the consent of the Holders of Securities at the
time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of
each series at the time Outstanding, on behalf of the Holders of all
Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
Note at the times, places and rate, and in the coin or currency, herein
prescribed.
<PAGE> 10
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable in the Security Register,
upon surrender of this Note for registration of transfer at the office or
agency of the Company in any place where the principal of and interest on
this Note are payable in Chicago, Illinois and New York, New York, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Registered Securities of this series and of like tenor, of
authorized denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
The Notes of this series are issuable only in registered form, without
coupons, in denominations of $100,000 and any integral multiple of $1,000
in excess thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Notes of this series are exchangeable for a
like aggregate principal amount of Notes of this series and of like tenor
of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration to transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of Illinois.
All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto
___________________________________________________________________________
[please insert social security or other identifying number of assignee]
___________________________________________________________________________
[please print or typewrite name and address of assignee]
the within Note of KEMPER CORPORATION and does hereby irrevocably
constitute and appoint_______________________________________________________,
Attorney, to transfer said Note on the books of the within-mentioned
Company, with full power of substitution in the premises.
Dated: ________________
--------------------------------------
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
<PAGE> 11
Note in every particular, without
alteration or enlargement or any change
whatever.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933
(THE "SECURITIES ACT") AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U. S. PERSONS (I) AS PART
OF THEIR DISTRIBUTION AT ANY TIME OR (II) OTHERWISE UNTIL 40 DAYS AFTER THE
LATER OF THE COMMENCEMENT OF THE OFFERING AND THE CLOSING DATE, EXCEPT IN
EITHER CASE IN ACCORDANCE WITH REGULATION S (OR RULE 144A IF AVAILABLE)
UNDER THE SECURITIES ACT. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S.
THIS SECURITY WAS ORIGINALLY ISSUED ON SEPTEMBER 22, 1993 WITH ORIGINAL
ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES. FOR PURPOSES OF
SECTION 1275 OF THE INTERNAL REVENUE CODE AND PROPOSED TREASURY REG.
SECTION 1.1275-3(a), THE FOLLOWING INFORMATION IS PROVIDED: (i) THE ISSUE
PRICE OF EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY IS $982.61; (ii) THE
AMOUNT OF OID ON EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY IS $17.39;
and (iii) THE ANNUAL YIELD TO MATURITY ON THIS SECURITY IS 7.1217%.
KEMPER CORPORATION
6.875% NOTE DUE 2003
_____________________________________________
No. ________ U.S. $___________
CIDS NO. U 48839 AA9
KEMPER CORPORATION, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company", which term
includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to
or registered assigns, the principal sum of
United States Dollars on September 15, 2003, and to pay interest thereon from
September 15, 1993, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually in arrears on
March 15 and September 15 in each year, commencing March 15, 1994, at the rate
of 6.875% per annum, subject to adjustment as set forth on the reverse hereof,
until the principal hereof is paid or made available for payment. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name
this Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest, which shall be the
March 1 or September 1 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Except as otherwise provided in the
Indenture, any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and
may either be paid to the Person in whose name this Note (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
<PAGE> 12
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in said Indenture.
Payment of the principal of and interest on this Note will be made at the
offices or agency of the Company maintained for that purpose in Chicago,
Illinois and New York, New York, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register, or at such other office or agency of the Company as may be
designated by it for such purpose in Chicago, Illinois or New York, New
York in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have
the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof, directly or through an
Authenticating Agent, by manual signature of an authorized signatory, this
Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated:
KEMPER CORPORATION
By________________________
Title:
[SEAL]
ATTEST:
- ---------------------------
Corporate Secretary
This is one of the Notes of the series designated therein referred to in
the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
By__________________________
Authorized Signatory
<PAGE> 13
REVERSE
This Note is one of a duly authorized issue of securities of the Company
(herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of September 15, 1993 (herein called
the "Indenture"), between the Company and The First National Bank of
Chicago, as trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereof reference is hereby made for a statement of
the respective rights, limitation of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities
and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Note is one of the series designated on
the face hereof.
The Notes are not subject to redemption prior to maturity.
The initial interest rate on this Note shall be increased by 0.50% per
annum from 6.875% per annum (the "Initial Interest Rate") to 7.375% per
annum (the "Step-Up in Interest Rate") in the event that on or prior to
March 15, 1994 either (i) the Company has not consummated a registered
exchange offer (the "Exchange Offer") in accordance with that certain
Exchange and Registration Agreement dated September 22, 1993 (the
"Registration Agreement"), pursuant to which this Note, at the option of
the Holder hereof, may be exchanged for a Security of a separate series
substantially identical to this Note (except that such Security will not
contain the legend set forth on the face of this Note restricting
transfers) or (ii) the Company has not caused a registration statement
covering resales of the Notes of this series (the "Registration Statement")
to be filed and declared or become effective under the Securities Act of
1933, as amended, in accordance with the Registration Agreement. The Step-
Up in Interest Rate, if any, shall accrue from March 15, 1994 and shall be
payable on September 15, 1994 and on each Interest Payment Date thereafter.
However, if after the Company becomes obligated to pay the Step-Up in
Interest Rate, either the Exchange Offer is consummated or the Registration
Statement is declared or becomes effective in accordance with the
Registration Agreement, then, upon the happening of either of such events,
the Step-Up in Interest Rate on this Note will be permanently rescinded and
the Initial Interest Rate shall be reinstated as of the date of either of
such events.
The Company is not obligated under the Registration Agreement to effect
the Exchange Offer or to register the resale of this Note pursuant to the
Registration Statement. The Holder hereof will be required to comply with
the terms of the Registration Agreement in order to exchange this Note
pursuant to the Exchange Offer, if any, or resell this Note pursuant to the
Registration Statement, if any. A copy of the Registration Agreement is
available upon request from the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of this Note and (b) certain restrictive
covenants, in each case upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.
In addition to the Events of Default set forth in the Indenture, the
following event shall also constitute an Event of Default with respect to the
Notes of this series: an event of default, as defined in any indentures or
<PAGE> 14
instruments under which the Company shall have outstanding at least
$25,000,000 aggregate principal amount of indebtedness for money borrowed,
shall happen and be continuing and either
(i) such default results from the failure to pay principal upon final
maturity of such indebtedness after expiration of any applicable grace
period or
(ii) such indebtedness shall, as a result thereof, have been
accelerated so that the same shall be or become due and payable prior to
the date on which the same would otherwise have become due and payable,
and such acceleration shall not be rescinded or annulled within 10 days
after notice thereof shall have been given, by registered or certified
mail, to the Company by the Trustee, or to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the Notes of
this series at the time Outstanding;
provided, however, that if such event of default under such indentures or
instruments shall be remedied or cured by the Company or waived by the
holders of such indebtedness, then even if the Notes of this series shall
have been accelerated as provided under the Indenture and provided that the
Notes of this series shall not have been repaid, such Event of Default
shall be deemed likewise to have been thereupon remedied, cured or waived
and such acceleration rescinded without further action upon the part of
either the Trustee or any Holder of the Notes of this series.
If an Event of Default with respect to Notes of this series shall occur
and be continuing, the principal of the Notes of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to
be affected under the Indenture at any time by the Company and the Trustee
with the consent of the Holders of a majority in principal amount of the
Securities at the time Outstanding of each series to be affected and, for
certain purposes, without the consent of the Holders of Securities at the
time Outstanding. The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of
each series at the time Outstanding, on behalf of the Holders of all
Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this
Note shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this
Note at the times, places and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable in the Security Register,
upon surrender of this Note for registration of transfer at the office or
agency of the Company in any place where the principal of and interest on
this Note are payable in Chicago, Illinois and New York, New York, duly
endorsed by, or accompanied by a written instrument of transfer in form
<PAGE> 15
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Registered Securities of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount, will be issued
to the designated transferee or transferees.
The Notes of this series are issuable only in registered form, without
coupons, in denominations of $100,000 and any integral multiple of $1,000
in excess thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Notes of this series are exchangeable for a
like aggregate principal amount of Notes of this series and of like tenor
of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any such registration to transfer or
exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Note is registered as the owner hereof for
all purposes, whether or not this Note be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of Illinois.
All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto
_____________________________________________________________________________
[please insert social security or other identifying number of assignee]
_____________________________________________________________________________
[please print or typewrite name and address of assignee]
the within Note of KEMPER CORPORATION and does hereby irrevocably
constitute and appoint________________________________________________________,
Attorney, to transfer said Note on the books of the within-mentioned
Company, with full power of substitution in the premises.
Dated: _________________
------------------------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the Note in every
particular, without alteration or
enlargement or any change whatever.
<PAGE> 1
EXHIBIT 10.1(a)
CREDIT AGREEMENT
Dated as of November 1, 1993
KEMPER CORPORATION, a Delaware corporation, the BANKS,
the CO-AGENTS, and THE FIRST NATIONAL BANK OF CHICAGO, as
Administrative Agent, agree as follows (with certain terms used
herein being defined in Article 10):
ARTICLE 1
CREDIT FACILITY
Section 1.01. (a) Commitment to Lend. Upon the terms
and subject to the conditions of this Agreement, from time to
time during the period from the Agreement Date to but not
including the Maturity Date, each Bank agrees to make one or more
Loans to the Borrower in an aggregate unpaid principal amount not
exceeding at any time such Bank's Commitment at such time. As of
the Agreement Date, the aggregate of the Commitments of the Banks
is $162,500,000.
(b) Types of Loans. Subject to Section 1.06 and the
other terms and conditions of this Agreement, the Loans may, at
the option of the Borrower, be made as, and from time to time
continued as or converted into, Base Rate, CD Rate or Eurodollar
Rate Loans of any permitted Type, or any combination thereof.
(c) Reborrowing. Within the foregoing limits, and
subject to the other terms and conditions of this Agreement, the
Borrower may borrow under this Section 1.01, repay and, as
provided herein, reborrow at any time.
Section 1.02. Manner of Borrowing. (a) The Borrower
shall give the Administrative Agent notice (which shall be
irrevocable) no later than 9:00 a.m. (Chicago time) on, in the
case of Base Rate Loans, the Business Day of, in the case of CD
Rate Loans, the second Business Day before, and, in the case of
Eurodollar Rate Loans, the third Eurodollar Business Day before,
the requested date for the making of the requested Loans. Each
such notice shall be in the form of Schedule 1.02 and shall
specify (i) the requested date for the making of the requested
Loans, which shall be, in the case of Domestic Rate Loans, a
Business Day and, in the case of Eurodollar Rate Loans, a
Eurodollar Business Day, (ii) the Type or Types of Loans
requested and (iii) the amount of each such Type of Loan, which
amount shall be, in the case of each such Type of Loan, (x) not
less than $10,000,000 and shall be an integral multiple of
<PAGE> 2
$1,000,000 or (y) the aggregate amount of the unused Commitments.
Upon receipt of any such notice, the Administrative Agent shall
promptly notify each Bank of the contents thereof and of the
amount and Type of each Loan to be made by such Bank on the
requested date specified therein.
(b) Not later than 10:00 a.m. (Chicago time) on each
requested date for the making of Loans, each Bank shall make
available to the Administrative Agent, in Dollars in funds
immediately available to the Administrative Agent at the Agent's
Office, the Loans to be made by such Bank on such date. Any
Bank's failure to make any Loan to be made by it on the requested
date therefor shall not relieve it of its obligations to make
such Loan nor shall such failure relieve any other Bank of its
obligation to make any Loan to be made by such other Bank on such
date, but such other Bank shall not be liable for such failure.
(c) Unless the Administrative Agent shall have
received notice from a Bank prior to 10:00 a.m. (Chicago time) on
the requested date for the making of any Loans that such Bank
will not make available to the Administrative Agent the Loans
requested to be made by such Bank on such date, the
Administrative Agent may assume that such Bank has made such
Loans available to the Administrative Agent on such date in
accordance with Section 1.02(b) and the Administrative Agent in
its sole discretion may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount on
behalf of such Bank. If and to the extent such Bank shall not
have so made available to the Administrative Agent the Loans
requested to be made by such Bank on such date and the
Administrative Agent shall have so made available to the Borrower
a corresponding amount on behalf of such Bank, such Bank shall,
on demand, pay to the Administrative Agent such corresponding
amount together with interest thereon, for each day from the date
such amount shall have been so made available by the
Administrative Agent to the Borrower until the date such amount
shall have been repaid to the Administrative Agent, at the
Federal Funds Rate until (and including) the third Business Day
after demand is made and thereafter at the Base Rate. If such
Bank does not pay such amount promptly upon the Administrative
Agent's demand therefor, the Administrative Agent shall promptly
notify the Borrower and the Borrower shall immediately repay such
corresponding amount to the Administrative Agent together with
accrued interest thereon at the applicable rate or rates provided
in Section 1.03(a).
(d) All Loans made available to the Administrative
Agent in accordance with Section 1.02(b) shall be disbursed by
the Administrative Agent not later than 11:00 a.m. (Chicago time)
on the requested date therefor in Dollars in funds immediately
available to the Borrower by credit to an account of the Borrower
at the Agent's Office or in such other manner as may have been
specified in the applicable notice and as shall be acceptable to
the Administrative Agent.
Section 1.03. Interest. (a) Rates. Unless an Event
of Default is continuing, (i) each Loan shall bear interest on
the outstanding principal amount thereof at a rate per annum
equal to (A) so long as it is a Base Rate Loan, the Base Rate as
in effect from time to time plus the Applicable Margin, (B) so
<PAGE> 3
long as it is a CD Rate Loan, the applicable Adjusted CD Rate
plus the Applicable Margin and (C) so long as it is a Eurodollar
Rate Loan, the applicable Adjusted Eurodollar Rate plus the
Applicable Margin and (ii) each other amount due and payable
hereunder shall, to the maximum extent permitted by Applicable
Law, bear interest from the date due through the date on which it
is paid in full at a rate per annum equal to the rate which would
be applicable to a Base Rate Loan during such period. During an
Event of Default (and whether before or after judgment), each
Loan (whether or not due) and, to the maximum extent permitted by
Applicable Law, each other amount due and payable hereunder shall
bear interest at a rate per annum equal to the applicable Post-
Default Rate.
(b) Payment. Interest shall be payable to the extent
accrued, (i) in the case of Base Rate Loans, on each Interest
Payment Date, (ii) in the case of Fixed Rate Loans, on the last
day of each applicable Interest Period (and, if an Interest
Period is longer than, in the case of a CD Rate Loan, 90 days,
and in the case of a Eurodollar Rate Loan, three months, at
intervals of, respectively, 90 days and three months after the
first day of such Interest Period), (iii) in the case of any
Loan, when such Loan shall be due (whether at maturity, by reason
of notice of prepayment or acceleration or otherwise), or
converted, but only to the extent then accrued on the amount then
so due or converted, and (iv) in the case of all other amounts
due and payable hereunder, on demand. Interest at the Post-
Default Rate shall be payable on demand.
(c) Conversion and Continuation. (i) All or any part
of the principal amount of Loans of any Type may, on any Business
Day, be converted into any other Type or Types of Loans, except
that (A) Fixed Rate Loans may be converted only on the last day
of an applicable Interest Period and (B) Domestic Rate Loans may
be converted into Eurodollar Rate Loans only on a Eurodollar
Business Day.
(ii) Base Rate Loans shall continue as Base Rate
Loans unless and until such Loans are converted into Loans of
another Type. Fixed Rate Loans of any Type shall continue as
Loans of such Type until the end of the then current Interest
Period therefor, at which time they shall be automatically
converted into Base Rate Loans unless the Borrower shall have
given the Administrative Agent notice in accordance with Section
1.03(c)(iv) requesting either that such Loans continue as Loans
of such Type for another Interest Period or that such Loans be
converted into Loans of another Type at the end of such Interest
Period.
(iii) Notwithstanding anything to the contrary
contained in Section 1.03(c)(i) or (ii), after the occurrence and
during the continuance of a Default, the Administrative Agent may
notify the Borrower that Loans may only be converted into or
continued as Loans of certain specified Types and, thereafter,
until no Default shall continue to exist, Loans may not be
converted into or continued as Loans of any Type other than one
or more of such specified Types.
(iv) The Borrower shall give the Administrative
Agent notice (which shall be irrevocable) of each conversion or
<PAGE> 4
continuation of Loans no later than 9:00 a.m. (Chicago time) on,
in the case of a conversion into or a continuation of Base Rate
Loans, the Business Day of, in the case of a conversion into or a
continuation of CD Rate Loans, the second Business Day before,
and, in the case of a conversion into or continuation of
Eurodollar Rate Loans, the third Eurodollar Business Day before,
the requested date of such conversion or continuation. Each
notice of conversion or continuation shall be in the form of
Schedule 1.03(c)(iv) and shall specify (A) the requested date of
such conversion or continuation, (B) the amount and Type and, in
the case of Fixed Rate Loans, the last day of the applicable
Interest Period of the Loans to be converted or continued and (C)
the amount and Type or Types of Loans into which such Loans are
to be converted or as which such Loans are to be continued. Upon
receipt of any such notice, the Administrative Agent shall
promptly notify each Bank of (x) the contents thereof, (y) the
amount and Type and, in the case of Fixed Rate Loans, the last
day of the applicable Interest Period of each Loan to be
converted or continued by such Bank and (z) the amount and Type
or Types of Loans into which such Loans are to be converted or as
which such Loans are to be continued.
(d) Maximum Interest Rate. Nothing contained in this
Agreement or any Note shall require the Borrower at any time to
pay interest at a rate exceeding the Maximum Permissible Rate.
If interest payable by the Borrower on any date would exceed the
maximum amount permitted by the Maximum Permissible Rate, such
interest payment shall automatically be reduced to such maximum
permitted amount, and interest for any subsequent period, to the
extent less than the maximum amount permitted for such period by
the Maximum Permissible Rate, shall be increased by the unpaid
amount of such reduction. Any interest actually received with
respect to any Loan for any period in excess of such maximum
amount permitted for such period shall be deemed to have been
applied as a prepayment of such Loan.
Section 1.04. Repayment. Each Loan shall mature and
be due and payable in full on the Maturity Date.
Section 1.05. Prepayments. The Borrower may, at any
time and from time to time, prepay the Loans in whole or in part,
without premium or penalty, except that any partial prepayment
shall be in an aggregate principal amount of at least $10,000,000
and any prepayment of Fixed Rate Loans shall be made only on the
last day of an applicable Interest Period. The Borrower shall
give the Administrative Agent notice of each prepayment at any
time prior to, but in any event no later than, 9:00 a.m. (Chicago
time) on, in the case of a prepayment of Base Rate Loans, the
Business Day of, in the case of CD Rate Loans, the second
Business Day before, and, in the case of a prepayment of
Eurodollar Rate Loans, the third Eurodollar Business Day before,
the date of such prepayment. Each notice of prepayment shall be
in the form of Schedule 1.05 and shall specify (a) the date such
prepayment is to be made and (b) the amount and Type and, in the
case of Fixed Rate Loans, the last day of the applicable Interest
Period of the Loans to be prepaid. Upon receipt of any such
notice, the Administrative Agent shall promptly notify each Bank
of the contents thereof and the amount and Type and, in the case
of Fixed Rate Loans, the last day of the applicable Interest
Period of each Loan of such Bank to be prepaid. Amounts to be
<PAGE> 5
prepaid shall irrevocably be due and payable on the date
specified in the applicable notice of prepayment, together with
interest thereon as provided in Section 1.03(b).
Section 1.06. Limitation on Types of Loans.
Notwithstanding anything to the contrary contained in this
Agreement, the Borrower shall borrow, prepay, convert and
continue Loans in a manner such that (a) the aggregate principal
amount of Fixed Rate Loans of the same Type and having the same
Interest Period shall at all times be not less than $10,000,000,
(b) there shall not be, at any one time, more than seven Interest
Periods in effect with respect to Fixed Rate Loans of all Types
and (c) no payment of Fixed Rate Loans will have to be made prior
to the last day of an applicable Interest Period in order to
repay the Loans in the amounts and (subject to Section 1.09(e))
on the dates specified in Section 1.04.
Section 1.07. Closing Fee; Facility Fee; Reduction of
Commitments. (a) The Borrower shall pay to the Administrative
Agent for the account of each Bank a closing fee in an amount
separately agreed to between the Borrower and each Bank.
(b) The Borrower shall pay to the Administrative Agent
for the account of each Bank a facility fee on the amount of such
Bank's Commitment for each day from the Agreement Date through
the Maturity Date for such Bank at a rate per annum equal to the
Applicable Facility Fee Rate, payable on successive Interest
Payment Dates, on the Maturity Date, on the date of any reduction
of such Commitment (to the extent accrued and unpaid on the
amount of the reduction) and on the date upon which a Proposed
Bank is made a party hereto pursuant to Section 1.12.
(c) The Borrower may reduce the aggregate Commitments
of the Banks (but not to an amount less than the aggregate
principal amount of all outstanding Loans) by giving the
Administrative Agent notice (which shall be irrevocable) thereof
no later than 9:00 a.m. (Chicago time) on the fifth Business Day
before the requested date of such reduction, except that no
partial reduction shall be in an aggregate amount less than
$7,500,000 and provided further that any reduction of Commitments
hereunder shall be accompanied by a simultaneous reduction in
equal amount of the Short Term Commitments under the Short Term
Facility. Upon receipt of any such notice, the Administrative
Agent shall promptly notify each Bank of the contents thereof and
the amount to which such Bank's Commitment is to be reduced.
Each Bank's Commitment shall terminate on the Maturity Date.
Section 1.08. Computation of Interest and Fees. The
facility fee and interest on Base Rate Loans and on other amounts
due and payable under this Agreement shall be computed on the
basis of a year of 365/366 days and interest on Fixed Rate Loans
shall be computed on the basis of a year of 360 days and in any
case paid for the actual number of days elapsed. Interest for
any period shall be calculated from and including the first day
thereof to but excluding the last day thereof.
Section 1.09. Payments by the Borrower. (a) Time,
Place and Manner. All payments due to the Administrative Agent
hereunder shall be made to the Administrative Agent at the
Agent's Office or at such other address as the Administrative
<PAGE> 6
Agent may designate by notice to the Borrower. All payments due
to any Bank hereunder shall, in the case of payments on account
of facility fees or principal of or interest on the Loans, be
made to the Administrative Agent at the Agent's Office and, in
the case of all other payments, be made directly to such Bank at
its Domestic Lending Office or at such other address as such Bank
may designate by notice to the Borrower. All payments due to any
Bank hereunder, whether made to the Administrative Agent or
directly to such Bank, shall be made for the account of, in the
case of payments in respect of Eurodollar Rate Loans, such Bank's
Eurodollar Rate Lending Office and, in the case of all other
payments, such Bank's Domestic Lending Office. A payment shall
not be deemed to have been made on any day unless such payment
has been received by the required Person, at the required place
of payment, in Dollars in funds immediately available to such
Person, no later than 11:00 a.m. (Chicago time) on such day.
(b) No Reductions. All payments due to the
Administrative Agent or any Bank hereunder, and all other terms,
conditions, covenants and agreements to be observed and performed
by the Borrower hereunder, shall be made, observed or performed
by the Borrower without any reduction or deduction whatsoever,
including any reduction or deduction for any set-off, recoupment,
counterclaim (whether sounding in tort, contract or otherwise) or
Tax, except for any withholding or deduction for Taxes required
to be withheld or deducted under Applicable Law.
(c) Taxes. If any Tax is required by Applicable Law
to be withheld or deducted from, or is otherwise payable by the
Borrower in connection with, any payment by the Borrower to the
Administrative Agent or any Bank hereunder, the Borrower (i)
shall, if required by Applicable Law, withhold or deduct the
amount of such Tax from such payment and, in any case, pay such
Tax to the appropriate taxing authority in accordance with
Applicable Law and (ii) shall pay to the Administrative Agent or
such Bank, as applicable, (A) such additional amounts as may be
necessary so that the net amount received by the Administrative
Agent or such Bank with respect to such payment, after
withholding or deducting all Taxes so required to be withheld or
deducted from such payment and such additional amounts paid by
the Borrower, is equal to the full amount payable hereunder and
(B) an amount equal to all Taxes payable by the Administrative
Agent or such Bank as a result of payments made by the Borrower
under clause (A) (whether to a taxing authority or to the
Administrative Agent or such Bank) pursuant to this Section
1.09(c) provided, that, if the Administrative Agent or such Bank
receives a credit or reduction in Taxes payable by the
Administrative Agent or such Bank as a result of such withholding
or deduction by the Borrower, the Administrative Agent or the
Bank, as applicable, shall pay to the Borrower an amount (not
exceeding the amount paid by the Borrower to the Administrative
Agent or the Bank, as applicable) equal to the net after tax
value of such credit, deduction or reduction allocable to such
payments by the Borrower. Notwithstanding the foregoing, neither
the Administrative Agent nor any Bank shall be obligated to
disclose to the Borrower any information regarding its tax
affairs or computations and nothing in this Section 1.09(c) shall
interfere with the right of the Administrative Agent, the Banks
or the Borrower to arrange their respective tax affairs as they
deem appropriate. If any Tax is withheld or deducted from, or is
<PAGE> 7
otherwise payable by the Borrower in connection with, any payment
due to the Administrative Agent or any Bank hereunder, the
Borrower shall, within 30 days after the date of such payment,
furnish to the Administrative Agent or such Bank, as applicable,
the original or a certified copy of a receipt for such Tax from
the applicable taxing authority. If any payment due to the
Administrative Agent or any Bank hereunder is or is expected to
be made without withholding or deducting therefrom, or otherwise
paying in connection therewith, any Tax payable to any taxing
authority, the Borrower shall, within 30 days after any request
from the Administrative Agent or such Bank, as applicable,
furnish to the Administrative Agent or such Bank a certificate
from such taxing authority, or an opinion of counsel acceptable
to the Administrative Agent or such Bank, in either case stating
that no Tax payable to such taxing authority was or is, as the
case may be, required by Applicable Law to be withheld or
deducted from, or otherwise paid by the Borrower in connection
with, such payment. Each Bank that is not a "United States
person" (as such term is defined in Section 7701(a)(30) of the
Code) shall submit to the Borrower and the Administrative Agent
on or before Agreement Date (or, in the case of a Person that
became a Bank by assignment, promptly upon such assignment), two
duly completed and signed copies of either (A) Form 1001 of the
United States Internal Revenue Service entitling such Bank to a
complete exemption from withholding on all amounts to be received
by such Bank pursuant to this Agreement and the Loans or (B) Form
4224 of the United States Internal Revenue Service relating to
all amounts to be received by such Bank pursuant to this
Agreement and the Loans. Each such Bank shall, from time to time
after submitting either such Form, submit to the Borrower and the
Administrative Agent such additional duly completed and signed
copies of one or the other such Forms (or such successor Forms as
shall be adopted from time to time by the relevant United States
taxing authorities) as may be (A) requested in writing by the
Borrower or the Administrative Agent and (B) appropriate under
then current United States law or regulations to avoid or reduce
United States withholding taxes on payments in respect of all
amounts to be received by such Bank pursuant to this Agreement or
the Loans.
(d) Authorization to Charge Accounts. The Borrower
hereby authorizes the Administrative Agent and each Bank, if and
to the extent any amount payable by the Borrower hereunder
(whether payable to such Person or to any other Person that is
the Administrative Agent or a Bank) is not otherwise paid when
due, to charge such amount against any or all of the accounts of
the Borrower with the Administrative Agent or such Bank or any of
their respective Affiliates (whether maintained at a branch or
office located within or without the United States), with the
Borrower remaining liable for any deficiency.
(e) Extension of Payment Dates. Whenever any payment
to the Administrative Agent or any Bank hereunder would otherwise
be due (except by reason of acceleration) on a day that is not a
Business Day, or, in the case of payments of the principal of
Eurodollar Rate Loans, a Eurodollar Business Day, such payment
thereof shall instead be due on the next succeeding Business or
Eurodollar Business Day, as the case may be, unless, in the case
of a payment of the principal of a Eurodollar Rate Loan, such
extension would cause payment to be due in the next succeeding
<PAGE> 8
calendar month, in which case such due date shall be advanced to
the next preceding Business Day or, in the case of Eurodollar
Rate Loan, Eurodollar Business Day. If the date any payment
hereunder is due is extended (whether by operation of this
Agreement, Applicable Law or otherwise), such payment shall bear
interest for such extended time at the rate of interest
applicable hereunder.
(f) Distribution by the Administrative Agent. The
Administrative Agent shall distribute to each Bank its ratable
share of each payment received by the Administrative Agent
hereunder for the account of the Banks by credit to an account of
such Bank at the Agent's Office or by wire transfer to an account
of such Bank at an office of any other commercial bank located in
the United States. Each such distribution of any such payment
shall be made on (i) the same day as such payment is received by
the Administrative Agent, if such payment is received by the
Administrative Agent prior to 11:00 a.m. (Chicago time) on any
day, and (ii) the first Business Day after such payment is
received by the Administrative Agent, if such payment is received
by the Administrative Agent after 11:00 a.m. (Chicago time) on
any day.
(g) Unfunded Distributions. Unless the Administrative
Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Administrative
Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative
Agent in its sole discretion may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date
a corresponding amount with respect to the amount then due such
Bank. If and to the extent the Borrower shall not have so made
such payment in full to the Administrative Agent and the
Administrative Agent shall have so distributed to any Bank a
corresponding amount, such Bank shall, on demand, repay to the
Administrative Agent the amount so distributed together with
interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such
amount to the Administrative Agent, at the Federal Funds Rate
until (and including) the third Business Day after demand is made
and thereafter at the Base Rate.
Section 1.10. Evidence of Indebtedness. Each Bank's
Loans and the Borrower's obligation to repay such Loans with
interest in accordance with the terms of this Agreement shall be
evidenced by this Agreement, the records of such Bank and, in the
case of Domestic Rate Loans, a single Domestic Note payable to
the order of such Bank and, in the case of Eurodollar Rate Loans,
a single Eurodollar Note payable to the order of such Bank. The
records of each Bank shall be prima facie evidence of such Bank's
Loans and accrued interest thereon and of all payments made in
respect thereof.
Section 1.11. Pro Rata Treatment. Except to the
extent otherwise provided herein, (a) Loans shall be made by the
Banks pro rata in accordance with their respective Commitments,
(b) Loans of the Banks shall be converted and continued pro rata
in accordance with their respective amounts of Loans of the Type
and, in the case of Fixed Rate Loans, having the Interest Period
<PAGE> 9
being so converted or continued, (c) each reduction in the
Commitments shall be made pro rata in accordance with the
respective amounts thereof and (d) each payment of the principal
of or interest on the Loans or of facility fees shall be made for
the account of the Banks pro rata in accordance with their
respective amounts thereof then due and payable.
Section 1.12. Substitution of Banks. In the event
that (i) any Bank notifies, or is deemed to have notified, the
Administrative Agent of its determination not to extend its Short
Term Commitment pursuant to Section 1.01 of the Short Term
Facility, (ii) any Bank makes a demand for payment from the
Borrower under Section 7.02 or (iii) any Tax is required to be
withheld or deducted, or is otherwise payable, by the Borrower in
accordance with Section 1.09(c) in connection with any payment by
the Borrower to any Bank or to the Administrative Agent on behalf
of any Bank (except where such Tax is required to be withheld or
deducted, or is otherwise payable, in connection with such
payment to all Banks that are not "United States persons" (as
such term is defined in Section 7701(a)(30) of the Code)), the
Borrower, on any day (the "Removal Date") during the period
commencing on (x) in the case of a determination not to extend
pursuant Section 1.01, the day on which such notice, or deemed
notice, is received by the Administrative Agent and ending on the
Business Day immediately preceding such Bank's Termination Date,
(y) in the case of a demand for payment under Section 7.02, the
day demand for payment under Section 7.02 is received by the
Borrower and ending 30 days after receipt of such demand or (z)
in the case of the withholding or payment of Taxes pursuant to
Section 1.09(c), the day such Tax is withheld or deducted or
otherwise paid and ending 30 days after such date, may, upon at
least ten Business Days' notice, require such Bank (the
"Substituted Bank") to assign and transfer all of its Commitment
hereunder and its Short Term Commitment under the Short Term
Facility, all of its outstanding Loans hereunder and its Short
Term Loans under the Short Term Facility and, except to the
extent specified in the final sentence of this Section 1.12, all
of its rights, title and interest in and to this Agreement and
its Notes to any Person identified by the Borrower (the "Proposed
Bank") who agrees to assume all of the obligations of a
Substituted Bank hereunder for a consideration equal to the
outstanding principal amount of such Substituted Bank's Loans
hereunder and its Short Term Loans under the Short Term Facility,
together with interest thereon to the date of such transfer and
assignment and all other amounts (other than any costs, expenses
or other amounts due and owing to the Substituted Bank pursuant
to Section 9.02 or pursuant to Section 9.02 of the Short Term
Facility) payable to such Substituted Bank hereunder and under
the Short Term Facility on or prior to the date of such transfer
and assignment (including any facility fees accrued to such
date). Subject to the execution and delivery of such instruments
and agreements relating to such transfer and assignment as such
Substituted Bank, the Proposed Bank and the Administrative Agent
shall reasonably request such Proposed Bank shall, on and after
the Removal Date, be a "Bank" for all purposes hereunder. The
assignment by a Substituted Bank of its rights under this
Agreement and the Notes shall not include such Bank's rights, to
the extent then vested, under Sections 9.02, 9.03, 9.09, 9.10,
9.11 and 9.15.
<PAGE> 10
ARTICLE 2
CONDITIONS TO LOANS
Section 2.01. Conditions to Initial Loans. The
obligation of each Bank to make its initial Loan is subject to
the Administrative Agent's receipt of each of the following, in
form and substance and, in the case of the materials referred to
in clauses (a), (b), (c), (f), (g) and (h), certified in a manner
satisfactory to the Administrative Agent:
(a) a certificate of the Corporate Secretary or an
Assistant Secretary of the Borrower, dated on or around the
Agreement Date but prior to the requested date for the making of
such Loan, substantially in the form of Schedule 2.01(a), to
which shall be attached copies of the resolutions and by-laws
referred to in such certificate;
(b) a copy of the certificate of incorporation of the
Borrower, certified, on or around the Agreement Date but prior to
the requested date for the making of such Loan, by the Secretary
of State or other appropriate official of the Borrower's
jurisdiction of incorporation;
(c) a good standing certificate with respect to the
Borrower and each Restricted Subsidiary, issued on or around the
Agreement Date but prior to the requested date for the making of
such Loan by the Secretary of State or other appropriate official
of such Person's jurisdiction of incorporation;
(d) an opinion of Kathleen A. Gallichio, Esq., as
general counsel of the Borrower, and Jones, Day, Reavis & Pogue,
special counsel for the Borrower, dated on or around the
Agreement Date but prior to the requested date for the making of
such Loan, in the form of Schedule 2.01(d)-1 and 2.01(d)-2,
respectively;
(e) an opinion of Winthrop, Stimson, Putnam & Roberts,
dated on or around the Agreement Date but prior to the requested
date for the making of such Loan, in form of Schedule 2.01(e);
(f) a copy of each Governmental Approval and other
consent or approval listed on Schedule 3.03;
(g) a certificate of the president or chief financial
officer of the Borrower, dated the Agreement Date setting forth
the manner and degree of detail in which the Borrower will make
the calculations required by paragraph 3 of Schedules 5.01(a) and
5.01(b);
(h) a duly executed Domestic Note and Eurodollar Note
for each Bank; and
(i) evidence satisfactory to the Administrative Agent
that each bank's commitment to lend under (i) the credit
agreement dated as of March 15, 1991 among the Borrower, the
banks listed on the signature pages thereof and Credit Suisse,
New York Branch, as Agent, and (ii) each other credit facility
<PAGE> 11
pursuant to which any bank has committed to lend to the Borrower,
other than the Indenture dated as of January 15, 1987 between
Kemper Corporation and The Chase Manhattan Bank, N.A., as
Trustee, shall have terminated, no advances under such credit
agreement or facilities shall be outstanding, and all amounts due
and payable to the banks and agent under such credit agreement or
facilities shall have been paid in full.
Section 2.02. Conditions to Each Loan. The obligation
of each Bank to make each Loan requested to be made by it,
including its initial Loan, is subject to the determination of
such Bank that each of the following conditions have been
fulfilled:
(a) the Administrative Agent shall have received a
notice of borrowing with respect to such Loan complying with the
requirements of Section 1.02;
(b) each Representation and Warranty shall be true and
correct in all material respects at and as of the time such Loan
is to be made, both with and without giving effect to such Loan
and all other Loans to be made at such time and to the
application of the proceeds thereof;
(c) no Default shall have occurred and be continuing
at the time such Loan is to be made or would result from the
making of such Loan and all other Loans to be made at such time
or from the application of the proceeds thereof;
(d) such Bank shall have received such materials as it
may have requested pursuant to Section 5.01(d); and
(e) such Loan will not contravene any Applicable Law
applicable to such Bank.
Each notice of borrowing shall constitute a
Representation and Warranty by the Borrower made as of the time
of the making of the requested Loans that the conditions
specified in clauses (b) and (c) have been fulfilled as of such
time, except, in the case of clause (c), for Defaults of which
the Borrower shall have notified the Banks prior to 4:00 p.m.
(Chicago time) on the Business Day before the requested date for
the making of such Loans.
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES
In order to induce each Bank to enter into this
Agreement and to make each Loan requested to be made by it, the
Borrower represents and warrants as follows:
Section 3.01. Organization; Power; Qualification. The
Borrower and each Restricted Subsidiary are corporations duly
organized, validly existing and in good standing under the laws
of their respective jurisdictions of incorporation, have the
corporate power and authority to own their respective properties
and to carry on their respective businesses as now being and
<PAGE> 12
hereafter proposed to be conducted and are duly qualified and in
good standing as foreign corporations, and are authorized to do
business, in all jurisdictions in which the character of their
respective properties or the nature of their respective
businesses requires such qualification or authorization, except
for qualifications and authorizations the lack of which, singly
or in the aggregate, has not had and will not have a Materially
Adverse Effect on the Borrower and the Restricted Subsidiaries
taken as a whole.
Section 3.02. Subsidiaries. Schedule 3.02 sets forth,
as of the Agreement Date, all of the Subsidiaries (other than
Subsidiaries which have assets of less than $100,000 and no known
material Liabilities), their jurisdictions of incorporation and,
with respect to the Restricted Subsidiaries, the percentages of
the various classes of their Capital Securities owned by the
Borrower or another Restricted Subsidiary and, with respect to
all Subsidiaries, indicates which Subsidiaries are Consolidated
Subsidiaries. As of the Agreement Date, the Borrower and each
Restricted Subsidiary, as the case may be, has the unrestricted
right to vote, and (subject to limitations imposed by Applicable
Law) to receive dividends and distributions on, all Capital
Securities indicated on Schedule 3.02 as owned by the Borrower or
such Restricted Subsidiary. All such Capital Securities have
been duly authorized and issued and are fully paid and
nonassessable. Either (i) the Consolidated Net Worth less an
amount equal to the aggregate amount of the Borrower's and the
Restricted Subsidiaries' equity in Unrestricted Subsidiaries is
equal to at least 80% of the Consolidated Net Worth or (ii) the
Required Banks have failed to designate, in accordance with the
terms of this Agreement and within 30 days after notice by the
Borrower to the Administrative Agent that the Consolidated Net
Worth less an amount equal to the aggregate amount of the
Borrower's and the Restricted Subsidiaries' equity in
Unrestricted Subsidiaries is less than 80% of the Consolidated
Net Worth, such additional Subsidiaries as Restricted
Subsidiaries as are necessary such that Consolidated Net Worth
less an amount equal to the aggregate amount of the Borrower's
and the Restricted Subsidiaries' equity in Unrestricted
Subsidiaries is equal to at least 80% of Consolidated Net Worth.
As of the Agreement Date, no Subsidiary, other than a Restricted
Subsidiary, had total assets equal to or in excess of 5% of the
total assets of the Borrower and the Consolidated Subsidiaries,
on a consolidated basis.
Section 3.03. Authorization; Enforceability;
Required Consents; Absence of Conflicts. The Borrower has the
power, and has taken all necessary action (including any
necessary stockholder action) to authorize it, to execute,
deliver and perform in accordance with their respective terms
this Agreement and the Notes and to borrow hereunder in the
unused amount of the Commitments. This Agreement has been duly
executed and delivered by the Borrower and is, and each of the
Notes when delivered to the Administrative Agent and completed
according to the tenor of this Agreement will be, a legal, valid
and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms except as enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general principles
<PAGE> 13
of equity. The execution, delivery and performance in accordance
with their respective terms by the Borrower of this Agreement and
the Notes, and each borrowing hereunder, whether or not in the
amount of the unused Commitments, do not and (absent any change
in any Applicable Law or applicable Contract) will not (a)
require any Governmental Approval or any other consent or
approval, including any consent or approval of any Subsidiary or
any consent or approval of the stockholders of the Borrower or
any Subsidiary, other than Governmental Approvals and other
consents and approvals that have been obtained, are final and not
subject to review on appeal or to collateral attack, are in full
force and effect and, in the case of any such required under any
Applicable Law or Contract as in effect on the Agreement Date,
are listed on Schedule 3.03, or, in the case of any Subsidiary
other than a Restricted Subsidiary, Governmental Approvals or
other consents or approvals the lack of which, alone or in the
aggregate, would not have a Materially Adverse Effect on the
Borrower and the Restricted Subsidiaries, taken as a whole, or on
the Borrower's ability to perform its obligations hereunder or on
this Agreement or the Notes or (b) violate or conflict with,
result in a breach of, constitute a default under, or result in
or require the creation of any Lien upon any assets of the
Borrower or any Restricted Subsidiary under, (i) any Contract to
which the Borrower or any Restricted Subsidiary is a party or by
which the Borrower or any Restricted Subsidiary or any of their
respective properties may be bound except for any Contract the
violation of which, or the existence of a default under, would
not, alone or in the aggregate, have a Materially Adverse Effect
on the Borrower and the Restricted Subsidiaries taken as a whole
or on the ability of the Borrower to perform its obligations
hereunder or on this Agreement or the Notes or (ii) any
Applicable Law.
Section 3.04. Litigation. Except as set forth on
Schedule 3.04 or in the Borrower's Annual Report on Form 10-K for
the period ended December 31, 1992, the Borrower's Quarterly
Reports on Form 10-Q for the periods ended March 31 or June 30
1993, in each case, as filed by the Borrower with the Securities
and Exchange Commission, there are not, in any court or before
any arbitrator of any kind or before or by any governmental or
non-governmental body, any actions, suits or proceedings pending
or threatened (nor, to the knowledge of the Borrower and the
Restricted Subsidiaries, is there any basis therefor) against or
in any other way relating to or affecting (a) the Borrower or any
Subsidiary or any of their respective businesses or properties or
(b) this Agreement or the Notes, which are reasonably likely,
singly or in the aggregate, to have a Materially Adverse Effect
on (x) the Borrower and the Restricted Subsidiaries taken as a
whole or (y) this Agreement or the Notes.
Section 3.05. Environmental Compliance. (a) To the
best of the Borrower's knowledge, the Borrower and its
Subsidiaries have duly complied with, and their respective
Premises are in compliance with, the provisions of all federal,
state, and local environmental, health, and safety laws, codes
and ordinances, and all rules and regulations promulgated
thereunder (collectively, "Environmental Laws"), except to the
extent that noncompliance with such Environmental Laws would not
have a Materially Adverse Effect on the Borrower and the
Restricted Subsidiaries taken as a whole.
<PAGE> 14
(b) To the best of the Borrower's knowledge, the
Borrower and its Subsidiaries have been issued and will maintain
all required federal, state, and local permits, licenses,
certificates, and approvals relating to (i) air emissions, (ii)
discharges to surface water or groundwater, (iii) noise
emissions, (iv) solid or liquid waste disposal, (v) the use,
generation, storage, transportation, or disposal of toxic or
hazardous substances or wastes (intended hereby and hereafter to
include any and all such materials listed in any Environmental
Laws as hazardous or potentially hazardous), or (vi) other
environmental, health, or safety matters, except to the extent
that the failure to have obtained or to maintain such permits,
licenses, certificates and approvals would not have a Materially
Adverse Effect on the Borrower and the Restricted Subsidiaries
taken as a whole.
(c) To the best of the Borrower's knowledge, neither
the Borrower nor any of its Subsidiaries has, with respect to its
Premises, received notice of, or knows or reasonably suspects
facts which might constitute, any violation of any Environmental
Laws, except to the extent that any such violations would not
have a Materially Adverse Effect on the Borrower and the
Restricted Subsidiaries taken as a whole.
(d) To the best of the Borrower's knowledge, except in
accordance with a valid governmental permit, license,
certificate, or approval, there has been no emission, spill,
release, or discharge into or upon (i) the air, (ii) soils or any
improvements located thereon, (iii) surface water or groundwater,
or (iv) the sewer, septic system or waste treatment, storage or
disposal system servicing the Premises, of any toxic or hazardous
substances or wastes at or from the Premises during such time as
either the Borrower or any of its Subsidiaries has held title to,
or leased, the Premises which would have a Materially Adverse
Effect on the Borrower and the Restricted Subsidiaries taken as a
whole.
(e) To the best of the Borrower's knowledge, there has
been no complaint, order, directive, claim, citation, or notice
by any governmental authority with respect to (i) air emissions,
(ii) spills, releases, or discharges to soils or improvements
located thereon, surface water, groundwater or the sewer, septic
system or waste treatment, storage or disposal systems servicing
the Premises, (iii) noise emissions, (iv) solid or liquid waste
disposal, (v) the use, generation, storage, transportation, or
disposal of toxic or hazardous substances or waste, or (vi) other
environmental, health, or safety matters affecting the Borrower
or any of its Restricted Subsidiaries or any of their respective
Premises.
Section 3.06. No Adverse Change or Event. From
December 31, 1992, no change in the business, assets,
Liabilities, financial condition, results of operations or
business prospects of the Borrower or any Subsidiary has
occurred, and no event has occurred or failed to occur, that has
had or might have, either alone or in conjunction with all other
such changes, events and failures, a Materially Adverse Effect on
(a) the Borrower and the Restricted Subsidiaries taken as a whole
or (b) this Agreement or the Notes. Any change in the business,
<PAGE> 15
assets, Liabilities, financial condition, results of operations
or business prospects of the Borrower or any Subsidiary disclosed
in the Borrower's Annual Report on Form 10K for the period ending
December 31, 1992, Quarterly Reports on Form 10Q for the periods
ending March 31 or June 30, 1993 or Current Reports on Form 8K
dated December 30, 1992, and August 20, 1993, shall not
constitute a change individually or in the aggregate which has
had such a Materially Adverse Effect.
Section 3.07. Taxes. United States Federal income tax
returns of the Borrower and its Consolidated Subsidiaries have
been examined and closed through the fiscal year ended December
31, 1983. The Borrower and its Consolidated Subsidiaries have
filed all United States Federal income tax returns and all other
material tax returns which are required to be filed by them and
have paid all taxes shown to be due pursuant to such returns or
pursuant to any income tax assessment relating to such returns or
the periods covered thereby received by the Borrower, except to
the extent that failure to so file or the failure to so pay, as
the case may be, together with all other such failures, would not
have a Materially Adverse Effect on the Borrower and the
Restricted Subsidiaries taken as a whole.
ARTICLE 4
CERTAIN COVENANTS
From the Agreement Date and until the Repayment Date,
A. The Borrower shall and shall cause each Restricted
Subsidiary to:
Section 4.01. Preservation of Existence and
Properties, Scope of Business, Compliance with Law, Payment of
Taxes and Claims, Preservation of Enforceability. (a) Preserve
and maintain its corporate existence and all of its other
franchises, licenses, rights and privileges, (b) preserve,
protect and obtain all Intellectual Property, and preserve and
maintain in good repair, working order and condition all other
properties, required for the conduct of its business, (c)
maintain the substantial portion of the business of the Borrower
and the Restricted Subsidiaries, taken as a whole, in businesses
in substantially the same fields as the businesses conducted by
the Borrower and its Restricted Subsidiaries on the Agreement
Date or other businesses related to diversified financial
services, (d) comply with Applicable Law, (e) pay or discharge
when due all Taxes and all Liabilities that might become a Lien
on any of its properties and (f) take all action and obtain all
consents and Governmental Approvals required so that its
obligations hereunder and under the Notes will at all times be
legal, valid and binding and enforceable in accordance with their
respective terms, except that this Section 4.01 (other than
clauses (a), in so far as it requires the Borrower to preserve
its corporate existence, (c) and (f)) shall not apply in any
circumstance where (x) noncompliance, together with all other
noncompliances with this Section 4.01, will not have a Materially
<PAGE> 16
Adverse Effect on (A) the Borrower and the Restricted
Subsidiaries taken as a whole or (B) this Agreement or the Notes
or (y), in the case of clauses (a) and (b), noncompliance results
from the cessation of the corporate existence of a Restricted
Subsidiary or the cessation of franchises, licenses, rights or
privileges as a result of any transaction to which Section 4.06,
4.07 or 4.12 is by its express terms inapplicable so long as such
cessation would not result in a Materially Adverse Effect on the
Borrower and the Restricted Subsidiaries taken as a whole.
Section 4.02. Insurance. Maintain insurance with
responsible insurance companies against at least such risks and
in at least such amounts as is customarily maintained by similar
businesses, or as may be required by Applicable Law.
Section 4.03. Use of Proceeds. Use the proceeds of
the Loans only for general corporate purposes, which shall
include, but not be limited to, the acquisition of assets,
including assets constituting a going concern, whether by stock
purchase or otherwise. None of the proceeds of any of the Loans
shall be used in any manner which would violate or cause any Bank
to be in violation of Regulations G, U or X of the Board of
Governors of the Federal Reserve System. If requested by any
Bank, the Borrower shall complete and sign Part I of a copy of
Federal Reserve Form U-1 referred to in Regulation U and deliver
such copy to such Bank.
B. The Borrower shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly:
Section 4.04. Guaranties. Be obligated, at any time,
in respect of any Guaranty, except that this Section 4.04 shall
not apply to Permitted Guaranties.
Section 4.05. Liens. Permit to exist, at any time,
any Lien upon any of its properties or assets of any character,
whether now owned or hereafter acquired, or upon any income or
profits therefrom, except that this Section 4.05 shall not apply
to Permitted Liens.
Section 4.06. Merger or Consolidation. Merge or
consolidate with any Person, except that, if after giving effect
thereto no Default would exist, this Section 4.06 shall not apply
to (a) any merger or consolidation of the Borrower with any one
or more Persons, provided that the Borrower shall be the
continuing Person, (b) any merger or consolidation of any
Restricted Subsidiary with any one or more Persons, provided that
the continuing Person shall, after giving effect to such merger
or consolidation, be a Subsidiary, and (c) any transaction or
disposition to which Section 4.07 or 4.12 (other than by
reference to this Section 4.06) is by its express terms
inapplicable.
Section 4.07. Disposition of Assets. Sell, lease,
license, transfer or otherwise dispose of any asset or interest
therein, except that this Section 4.07 shall not apply to (a) any
disposition of any asset or interest therein in the ordinary
course of business, (b) any disposition of any obsolete or
retired property not used in its business, (c) any disposition of
any asset or interest therein to the Borrower or to a Restricted
<PAGE> 17
Subsidiary, (d) any disposition of the Capital Securities of any
Subsidiary other than a Restricted Subsidiary, (e) any
disposition of Unrestricted Margin Stock, (f) any disposition of
any assets or interest therein (including Capital Securities of
any Restricted Subsidiary) for fair market value, as determined
by the Board of Directors of the Borrower or such Restricted
Subsidiary, as the case may be, (g) any transfer of any assets
(of the type represented by the line items "Joint Venture
Mortgage Loans", "Third Party Mortgage Loans", "Other Real
Estate-Related Investments", "Other Loans and Investments" and
"Other Accounts and Notes Receivable" on the Borrower's
consolidated financial statements delivered in accordance with
Section 5.01 hereof), or any interest therein, to a special
purpose corporation, limited partnership, trust or similar entity
in exchange for certificates or other securities issued by such
entity representing ownership of similar interests in such
similar assets or interests therein, and (h) any transaction to
which any of the other provisions of this Agreement (other than
Section 4.10) is by its express terms inapplicable.
Section 4.08. Taxes of Other Persons. (a) File a
consolidated tax return with any other Person other than, in the
case of the Borrower, a Consolidated Subsidiary and, in the case
of any such Restricted Subsidiary, the Borrower or a Consolidated
Subsidiary, or (b) except as required by Applicable Law, pay or
enter into any Contract (other than any tax indemnification or
similar arrangements in connection with a merger or consolidation
or the disposition of assets or issuance or disposition of
Capital Securities or any interest therein pursuant to any
transaction to which Section 4.06, 4.07 or 4.12 by its express
terms is inapplicable) to pay any Taxes owing by any Person other
than the Borrower or a Consolidated Subsidiary.
Section 4.09. Benefit Plans. (a) Establish any
Benefit Plan, or amend any Benefit Plan, in either case in any
manner that in the reasonable good faith estimate of the
Borrower's actuary would increase, on a consolidated basis, the
aggregate Unfunded Benefit Liabilities under all Benefit Plans
maintained by Borrower or its ERISA Affiliates to an amount in
excess of $25,000,000, provided, however, that the foregoing
shall not prevent Borrower or a Restricted Subsidiary from
establishing or amending any Benefit Plan to the extent necessary
to comply with applicable law; or (b) amend any Benefit Plan,
except to the extent necessary to comply with applicable law, if
after giving effect to such amendment Borrower or any Restricted
Subsidiary would be required to post security pursuant to Section
401(a)(29) of the Code.
Section 4.10. Transactions with Affiliates. Effect
any transaction with any Affiliate (or Affiliates thereof), other
than another Subsidiary or the Borrower, which, taken together
with all such transactions engaged in by the Borrower and
Restricted Subsidiaries with such Affiliate (and Affiliates
thereof) is on a basis materially less favorable than would at
the time be obtainable for a comparable transaction in arms-
length dealing with an unrelated third party, provided that this
Section 4.10 shall not apply to transactions with Fidelity Life
Association or Lumbermens Mutual Casualty Company (or its
Affiliates which are not Affiliates of the Borrower or any
Restricted Subsidiary) relating to asset management, insurance
<PAGE> 18
and other services all as carried on in accordance with the
Borrower's and Restricted Subsidiaries' customary business
practice as in effect on, or announced prior to, the Agreement
Date.
Section 4.11. Limitation on Restrictive Covenants.
Permit to exist, at any time, any consensual restriction limiting
the ability (whether by covenant, event of default, subordination
or otherwise but not merely as a result of any requirement to pay
principal or interest on Indebtedness or dividends or other
payments on preferred stock or other similar requirements which
would limit the availability of funds at such Restricted
Subsidiary or as a result of any commitments to any regulatory
authority made by the Borrower or any Restricted Subsidiary to
the extent that such restriction, together with all such other
restrictions, has not and, in the reasonable determination of the
Banks, will not have a Materially Adverse Effect on the Borrower
or its ability to perform its obligations hereunder) of any
Restricted Subsidiary to (a) pay dividends or make any other
distributions on shares of its capital stock held by the Borrower
or any other Restricted Subsidiary, (b) pay any obligation owed
to the Borrower or any other Restricted Subsidiary, (c) make any
loans or advances to or investments in the Borrower or in any
other Restricted Subsidiary, (d) transfer any of its property or
assets to the Borrower or any other Restricted Subsidiary, or (e)
create any Lien upon its property or assets whether now owned or
hereafter acquired or upon any income or profits therefrom,
except that this Section 4.11 shall not apply to Permitted
Restrictive Covenants.
Section 4.12. Issuance or Disposition of Capital
Securities. Issue any of its Capital Securities or sell,
transfer or otherwise dispose of any Capital Securities of any
Restricted Subsidiary, except that this Section 4.12 shall not
apply to (a) any issuance by the Borrower of any of its Capital
Securities, (b) any issuance by a Restricted Subsidiary of any of
its Capital Securities to the Borrower or a Restricted
Subsidiary, (c) any issuance by a Restricted Subsidiary of any of
its Capital Securities to the holders of the common stock of such
Restricted Subsidiary made pro rata to the relative amounts of
such common stock held by such holders, (d) any disposition by
the Borrower or any Restricted Subsidiary of any Capital
Securities of a Restricted Subsidiary to the Borrower or a
Restricted Subsidiary, (e) any issuance or disposition of
Convertible Preferred Stock, Class B Common Stock or Floating
Rate Convertible Subordinated Debentures of Kemper Financial
Companies, Inc. and (f) any issuance or disposition of Capital
Securities for fair market value in connection with any
transaction to which Section 4.06 or 4.07 is by its express terms
inapplicable.
C. The Borrower shall not:
Section 4.13. Ratio of Consolidated Indebtedness to
Consolidated Net Worth. Permit Consolidated Indebtedness to
exceed 50% of Consolidated Net Worth at any time.
Section 4.14. Minimum Net Worth. Permit Consolidated
Net Worth at any time to be less than $1,250,000,000.
<PAGE> 19
Section 4.15. Interest Expense Coverage. Permit the
ratio of EBIT to Interest Expense for any period consisting of
four consecutive fiscal quarters ending on or after the Agreement
Date to be less than 1.5 to 1.0.
ARTICLE 5
FINANCIAL STATEMENTS AND INFORMATION
Section 5.01. Financial Statements and Information to
Be Furnished. From the Agreement Date and until the Repayment
Date, the Borrower shall furnish to each Bank:
(a) Quarterly Financial Statements; Officer's
Certificate. As soon as available and in any event within 50
days after the close of each of the first three quarterly
accounting periods in each fiscal year of the Borrower,
commencing with the quarterly period ending September 30, 1993:
(i) consolidated and consolidating (by business
segment) balance sheets of the Borrower and the Consolidated
Subsidiaries as at the end of such quarterly period and the
related consolidated and consolidating (by business segment)
statements of income, retained earnings and cash flows of
the Borrower and the Consolidated Subsidiaries for such
quarterly period and for the elapsed portion of the fiscal
year ended with the last day of such quarterly period,
setting forth in each case in comparative form the figures
for the corresponding periods of the previous fiscal year;
and
(ii) a certificate with respect thereto of the
president or chief financial officer of the Borrower in the
form of Schedule 5.01(a).
(b) Year-End Financial Statements; Accountants' and
Officer's Certificates. As soon as available and in any event
within 95 days after the end of each fiscal year of the Borrower,
commencing with the fiscal year ending December 31, 1993:
(i) consolidated and consolidating (by business
segment) balance sheets of the Borrower and the Consolidated
Subsidiaries as at the end of such fiscal year and the
related consolidated and consolidating (by business segment)
statements of income, retained earnings and cash flows of
the Borrower and the Consolidated Subsidiaries for such
fiscal year, setting forth in comparative form the figures
as at the end of and for the previous fiscal year;
(ii) an audit report of KPMG Peat Marwick, or
other independent certified public accountants of recognized
standing satisfactory to the Required Banks, on such of the
financial statements referred to in clause (i) as are
consolidated financial statements, which report shall be in
scope and substance satisfactory to the Required Banks;
(iii) a certificate of such accountants addressed
to the Banks and in form and substance satisfactory to the
<PAGE> 20
Required Banks confirming that (A) the Borrower is
authorized to deliver their report referred to in clause
(ii) to the Banks pursuant to this Agreement and (B) it is
their understanding that the Banks are relying on such
report and such certificate; and
(iv) a certificate of the president or chief
financial officer of the Borrower in the form of Schedule
5.01(b).
(c) Reports and Filings. (i) Promptly upon receipt
thereof, copies of all reports (other than management letters or
reports), if any, submitted to the Borrower or any Restricted
Subsidiary, or the Board of Directors of the Borrower or any
Restricted Subsidiary, by its independent certified public
accountants; (ii) as soon as practicable, copies of all such
financial statements and reports as the Borrower or any
Restricted Subsidiary shall send to its stockholders (other than
reports of the Restricted Subsidiaries sent to the Borrower in
the ordinary course of business) and of all registration
statements and all regular or periodic reports that the Borrower
or any Restricted Subsidiary shall file, or may be required to
file, as a reporting company subject to the reporting
requirements of the Securities Exchange Act of 1934 with the
Securities and Exchange Commission or any successor commission;
and (iii) in the case of Kemper Investors Life Insurance Company
and Federal Kemper Life Assurance Company, as soon as
practicable, copies of all year-end Annual Statements and
Quarterly Statements of the Condition and Affairs of such
entities filed with the Illinois Department of Insurance.
(d) Requested Information. From time to time and
promptly upon request of any Bank, such Information regarding
this Agreement, the Notes or the Loans and the business, assets,
Liabilities, financial condition, results of operations or
business prospects of the Borrower and the Subsidiaries as such
Bank may reasonably request, in each case in form and substance
and certified in a manner satisfactory to the requesting Bank.
(e) Notice of Defaults, Material Adverse Changes and
Other Matters. Prompt notice of: (i) any Default, (ii) any
change in the name of any Restricted Subsidiary, its jurisdiction
of incorporation, the percentages of the various classes of its
Capital Securities owned by the Borrower or another Subsidiary or
its status as a Consolidated or non-Consolidated Subsidiary,
(iii) the commencement of, or the occurrence or nonoccurrence of
any change or event relating to, any action, suit, proceeding or
investigation that would cause the Representation and Warranty
contained in Section 3.04 to be incorrect if made at such time,
(iv) any event or condition referred to in clauses (i) through
(vi) of Section 6.01(h), whether or not such event or condition
shall constitute an Event of Default, (v) any amendment of the
certificate of incorporation or by-laws of the Borrower and (vi)
any change in the Implied Senior Rating (as defined in the
definition of Applicable Facility Fee Rate and Applicable
Margin).
Section 5.02. Accuracy of Financial Statements and
Information.
<PAGE> 21
(a) Historical Financial Statements. The Borrower
hereby represents and warrants that (i) Schedule 5.02(a) sets
forth a complete and correct list of the financial statements
submitted by the Borrower to the Banks in order to induce them to
execute and deliver this Agreement, (ii) such financial
statements present fairly, in accordance with Generally Accepted
Accounting Principles, the consolidated and consolidating (by
business segment) financial position of the Borrower and the
Consolidated Subsidiaries as at their respective dates and the
consolidated and consolidating (by business segment) results of
operations, retained earnings and, as applicable, changes in
financial position or cash flows of the Borrower and such
Subsidiaries for the respective periods to which such statements
relate, and (iii) except as disclosed or reflected in such
financial statements, as at June 30, 1993, neither the Borrower
nor any Subsidiary had any Liability, contingent or otherwise, or
any unrealized or anticipated loss, that, singly or in the
aggregate, has, had or could reasonably be expected to have a
Materially Adverse Effect on the Borrower and the Consolidated
Subsidiaries taken as a whole.
(b) Future Financial Statements. The financial
statements delivered pursuant to Section 5.01(a) or (b) shall
present fairly, in accordance with Generally Accepted Accounting
Principles (except for changes therein or therefrom that are
described in the certificate or report accompanying such
statements and that have been approved in writing by the Chief
Financial Officer of the Borrower or, in the case of the
financial statements delivered pursuant to Section 5.01(b), the
Borrower's then current independent certified public
accountants), the consolidated and consolidating (by business
segment) financial position of the Borrower and the Consolidated
Subsidiaries as at their respective dates and the consolidated
and consolidating (by business segment) results of operations,
retained earnings and cash flows of the Borrower and such
Subsidiaries for the respective periods to which such statements
relate, and the furnishing of the same to the Banks shall
constitute a representation and warranty by the Borrower made on
the date the same are furnished to the Banks to that effect and
to the further effect that, except as disclosed or reflected in
such financial statements, as at the respective dates thereof,
neither the Borrower nor any Subsidiary had any Liability,
contingent or otherwise, or any unrealized or anticipated loss,
that, singly or in the aggregate, has had or could reasonably be
expected to have a Materially Adverse Effect on the Borrower and
the Consolidated Subsidiaries taken as a whole.
(c) Historical Information. The Borrower hereby
represents and warrants that all Information furnished to the
Administrative Agent or the Banks by or on behalf of the Borrower
prior to the Agreement Date in connection with or pursuant to
this Agreement and the relationship established hereunder, at the
time the same was so furnished, but in the case of Information
dated as of a prior date, as of such date, in the case of any
Information prepared in the ordinary course of business, was
complete and correct in all material respects in the light of the
purpose prepared, and, in the case of any Information the
preparation of which was requested by any Bank, was complete and
correct in all material respects to the extent necessary to give
such Bank true and accurate knowledge of the subject matter
<PAGE> 22
thereof, and, with respect to any Information which has been
filed with the SEC, (x) did not contain any untrue statement of a
material fact, and (y) did not omit to state a material fact
necessary in order to make the statements contained therein not
misleading in the light of the circumstances under which they
were made.
(d) Future Information. All Information furnished to
the Administrative Agent or the Banks by or on behalf of the
Borrower on or after the Agreement Date in connection with or
pursuant to this Agreement or in connection with or pursuant to
any amendment or modification of, or waiver of rights under, this
Agreement, shall, at the time the same is so furnished, but in
the case of Information dated as of a prior date, as of such
date, in the case of any Information prepared in the ordinary
course of business, be complete and correct in all material
respects in the light of the purpose prepared, and, in the case
of any Information required by the terms of this Agreement or the
preparation of which was requested by any Bank, be complete and
correct in all material respects to the extent necessary to give
the Banks true and accurate knowledge of the subject matter
thereof, and, with respect to any such Information filed or to be
filed with the SEC, (x) not contain any untrue statement of a
material fact, and (y) not omit to state a material fact
necessary in order to make the statements contained therein not
misleading in the light of the circumstances under which they
were made, and the furnishing of the same to the Administrative
Agent or any Bank shall constitute a representation and warranty
by the Borrower made on the date the same are so furnished to
such effect.
Section 5.03. Additional Covenants Relating to
Disclosure. From the Agreement Date and until the Repayment
Date, the Borrower shall and shall cause each Restricted
Subsidiary to:
(a) Accounting Methods and Financial Records.
Maintain a system of accounting, and keep such books, records and
accounts (which shall be true and complete in all material
respects), as may be required or necessary to permit (i) the
preparation of financial statements required to be delivered
pursuant to Section 5.01(a) and (b) and (ii) the determination of
the Borrower's compliance with the terms of this Agreement.
(b) Visits and Inspections. Permit, or, in the case
of properties, books, records or Persons not within its immediate
control, promptly take such actions as are reasonably practicable
in order to permit, representatives (whether or not officers or
employees) of any Bank, from time to time, as often as may be
reasonably requested, to (i) visit and inspect any properties of
the Borrower and each Restricted Subsidiary, (ii) inspect and
make extracts from the books and records of the Borrower and each
Restricted Subsidiary, including management letters prepared by
their respective independent certified public accountants, and
(iii) discuss with any director, any principal officers and the
independent certified public accountants of the Borrower and each
Restricted Subsidiary, the respective businesses, assets,
Liabilities, financial conditions, results of operations and
business prospects of the Borrower and each Subsidiary.
<PAGE> 23
ARTICLE 6
DEFAULT
Section 6.01. Events of Default. Each of the
following shall constitute an Event of Default, whatever the
reason for such event and whether it shall be voluntary or
involuntary, or within or without the control of the Borrower or
any Subsidiary, or be effected by operation of law or pursuant to
any judgment or order of any court or any order, rule or
regulation of any governmental or nongovernmental body:
(a) Any payment of principal of or interest on any of
the Loans or the Notes or of the facility fee shall not be made
when and as due (whether at maturity, by reason of notice of
prepayment or acceleration or otherwise) and in accordance with
the terms of this Agreement and the Notes and, in the case of
interest and facility fees, such non-payment shall continue for
three Business Days;
(b) Any Representation and Warranty shall at any time
prove to have been incorrect or misleading in any material
respect when made;
(c) The Borrower shall default in the performance or
observance of
(i) any term, covenant, condition or agreement
contained in Section 4.01(a) (insofar as such Section
requires the preservation of the corporate existence of the
Borrower), 4.01(f), 4.03, 4.04 through 4.09, 4.11 through
4.15, 5.01(e)(i) or 5.03(b);
(ii) any term, covenant, condition or agreement
contained in this Agreement (other than a term, covenant,
condition or agreement a default in the performance or
observance of which is elsewhere in this Section
specifically dealt with) and, if capable of being remedied,
such default shall continue unremedied for a period of 30
days; or
(iii) an Event of Default under (and as defined in)
the Short Term Facility shall have occurred and be
continuing;
(d) (i) The Borrower or any Restricted Subsidiary
shall fail to pay, in accordance with its terms and when due and
payable (after giving effect to any applicable grace period,
which in the case of any Guaranty of Indebtedness, shall be
deemed not less than five Business Days after the underlying
Indebtedness became due), any of the principal of or interest on
any Indebtedness (other than the Loans or the Short Term Loans)
in an aggregate principal amount in excess of $10,000,000, (ii)
the maturity of any such Indebtedness shall, in whole or in part,
have been accelerated, or any such Indebtedness shall, in whole
or in part, have been required to be prepaid prior to the stated
<PAGE> 24
maturity thereof, in accordance with the provisions of any
Contract evidencing, providing for the creation of or concerning
such Indebtedness, or (iii) (A) any event shall have occurred and
be continuing that permits (or, with the passage of time or the
giving of notice or both, would permit) any holder or holders of
such Indebtedness, any trustee or agent acting on behalf of such
holder or holders or any other Person so to accelerate such
maturity or require any such prepayment and such event has
continued unremedied and unwaived for a period of five Business
Days and (B) if the Contract evidencing, providing for the
creation of or concerning such Indebtedness provides for a cure
period for such event, such event shall not be cured prior to the
end of such cure period, except that no such failure to pay any
amount that has become due and payable by virtue of an
acceleration, no such acceleration or required prepayment, and no
such event, based solely upon a breach of any agreement or
condition that restricts the ability of the Borrower or any
Subsidiary to sell, pledge or otherwise dispose of Unrestricted
Margin Stock and that is contained in any Contract to which any
Bank or an "affiliate" (as defined in Regulation U) of any Bank
is a party shall constitute an Event of Default;
(e) A default shall be continuing under any Contract
(other than a Contract relating to Indebtedness to which clause
(d) of this Section 6.01 is applicable) binding upon the Borrower
or any Restricted Subsidiary, except a default that, together
with all other such defaults, has not had and will not have a
Materially Adverse Effect on (i) the Borrower and the Restricted
Subsidiaries taken as a whole or (ii) the Agreement or the Notes;
(f) (i) The Borrower or any Subsidiary other than a
Real Estate Joint Venture Subsidiary that is not a Restricted
Subsidiary shall (A) commence a voluntary case under the Federal
bankruptcy laws (as now or hereafter in effect), (B) file a
petition seeking to take advantage of any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts, (C) consent to
or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such
bankruptcy laws or other laws, (D) apply for, or consent to, or
fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or the like of itself or of a
substantial part of its assets, domestic or foreign, (E) admit in
writing its inability to pay, or generally not be paying, its
debts (other than those that are the subject of bona fide
disputes) as they become due, (F) make a general assignment for
the benefit of creditors, or (G) take any corporate action for
the purpose of effecting any of the foregoing; or
(ii) (A) A case or other proceeding shall be
commenced against the Borrower or any Subsidiary other than a
Real Estate Joint Venture Subsidiary that is not a Restricted
Subsidiary seeking (1) relief under the Federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic
or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts, or (2) the
appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower or any Subsidiary, or of all or any
substantial part of the assets, domestic or foreign, of the
<PAGE> 25
Borrower or any Subsidiary, and such case or proceeding shall
continue undismissed or unstayed for a period of 60 days, or (B)
an order granting the relief requested in such case or proceeding
against the Borrower or any Subsidiary (including an order for
relief under such Federal bankruptcy laws) shall be entered;
(g) A judgment or order shall be entered against the
Borrower or any Restricted Subsidiary by any court, and (i) in
the case of a judgment or order for the payment of money, either
(A) such judgment or order shall continue undischarged and
unstayed for a period of 30 days in which the aggregate amount of
all such judgments and orders exceeds $10,000,000 or (B)
enforcement proceedings shall have been commenced upon such
judgment or order and (ii) in the case of any judgment or order
for other than the payment of money, such judgment or order
could, together with all other such judgments or orders, have a
Materially Adverse Effect on the Borrower and the Restricted
Subsidiaries taken as a whole;
(h) (i) Any Termination Event shall occur with respect
to any Benefit Plan, (ii) any Accumulated Funding Deficiency,
whether or not waived, shall exist with respect to any Benefit
Plan maintained by Borrower or an ERISA Affiliate, or with
respect to any other employee benefit plan maintained by Borrower
or an ERISA Affiliate that is subject to Section 412 of the Code,
(iii) the Borrower or any ERISA Affiliate shall engage in any
Prohibited Transaction involving any Benefit Plan maintained by
the Borrower or an ERISA Affiliate, (iv) the Borrower or any
ERISA Affiliate shall be in "default" (as defined in ERISA
Section 4219(c)(5)) with respect to payments owing to a
Multiemployer Benefit Plan as a result of the Borrower's or any
ERISA Affiliate's complete or partial withdrawal (as described in
ERISA Section 4203 or 4205) from such Multiemployer Benefit Plan,
(v) the Borrower or any ERISA Affiliate shall fail to pay when
due an amount (other than premium payments to the PBGC) that is
payable by it to the PBGC or to a Benefit Plan in accordance with
Title IV of ERISA, or (vi) a proceeding shall be instituted by a
fiduciary of any Multiemployer Benefit Plan against the Borrower
or any ERISA Affiliate to enforce ERISA Section 515 and such
proceeding shall not have been dismissed within 60 days
thereafter, except that no event or condition referred to in
clauses (i) through (vi) shall constitute an Event of Default if
it, together with all other such events or conditions at the time
existing, has not had, and will not have, a Materially Adverse
Effect on the Borrower and the Consolidated Subsidiaries taken as
a whole;
(i) Any person or group of persons acting in concert
acquires, in the aggregate, 50% or more of any class of voting
stock of the Borrower; or
(j) Any Real Estate Joint Venture Subsidiary that is
not a Restricted Subsidiary shall take any action, or have any
action taken against or with respect to it, voluntarily or
involuntarily, which would result in an Event of Default under
Section 6.01(f) but for the express reference to Real Estate
Joint Venture Subsidiaries therein which, individually or in the
aggregate with such actions taken by or against any other Real
Estate Joint Venture Subsidiary, has had or is reasonably likely
to have a Materially Adverse Effect on the Borrower and the
<PAGE> 26
Consolidated Subsidiaries taken as a whole.
Section 6.02. Remedies upon Event of Default. During
the continuance of any Event of Default (other than one specified
in Section 6.01(f)) and in every such event, the Administrative
Agent, upon notice to the Borrower, may do either or both of the
following: (a) declare, in whole or, from time to time, in part,
the principal of and interest on the Loans and the Notes and all
other amounts owing under this Agreement to be, and the Loans and
the Notes and all such other amounts shall thereupon and to that
extent become, due and payable and (b) terminate, in whole or,
from time to time, in part, the Commitments. Upon the occurrence
of an Event of Default specified in Section 6.01(f),
automatically and without any notice to the Borrower, (a) the
principal of and interest on the Loans and the Notes and all
other amounts owing under this Agreement shall be due and payable
and (b) the Commitments shall terminate. Presentment, demand,
protest or notice of any kind (other than the notice provided for
in the first sentence of this Section 6.02) are hereby expressly
waived.
ARTICLE 7
ADDITIONAL CREDIT FACILITY PROVISIONS
Section 7.01. Mandatory Suspension and Conversion of
Fixed Rate Loans. A Bank's obligations to make, continue or
convert into Fixed Rate Loans shall be suspended, all such Bank's
outstanding Loans of that Type shall be converted on the last day
of their applicable Interest Periods (or, if earlier, in the case
of clause (c) below, on the last day such Bank may lawfully
continue to maintain Loans of that Type or, in the case of clause
(d) below, on the day determined by such Bank to be the last
Business Day before the effective date of the applicable
restriction) into, and all pending requests for the making or
continuation of or conversion into Loans of such Type by such
Bank shall be deemed requests for, Base Rate Loans, if:
(a) on or prior to the determination of an interest
rate for a Fixed Rate Loan of that Type for any Interest
Period, the Administrative Agent determines that for any
reason appropriate information is not available to it for
purposes of determining the Adjusted CD Rate or the Adjusted
Eurodollar Rate, as the case may be, for such Interest
Period;
(b) on or prior to the first day of any Interest
Period for a Fixed Rate Loan of that Type, such Bank
reasonably determines that the Adjusted CD Rate or the
Adjusted Eurodollar Rate, as the case may be, as determined
by the Administrative Agent for such Interest Period would
not accurately reflect the cost to such Bank of making,
continuing or converting into a Fixed Rate Loan of such Type
for such Interest Period;
(c) at any time such Bank reasonably determines that
any Regulatory Change makes it unlawful or impracticable for
such Bank or its applicable Lending Office to make, continue
<PAGE> 27
or convert any Fixed Rate Loan of that Type, or to comply
with its obligations hereunder in respect thereof; or
(d) such Bank reasonably determines that, by reason of
any Regulatory Change, such Bank or its applicable Lending
Office is restricted, directly or indirectly, in the amount
that it may hold of (i) a category of liabilities that
includes deposits by reference to which, or on the basis of
which, the interest rate applicable to Fixed Rate Loans of
that type is directly or indirectly determined or (ii) the
category of assets that includes Fixed Rate Loans of that
Type.
If, as a result of this Section 7.01, any Loan of any Bank that
would otherwise be made or maintained as or converted into a
Fixed Rate Loan of any Type for any Interest Period is instead
made or maintained as or converted into a Base Rate Loan, then,
unless the corresponding Loan of each of the other Banks is also
to be made or maintained as or converted into a Base Rate Loan,
such Loan shall be treated as being a Fixed Rate Loan, as the
case may be, of such Type for such Interest Period for all
purposes of this Agreement (including the timing, application and
proration among the Banks of interest payments, conversions and
prepayments) except for the calculation of the interest rate
borne by such Loan. The Administrative Agent shall promptly
notify the Borrower and each Bank of the existence or occurrence
of any condition or circumstance specified in clause (a) above,
and each Bank shall promptly notify the Borrower and the
Administrative Agent of the existence or occurrence of any
condition or circumstance specified in clause (b), (c) or (d)
above applicable to such Bank's Loans, but the failure by the
Administrative Agent or such Bank to give any such notice shall
not affect such Bank's rights hereunder.
Section 7.02. Regulatory Changes. If in the
reasonable determination of any Bank (a) any Regulatory Change or
the application of any provision of Applicable Law relating to
capital adequacy shall directly or indirectly (i) reduce the
amount of any sum received or receivable by such Bank with
respect to any Loan or the return to be earned by such Bank on
any Loan, (ii) impose a cost on such Bank or any Affiliate of
such Bank that is attributable to the making or maintaining of,
or such Bank's commitment to make, any Loan, (iii) require such
Bank or any Affiliate of such Bank to make any payment on or
calculated by reference to the gross amount of any amount
received by such Bank hereunder or under any Note or (iv) reduce,
or have the effect of reducing, the rate of return on the capital
of such Bank or any Affiliate of such Bank allocable to any Loan
or such Bank's commitment to make any Loan and (b) such
reduction, increased cost or payment shall not be fully
compensated for by an adjustment in the applicable rates of
interest payable hereunder, then the Borrower shall pay to such
Bank such additional amounts as such Bank reasonably determines
will, together with any adjustment in the applicable rates of
interest payable hereunder, fully compensate for such reduction,
increased cost or payment, such amounts to be paid, in the case
of those applicable to prior periods, within 15 days after
request by such Bank for such payment or, in the case of those
applicable to future periods, on the dates specified, or
determined in accordance with a method specified, by such Bank.
<PAGE> 28
Each Bank will promptly notify the Borrower of any Regulatory
Change of which it has knowledge that will entitle such Bank to
compensation pursuant to this Section 7.02, but the failure to
give such notice shall not affect such Bank's right to such
compensation provided that no Bank shall be entitled to receive
any payment to compensate it for such costs incurred prior to the
ninetieth day preceding the date on which the Bank gives such
notice to the Borrower.
Section 7.03. Change of Lending Office. If an event
occurs with respect to a Lending Office of any Bank that
obligates the Borrower to pay any amount under Section 1.10(c),
makes operable the provisions of clause (b) or (c) of Section
7.01 or entitles such Bank to make a claim under Section 7.02,
such Bank shall, if requested by the Borrower, use reasonable
efforts to designate another Lending Office or Offices the
designation of which will reduce the amount the Borrower is so
obligated to pay, eliminate such operability or reduce the amount
such Bank is so entitled to claim, provided that such designation
would not, in the sole and absolute discretion of such Bank, be
disadvantageous to such Bank in any manner or contrary to such
Bank's policies. Each Bank may at any time and from time to time
change any Lending Office and shall give notice of any such
change to the Administrative Agent and the Borrower. Except in
the case of a change in Lending Offices made at the request of
the Borrower, the designation of a new Lending Office by any Bank
shall not obligate the Borrower to pay any amount to such Bank
under Section 1.10(c), make operable the provisions of clause (b)
or (c) of Section 7.01 or entitle such Bank to make a claim under
Section 7.02 if such obligation, the operability of such clause
or such claim results solely from such designation and not from a
subsequent Regulatory Change.
Section 7.04. Funding Losses. The Borrower shall pay
to each Bank, upon request, such amount or amounts as such Bank
reasonably determines are necessary to compensate it for any
loss, cost or expense incurred by it as a result of (a) any
payment, prepayment or conversion of a Fixed Rate Loan on a date
other than the last day of an Interest Period for such Fixed Rate
Loan or (b) a Fixed Rate Loan for any reason not being made or
converted (other than as a result of such Bank wrongfully failing
to fund its Loan or permit such conversion), or any payment of
principal thereof or interest thereon not being made, on the date
therefor determined in accordance with the applicable provisions
of this Agreement. At the election of such Bank, and without
limiting the generality of the foregoing, but without
duplication, such compensation on account of losses may include
an amount equal to the excess of (i) the interest that would have
been received from the Borrower under this Agreement on any
amounts to be reemployed during an Interest Period or its
remaining portion over (ii) the interest component of the return
that such Bank reasonably determines it could have obtained had
it placed such amount on deposit in the interbank Dollar market
selected by it for a period equal to such Interest Period or its
remaining portion.
Section 7.05. Determinations. In making the
determinations contemplated by Sections 7.01, 7.02 and 7.04, each
Bank may make such reasonable estimates, assumptions, allocations
and the like that such Bank in good faith determines to be
<PAGE> 29
appropriate, but such Bank's selection thereof in accordance with
this Section 7.05, and the determinations made by such Bank on
the basis thereof, shall be final, binding and conclusive upon
the Borrower, except, in the case of such determinations, for
manifest errors in computation or transmission. Each Bank shall
furnish to the Borrower upon request a certificate outlining in
reasonable detail the computation of any amounts claimed by it
under this Article 7 and the assumptions underlying such
computations.
ARTICLE 8
THE AGENTS
Section 8.01. Appointment and Powers. Each Bank
hereby irrevocably appoints and authorizes The First National
Bank of Chicago, and The First National Bank of Chicago hereby
agrees, to act as the agent of such Bank under this Agreement
with such powers as are delegated to the Administrative Agent by
the terms hereof, together with such other powers as are
reasonably incidental thereto. The Administrative Agent's duties
shall be purely ministerial and it shall have no duties or
responsibilities except those expressly set forth in this
Agreement and shall not be required under any circumstances to
take any action that, in its judgment, is contrary to this
Agreement or Applicable Law or would expose it to Liability. The
Administrative Agent shall not, by reason of its serving as the
Administrative Agent, be a trustee or other fiduciary for any
Bank.
Section 8.02. Limitation on Administrative Agent's and
Co-Agents' Liability. Neither the Administrative Agent nor any
Co-Agent nor any of their respective directors, officers,
employees or agents shall be liable or responsible to any Bank
for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own
willful misconduct, gross negligence or knowing violations of
law. Neither the Administrative Agent nor any Co-Agent shall be
responsible to any Bank for (a) any recitals, statements,
representations or warranties contained in this Agreement or in
any certificate or other document referred to or provided for in,
or received by any of the Banks under, this Agreement, (b) the
validity, effectiveness or enforceability of this Agreement or
the Notes or any such certificate or other document or (c) any
failure by the Borrower to perform any of its obligations under
this Agreement or the Notes. The Administrative Agent may employ
agents and attorneys-in-fact selected by it in good faith and
shall not be responsible for the negligence or misconduct of any
such agents or attorneys-in-fact. The Administrative Agent shall
be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telex,
telecopier, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by
the Administrative Agent. As to any matters not expressly
provided for by this Agreement, the Administrative Agent shall in
all cases be fully protected in acting, or in refraining from
<PAGE> 30
acting, under this Agreement in accordance with instructions
signed by the Required Banks, and such instructions of the
Required Banks and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
Section 8.03. Defaults. The Administrative Agent
shall not be deemed to have knowledge of the occurrence of a
Default (other than the non-payment to it of facility fees or
principal of or interest on the Loans) unless the Administrative
Agent has received notice from a Bank or the Borrower specifying
such Default and stating that such notice is a "Notice of
Default". In the event that the Administrative Agent receives
such a notice of the occurrence of a Default, the Administrative
Agent shall give prompt notice thereof to the Banks. In the
event of any Default, the Administrative Agent shall (subject to
Section 8.05(b)) (a) in the case of a Default that constitutes an
Event of Default, take either or both of the actions referred to
in clauses (a) and (b) of the first sentence of Section 6.02 if
so directed by the Required Banks, and (b) in the case of any
Default, take such other action with respect to such Default as
shall be reasonably directed by the Required Banks; provided
that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall
not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall deem
advisable in the best interests of the Banks.
Section 8.04. Rights as a Bank. Each Person acting as
the Administrative Agent or as a Co-Agent that is also a Bank
shall, in its capacity as a Bank, have the same rights and powers
under this Agreement as any other Bank and may exercise the same
as though it were not acting as the Administrative Agent or as a
Co-Agent, and the term "Bank" or "Banks" shall include such
Person in its individual capacity. Each Person acting as the
Administrative Agent or as a Co-Agent and its Affiliates may
(without having to account therefor to any Bank) accept deposits
from, lend money to and generally engage in any kind of banking,
trust or other business with the Borrower and its Affiliates as
if it were not acting as the Administrative Agent or as a Co-
Agent, and such Person and its Affiliates may accept fees and
other consideration from the Borrower and its Affiliates for
services in connection with this Agreement or otherwise without
having to account for the same to the Banks.
Section 8.05. Indemnification. (a) The Banks agree
to indemnify the Administrative Agent and each Co-Agent (to the
extent not reimbursed by the Borrower hereunder), ratably on the
basis of the respective principal amounts of the Loans
outstanding made by the Banks (or, if no Loans are at the time
outstanding, ratably on the basis of their respective
Commitments), for any and all Liabilities, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Administrative
Agent or any such Co-Agent (including the costs and expenses that
the Borrower is obligated to pay hereunder) in any way relating
to or arising out of this Agreement or any other documents
contemplated thereby or referred to therein or the transactions
contemplated thereby or the enforcement of any of the terms
thereof or of any such other documents, provided that no Bank
<PAGE> 31
shall be liable for any of the foregoing to the extent they arise
from willful misconduct, gross negligence or knowing violations
of law by the party to be indemnified.
(b) Notwithstanding any other provision of this
Agreement, the Administrative Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall
be indemnified to its satisfaction by the Banks against any and
all Liability and expense that may be incurred by it by reason of
taking or continuing to take any such action.
Section 8.06. Non-Reliance on the Administrative
Agent, the Co-Agents and Other Banks. Each Bank agrees that it
has, independently and without reliance on the Administrative
Agent, any Co-Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and its own decision to enter
into this Agreement, and that it will, independently and without
reliance upon the Administrative Agent, any Co-Agent or any other
Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis
and decisions in taking or not taking action under this Agreement
or its Notes. Neither the Administrative Agent nor any Co-Agent
shall be required to keep itself informed as to the performance
or observance by the Borrower of this Agreement or any other
document referred to or provided for herein or to inspect the
properties or books of the Borrower or any Subsidiary. Except
for notices, reports and other documents and information
expressly required to be furnished to the Banks by the
Administrative Agent under this Agreement, neither the
Administrative Agent nor any Co-Agent shall have any duty or
responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or
business of the Borrower or any Subsidiary that may come into the
possession of the Administrative Agent or any of its Affiliates.
Section 8.07. Resignation or Removal of the
Administrative Agent. Subject to the appointment and acceptance
of a successor Administrative Agent as provided below, the
Administrative Agent may at any time give notice of its
resignation to the Banks and the Borrower and the Administrative
Agent may be removed at any time with cause by the Required
Banks. Upon receipt of any such notice of resignation or upon
any such removal, the Required Banks may, after consultation with
the Borrower, appoint a successor Administrative Agent which
shall be a Bank unless otherwise agreed to by the Borrower (which
in any case shall be a commercial bank with not less than
$250,000,000 of capital). If no successor Administrative Agent
shall have been so appointed by the Required Banks and shall have
accepted such appointment within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Administrative Agent,
then the retiring Administrative Agent may, on behalf of the
Banks and after consultation with the Borrower, appoint a
successor Administrative Agent. Upon the acceptance by any
Person of its appointment as a successor Administrative Agent,
such Person shall thereupon succeed to and become vested with all
the rights, powers, privileges, duties and obligations of the
retiring Administrative Agent and the retiring Administrative
Agent shall be discharged from its duties and obligations as
<PAGE> 32
Administrative Agent under this Agreement. After any retiring
Administrative Agent's resignation or removal as Administrative
Agent, the provisions of this Article 8 shall continue in effect
for its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as the Administrative Agent.
ARTICLE 9
MISCELLANEOUS
Section 9.01. Notices and Deliveries. (a) Manner of
Delivery. All notices, communications and materials (including
all Information) to be given or delivered pursuant to this
Agreement shall, except in those cases where a telephone notice
is expressly permitted, be in writing (which shall include telex
or telecopy transmissions). Notices under Sections 1.02, 1.03,
1.04(c), 1.06, 1.08 and 6.02 may be by telephone, promptly, in
the case of each notice other than one under Section 6.02,
confirmed in writing. In the event of a discrepancy between any
telephonic notice and any written confirmation thereof, such
written confirmation shall be deemed the effective notice except
to the extent that the Administrative Agent has acted in reliance
on such telephonic notice.
(b) Addresses. All notices, communications and
materials to be given or delivered pursuant to this Agreement
shall be given or delivered at the following respective addresses
and telex, telecopier and telephone numbers and to the attention
of the following individuals or departments:
(i) if to the Borrower, to it at:
Kemper Corporation C-4
Route 22 and Kemper Drive
Long Grove, Illinois 60049
Telex No.:
Telecopier No.: 708-320-4695
Telephone No.: 708-320-2412
Attention: Treasurer
with a copy to:
Kemper Corporation
Route 22 and Kemper Drive
Long Grove, Illinois 60049
Attention: Kathleen Gallichio,
General Counsel
(ii) if to the Administrative Agent, to it at:
The First National Bank of Chicago
One First National Plaza, Suite 0085
Chicago, Illinois 60670
Telecopier No.: 312-732-4033
Telephone No.: 312-732-9565
<PAGE> 33
Attention: Cynthia W. Priest
with a copy to:
The First National Bank of Chicago
One First National Plaza,
Suite 0353
Chicago, Illinois 60670
Attention: Fotis Theodore
Telecopier No.: 312-732-2038
Telephone No.: 312-732-7217
(iii) if to any Bank, to it at the address or
telex, telecopier or telephone number and to the
attention of the individual or department, set
forth below such Bank's name under the heading
"Notice Address" on Annex A or, in the case of a
Bank that becomes a Bank pursuant to an
assignment, set forth under the heading "Notice
Address" in the Notice of Assignment given to the
Borrower and the Administrative Agent with respect
to such assignment;
or at such other address or telex, telecopier or telephone number
or to the attention of such other individual or department as the
party to which such information pertains may hereafter specify
for the purpose in a notice specifically captioned "Notice of
Change of Address" given to (x) if the party to which such
information pertains is the Borrower, the Administrative Agent
and each Bank, (y) if the party to which such information
pertains is the Administrative Agent, the Borrower and each Bank
and (z) if the party to which such information pertains is a
Bank, the Borrower and the Administrative Agent.
(c) Effectiveness. Each notice and communication and
any material to be given or delivered pursuant to this Agreement
shall be effective or deemed delivered or furnished (i) if sent
by registered or certified mail, postage prepaid, return receipt
requested, on the third Business Day after such notice,
communication or material, addressed as above provided, is
delivered to a United States post office and a receipt therefor
is issued thereby, (ii) if given by any other means of physical
delivery, when such notice, communication or material is
delivered to the appropriate address as above provided, (iii) if
sent by telex, when such notice, communication or material is
transmitted to the appropriate number determined as above
provided in this Section 9.01 and the appropriate answer-back is
received, (iv) if sent by telecopier, when such notice,
communication or material is transmitted to the appropriate
telecopier number as above provided and is received at such
number, and (v) if given by telephone, when communicated to the
individual or any member of the department specified as the
individual or department to whose attention notices,
communications and materials are to be given or delivered, or, in
the case of notice by the Administrative Agent to the Borrower
under Section 6.02 given by telephone as above provided, if any
individual or any member of the department to whose attention
notices, communications and materials are to be given or
<PAGE> 34
delivered is unavailable at the time, to any other officer of the
Borrower, except that notices of a change of address, telex,
telecopier or telephone number or individual or department to
whose attention notices, communications and materials are to be
given or delivered, and notices to the Administrative Agent under
Sections 1.02, 1.03(c), 1.05, 1.07 and 1.09(g), shall not be
effective, and materials to be furnished to any Bank pursuant to
Article 5 shall not be deemed furnished, until received, and such
notices to the Administrative Agent shall not be deemed received
until received by the officer of the Administrative Agent
responsible, at the time, for the administration of this
Agreement.
(d) Reasonable Notice. Any requirement under
Applicable Law of reasonable notice by the Administrative Agent
or the Banks to the Borrower of any event in connection with, or
in any way related to, this Agreement or the Notes or the
exercise by the Administrative Agent or the Banks of their rights
hereunder and thereunder shall be met if notice of such event is
given to the Borrower in the manner prescribed above at least 10
days before (i) the date of such event or (ii) the date after
which such event will occur.
Section 9.02. Expenses; Indemnification. (a) Whether
or not any Loans are made hereunder, the Borrower shall:
(i) pay or reimburse the Administrative Agent,
each Co-Agent and each Bank for all transfer, documentary,
stamp and similar taxes, and all recording and filing fees,
payable in connection with, arising out of, or in any way
related to, the execution, delivery and performance of this
Agreement or the Notes or the making of the Loans;
(ii) pay or reimburse the Administrative Agent and
each Co-Agent for all costs and expenses (including fees and
disbursements of legal counsel and other experts employed or
retained by the Administrative Agent and each Co-Agent)
incurred by the Administrative Agent and each Co-Agent in
connection with, arising out of, or in any way related to
(A) the negotiation, preparation, execution and delivery of
(1) this Agreement and the Notes and (2) whether or not
executed, any waiver, amendment or consent under or to this
Agreement or the Notes, (B) the administration of and any
operations under this Agreement, (C) consulting with respect
to any matter in any way arising out of, related to, or
connected with, this Agreement, including (1) the
protection, preservation, exercise or enforcement of any of
the rights of the Administrative Agent or the Banks under or
related to this Agreement or the Notes or (2) the
performance of any of the obligations of the Administrative
Agent or the Banks under or related to this Agreement or the
Notes, or (D) protecting, preserving, exercising or
enforcing any of the rights of the Administrative Agent, the
Co-Agents or the Banks under or related to this Agreement or
the Notes;
(iii) pay or reimburse each Bank for all costs and
expenses (including fees and disbursements of legal counsel
and other experts employed or retained by such Bank)
incurred by such Bank in connection with, arising out of, or
<PAGE> 35
in any way related to (A) consulting during a Default with
respect to (i) the protection, preservation, exercise or
enforcement of any of its rights under or related to this
Agreement or the Notes or (ii) the performance of any of its
obligations under or related to this Agreement or the Notes
or (B) protecting, preserving, exercising or enforcing
during a Default any of its rights under or related to this
Agreement or the Notes; and
(iv) indemnify and hold each Indemnified Person
harmless from and against all losses (including judgments,
penalties and fines) suffered, and pay or reimburse each
Indemnified Person for all costs and expenses (including
fees and disbursements of legal counsel and other experts
employed or retained by such Indemnified Person) incurred,
by such Indemnified Person in connection with, arising out
of, or in any way related to (A) any Credit Agreement
Related Claim (whether asserted by such Indemnified Person
or the Borrower or any other Person), including the
prosecution or defense thereof and any litigation or
proceeding with respect thereto (whether or not, in the case
of any such litigation or proceeding, such Indemnified
Person is a party thereto), or (B) any investigation,
governmental or otherwise, arising out of, related to, or in
any way connected with, any Credit Agreement Related Claim,
whether or not asserted, except that the foregoing indemnity
shall not be applicable (I) to any loss suffered by any
Indemnified Person to the extent such loss is determined by
a judgment of a court that is binding on the Borrower and
such Indemnified Person, final and not subject to review on
appeal, to be the result of acts or omissions on the part of
such Indemnified Person constituting (w) gross negligence,
(x) willful misconduct, (y) knowing violations of law or (z)
in the case of claims by the Borrower against such
Indemnified Person, such Indemnified Person's failure to
observe any other standard applicable to it under any of the
other provisions of this Agreement or, but only to the
extent not waivable thereunder, Applicable Law, (II) in the
case of any action by an Indemnified Party against the
Borrower, where judgment is rendered wholly against such
Indemnified Person or (III) to any losses or costs and
expenses of any Bank incurred in connection with, or arising
out of, or in any way related to any Credit Agreement
Related Claim asserted by or against such Bank by or against
any other Bank or the Administrative Agent or any Co-Agent.
(b) All amounts payable by the Borrower under Section
9.02(a) shall be immediately due upon request for the payment
thereof.
Section 9.03. Rights Cumulative. Each of the rights
and remedies of the Administrative Agent, the Co-Agents and the
Banks under this Agreement and the Notes shall be in addition to
all of their other rights and remedies under this Agreement, the
Notes and Applicable Law, and nothing in this Agreement or the
Notes shall be construed as limiting any such rights or remedies.
Section 9.04. Disclosures; Confidentiality. Unless
otherwise agreed to in writing by the Borrower, each of the
Administrative Agent, the Co-Agents and the Banks agrees:
<PAGE> 36
(a) to keep confidential any information supplied to
it by the Borrower or its Subsidiaries or their respective agents
or representatives under or in connection with the Loan Documents
or the transactions contemplated thereby, whether furnished
before or after the date hereof, which (i) was not already in the
Administrative Agent's, such Co-Agent's or such Bank's possession
prior to any disclosure by the Borrower, any Subsidiary or their
respective agents or representatives, (ii) is not or does not
become public other than (A) as a result of an action by the
Administrative Agent, any Co-Agent or any Bank contrary to the
terms of this Section or (B) by the action of any other person or
entity contrary to the terms of a confidentiality agreement with
the Borrower to which such person or entity is bound and such
violation by such person or entity is known to the Administrative
Agent, such Co-Agent or such Bank, and (iii) is not derived
solely from such public information and other information not
otherwise subject to the terms of this Section (collectively,
"Confidential Information"); provided that the Administrative
Agent, each Co-Agent and each Bank may disclose Confidential
Information, as long as such disclosure does not and will not
violate the Administrative Agent's, such Co-Agent's or such
Bank's duties under applicable state or federal securities laws
regarding disclosure of nonpublic information, (I) to the
Administrative Agent, any Co-Agent or any Bank, (II) to the
extent required by Applicable Law or legal process reasonably
believed by the Administrative Agent, any Co-Agent or any Bank to
compel disclosure, (III) to counsel for the Administrative Agent,
such Co-Agent or such Bank or to their respective accountants,
(IV) to the extent necessary or appropriate in connection with
any litigation relating to a Credit Agreement Related Claim to
which the Administrative Agent, such Co-Agent or such Bank is a
party, (V) to the extent necessary or appropriate for the
purposes of protecting, preserving or exercising any rights under
the Loan Documents during the continuance of an Event of Default,
or (VI) to any actual or prospective assignee of or participant
in any or all of such Bank's rights and obligations under the
Loan Documents, provided that, prior to the disclosure of any
Confidential Information, each such actual or prospective
assignee or participant has agreed in writing for the benefit of
the Borrower that it will comply with the terms of this Section
to the same extent as if it were a Bank;
(b) to the extent reasonably practicable, provide the
Borrower with prompt notice of any request in a judicial,
administrative or governmental proceeding which requires the
Administrative Agent, any Co-Agent or any Bank to disclose any
Confidential Information so that the Borrower may seek an
appropriate protective order; provided, however, that if the
Administrative Agent, any Co-Agent or any Bank is, with the
advice of counsel, compelled to make immediate or prompt
disclosure of any Confidential Information or else stand liable
for contempt or other censure or penalty, the Administrative
Agent, such Co-Agent or such Bank will not delay disclosure in
order to (i) provide the Borrower with the notice to in this
paragraph (although the Administrative Agent, such Co-Agent or
such Bank will endeavor to provide the Borrower with such prior
notice) or (ii) preserve the benefits that the Borrower may
realize from a protective order; and
(c) in the case of any Bank, any Co-Agent or the
<PAGE> 37
Administrative Agent, on or after the date such Bank (including
the Administrative Agent and any Co-Agent in its capacity as a
Bank) ceases to have any Commitments or outstanding Loans or
other amounts owing to it hereunder, and in the case of the
Agent, ceases to act as Administrative Agent hereunder, upon the
Borrower's written request, endeavor to deliver to the Borrower
or destroy all Confidential Information in written or tangible
form identified in such request and all written or tangible
material reflecting any Confidential Information, without
retaining any copies, summaries, analyses or extracts thereof,
except that none of the Administrative Agent, the Co-Agents and
the Banks shall be obligated to deliver or destroy any written or
tangible materials, including summaries, analyses and extracts
which reflect any Confidential Information or contain any
Confidential Information which has been substantially integrated
with information not subject to the confidential treatment
discussed in this Section so long as the Administrative Agent,
such Co-Agent or such Bank continues to keep such materials
confidential in accordance with the terms of this Section.
Section 9.05. Amendments; Waivers. Any term,
covenant, agreement or condition of this Agreement or the Notes
may be amended, and any right under this Agreement or the Notes
may be waived, if, but only if, such amendment or waiver is in
writing and is signed by the Required Banks and, if the rights
and duties of the Administrative Agent are affected thereby, by
the Administrative Agent and, in the case of an amendment, by the
Borrower; provided, however, that no amendment or waiver shall be
effective, unless in writing and signed by each Bank affected
thereby, to the extent it (i) changes the amount of such Bank's
Commitment, (ii) reduces the principal of or the rate of interest
on such Bank's Loans or Notes or the facility fees payable to
such Bank hereunder, (iii) postpones any date fixed for any
payment of principal of or interest on such Bank's Loans or Notes
or the facility fees payable to such Bank hereunder or (iv)
amends this Section 9.05 or any provision of this Agreement
requiring the consent or other action of all of the Banks.
Unless otherwise specified in such waiver, a waiver of any right
under this Agreement or the Notes shall be effective only in the
specific instance and for the specific purpose for which given.
No election not to exercise, failure to exercise or delay in
exercising any right, nor any course of dealing or performance,
shall operate as a waiver of any right of the Administrative
Agent, any Co-Agent or any Bank under this Agreement, the Notes
or Applicable Law, nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or
the exercise of any other right of the Administrative Agent, any
Co-Agent or any Bank under this Agreement, the Notes or
Applicable Law.
Section 9.06. Set-Off; Suspension of Payments and
Performance. The Administrative Agent, each Co-Agent and each
Bank is hereby authorized by the Borrower, at any time and from
time to time, without notice, (a) during any Event of Default, to
set off against, and to appropriate and apply to the payment of,
the Liabilities of the Borrower under this Agreement and the
Notes (whether owing to such Person or to any other Person that
is the Administrative Agent, a Co-Agent or a Bank and whether
matured or unmatured, fixed or contingent or liquidated or
unliquidated) any and all Liabilities owing by such Person or any
<PAGE> 38
of its Affiliates to the Borrower (whether payable in Dollars or
any other currency, whether matured or unmatured and, in the case
of Liabilities that are deposits, whether general or special,
time or demand and however evidenced and whether maintained at a
branch or office located within or without the United States) and
(b) during any Default, to suspend the payment and performance of
such Liabilities owing by such Person or its Affiliates and, in
the case of Liabilities that are deposits, to return as unpaid
for insufficient funds any and all checks and other items drawn
against any such deposits.
Section 9.07. Sharing of Recoveries. (a) Each Bank
agrees that, if, for any reason, including as a result of (i) the
exercise of any right of counterclaim, set-off, banker's lien or
similar right, (ii) its claim in any applicable bankruptcy,
insolvency or other similar law being deemed secured by a Debt
owed by it to the Borrower, including a claim deemed secured
under section 506 of the Bankruptcy Code, or (iii) the allocation
of payments by the Administrative Agent or the Borrower in a
manner contrary to the provisions of Section 1.11, such Bank
shall receive payment of a proportion of the aggregate amount due
and payable to it hereunder as principal or interest or facility
fees that is greater than the proportion received by any other
Bank in respect of the aggregate of such amounts due and payable
to such other Bank hereunder, then the Bank receiving such
proportionately greater payment shall purchase participations
(which it shall be deemed to have done simultaneously upon the
receipt of such payment) in the Loans and the rights of the other
Banks hereunder so that all such recoveries with respect to such
amounts due and payable hereunder (net of costs of collection)
shall be pro rata based on the outstanding Loans held by each
Bank prior to its giving effect to such set-off; provided that if
all or part of such proportionately greater payment received by
the purchasing Bank is thereafter recovered by or on behalf of
the Borrower from such Bank, such purchases shall be rescinded
and the purchase prices paid for such participations shall be
returned to such Bank to the extent of such recovery, but without
interest (unless the purchasing Bank is required to pay interest
on the amount recovered to the Person recovering such amount, in
which case the selling Bank shall be required to pay interest at
a like rate). The Borrower expressly consents to the foregoing
arrangements and agrees that any holder of a participation in any
rights hereunder so purchased or acquired pursuant to this
Section 9.07(a) shall, with respect to such participation, be
entitled to all of the rights of a Bank under Sections 7.02,
7.04, 7.05, 9.02 and 9.06 and may exercise any and all rights of
set-off with respect to such participation as fully as though the
Borrower were directly indebted to the holder of such
participation for Loans in the amount of such participation.
(b) Each Bank agrees to exercise any right of
counterclaim, set-off, banker's lien or similar right that it may
have in respect of the Borrower in a manner so as to apportion
the amount subject to such exercise, on a pro rata basis, between
(i) obligations of the Borrower for amounts subject to the
sharing provisions of Section 9.07(a) and (ii) other Liabilities
of the Borrower.
Section 9.08. Assignments and Participations.
<PAGE> 39
(a) Assignments. The Borrower may not assign any of
its rights or obligations under this Agreement or the Notes
without the prior written consent of each Bank, and no assignment
of any such obligation shall release the Borrower therefrom
unless each Bank shall have consented to such release in a
writing specifically referring to the obligation from which the
Borrower is to be released. No Bank may assign any or all of its
rights and obligations under this Agreement and the Notes to any
person (other than another Bank) provided that (i) any Bank may
assign any or all of its rights under this Agreement and the
Notes as security to a Federal Reserve Bank or to an Affiliate of
such Bank, and, (ii) with the consent of the Borrower which
consent shall not be unreasonably withheld, any Bank may assign
any or all of such rights and obligations to one or more
commercial banks. Upon request, against receipt of the existing
Notes of the assignor Bank, the Borrower shall execute new Notes
to the assignee and, in the case of partial assignments, the
assignor Bank appropriately reflecting such assignment.
(b) Participations. Each Bank may from time to time
sell or otherwise grant participations to one or more Eligible
Participants in any or all of its rights and obligations under
this Agreement and the Notes without the consent of the Borrower;
provided, however, that (i) no Bank may grant to any holder of a
participation the right to require such Bank to take or omit to
take any action hereunder except that a Bank may grant to any
such holder the right to require such holder's consent to (A)
reduce the principal of or the rate of interest on such Bank's
Loans or Notes or the facility fees payable to such Bank
hereunder, (B) postpone any date fixed for any payment of
principal of or interest on such Bank's Loans or Notes or the
facility fees payable to such Bank hereunder or (C) the
assignment by the Borrower of any of its rights or obligations
under the Loan Documents, (ii) each participation agreement shall
provide that the holder of the participation shall be subject to
the obligations set forth in Section 9.04 to the same extent as
if it were a Bank, and (iii) no such grant of a participation
shall relieve any Bank of its obligations hereunder and the
Borrower shall be entitled to deal solely with the Banks (and
their respective assignees) for all purposes of this Agreement
and the Notes.
(c) Rights of Assignees and Participants. Each
assignee of the rights of any Bank under this Agreement and the
Notes, if and to the extent the applicable assignment agreement
so provides, (i) shall, with respect to its assignment, be
entitled to all of the rights of a Bank and (ii) may exercise any
and all rights of set-off or banker's lien with respect thereto.
Each assignee of, and each holder of a participation in, the
rights of any Bank under this Agreement, if and to the extent the
applicable assignment or participation agreement so provides,
shall be entitled to all the rights of a Bank under Article 7 (as
fully, in the case of a participant, as though it were a Bank);
provided, however, that no assignee and no holder of a
participation shall be entitled to any amounts that would
otherwise be payable to it with respect to its assignment or
participation under Section 7.02 unless (x) such amounts are
payable in respect of Regulatory Changes that become effective or
are implemented or first required or expected to be complied with
after the date the applicable assignment or participation
<PAGE> 40
agreement was executed or (y) in the case of participations, such
amounts would have been payable to the Bank that granted such
participation if such participation granted had not been made.
Section 9.09. Governing Law. This Agreement and the
Notes (including matters relating to the Maximum Permissible
Rate) shall be construed in accordance with and governed by the
law of the State of New York (without giving effect to its
conflict of laws principles).
Section 9.10. Judicial Proceedings; Waiver of Jury
Trial. Any judicial proceeding brought against the Borrower with
respect to any Credit Agreement Related Claim may be brought in
any court of competent jurisdiction in the City of New York, and,
by execution and delivery of this Agreement, the Borrower (a)
accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any final, nonappealable
judgment rendered thereby in connection with any Credit Agreement
Related Claim and (b) irrevocably waives any objection it may now
or hereafter have as to the venue of any such proceeding brought
in such a court or that such a court is an inconvenient forum.
The Borrower hereby waives personal service of process and
consents that service of process upon it may be made by certified
or registered mail, return receipt requested, at its address
specified or determined in accordance with the provisions of
Section 9.01(b), and service so made shall be deemed completed on
the third Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the
Administrative Agent, any Co-Agent, any Bank or any other
Indemnified Person to serve process in any other manner permitted
by law or shall limit the right of the Administrative Agent, any
Co-Agent, any Bank or any other Indemnified Person to bring
proceedings against the Borrower in the courts of any other
jurisdiction. Any judicial proceeding by the Borrower against
the Administrative Agent, any Co-Agent or any Bank involving any
Credit Agreement Related Claim shall be brought only in a court
located in, in the case of the Administrative Agent, the City and
State of New York and, in the case of a Co-Agent or a Bank, the
jurisdiction in which such Co-Agent's or Bank's principal United
States office is located. THE BORROWER, THE ADMINISTRATIVE
AGENT, EACH CO-AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING ANY CREDIT AGREEMENT RELATED
CLAIM.
Section 9.11. LIMITATION OF LIABILITY. NEITHER THE
ADMINISTRATIVE AGENT NOR THE CO-AGENTS NOR THE BANKS NOR ANY
OTHER INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT
TO, AND THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO
SUE FOR, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED
BY THE BORROWER IN CONNECTION WITH ANY CREDIT AGREEMENT RELATED
CLAIM.
Section 9.12. Reference Banks. Each Reference Bank
shall furnish to the Administrative Agent timely information for
the purpose of determining the CD Rate and the Eurodollar Rate.
If any Reference Bank shall notify the Administrative Agent that
thenceforth it shall not be able to furnish such information in a
timely manner or shall assign all of its Loans or Commitment to a
Person that is not an Affiliate of such Reference Bank, the
<PAGE> 41
Administrative Agent shall, with the consent of the Required
Banks and after consultation with the Borrower, appoint another
Bank as a Reference Bank in place of such Reference Bank.
Section 9.13. Severability of Provisions. Any
provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or affecting
the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by Applicable Law, the
Borrower hereby waives any provision of Applicable Law that
renders any provision hereof prohibited or unenforceable in any
respect.
Section 9.14. Counterparts. This Agreement may be
signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto were
upon the same instrument.
Section 9.15. Survival of Obligations. Except as
otherwise expressly provided herein, the rights and obligations
of the Borrower, the Administrative Agent, the Banks and the
other Indemnified Persons under Sections 1.03, 1.08, 1.09, 1.10
and 1.11 and Articles 8 and 9 shall survive the Repayment Date.
Section 9.16. Entire Agreement. This Agreement and
the Notes embody the entire agreement among the Borrower, the
Administrative Agent, the Co-Agents and the Banks relating to the
subject matter hereof and supersede all prior agreements,
representations and understandings, if any, relating to the
subject matter hereof.
Section 9.17. Successors and Assigns. All of the
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns.
Section 9.18. Nonreliance on Margin Stock. Each Bank
represents and warrants to the Borrower that it in good faith is
not relying upon any Margin Stock as collateral in the extension
or maintenance of the credit provided for in this Agreement.
ARTICLE 10
INTERPRETATION
Section 10.01. Definitional Provisions. (a) Defined
Terms. For the purposes of this Agreement:
"Accumulated Funding Deficiency" has the meaning
ascribed to that term in Section 302 of ERISA.
"Adjusted CD Rate" means, for any Interest Period, a
rate per annum equal to the sum (rounded upward, if necessary, to
the next higher 1/100 of 1%) of (i) the rate obtained by dividing
(A) the CD Rate for such Interest Period by (B) a percentage
equal to 1 minus the Reserve Requirement in effect from time to
<PAGE> 42
time during such Interest Period plus (ii) the Assessment Rate in
effect from time to time during such Interest Period.
"Adjusted Eurodollar Rate" means, for any Interest
Period, a rate per annum (rounded upward, if necessary, to the
next higher 1/16 of 1%) equal to the rate obtained by dividing
(i) the Eurodollar Rate for such Interest Period by (ii) a
percentage equal to 1 minus the Reserve Requirement in effect
from time to time during such Interest Period.
"Administrative Agent" means The First National Bank of
Chicago, as agent for the Banks under the Credit Agreement, and
any successor Administrative Agent appointed pursuant to Section
8.07.
"Affiliate" means, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such first Person; unless otherwise specified,
"Affiliate" means an Affiliate of the Borrower.
"Agent's Office" means the address of the
Administrative Agent specified in or determined in accordance
with the provisions of Section 9.01(b).
"Agreement" means this Agreement, including all
schedules, annexes and exhibits hereto.
"Agreement Date" means the date set forth as such on
the last signature page hereof.
"Applicable Facility Fee Rate" means, on the Agreement
Date, .275%. Thereafter the Applicable Facility Fee Rate shall
be adjusted, such adjustment to be based on the lower of the
Senior Ratings, or if only one Senior Rating is available, on
such Senior Rating, in accordance with the following schedule:
Applicable
Senior Ratings Facility Fee
a) A/A2 or higher .20%
b) BBB/Baa2 through A-/A3 .275%
c) Below BBB/Baa2 .35%
Adjustments to the Applicable Facility Fee Rate, if any,
shall be effective on the effective date of a change to either
Senior Rating, as specified by Standard & Poor's Corporation or
Moody's Investors Service, Inc., as the case may be, or, if no
such effective date is specified, on the date such change shall
have become publicly available. For purposes hereof, "Senior
Rating" means the rating which Standard & Poor's Corporation or
Moody's Investors Service, Inc., as the case may be, assigns to
the senior unsecured long term Indebtedness of the Borrower. In
the event that either (a) both Moody's Investors Service, Inc.
and Standard & Poor's Corporation shall cease to exist and shall
not thereupon be succeeded by successor entities performing
similar functions, or (b) either such corporations (or any such
successor entities) shall at any time cease to maintain a Senior
<PAGE> 43
Rating with respect to the Borrower, the Borrower, each Bank and
the Administrative Agent agree to enter into negotiations
promptly thereafter in good faith with a view toward amending
this Agreement to provide for an alternate mechanism (including,
without limitation, providing for a replacement rating agency and
range of ratings of the Borrower) for determining the Applicable
Facility Fee Rate so to achieve, as nearly as possible, the same
economic basis for determining such Applicable Facility Fee Rate
as exists on the date of this Agreement, provided, that during
such negotiations the highest Applicable Facility Fee Rate shall
apply.
"Applicable Law" means, anything in Section 9.09 to the
contrary notwithstanding, (i) all applicable common law and
principles of equity and (ii) all applicable provisions of all
(A) constitutions, statutes, rules, regulations and orders of
governmental bodies (including, but not limited to, guidelines or
policies published or imposed by governmental bodies or other
bodies having supervisory authority over the Person subject to
such Applicable Law), (B) Governmental Approvals and (C) orders,
decisions, judgments and decrees of all courts (whether at law or
in equity or admiralty) and arbitrators.
"Applicable Margin" means, on the Agreement Date, in the
case of Base Rate Loans, 0%, in the case of Eurodollar Rate
Loans, .50%, and, in the case of CD Rate Loans, .625%.
Thereafter, the Applicable Margin shall be adjusted, such
adjustment to be based on (x) the aggregate utilized portion of
the Commitments as of any day and (y) the lower of the Senior
Ratings, or if only one Senior Rating is available, on such
Senior Rating, in accordance with the following schedule:
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin
Senior For Base Rate For Eurodollar Applicable Margin
Ratings Loans Rate Loans For CD Rate Loans
Greater Greater Greater
33-1/3% than 33-1/3% 33-1/3% than 33-1/3% 33-1/3% than 33-1/3%
Commitment Commitment Commitment Commitment Commitment Commitment
Utilization Utilization Utilization Utilization Utilization Utilization
<S> <C> <C> <C> <C> <C> <C>
a) A/A2 or 0% 0% .30% .425% .425% .55%
higher
b) BBB/Baa2 0% 0% .50% .75% .625% .875%
through
A-/A3
c) Below BBB/ 0% 0% .70% 1.075% .825% 1.20%
Baa2
</TABLE>
Adjustments to the Applicable Margin, if any, shall be
effective, to the extent such adjustment occurs as a result of
changes in utilization of the Commitments, on the day such change
occurs, and, to the extent such adjustment occurs as a result of
changes of the Senior Ratings, on the effective date of a change
to either Senior Rating, as specified by Standard & Poor's
Corporation or Moody's Investors Service, Inc., as the case may
<PAGE> 44
be, or, if no such effective date is specified, on the date such
change shall have become publicly available. For purposes
hereof, "Senior Rating" means the rating which Standard & Poor's
Corporation or Moody's Investors Service, Inc., as the case may
be, assigns to the senior unsecured long term Indebtedness of the
Borrower. In the event that either (a) both Moody's Investors
Service, Inc. and Standard & Poor's Corporation shall cease to
exist and shall not thereupon be succeeded by successor entities
performing similar functions, or (b) either such corporations (or
any such successor entities) shall at any time cease to maintain
a Senior Rating with respect to the Borrower, the Borrower, each
Bank and the Administrative Agent agree to enter into
negotiations promptly thereafter in good faith with a view toward
amending this Agreement to provide for an alternate mechanism
(including, without limitation, providing for a replacement
rating agency and range of ratings of the Borrower) for
determining the Applicable Margin so to achieve, as nearly as
possible, the same economic basis for determining such Applicable
Margin as exists on the date of this Agreement, provided, that
during such negotiations the highest Applicable Margin shall
apply.
"Assessment Rate" means, at any time, the annual rate
(rounded upwards, if necessary, to the next higher 1/100th of 1%)
then estimated by the Administrative Agent as the net annual
assessment rate that will be employed in determining the annual
assessment payable by The First National Bank of Chicago to the
Federal Deposit Insurance Corporation (or any successor) for
insuring domestic Dollar time deposits at such bank.
"Bank" means (i) any Person listed on the signature
pages hereof following the Administrative Agent or (ii) any
successor or assignee of any Bank, including any assignee
pursuant to Section 1.13 or Section 9.08(a).
"Base Financial Statements" means the most recent,
audited, consolidated balance sheet of the Borrower and the
Consolidated Subsidiaries referred to in Schedule 5.02(a) and the
related statements of income, retained earnings and, as
applicable, changes in financial position or cash flows for the
fiscal year ended with the date of such balance sheet.
"Base Rate" means, for any day, a rate per annum equal
to the higher of (i) the Prime Rate for such day and (ii) the sum
of the Federal Funds Rate for such day plus 1/2% per annum.
"Base Rate Loan" means any Loan the interest on which
is, or is to be, as the context may require, computed on the
basis of the Base Rate.
"Benefit Plan" means, at any time, any employee benefit
plan (other than a Multiemployer Benefit Plan), subject to Title
IV of ERISA in respect of which Borrower or any ERISA Affiliate
is, or at any time within five years immediately preceding the
time in question was, an "Employer" (as defined in Section 3(5)
of ERISA).
"Borrower" means Kemper Corporation, a Delaware
corporation, and its successors and assigns.
<PAGE> 45
"Business Day" means any day other than a Saturday,
Sunday or other day on which banks in New York City or Chicago
are authorized to close.
"Capital Security" means, with respect to any Person,
(i) any share of capital stock of such Person or (ii) any
security convertible into, or any option, warrant or other right
to acquire, any share of capital stock of such Person.
"CD Rate" means, for any Interest Period, the rate per
annum determined by the Administrative Agent to be the average
(rounded upward, if necessary, to the next higher 1/100 of 1%) of
the rates per annum determined, respectively, by each Reference
Bank to be the prevailing rate per annum (similarly rounded) bid
at approximately 9:00 a.m. (Chicago time) (or as soon thereafter
as is practicable) on the first day of such Interest Period by
two or more New York certificate of deposit dealers of recognized
standing selected by such Reference Bank for the purchase at face
value of certificates of deposit of such Reference Bank in the
secondary market in an amount comparable to the principal amount
of the CD Rate Loan of such Reference Bank to which such Interest
Period applies and with a maturity comparable to such Interest
Period. If any Reference Bank is unable or otherwise fails to
furnish the Administrative Agent with appropriate rate
information in a timely manner, the Administrative Agent shall
determine the CD Rate based on the rate information furnished by
the remaining Reference Banks.
"CD Rate Loan" means any Loan, other than a Bid Loan,
the interest on which is, or is to be, as the context may
require, computed on the basis of the Adjusted CD Rate.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commitment" of any Bank means (i) the amount set forth
opposite such Bank's name under the heading "Commitment" on Annex
A, or, in the case of a Bank that becomes a Bank pursuant to an
assignment, the amount of the assignor's Commitment assigned to
such Bank, in either case as the same may be reduced from time to
time pursuant to Section 1.07 or increased or reduced from time
to time pursuant to assignments in accordance with Section
9.08(a), or (ii) as the context may require, the obligation of
such Bank to make Loans in an aggregate unpaid principal amount
not exceeding such amount.
"Consolidated Indebtedness" means, at any time, the
consolidated Indebtedness of the Borrower and the Consolidated
Subsidiaries as of such time, provided that, for purposes of
calculation of the covenant set forth in Section 4.13,
Consolidated Indebtedness shall not include (i) Indebtedness of
Kemper Clearing Corp. incurred in the ordinary course of its
clearing business to the extent that assets of Kemper Clearing
Corp. have been pledged to secure such Indebtedness pursuant to
agreements to pledge or the like in the ordinary course of
business, (ii) Real Estate Joint Venture Indebtedness, or
Guaranties thereof, of Real Estate Joint Venture Subsidiaries
which are not Consolidated Subsidiaries and (iii) Real Estate
Joint Venture Indebtedness, or Guaranties thereof, of Real Estate
Joint Venture Subsidiaries which are Consolidated Subsidiaries to
<PAGE> 46
the extent of the value of the assets securing such Indebtedness
or, in the case of any such Guaranty, to the extent of the value
of the assets which, upon funding such Guaranty, would either be
owned directly or indirectly by the guarantor or would secure the
obligations owed to the guarantor as a result of such funding.
"Consolidated Net Worth" means, at any time, the
consolidated stockholders' equity of the Borrower and the
Consolidated Subsidiaries provided that, for purposes of
calculating the covenant contained in Section 4.13, Consolidated
Net Worth shall exclude (a) the value of all assets of Kemper
Clearing Corp. or Real Estate Joint Venture Subsidiaries pledged
to secure Indebtedness excluded from Consolidated Indebtedness in
accordance with the definition thereof to the extent such value
exceeds such secured Indebtedness, (b) the value of all assets
pledged to secure collateralized mortgage obligations,
collateralized bond obligations or other similar obligations
excluded from the definition of "Indebtedness" in an amount equal
to such obligations to the extent such value exceeds such
obligations and (c) unrealized gain (or loss) on fixed rate
securities held as investments by the Borrower or any of its
Consolidated Subsidiaries.
"Consolidated Subsidiary" means, with respect to any
Person at any time, any Subsidiary or other Person the accounts
of which would be consolidated with those of such first Person in
its consolidated financial statements as of such time; unless
otherwise specified, "Consolidated Subsidiary" means a
Consolidated Subsidiary of the Borrower.
"Contract" means (i) any agreement (whether bi-lateral
or uni-lateral or executory or non-executory and whether a Person
entitled to rights thereunder is so entitled directly or as a
third-party beneficiary), including an indenture, lease or
license, (ii) any deed or other instrument of conveyance, (iii)
any certificate of incorporation or charter and (iv) any bylaw.
"Credit Agreement Related Claim" means any claim
(whether sounding in tort, contract or otherwise) in any way
arising out of, related to, or connected with, this Agreement,
the Notes or the relationship established hereunder or
thereunder, whether such claim arises or is asserted before or
after the Agreement Date or before or after the Repayment Date.
"Debt" means any Liability that constitutes "debt" or
"Debt" under section 101(11) of the Bankruptcy Code or under the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any analogous Applicable Law.
"Default" means any condition or event that constitutes
an Event of Default or that with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default.
"Dollars" and the sign "$" mean lawful money of the
United States of America.
"Domestic Lending Office" of any Bank means (i) the
branch or office of such Bank set forth below such Bank's name
under the heading "Domestic Lending Office" on Annex A or, in the
<PAGE> 47
case of a Bank that becomes a Bank pursuant to an assignment, the
branch or office of such Bank designated by such assignee Bank in
a notice entitled "Domestic Lending Office" given to the Borrower
and the Administrative Agent with respect to such assignment or
(ii) such other branch or office of such Bank designated by such
Bank from time to time as the branch or office at which its
Domestic Rate Loans are to be made or maintained. Each Bank may
from time to time designate separate Domestic Lending Offices for
its Base Rate Loans and CD Rate Loans, in which case all
references to the Domestic Lending Office of such Bank shall be
deemed to refer to either or both of such Offices, as the context
may require.
"Domestic Note" means any promissory note in the form
of Exhibit A-1.
"Domestic Rate Loan" means any CD Rate Loan or Base
Rate Loan.
"EBIT" means, for any period, the net income or loss
from continuing operations of the Borrower and its Consolidated
Subsidiaries for such period as reflected in the Borrower's
consolidating statements of income as required by Sections
5.01(a)(i) and 5.01(b)(i) from the operations reflected in the
segments designated, as of June 30, 1993, "Asset Management,"
"Securities Brokerage" and "Corporate & Other," plus, to the
extent deducted in determining such net income or loss from
continuing operations (i) federal income tax expense, (ii)
interest expense of the Borrower and Kemper Financial Companies,
Inc. (in each case, on an unconsolidated basis but excluding
intercompany items between the Borrower and its Subsidiaries) and
(iii) any special mention litigation or restructuring charges of
Kemper Securities, Inc. taken during such period.
"Eligible Participant" means (i) any commercial bank,
savings and loan institution or savings bank organized under the
laws of the United States, or any State thereof, (ii) any
commercial bank organized under the laws of any other country
that is a member of the Organization for Economic Cooperation and
Development ("OECD"), or a political subdivision of any such
country, provided that such bank is acting through a branch,
agency or Affiliate located in the country in which it is
organized or another country that is also a member of the OECD,
(iii) the central bank of any country that is a member of the
OECD or (iv) any other financial institution of recognized
standing other than an insurance company, pension fund or mutual
fund except to the extent the Borrower has consented to such
insurance company, pension fund or mutual fund.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" means any Person, including a
Subsidiary or other Affiliate, that is a member of any group of
organizations within the meaning of Code Sections 414(b), (c),
(m) or (o) of which the Borrower is a member.
"Eurodollar Business Day" means any Business Day on
which dealings in Dollar deposits are carried on in the London
interbank market and on which commercial banks are open for
<PAGE> 48
domestic and international business (including dealings in Dollar
deposits) in London, England.
"Eurodollar Lending Office" of any Bank means (i) the
branch or office of such Bank set forth below such Bank's name
under the heading "Eurodollar Lending Office" on Annex A or, in
the case of a Bank that becomes a Bank pursuant to an assignment,
the branch or office of such Bank designated by such assignee
Bank in a notice entitled "Eurodollar Lending Office" in the
Notice of Assignment given to the Borrower with respect to such
assignment or (ii) such other branch or office of such Bank
designated by such Bank from time to time as the branch or office
at which its Eurodollar Rate Loans are to be made or maintained.
"Eurodollar Note" means any promissory note in the form
of Exhibit A-2.
"Eurodollar Rate" means, for any Interest Period, the
rate per annum determined by the Administrative Agent to be the
average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the rates per annum determined, respectively, by each
Reference Bank to be the rate at which such Reference Bank
offered or would have offered to place with first-class banks in
the London interbank market deposits in Dollars in amounts
comparable to the Eurodollar Rate Loan of such Reference Bank to
which such Interest Period applies, for a period equal to such
Interest Period, at 11:00 a.m. (London time) on the second
Eurodollar Business Day before the first day of such Interest
Period. If any Reference Bank is unable or otherwise fails to
furnish the Administrative Agent with appropriate rate
information in a timely manner, the Administrative Agent shall
determine the Eurodollar Rate based on the rate information
furnished by the remaining Reference Banks.
"Eurodollar Rate Loan" means any Loan the interest on
which is, or is to be, as the context may require, computed on
the basis of the Adjusted Eurodollar Rate.
"Event of Default" means any of the events specified in
Section 6.01.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if no
such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate
(similarly rounded) quoted to The First National Bank of Chicago
on such day on such transactions as determined by the
Administrative Agent.
"Fixed Rate Loan" means any CD Rate Loan or Eurodollar
Rate Loan.
<PAGE> 49
"Generally Accepted Accounting Principles" means (i) in
the case of the Base Financial Statements, generally accepted
accounting principles at the time of the issuance of the Base
Financial Statements, and (ii) in all other cases, the accounting
principles followed in the preparation of the Base Financial
Statements.
"Governmental Approval" means any authorization,
consent, approval, license or exemption of, registration or
filing with, or report or notice to, any governmental unit.
"Guaranty" of any Person means any obligation,
contingent or otherwise, of such Person (i) to pay any Liability
of any other Person or to otherwise protect, or having the
practical effect of protecting, the holder of any such Liability
against loss (whether such obligation arises by virtue of such
Person being a partner of a partnership or participant in a joint
venture or by agreement to pay, to keep well, to purchase assets,
goods, securities or services or to take or pay, or otherwise) or
(ii) incurred in connection with the issuance by a third Person
of a Guaranty of any Liability of any other Person (whether such
obligation arises by agreement to reimburse or indemnify such
third Person or otherwise). The word "Guarantee" when used as a
verb has the correlative meaning.
"Indebtedness" of any Person means (whether, in each
case, such obligation is with full or limited recourse) (i) any
obligation of such Person for borrowed money, (ii) any obligation
of such Person evidenced by a bond, debenture, note or other
similar instrument, (iii) any obligation of such Person to pay
the deferred purchase price of property or services, except a
trade account payable that arises in the ordinary course of
business but only if and so long as the same is payable on
customary trade terms, (iv) any obligation of such Person as
lessee under a capital lease, (v) any Mandatorily Redeemable
Stock of such Person owned by any Person other than such Person
or an Indebtedness-Free Subsidiary of such Person (the amount of
such Mandatorily Redeemable Stock to be determined for this
purpose as the higher of the liquidation preference of and the
amount payable upon redemption of such Mandatorily Redeemable
Stock), (vi) any obligation of such Person to purchase securities
or other property that arises out of or in connection with the
sale of the same or substantially similar securities or property,
provided, that for the purpose of calculating compliance with
Section 4.13, Indebtedness of the type set forth in this clause
(vi) shall only be included to the extent such Indebtedness
exceeds the fair market value of the securities or other property
required to be so purchased, (vii) any non-contingent obligation
of such Person to reimburse any other Person in respect of
amounts paid under a letter of credit or other Guaranty issued by
such other Person, to the extent that such reimbursement
obligation remains outstanding after it becomes non-contingent,
(viii) any obligation with respect to an interest rate or
currency swap or similar obligation obligating such Person to
make payments, whether periodically or upon the happening of a
contingency, except that if any agreement relating to such
obligation provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligation shall be the net
<PAGE> 50
amount thereof, (ix) any Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) a Lien (other than
Liens incurred in the ordinary course of business in connection
with securities lending activities) on any asset of such Person,
and (x) Indebtedness of others Guaranteed by such Person,
provided, that if Indebtedness of the type set forth in this
clause (x) is undertaken in connection with an acquisition,
disposition, restructuring or refinancing of assets, stock or
other property by the Borrower or any of its Subsidiaries, such
Indebtedness shall be included for the purposes of calculating
compliance with Section 4.13 only to the extent such Indebtedness
exceeds the sum of the value of the assets, stock or other
property, directly or indirectly, securing such Indebtedness and
any reserve maintained in connection with such assets, stock or
other property; provided, that, the term "Indebtedness" shall not
include (a) nonrecourse collateralized mortgage obligations,
nonrecourse collateralized bond obligations or similar
nonrecourse collateralized obligations or (b) letters of credit
or bonds or similar instruments issued in the normal course of
business by the Borrower or any Subsidiary guaranteeing
Indebtedness of third parties except to the extent the obligation
under any such instrument has become non-contingent.
"Indebtedness-Free Subsidiary" means any wholly owned
Subsidiary that has no Indebtedness other than the Loans and
Indebtedness owing to the Borrower or another Indebtedness-Free
Subsidiary.
"Indemnified Person" means any Person that is, or at
any time was, the Administrative Agent, a Co-Agent, a Bank, an
Affiliate of the Administrative Agent, a Co-Agent or a Bank or a
director, officer, employee or agent of any such Person.
"Information" means written data, certificates,
reports, statements (including financial statements), opinions of
counsel, documents and other information.
"Intellectual Property" means (i) (A) patents and
patent rights, (B) trademarks, trademark rights, trade names,
trade name rights, corporate names, business names, trade styles,
service marks, logos and general intangibles of like nature and
(C) copyrights, in each case whether registered, unregistered or
under pending registration and, in the case of any such that are
registered or under pending registration, whether registered or
under pending registration under the laws of the United States or
any other country, (ii) reissues, continuations, continuations-
in-part and extensions of any Intellectual Property referred to
in clause (i), and (iii) rights relating to any Intellectual
Property referred to in clause (i) or (ii), including rights
under applications (whether pending under the laws of the United
States or any other country) or licenses relating thereto.
"Interest Expense" means, with respect to any period,
the aggregate interest expense of the Borrower and Kemper
Financial Companies, Inc. (in each case, on an unconsolidated
basis but excluding intercompany items between the Borrower and
its Subsidiaries) during such period plus an amount equal to (x)
the aggregate amount of dividends paid during such period by the
Borrower on its preferred stock divided by (y) a percentage equal
<PAGE> 51
to 1 minus the maximum federal income tax rate applicable to the
Borrower during such period.
"Interest Payment Date" means the last day of March,
June, September and December of each year.
"Interest Period" means a period commencing, in the
case of the first Interest Period applicable to a Fixed Rate
Loan, on the date of the making of, or conversion into, such
Loan, and, in the case of each subsequent, successive Interest
Period applicable thereto, on the last day of the immediately
preceding Interest Period, and ending, depending on the Type of
Loan, in the case of Eurodollar Interest Periods, on the same day
in the first, second, third, sixth or, if available from all of
the Banks, in their discretion, ninth or twelfth calendar month
thereafter, and, in the case of CD Interest Periods, on the day
30, 60, 90, 180 or, if available from all of the Banks, in their
discretion, 270 or 360 days thereafter, except that (i) any
Interest Period that would otherwise end on a day that is not a
Business Day or, in the case of a Eurodollar Interest Period or a
CD Interest Period for CD Rate Loans being converted into
Eurodollar Rate Loans, a Eurodollar Business Day shall be
extended to the next succeeding Business Day or Eurodollar
Business Day, as the case may be, unless, in the case of a
Eurodollar Interest Period, such Eurodollar Business Day falls in
another calendar month, in which case such Interest Period shall
end on the next preceding Eurodollar Business Day and (ii) any
Eurodollar Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month in which
such Interest Period ends) shall end on the last Eurodollar
Business Day of a calendar month. "CD Interest Period" and
"Eurodollar Interest Period" mean, respectively, an Interest
Period applicable to a CD Rate Loan and a Eurodollar Rate Loan.
"Lending Office" of any Bank means the Domestic Lending
Office or the Eurodollar Lending Office of such Bank.
"Liability" of any Person means (in each case whether
with full or limited recourse) any indebtedness, liability,
obligation, covenant or duty of or binding upon, or any term or
condition to be observed by or binding upon, such Person or any
of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or
tortious, liquidated or unliquidated, whether arising under
Contract, Applicable Law, or otherwise, now existing or hereafter
arising, and whether or not (i) for the payment of money or the
performance or non-performance of any act or (ii) an allowable
claim under the Bankruptcy Code, and includes any Indebtedness or
Debt of such Person.
"Lien" means, with respect to any property or asset (or
any income or profits therefrom) of any Person (in each case
whether the same is consensual or nonconsensual or arises by
Contract, operation of law, legal process or otherwise) (i) any
mortgage, lien, pledge, attachment, levy or other security
interest of any kind thereupon or in respect thereof or (ii) any
other arrangement, express or implied, under which the same is
subordinated, transferred, sequestered or otherwise identified so
as to subject the same to, or make the same available for, the
<PAGE> 52
payment or performance of any Liability in priority to the
payment of the ordinary, unsecured creditors of such Person. For
the purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset that it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means any advance made pursuant to Section
1.01(a).
"Mandatorily Redeemable Stock" means, with respect to
any Person, any share of such Person's capital stock to the
extent that it is (i) redeemable, payable or required to be
purchased or otherwise retired or extinguished, or convertible
into any Indebtedness or other Liability of such Person, (A) at a
fixed or determinable date, whether by operation of a sinking
fund or otherwise, (B) at the option of any Person other than
such Person or (C) upon the occurrence of a condition not solely
within the control of such Person, such as a redemption required
to be made out of future earnings or (ii) convertible into
Mandatorily Redeemable Stock; provided that Mandatorily
Redeemable Stock shall not include (i) Kemper Financial
Companies, Inc., Class B Common Stock (in a maximum aggregate
amount not exceeding $40,000,000) or (ii) Kemper Financial
Companies, Inc. Convertible Preferred Stock; provided further
that any stock excluded by the preceding proviso shall be
excluded from the calculation of the equity of such Person.
"Margin Stock" means "margin stock" as defined in
Regulation U.
"Materially Adverse Effect" means (i) with respect to
any Person, an effect that would result in a material adverse
change from the perspective of a lender under a credit facility
substantially similar to that provided for under this Agreement
in any of such Person's business, assets, Liabilities, financial
condition, results of operations or business prospects, (ii) with
respect to a group of Persons "taken as a whole", an effect that
would result in a material adverse change from the perspective of
a lender under a credit facility substantially similar to that
provided for under this Agreement in any of such Persons'
business, assets, Liabilities, financial conditions, results of
operations or business prospects taken as a whole on, where
appropriate, a consolidated basis in accordance with Generally
Accepted Accounting Principles but, in any case, with respect to
the Borrower and the Restricted Subsidiaries taken as a whole,
excluding all other Subsidiaries and (iii) with respect to this
Agreement and the Notes, any adverse effect, WHETHER OR NOT
MATERIAL, on the binding nature, validity or enforceability
thereof as obligations of the Borrower.
"Maturity Date" means November 1, 1996.
"Maximum Permissible Rate" means, with respect to
interest payable on any amount, the rate of interest on such
amount that, if exceeded, could, under Applicable Law, result in
(i) civil or criminal penalties being imposed on the payee or
(ii) the payee's being unable to enforce payment of (or, if
collected, to retain) all or any part of such amount or the
<PAGE> 53
interest payable thereon.
"Multiemployer Benefit Plan" means any employee benefit
plan that is a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Note" means any Domestic Note or Eurodollar Note.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Guaranty" means any Guaranty that is (i) an
endorsement of a check for collection in the ordinary course of
business, (ii) a Guaranty of and only of the obligations of the
Borrower under this Agreement and the Notes, (iii) a Guaranty of
Liabilities of the Borrower or any of its Subsidiaries, a Trust
or a partnership in which the Borrower or any of its Restricted
Subsidiaries is a general partner but only to the extent that
such Guaranty Guarantees Liabilities of such partnership and not
Liabilities of any of the partners to such partnership other than
the Borrower or any of its Restricted Subsidiaries, (iv) an
obligation undertaken in connection with employees' Indebtedness
incurred to finance the purchase of certain Floating Rate
Convertible Subordinated Debentures of Kemper Financial
Companies, Inc. in the ordinary course of business, (v) an
obligation to redeem or purchase, as applicable, Kemper Financial
Companies, Inc. Class B Common Stock or Convertible Preferred
Stock, (vi) Guaranties constituting commitments to refinance
Indebtedness owed by any Subsidiary or Trust (so long as such
Indebtedness is included in the calculation of Consolidated
Indebtedness for purposes of Section 4.13), (vii) any policy of
insurance issued by or similar financial commitment made by any
Subsidiary which is an insurance company in the ordinary course
of business, (viii) an obligation undertaken in connection with
an acquisition, disposition, restructuring or refinancing of
assets, stock or other property, including, without limitation,
any obligation, or any extension, renewal or modification of any
obligation, to credit enhance or purchase Indebtedness to which
such assets, stock or other property being restructured,
refinanced, acquired or disposed of is subject, (ix) Guaranties
issued in the ordinary course of business with respect to a
financial services product, (x) an obligation undertaken in
connection with self-insurance or similar arrangements, (xi) a
commitment to purchase or sell securities in the ordinary course
of business or a Guaranty thereof, (xii) a Real Estate Joint
Venture Commitment, (xiii) Guaranties of any Subsidiary existing
on the date such Subsidiary is designated a Restricted Subsidiary
in accordance with the definition of "Restricted Subsidiary",
(xiv) a Guarantee of real estate leases of the Borrower or any
Subsidiary, (xv) a bond, letter of credit, or similar instrument
issued by the Borrower, or a Guaranty of a bond or similar
instrument, in an amount not to exceed $137,400,000, plus
interest and costs payable in connection with the following
described judgment, required to stay any proceeding to enforce or
execute the judgment entered in April 20, 1992 in Conticommodity
Services, Inc. v. Prescott Ball & Turben, Inc., Civil Action No.
H-9181 in the U.S. District Court for the Southern District of
Texas, Houston Division or any modification or amendment of such
judgment or any other judgment entered in such proceeding or in
connection with any settlement of any such judgment, (xvi) a bond
or similar instrument issued by the Borrower, or a Guaranty of a
<PAGE> 54
bond or similar instrument, in an amount not to exceed the amount
of any judgment entered in connection with the following
described litigation, plus interest and costs payable in
connection therewith, required to stay any proceeding to enforce
or execute any judgment entered in In Re Melridge, Inc.
Securities Litigation, in the U.S. District Court for the
District of Oregon, or any modification or amendment of any such
judgment or any other judgment entered in such proceeding or in
connection with any settlement of any such judgment, and (xvii)
other Guaranties of Liabilities which, together with the
aggregate amount of Liabilities secured by Liens permitted under
clause (xiii) of the definition of Permitted Liens, does not
exceed $25,000,000.
"Permitted Lien" means: (i) a Lien securing and only
securing the obligations of the Borrower under this Agreement and
the Notes; (ii) any Lien securing a tax, assessment or other
governmental charge or levy or the claim of a materialman,
mechanic, carrier, warehouseman or landlord for labor, materials,
supplies or rentals incurred in the ordinary course of business,
but only if payment thereof shall not at the time be required to
be made in accordance with Section 4.01(e) and foreclosure,
distraint, sale or other similar proceedings shall not have been
commenced; (iii) any Lien on the properties and assets of a
Subsidiary of the Borrower securing an obligation owing to the
Borrower or a Restricted Subsidiary; (iv) any Lien consisting of
a deposit or pledge made in the ordinary course of business in
connection with, or to secure payment of, obligations under
worker's compensation, unemployment insurance or similar
legislation; (v) any Lien arising pursuant to an order of
attachment, distraint or similar legal process arising in
connection with legal proceedings, but only if and so long as the
execution or other enforcement thereof is not unstayed for more
than 30 days; (vi) any Lien existing on (A) any property or asset
of any Person at the time such Person becomes a Subsidiary or (B)
any property or asset at the time such property or asset is
acquired by the Borrower or a Subsidiary, but only, in the case
of either (A) or (B), if and so long as (1) such Lien was not
created in contemplation of such Person becoming a Subsidiary or
such property or asset being acquired, (2) such Lien is and will
remain confined to the property or asset subject to it at the
time such Person becomes a Subsidiary or such property or asset
is acquired and to fixed improvements thereafter erected on such
property or asset, (3) such Lien secures only the obligation
secured thereby at the time such Person becomes a Subsidiary or
such property or asset is acquired and (4) the obligation secured
by such Lien is not in default; (vii) any Lien in existence on
the Agreement Date to the extent set forth on Schedule 4.05, but
only, in the case of each such Lien, to the extent it secures an
obligation outstanding on the Agreement Date to the extent set
forth on such Schedule; (viii) any Lien securing Purchase Money
Indebtedness but only if, in the case of each such Lien, (A) such
Lien shall at all times be confined solely to the property or
asset the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such
Lien and to fixed improvements thereafter erected on such
property or asset and (B) such Lien attached to such property or
asset within 30 days of the acquisition of such property or
asset; (ix) in the case of any Subsidiary which is an insurance
company, Liens on such Subsidiary's securities portfolio arising
<PAGE> 55
out of such Subsidiary's ordinary course of business with
securities brokers; (x) Liens in connection with repurchase
agreements entered into in the ordinary course of business; (xi)
Liens on the assets of Kemper Clearing Corp. in connection with
Indebtedness incurred in the ordinary course of business of
Kemper Clearing Corp.; (xii) Liens incurred in the ordinary
course of business in connection with securities lending
activities; (xiii) other Liens on assets securing Liabilities
which, together with the aggregate amount of Indebtedness
Guaranteed by Guaranties permitted by clause (xv) of the
definition of Permitted Guaranties does not exceed $25,000,000;
or (xiv) any Lien constituting a renewal, extension or
replacement of a Lien constituting a Permitted Lien by virtue of
clause (vi), (vii), (viii), (ix), (x), (xi) or (xii) of this
definition, but only if (A) at the time such Lien is granted and
immediately after giving effect thereto, no Default would exist,
(B) such Lien is limited to all or a part of the property or
asset that was subject to the Lien so renewed, extended or
replaced and to fixed improvements thereafter erected on such
property or asset, (C) the principal amount of the obligations
secured by such Lien does not exceed the principal amount of the
obligations secured by the Lien so renewed, extended or replaced
and (D) the obligations secured by such Lien bear interest at a
rate per annum not exceeding the rate borne by the obligations
secured by the Lien so renewed, extended or replaced except for
any increase that is commercially reasonable at the time of such
increase; or (xiv) any Lien on Margin Stock if, at the time such
Lien is created, such Margin Stock constitutes Unrestricted
Margin Stock; or (xv) any Lien against any right, title or
interest of the Borrower or any of its Restricted Subsidiaries in
or to any assets, stock or other property received from a third
party as consideration in exchange for any assets, stock or other
property of the Borrower or any of its Restricted Subsidiaries
sold, assigned or otherwise conveyed to such third party.
"Permitted Restrictive Covenant" means (i) any covenant
or restriction contained in this Agreement, (ii) any covenant or
restriction binding upon any Person at the time such Person
becomes a Subsidiary of the Borrower if the same is not created
in contemplation thereof, (iii) any covenant or restriction of
the type contained in Section 4.05 that is contained in any
Contract evidencing or providing for the creation of or
concerning Purchase Money Indebtedness, (iv) any covenant or
restriction limiting the ability of (A) a general partner to
transfer or dispose of its interest in a general partnership, (B)
a limited or general partner to transfer or dispose of its
interest in a limited partnership or (C) a beneficiary of a trust
to transfer or dispose of its beneficial interest in such trust,
(v) any covenant or restriction limiting the transfer or
disposition of assets where the disposition of such assets is
restricted by Federal or state securities law or other laws
applicable of assets of that class or type, (vi) any covenant or
restriction described in Schedule 4.11, but only to the extent
such covenant or restriction is there identified by specific
reference to the provision of the Contract in which such covenant
or restriction is contained, or (vii) any covenant or restriction
that (A) is not more burdensome than an existing Permitted
Restrictive Covenant that is such by virtue of clause (ii),
(iii), (iv), (v), (vi) or (vii), (B) is contained in a Contract
constituting a renewal, extension or replacement of the Contract
<PAGE> 56
in which such existing Permitted Restrictive Covenant is
contained and (C) is binding only on the Person or Persons bound
by such existing Permitted Restrictive Covenant.
"Person" means any individual, sole proprietorship,
corporation, partnership, trust, unincorporated organization,
mutual company, joint stock company, estate, union, employee
organization, government or any agency or political subdivision
thereof or, for the purpose of the definition of "ERISA
Affiliate", any trade or business.
"Post-Default Rate" means the rate otherwise applicable
under Section 1.04(a) plus 2%.
"Premises" means any real property (i) to which the
Borrower or any of its Subsidiaries holds title or (ii) of which
the Borrower or any of its Subsidiaries is the lessee.
"Prime Rate" means, at any time, the rate of interest
publicly announced from time to time by The First National Bank
of Chicago as its "corporate base rate" (which rate may not be
such bank's lowest rate of interest).
"Prohibited Transaction" means any transaction that is
prohibited under Code Section 4975 or ERISA Section 406 and not
exempt under Code Section 4975 or ERISA Section 408.
"Proposed Bank" has the meaning set forth in Section
1.12.
"Purchase Money Indebtedness" means (i) Indebtedness of
the Borrower or any Restricted Subsidiary that is incurred to
finance part or all of (but not more than) the purchase price of
a tangible asset, provided that (A) neither the Borrower nor any
Subsidiary had at any time prior to such purchase any interest in
such asset other than a security interest or an interest as
lessee under an operating lease and (B) such Indebtedness is
incurred within 30 days after such purchase, or (ii) Indebtedness
that (A) constitutes a renewal, extension or refunding of, but
not an increase in the principal amount of, Purchase Money
Indebtedness that is such by virtue of clause (i) or (ii) and (B)
bears interest at a rate per annum that is commercially
reasonable at the time such Indebtedness is incurred.
"Real Estate Joint Venture Commitment" means a Guaranty
in the ordinary course of business of the guarantor of Real
Estate Joint Venture Indebtedness with respect to which Guaranty
the guarantor has no presently due and unpaid payment obligation.
"Real Estate Joint Venture Indebtedness" means, at any
time, Indebtedness of Real Estate Joint Venture Subsidiaries
incurred in the ordinary course of business whether or not
Guaranteed by the Borrower or any of its Subsidiaries.
"Real Estate Joint Venture Subsidiary" means any entity
(i) which is engaged primarily in the business of acquiring,
developing and/or owning real property and (ii) at least 50% of
the equity ownership interest of which, in the aggregate, is
owned directly or indirectly, or, upon the exercise of options or
other rights to acquire equity ownership interests, would be
owned directly or indirectly, by the Borrower and/or Subsidiaries
<PAGE> 57
of the Borrower.
"Reference Banks" means Credit Suisse, The First
National Bank of Chicago, The Bank of New York, Continental Bank
N.A. and Bank of Montreal, and any replacement Reference Bank
appointed pursuant to Section 9.12.
"Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve System and any successor
regulation.
"Regulation U" means Regulation U issued by the Board
of Governors of the Federal Reserve System (12 CFR 221.1 et seq.)
and any successor Regulation.
"Regulatory Change" means any Applicable Law,
interpretation, directive, request or guideline (whether or not
having the force of law), or any change therein or in the
administration or enforcement thereof, that becomes effective or
is implemented or first required or expected to be complied with
after the Agreement Date, whether the same is (i) the result of
an enactment by a government or any agency or political
subdivision thereof, a determination of a court or regulatory
authority, or otherwise or (ii) enacted, adopted, issued or
proposed before or after the Agreement Date, including any such
that imposes, increases or modifies any Tax, reserve requirement,
insurance charge, special deposit requirement, assessment or
capital adequacy requirement, but excluding any such that
imposes, increases or modifies any income or franchise tax
imposed upon a Bank by any jurisdiction (or any political
subdivision thereof) in which such Bank or any of its Lending
Offices is located.
"Removal Date" has the meaning set forth in Section
1.12.
"Repayment Date" means the later of (i) the termination
of the Commitments of all of the Banks (whether as a result of
the occurrence of the Maturity Date, reduction to zero pursuant
to Section 1.07, termination pursuant to Section 6.02 or
otherwise) and (ii) the payment in full of the Loans and all
other amounts payable or accrued hereunder.
"Reportable Event" means, with respect to any Benefit
Plan maintained by Borrower or any ERISA Affiliate, (i) the
occurrence of any of the events set forth in ERISA Section
4043(b) (other than a Reportable Event as to which the provision
of 30 days' notice to the PBGC is waived under applicable
regulations), or the regulations thereunder with respect to such
Benefit Plan, (ii) the incurrence of liability by the Borrower or
any ERISA Affiliate under Section 4063 of ERISA as a result of
the withdrawal of Borrower or any ERISA Affiliate from any
Benefit Plan during a plan year in which it is a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, including a
cessation of operations that is treated as a withdrawal by a
"substantial employer" under Section 4068(f) of ERISA, (iii) any
event requiring the Borrower or any ERISA Affiliate to provide
security to such Benefit Plan under Code Section 401(a)(29) or
(iv) any failure by Borrower or any ERISA Affiliate to make a
payment required by Code Section 412(m) with respect to such
<PAGE> 58
Benefit Plan.
"Representation and Warranty" means any representation
or warranty made pursuant to or under (i) Section 2.02, Article
3, Section 5.02 or any other provision of this Agreement or (ii)
any amendment to, or waiver of rights under, this Agreement,
WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR WARRANTY
REFERRED TO IN CLAUSE (i) OR (ii) OF THIS DEFINITION (EXCEPT, IN
EACH CASE, TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE
INFORMATION THAT IS THE SUBJECT MATTER THEREOF IS WITHIN THE
KNOWLEDGE OF THE BORROWER.
"Required Banks" means, at any time, Banks having more
than 66 2/3% of the aggregate amount of the Commitments of the
Banks.
"Reserve Requirement" means, at any time, the then
current maximum rate for which reserves (including any marginal,
supplemental or emergency reserve) are required to be maintained
under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding five billion Dollars
against (i) in the case of a CD Rate Loan, negotiable
certificates of deposit in an amount of $100,000 or more with a
term comparable to the Interest Period applicable to such Loan
and (ii) in the case of a Eurodollar Rate Loan, "Eurocurrency
liabilities", as that term is used in Regulation D. The Adjusted
CD and Adjusted Eurodollar Rates shall be adjusted automatically
on and as of the effective date of any change in the applicable
Reserve Requirement.
"Restricted Subsidiary" means those Subsidiaries set
forth on Schedule 3.02, as such Schedule may be amended, modified
or replaced by the Borrower with the consent of the
Administrative Agent and the Banks from time to time; provided,
that, Kemper Financial Services, Inc., or any successor to
substantially all of the asset management business of Kemper
Financial Services, Inc. as conducted on the Agreement Date, at
all times shall be a Restricted Subsidiary; and, provided,
further, that if the Consolidated Net Worth less an amount equal
to the aggregate amount of Borrower's and the Restricted
Subsidiaries' equity in Unrestricted Subsidiaries at any time is
less than 80% of the Consolidated Net Worth, the Required Banks
may, by notice from the Administrative Agent to the Borrower,
designate one or more other Subsidiaries as "Restricted
Subsidiaries", solely to the extent necessary, such that, after
giving effect to such designation, the Consolidated Net Worth
less an amount equal to the aggregate amount of Borrower's and
the Restricted Subsidiaries' equity in Unrestricted Subsidiaries
is equal to at least 80% of the Consolidated Net Worth; provided,
further, however, that, in making any such designation, the
Required Banks shall, to the extent possible, designate
Subsidiaries which would not, solely as a result of such
designation, cause the Borrower and the Restricted Subsidiaries
to be out of compliance with the terms and provisions of this
Agreement.
"Short Term Commitment" means a Commitment as such term
is defined in the Short Term Facility.
"Short Term Facility" means the Credit Agreement dated
<PAGE> 59
as of November 1, 1993 among the parties hereto which agreement
provides for a commitment from the Banks thereunder to make
advances during a period not in excess of 360 days.
"Short Term Loan" means a Loan as such term is defined
in the Short Term Facility.
"Subsidiary" means, with respect to any Person, any
other Person (i) the securities of which having ordinary voting
power to elect a majority of the board of directors (or other
persons having similar functions) or (ii) other ownership
interests which ordinarily constitute a majority voting interest,
are at the time, directly or indirectly, owned or controlled by
such first Person, or by one or more of its Subsidiaries, or by
such first Person and one or more of its Subsidiaries; unless
otherwise specified, "Subsidiary" means a Subsidiary of the
Borrower.
"Substituted Bank" has the meaning set forth in
Section 1.13.
"Tax" means any Federal, State or foreign tax,
assessment or other governmental charge or levy (including any
withholding tax) upon a Person or upon its assets, revenues,
income or profits.
"Termination Event" means, with respect to any Benefit
Plan maintained by Borrower or any ERISA Affiliate, (i) any
Reportable Event with respect to such Benefit Plan, (ii) the
provision by Borrower or any ERISA Affiliate of a notice of
intent to terminate such Benefit Plan in a distress termination
under ERISA Section 4041(c), (iii) the institution of proceedings
to terminate such Benefit Plan under ERISA Section 4042 or (iv)
the appointment of a trustee to administer such Benefit Plan
under ERISA Section 4042, provided that a Termination Event shall
not include any of the events specified on Schedule 10.01.
"Total Commitment" means, as to any Bank, the sum of
its Commitment and Short Term Commitment, and, as to all of the
Banks, the aggregate sum of all Banks' Commitments and Short Term
Commitments.
"Trust" means, a Person that is a trust or a pooled
entity in which the Borrower and its Subsidiaries own a majority
of the certificates or other securities evidencing a beneficial
interest in such Person.
"Type" means, with respect to Loans, any of the
following, each of which shall be deemed to be a different "Type"
of Loan: Base Rate Loans, CD Rate Loans having a 30-day Interest
Period, CD Rate Loans having a 60-day Interest Period, CD Rate
Loans having a 90-day Interest Period, CD Rate Loans having a
180-day Interest Period, CD Rate Loans having a 270-day Interest
Period, CD Rate Loans having a 360-day Interest Period,
Eurodollar Rate Loans having a one-month Interest Period,
Eurodollar Rate Loans having a two-month Interest Period,
Eurodollar Rate Loans having a three-month Interest Period,
Eurodollar Rate Loans having a six-month Interest Period,
Eurodollar Rate Loans having a nine-month Interest Period and
Eurodollar Rate Loans having a twelve-month Interest Period. Any
<PAGE> 60
CD Rate Loan or Eurodollar Rate Loan having an Interest Period
with a duration that differs from the duration specified for a
Type of CD Rate Loan or Eurodollar Rate Loan, as the case may be,
listed above solely as a result of the operation of clauses (i)
and (ii) of the definition of "Interest Period" shall be deemed
to be a Loan of such above-listed Type notwithstanding such
difference in duration of Interest Periods.
"Unfunded Benefit Liabilities" means, with respect to
any Benefit Plan at any time, the amount of unfunded benefit
liabilities of such Benefit Plan at such time as determined under
ERISA Section 4001(a)(18).
"Unrestricted Margin Stock" means, at any time, any
Margin Stock having an aggregate value at such time not exceeding
the Unrestricted Margin Stock Amount at such time; provided that
(i) if, at any time, any shares of Margin Stock are subject to
Liens securing obligations owing to Persons other than the Banks
but the aggregate value of such encumbered shares is less than
the Unrestricted Margin Stock Amount, then "Unrestricted Margin
Stock" means, at such time, (A) such encumbered shares and (B)
any other shares of Margin Stock having an aggregate value equal
to the amount by which the Unrestricted Margin Stock Amount
exceeds the aggregate value of such encumbered shares and (ii)
if, at any time, the aggregate value of Margin Stock subject to
Liens securing obligations owing to Persons other than the Banks
exceeds the Unrestricted Margin Stock Amount, then "Unrestricted
Margin Stock" means, at such time, any such encumbered shares
having an aggregate value not exceeding the Unrestricted Margin
Stock Amount.
"Unrestricted Margin Stock Amount" means, at any time,
the minimum aggregate value of Margin Stock that must not be
subject to the covenants set forth in Section 4.05 or 4.07 at
such time so that (i) the aggregate value of Margin Stock that is
subject to the covenants set forth in Section 4.05 or 4.07 at
such time does not exceed (ii) 25% of the aggregate value of
assets (excluding intercompany items) of the Borrower and its
Subsidiaries that are subject to the covenants set forth in
Section 4.05 or 4.07 at such time.
"Unrestricted Subsidiary" means each Subsidiary of the
Borrower which is not a Restricted Subsidiary.
(b) Other Definitional Provisions. (i) Except as
otherwise specified herein, all references herein (A) to any
Person shall be deemed to include such Person's successors and
assigns, (B) to any Applicable Law defined or referred to herein
shall be deemed references to such Applicable Law as the same may
have been or may be amended or supplemented from time to time and
(C) to this Agreement, any Note or any Contract defined or
referred to herein shall be deemed references to this Agreement,
such Note or such Contract (and, in the case of any Note or other
instrument, any instrument issued in substitution therefor) as
the terms thereof may have been or may be amended, supplemented,
waived or otherwise modified from time to time.
(ii) When used in this Agreement, the words
"herein", "hereof" and "hereunder" and words of similar import
<PAGE> 61
shall refer to this Agreement as a whole and not to any provision
of this Agreement, and the words "Article", "Section", "Annex",
"Schedule" and "Exhibit" shall refer to Articles and Sections of,
and Annexes, Schedules and Exhibits to, this Agreement unless
otherwise specified.
(iii) Whenever the context so requires, the
neuter gender includes the masculine or feminine, the masculine
gender includes the feminine, and the singular number includes
the plural, and vice versa.
(iv) Any item or list of items set forth
following the word "including", "include" or "includes" is set
forth only for the purpose of indicating that, regardless of
whatever other items are in the category in which such item or
items are "included", such item or items are in such category,
and shall not be construed as indicating that the types of items
in the category in which such item or items are "included" are
limited to such items or to items similar to such items.
(v) Except as otherwise specified therein, all
terms defined in this Agreement shall have the meanings herein
ascribed to them when used in the Notes or any certificate,
opinion or other document delivered pursuant hereto.
Section 10.02. Accounting Matters. Unless otherwise
specified herein, all accounting determinations hereunder and all
computations utilized by the Borrower in complying with the
covenants contained herein shall be made, all accounting terms
used herein shall be interpreted, and all financial statements
required to be delivered hereunder shall be prepared, in
accordance with Generally Accepted Accounting Principles, except,
in the case of such financial statements other than the Base
Financial Statements for changes therein or therefrom (x) that
have been certified and approved by the Chief Financial Officer
of the Borrower and, in the case of the financial statement
delivered in accordance with Section 5.01(b) may from time to
time be approved in writing by the independent certified public
accountants who are at the time, in accordance with Section
5.01(b), reporting on the Borrower's financial statements and (y)
as may be required by any governmental body having supervisory
power over the Borrower or any of its Subsidiaries to the extent
such changes are described therein and have been noted by such
accountants.
Section 10.03. Representations and Warranties. All
Representations and Warranties shall be deemed made (a) in the
case of any Representation and Warranty contained in this
Agreement at the time of its initial execution and delivery, at
and as of the Agreement Date, (b) in the case of any
Representation and Warranty contained in this Agreement or any
other document at the time any Loan is made, at and as of such
time and (c) in the case of any particular Representation and
Warranty, wherever contained, at such other time or times as such
Representation and Warranty is made or deemed made in accordance
with the provisions of this Agreement or the document pursuant
to, under or in connection with which such Representation and
Warranty is made or deemed made.
Section 10.04. Captions. Captions to Articles,
<PAGE> 62
Sections and subsections of, and Annexes, Schedules and Exhibits
to, this Agreement are included for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose or in any way affect the meaning or construction of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers all as
of the Agreement Date.
KEMPER CORPORATION
By /s/ JOHN H. FITZPATRICK
Name: John H. Fitzpatrick
Title: Executive Vice President & CFO
THE FIRST NATIONAL BANK OF CHICAGO,
individually, and as
Administrative Agent
By /s/ CYNTHIA W. PRIEST
Name: Cynthia W. Priest
Title: Assistant Vice President
CREDIT SUISSE, individually,
and as a Co-Agent
By /s/ WILLIAM P. MURRAY
Name: William P. Murray
Title: Member of Senior Management
By /s/ KRISTINN R. KRISTINSSON
Name: Kristinn R. Kristinsson
Title: Associate
BANK OF MONTREAL, individually,
and as a Co-Agent
By /s/ JEFFREY C. NICHOLSON
Name: Jeffrey C. Nicholson
Title: Director
THE BANK OF NEW YORK, individually,
and as a Co-Agent
<PAGE> 63
By /s/ TIMOTHY J. STAMBAUGH
Name: Timothy J. Stambaugh
Title: Vice President
CONTINENTAL BANK N.A.,
individually, and as a Co-Agent
By /s/ ANN M. BENSCHOTER
Name: Ann M. Benschoter
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ W. J. BROWN
Name: W. J. Brown
Title: Vice President
THE BANK OF TOKYO, CHICAGO BRANCH
By /s/ DINO G. JANIS
Name: Dino G. Janis
Title: Vice President
M & I MARSHALL & ILSLEY BANK
By /s/ STEPHEN F. GEIMER
Name: Stephen F. Geimer
Title: Vice President
MELLON BANK, N.A.
By /s/ SALLY D. JONES
Name: Sally D. Jones
Title: Vice President
THE NORTHERN TRUST COMPANY
By /S/ CAROLYN L. NYREN
Name: Carolyn L. Nyren
Title: 2nd Vice President
SHAWMUT BANK CONNECTICUT, N.A.
<PAGE> 64
By /s/ DANIEL P. TOWLE
Name: Daniel P. Towle
Title: Vice President
UNITED MISSOURI BANK, N.A.
By /s/ DOUGLAS F. PAGE
Name: Douglas F. Page
Title: Executive Vice President
THE YASUDA TRUST & BANKING CO., LTD.,
CHICAGO BRANCH
By /s/ JOSEPH C. MEEK
Name: Joseph C. Meek
Title: Vice President & Manager
Agreement Date:
<PAGE> 1
EXHIBIT 10.1(b)
CREDIT AGREEMENT
Dated as of November 1, 1993
KEMPER CORPORATION, a Delaware corporation, the BANKS,
the CO-AGENTS, and THE FIRST NATIONAL BANK OF CHICAGO, as
Administrative Agent, agree as follows (with certain terms used
herein being defined in Article 10):
ARTICLE 1
CREDIT FACILITY
5 Section 1.01. (a) Commitment to Lend. Upon the
terms and subject to the conditions of this Agreement, from time to
time during the period from the Agreement Date to but not including
such Bank's Termination Date, each Bank agrees to make one or more
Loans to the Borrower in an aggregate unpaid principal amount not
exceeding at any time such Bank's Commitment at such time. As of
the Agreement Date, the aggregate Commitments of the Banks is
$162,500,000 and the Termination Date for each Bank is the last day
of a period of 360 consecutive days commencing on and including the
Agreement Date. Effective as of any day (an "Extension Date")
prior to the Termination Date then in effect for any Bank, the
Borrower may, by written notice to the Administrative Agent (an
"Extension Notice") in the form of Schedule 1.01(a) hereto, request
all, but not less than all, of the Banks to extend the Termination
Dates applicable to each such Bank to the last day of a period of
360 days commencing on and including such Extension Date, such
Extension Notice to be given to the Administrative Agent at least
60, but no more than 90, days prior to the Extension Date (which
shall be specified in such notice). Promptly upon receipt of
such Extension Notice from the Borrower, the Administrative Agent
shall notify the Banks of the contents thereof. Each Bank shall
notify the Administrative Agent of its determination to extend or
not extend its Termination Date effective as of the proposed
Extension Date no later than such proposed Extension Date, but in
any event no earlier than 4 days prior to such Extension Date, which
notice shall be irrevocable, provided that if any Bank shall fail to
so notify the Administrative Agent by such proposed Extension Date,
such Bank shall be deemed to have given notice of its determination
not to extend. If for any reason the Administrative Agent receives
notice from a Bank of such Bank's consent to the proposed extension
prior to the fourth day prior to the proposed Extension Date, such
Bank's notice shall be considered absolutely revocable and in no
manner binding on such Bank until the fourth day prior to the
proposed Extension Date, at which time such notice shall be
irrevocable. Upon timely
<PAGE> 2
receipt of such notice from each Bank, the Administrative Agent
shall notify each other Bank and the Borrower of the contents
thereof. If Banks holding at least 75% of the aggregate
Commitments have consented to the requested extension, the new
Termination Date for each Bank which has agreed to such extension
shall be the last day of the period of 360 days commencing on
such Extension Date and the Administrative Agent shall so notify
each other Bank and the Borrower. Notwithstanding the foregoing,
the Termination Date for any Bank shall not extend beyond the
Maturity Date.
(b) Types of Loans. Subject to Section 1.06 and the
other terms and conditions of this Agreement, the Loans may, at
the option of the Borrower, be made as, and from time to time
continued as or converted into, Base Rate, CD Rate or Eurodollar
Rate Loans of any permitted Type, or any combination thereof.
(c) Reborrowing. Within the foregoing limits, and
subject to the other terms and conditions of this Agreement, the
Borrower may borrow under this Section 1.01, repay and, as
provided herein, reborrow at any time.
Section 1.02. Manner of Borrowing. (a) The Borrower
shall give the Administrative Agent notice (which shall be
irrevocable) no later than 9:00 a.m. (Chicago time) on, in the
case of Base Rate Loans, the Business Day of, in the case of CD
Rate Loans, the second Business Day before, and, in the case of
Eurodollar Rate Loans, the third Eurodollar Business Day before,
the requested date for the making of the requested Loans. Each
such notice shall be in the form of Schedule 1.02 and shall
specify (i) the requested date for the making of the requested
Loans, which shall be, in the case of Domestic Rate Loans, a
Business Day and, in the case of Eurodollar Rate Loans, a
Eurodollar Business Day, (ii) the Type or Types of Loans
requested and (iii) the amount of each such Type of Loan, which
amount shall be, in the case of each such Type of Loan, (x) not
less than $10,000,000 and shall be an integral multiple of
$1,000,000 or (y) the aggregate amount of the unused Commitments.
Upon receipt of any such notice, the Administrative Agent shall
promptly notify each Bank of the contents thereof and of the
amount and Type of each Loan to be made by such Bank on the
requested date specified therein.
(b) Not later than 10:00 a.m. (Chicago time) on each
requested date for the making of Loans, each Bank shall make
available to the Administrative Agent, in Dollars in funds
immediately available to the Administrative Agent at the Agent's
Office, the Loans to be made by such Bank on such date. Any
Bank's failure to make any Loan to be made by it on the requested
date therefor shall not relieve it of its obligations to make
such Loan nor shall such failure relieve any other Bank of its
obligation to make any Loan to be made by such other Bank on such
date, but such other Bank shall not be liable for such failure.
(c) Unless the Administrative Agent shall have
received notice from a Bank prior to 10:00 a.m. (Chicago time) on
the requested date for the making of any Loans that such Bank
will not make available to the Administrative Agent the Loans
requested to be made by such Bank on such date, the
Administrative Agent may assume that such Bank has made such
<PAGE> 3
Loans available to the Administrative Agent on such date in
accordance with Section 1.02(b) and the Administrative Agent in
its sole discretion may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount on
behalf of such Bank. If and to the extent such Bank shall not
have so made available to the Administrative Agent the Loans
requested to be made by such Bank on such date and the
Administrative Agent shall have so made available to the Borrower
a corresponding amount on behalf of such Bank, such Bank shall,
on demand, pay to the Administrative Agent such corresponding
amount together with interest thereon, for each day from the date
such amount shall have been so made available by the
Administrative Agent to the Borrower until the date such amount
shall have been repaid to the Administrative Agent, at the
Federal Funds Rate until (and including) the third Business Day
after demand is made and thereafter at the Base Rate. If such
Bank does not pay such amount promptly upon the Administrative
Agent's demand therefor, the Administrative Agent shall promptly
notify the Borrower and the Borrower shall immediately repay such
corresponding amount to the Administrative Agent together with
accrued interest thereon at the applicable rate or rates provided
in Section 1.03(a).
(d) All Loans made available to the Administrative
Agent in accordance with Section 1.02(b) shall be disbursed by
the Administrative Agent not later than 11:00 a.m. (Chicago time)
on the requested date therefor in Dollars in funds immediately
available to the Borrower by credit to an account of the Borrower
at the Agent's Office or in such other manner as may have been
specified in the applicable notice and as shall be acceptable to
the Administrative Agent.
Section 1.03. Interest. (a) Rates. Unless an Event
of Default is continuing, (i) each Loan shall bear interest on
the outstanding principal amount thereof at a rate per annum
equal to (A) so long as it is a Base Rate Loan, the Base Rate as
in effect from time to time plus the Applicable Margin, (B) so
long as it is a CD Rate Loan, the applicable Adjusted CD Rate
plus the Applicable Margin and (C) so long as it is a Eurodollar
Rate Loan, the applicable Adjusted Eurodollar Rate plus the
Applicable Margin and (ii) each other amount due and payable
hereunder shall, to the maximum extent permitted by Applicable
Law, bear interest from the date due through the date on which it
is paid in full at a rate per annum equal to the rate which would
be applicable to a Base Rate Loan during such period. During an
Event of Default (and whether before or after judgment), each
Loan (whether or not due) and, to the maximum extent permitted by
Applicable Law, each other amount due and payable hereunder shall
bear interest at a rate per annum equal to the applicable Post-
Default Rate.
(b) Payment. Interest shall be payable to the extent
accrued, (i) in the case of Base Rate Loans, on each Interest
Payment Date, (ii) in the case of Fixed Rate Loans, on the last
day of each applicable Interest Period (and, if an Interest
Period is longer than, in the case of a CD Rate Loan, 90 days,
and in the case of a Eurodollar Rate Loan, three months, at
intervals of, respectively, 90 days and three months after the
first day of such Interest Period), (iii) in the case of any
Loan, when such Loan shall be due (whether at maturity, by reason
<PAGE> 4
of notice of prepayment or acceleration or otherwise), or
converted, but only to the extent then accrued on the amount then
so due or converted, and (iv) in the case of all other amounts
due and payable hereunder, on demand. Interest at the Post-
Default Rate shall be payable on demand.
(c) Conversion and Continuation. (i) All or any part
of the principal amount of Loans of any Type may, on any Business
Day, be converted into any other Type or Types of Loans, except
that (A) Fixed Rate Loans may be converted only on the last day
of an applicable Interest Period and (B) Domestic Rate Loans may
be converted into Eurodollar Rate Loans only on a Eurodollar
Business Day.
(ii) Base Rate Loans shall continue as Base Rate
Loans unless and until such Loans are converted into Loans of
another Type. Fixed Rate Loans of any Type shall continue as
Loans of such Type until the end of the then current Interest
Period therefor, at which time they shall be automatically
converted into Base Rate Loans unless the Borrower shall have
given the Administrative Agent notice in accordance with Section
1.03(c)(iv) requesting either that such Loans continue as Loans
of such Type for another Interest Period or that such Loans be
converted into Loans of another Type at the end of such Interest
Period.
(iii) Notwithstanding anything to the contrary
contained in Section 1.03(c)(i) or (ii), after the occurrence and
during the continuance of a Default, the Administrative Agent may
notify the Borrower that Loans may only be converted into or
continued as Loans of certain specified Types and, thereafter,
until no Default shall continue to exist, Loans may not be
converted into or continued as Loans of any Type other than one
or more of such specified Types.
(iv) The Borrower shall give the Administrative
Agent notice (which shall be irrevocable) of each conversion or
continuation of Loans no later than 9:00 a.m. (Chicago time) on,
in the case of a conversion into or a continuation of Base Rate
Loans, the Business Day of, in the case of a conversion into or a
continuation of CD Rate Loans, the second Business Day before,
and, in the case of a conversion into or continuation of
Eurodollar Rate Loans, the third Eurodollar Business Day before,
the requested date of such conversion or continuation. Each
notice of conversion or continuation shall be in the form of
Schedule 1.03(c)(iv) and shall specify (A) the requested date of
such conversion or continuation, (B) the amount and Type and, in
the case of Fixed Rate Loans, the last day of the applicable
Interest Period of the Loans to be converted or continued and (C)
the amount and Type or Types of Loans into which such Loans are
to be converted or as which such Loans are to be continued. Upon
receipt of any such notice, the Administrative Agent shall
promptly notify each Bank of (x) the contents thereof, (y) the
amount and Type and, in the case of Fixed Rate Loans, the last
day of the applicable Interest Period of each Loan to be
converted or continued by such Bank and (z) the amount and Type
or Types of Loans into which such Loans are to be converted or as
which such Loans are to be continued.
(d) Maximum Interest Rate. Nothing contained in this
<PAGE> 5
Agreement or any Note shall require the Borrower at any time to
pay interest at a rate exceeding the Maximum Permissible Rate.
If interest payable by the Borrower on any date would exceed the
maximum amount permitted by the Maximum Permissible Rate, such
interest payment shall automatically be reduced to such maximum
permitted amount, and interest for any subsequent period, to the
extent less than the maximum amount permitted for such period by
the Maximum Permissible Rate, shall be increased by the unpaid
amount of such reduction. Any interest actually received with
respect to any Loan for any period in excess of such maximum
amount permitted for such period shall be deemed to have been
applied as a prepayment of such Loan.
Section 1.04. Repayment. Each Bank's Loans shall
mature and be due and payable in full on the Termination Date for
such Bank.
Section 1.05. Prepayments. The Borrower may, at any
time and from time to time, prepay the Loans in whole or in part,
without premium or penalty, except that any partial prepayment
shall be in an aggregate principal amount of at least $10,000,000
and any prepayment of Fixed Rate Loans shall be made only on the
last day of an applicable Interest Period. The Borrower shall
give the Administrative Agent notice of each prepayment at any
time prior to, but in any event no later than, 9:00 a.m. (Chicago
time) on, in the case of a prepayment of Base Rate Loans, the
Business Day of, in the case of CD Rate Loans, the second
Business Day before, and, in the case of a prepayment of
Eurodollar Rate Loans, the third Eurodollar Business Day before,
the date of such prepayment. Each notice of prepayment shall be
in the form of Schedule 1.05 and shall specify (a) the date such
prepayment is to be made and (b) the amount and Type and, in the
case of Fixed Rate Loans, the last day of the applicable Interest
Period of the Loans to be prepaid. Upon receipt of any such
notice, the Administrative Agent shall promptly notify each Bank
of the contents thereof and the amount and Type and, in the case
of Fixed Rate Loans, the last day of the applicable Interest
Period of each Loan of such Bank to be prepaid. Amounts to be
prepaid shall irrevocably be due and payable on the date
specified in the applicable notice of prepayment, together with
interest thereon as provided in Section 1.03(b).
Section 1.06. Limitation on Types of Loans.
Notwithstanding anything to the contrary contained in this
Agreement, the Borrower shall borrow, prepay, convert and
continue Loans in a manner such that (a) the aggregate principal
amount of Fixed Rate Loans of the same Type and having the same
Interest Period shall at all times be not less than $10,000,000,
(b) there shall not be, at any one time, more than seven Interest
Periods in effect with respect to Fixed Rate Loans of all Types
and (c) no payment of Fixed Rate Loans will have to be made prior
to the last day of an applicable Interest Period in order to
repay the Loans in the amounts and (subject to Section 1.09(e))
on the dates specified in Section 1.04.
Section 1.07. Closing Fee; Facility Fee; Reduction of
Commitments. (a) The Borrower shall pay to the Administrative
Agent for the account of each Bank a closing fee in an amount
separately agreed to between the Borrower and each Bank.
<PAGE> 6
(b) The Borrower shall pay to the Administrative Agent
for the account of each Bank a facility fee on the amount of such
Bank's Commitment for each day from the Agreement Date through
the Termination Date for such Bank at a rate per annum equal to
the Applicable Facility Fee Rate, payable on the Termination Date
for such Bank, on the date of any reduction of such Commitment
(to the extent accrued and unpaid on the amount of the reduction)
and on the date upon which a Proposed Bank is made a party hereto
pursuant to Section 1.12.
(c) The Borrower shall pay to the Administrative Agent
for the account of each Bank which extends the Termination Date
in accordance with Section 1.01 an extension fee in an amount
equal to .025% of the Commitment of such Bank, payable on the
Extension Date.
(d) The Borrower may reduce the aggregate Commitments
of the Banks (but not to an amount less than the aggregate
principal amount of all outstanding Loans) by giving the
Administrative Agent notice (which shall be irrevocable) thereof
no later than 9:00 a.m. (Chicago time) on the fifth Business Day
before the requested date of such reduction, except that no
partial reduction shall be in an aggregate amount less than
$7,500,000 and provided further that any reduction of Commitments
hereunder shall be accompanied by a simultaneous reduction in
equal amount of the Long Term Commitments under the Long Term
Facility. Upon receipt of any such notice, the Administrative
Agent shall promptly notify each Bank of the contents thereof and
the amount to which such Bank's Commitment is to be reduced.
Each Bank's Commitment shall terminate on the Termination Date.
(e) In the event that any Bank makes a demand for
payment pursuant to Section 7.02 as a result of any requirement
that the Commitment of such Bank be treated other than as a
"short term commitment" as defined in the Risk-Based Capital
Guidelines issued by the Federal Reserve Board (or the equivalent
guidelines issued by the banking regulatory authority having
jurisdiction over such Bank), the Borrower may terminate the
Commitments of all (but not less than all) the Banks in full by
giving the Administrative Agent notice (which shall be
irrevocable) thereof no later than 30 days after such demand for
payment was made, which notice shall specify the effective date
of such termination (which shall be no later than the fifth
Business Day after the date such notice is given). Upon the
effective date of such notice, the Commitments of the Banks shall
terminate and all Loans outstanding, if any, shall be immediately
due and payable, and shall be paid in full by the Borrower on
such effective date.
Section 1.08. Computation of Interest and Fees. The
facility fee and interest on Base Rate Loans and on other amounts
due and payable under this Agreement shall be computed on the
basis of a year of 365/366 days and interest on Fixed Rate Loans
shall be computed on the basis of a year of 360 days and in any
case paid for the actual number of days elapsed. Interest for
any period shall be calculated from and including the first day
thereof to but excluding the last day thereof.
Section 1.09. Payments by the Borrower. (a) Time,
<PAGE> 7
Place and Manner. All payments due to the Administrative Agent
hereunder shall be made to the Administrative Agent at the
Agent's Office or at such other address as the Administrative
Agent may designate by notice to the Borrower. All payments due
to any Bank hereunder shall, in the case of payments on account
of facility fees or principal of or interest on the Loans, be
made to the Administrative Agent at the Agent's Office and, in
the case of all other payments, be made directly to such Bank at
its Domestic Lending Office or at such other address as such Bank
may designate by notice to the Borrower. All payments due to any
Bank hereunder, whether made to the Administrative Agent or
directly to such Bank, shall be made for the account of, in the
case of payments in respect of Eurodollar Rate Loans, such Bank's
Eurodollar Rate Lending Office and, in the case of all other
payments, such Bank's Domestic Lending Office. A payment shall
not be deemed to have been made on any day unless such payment
has been received by the required Person, at the required place
of payment, in Dollars in funds immediately available to such
Person, no later than 11:00 a.m. (Chicago time) on such day.
(b) No Reductions. All payments due to the
Administrative Agent or any Bank hereunder, and all other terms,
conditions, covenants and agreements to be observed and performed
by the Borrower hereunder, shall be made, observed or performed
by the Borrower without any reduction or deduction whatsoever,
including any reduction or deduction for any set-off, recoupment,
counterclaim (whether sounding in tort, contract or otherwise) or
Tax, except for any withholding or deduction for Taxes required
to be withheld or deducted under Applicable Law.
(c) Taxes. If any Tax is required by Applicable Law
to be withheld or deducted from, or is otherwise payable by the
Borrower in connection with, any payment by the Borrower to the
Administrative Agent or any Bank hereunder, the Borrower (i)
shall, if required by Applicable Law, withhold or deduct the
amount of such Tax from such payment and, in any case, pay such
Tax to the appropriate taxing authority in accordance with
Applicable Law and (ii) shall pay to the Administrative Agent or
such Bank, as applicable, (A) such additional amounts as may be
necessary so that the net amount received by the Administrative
Agent or such Bank with respect to such payment, after
withholding or deducting all Taxes so required to be withheld or
deducted from such payment and such additional amounts paid by
the Borrower, is equal to the full amount payable hereunder and
(B) an amount equal to all Taxes payable by the Administrative
Agent or such Bank as a result of payments made by the Borrower
under clause (A) (whether to a taxing authority or to the
Administrative Agent or such Bank) pursuant to this Section
1.09(c) provided, that, if the Administrative Agent or such Bank
receives a credit or reduction in Taxes payable by the
Administrative Agent or such Bank as a result of such withholding
or deduction by the Borrower, the Administrative Agent or the
Bank, as applicable, shall pay to the Borrower an amount (not
exceeding the amount paid by the Borrower to the Administrative
Agent or the Bank, as applicable) equal to the net after tax
value of such credit, deduction or reduction allocable to such
payments by the Borrower. Notwithstanding the foregoing, neither
the Administrative Agent nor any Bank shall be obligated to
disclose to the Borrower any information regarding its tax
affairs or computations and nothing in this Section 1.09(c) shall
<PAGE> 8
interfere with the right of the Administrative Agent, the Banks
or the Borrower to arrange their respective tax affairs as they
deem appropriate. If any Tax is withheld or deducted from, or is
otherwise payable by the Borrower in connection with, any payment
due to the Administrative Agent or any Bank hereunder, the
Borrower shall, within 30 days after the date of such payment,
furnish to the Administrative Agent or such Bank, as applicable,
the original or a certified copy of a receipt for such Tax from
the applicable taxing authority. If any payment due to the
Administrative Agent or any Bank hereunder is or is expected to
be made without withholding or deducting therefrom, or otherwise
paying in connection therewith, any Tax payable to any taxing
authority, the Borrower shall, within 30 days after any request
from the Administrative Agent or such Bank, as applicable,
furnish to the Administrative Agent or such Bank a certificate
from such taxing authority, or an opinion of counsel acceptable
to the Administrative Agent or such Bank, in either case stating
that no Tax payable to such taxing authority was or is, as the
case may be, required by Applicable Law to be withheld or
deducted from, or otherwise paid by the Borrower in connection
with, such payment. Each Bank that is not a "United States
person" (as such term is defined in Section 7701(a)(30) of the
Code) shall submit to the Borrower and the Administrative Agent
on or before Agreement Date (or, in the case of a Person that
became a Bank by assignment, promptly upon such assignment), two
duly completed and signed copies of either (A) Form 1001 of the
United States Internal Revenue Service entitling such Bank to a
complete exemption from withholding on all amounts to be received
by such Bank pursuant to this Agreement and the Loans or (B) Form
4224 of the United States Internal Revenue Service relating to
all amounts to be received by such Bank pursuant to this
Agreement and the Loans. Each such Bank shall, from time to time
after submitting either such Form, submit to the Borrower and the
Administrative Agent such additional duly completed and signed
copies of one or the other such Forms (or such successor Forms as
shall be adopted from time to time by the relevant United States
taxing authorities) as may be (A) requested in writing by the
Borrower or the Administrative Agent and (B) appropriate under
then current United States law or regulations to avoid or reduce
United States withholding taxes on payments in respect of all
amounts to be received by such Bank pursuant to this Agreement or
the Loans.
(d) Authorization to Charge Accounts. The Borrower
hereby authorizes the Administrative Agent and each Bank, if and
to the extent any amount payable by the Borrower hereunder
(whether payable to such Person or to any other Person that is
the Administrative Agent or a Bank) is not otherwise paid when
due, to charge such amount against any or all of the accounts of
the Borrower with the Administrative Agent or such Bank or any of
their respective Affiliates (whether maintained at a branch or
office located within or without the United States), with the
Borrower remaining liable for any deficiency.
(e) Extension of Payment Dates. Whenever any payment
to the Administrative Agent or any Bank hereunder would otherwise
be due (except by reason of acceleration) on a day that is not a
Business Day, or, in the case of payments of the principal of
Eurodollar Rate Loans, a Eurodollar Business Day, such payment
thereof shall instead be due on the next succeeding Business or
<PAGE> 9
Eurodollar Business Day, as the case may be, unless, (i) in the
case of a payment of the principal of a Loan, such extension
would cause payment to be made after the Termination Date or (ii)
in the case of a payment of the principal of a Eurodollar Rate
Loan, such extension would cause payment to be due in the next
succeeding calendar month, in which case such due date shall be
advanced to the next preceding Business Day or, in the case of
Eurodollar Rate Loan, Eurodollar Business Day. If the date any
payment hereunder is due is extended (whether by operation of
this Agreement, Applicable Law or otherwise), such payment shall
bear interest for such extended time at the rate of interest
applicable hereunder.
(f) Distribution by the Administrative Agent. The
Administrative Agent shall distribute to each Bank its ratable
share of each payment received by the Administrative Agent
hereunder for the account of the Banks by credit to an account of
such Bank at the Agent's Office or by wire transfer to an account
of such Bank at an office of any other commercial bank located in
the United States. Each such distribution of any such payment
shall be made on (i) the same day as such payment is received by
the Administrative Agent, if such payment is received by the
Administrative Agent prior to 11:00 a.m. (Chicago time) on any
day, and (ii) the first Business Day after such payment is
received by the Administrative Agent, if such payment is received
by the Administrative Agent after 11:00 a.m. (Chicago time) on
any day.
(g) Unfunded Distributions. Unless the Administrative
Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Administrative
Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative
Agent in its sole discretion may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date
a corresponding amount with respect to the amount then due such
Bank. If and to the extent the Borrower shall not have so made
such payment in full to the Administrative Agent and the
Administrative Agent shall have so distributed to any Bank a
corresponding amount, such Bank shall, on demand, repay to the
Administrative Agent the amount so distributed together with
interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such
amount to the Administrative Agent, at the Federal Funds Rate
until (and including) the third Business Day after demand is made
and thereafter at the Base Rate.
Section 1.10. Evidence of Indebtedness. Each Bank's
Loans and the Borrower's obligation to repay such Loans with
interest in accordance with the terms of this Agreement shall be
evidenced by this Agreement, the records of such Bank and, in the
case of Domestic Rate Loans, a single Domestic Note payable to
the order of such Bank and, in the case of Eurodollar Rate Loans,
a single Eurodollar Note payable to the order of such Bank. The
records of each Bank shall be prima facie evidence of such Bank's
Loans and accrued interest thereon and of all payments made in
respect thereof.
Section 1.11. Pro Rata Treatment. Except to the
<PAGE> 10
extent otherwise provided herein, (a) Loans shall be made by the
Banks pro rata in accordance with their respective Commitments,
(b) Loans of the Banks shall be converted and continued pro rata
in accordance with their respective amounts of Loans of the Type
and, in the case of Fixed Rate Loans, having the Interest Period
being so converted or continued, (c) each reduction in the
Commitments shall be made pro rata in accordance with the
respective amounts thereof and (d) each payment of the principal
of or interest on the Loans or of facility fees shall be made for
the account of the Banks pro rata in accordance with their
respective amounts thereof then due and payable.
Section 1.12. Substitution of Banks. In the event
that (i) any Bank notifies, or is deemed to have notified, the
Administrative Agent of its determination not to extend its
Commitment pursuant to Section 1.01, (ii) any Bank makes a demand
for payment from the Borrower under Section 7.02 or (iii) any Tax
is required to be withheld or deducted, or is otherwise payable,
by the Borrower in accordance with Section 1.09(c) in connection
with any payment by the Borrower to any Bank or to the
Administrative Agent on behalf of any Bank (except where such Tax
is required to be withheld or deducted, or is otherwise payable,
in connection with such payment to all Banks that are not "United
States persons" (as such term is defined in Section 7701(a)(30)
of the Code)) the Borrower, on any day (the "Removal Date")
during the period commencing on (x) in the case of a
determination not to extend pursuant to Section 1.01, the day on
which such notice, or deemed notice, is received by the
Administrative Agent and ending on the Business Day immediately
preceding such Bank's Termination Date, (y) in the case of a
demand for payment under Section 7.02, the day demand for payment
under Section 7.02 is received by the Borrower and ending 30 days
after receipt of such demand or (z) in the case of the
withholding or payment of Taxes pursuant to Section 1.09(c), the
day such Tax is withheld or deducted or otherwise paid and ending
30 days after such date, may, upon at least ten Business Days'
notice, require such Bank (the "Substituted Bank") to assign and
transfer all of its Commitment hereunder and its Long Term
Commitment under the Long Term Facility, all of its outstanding
Loans hereunder and its Long Term Loans under the Long Term
Facility and, except to the extent specified in the final
sentence of this Section 1.12, all of its rights, title and
interest in and to this Agreement and its Notes to any Person
identified by the Borrower (the "Proposed Bank") who agrees to
assume all of the obligations of a Substituted Bank hereunder for
a consideration equal to the outstanding principal amount of such
Substituted Bank's Loans hereunder and its Long Term Loans under
the Long Term Facility, together with interest thereon to the
date of such transfer and assignment and all other amounts (other
than any costs, expenses or other amounts due and owing to the
Substituted Bank pursuant to Section 9.02 or pursuant to Section
9.02 of the Long Term Facility) payable to such Substituted Bank
hereunder and under the Long Term Facility on or prior to the
date of such transfer and assignment (including any facility fees
accrued to such date). Subject to the execution and delivery of
such instruments and agreements relating to such transfer and
assignment as such Substituted Bank, the Proposed Bank and the
Administrative Agent shall reasonably request, (i) such Proposed
Bank shall, on and after the Removal Date, be a "Bank" for all
purposes hereunder and (ii) the Termination Date for such
<PAGE> 11
proposed Bank shall be determined in accordance with Section 1.01
without giving effect to the notice of determination not to
extend given, or deemed to have been given, by the Substituted
Bank making such transfer and assignment of the Proposed Bank.
The assignment by a Substituted Bank of its rights under this
Agreement and the Notes shall not include such Bank's rights, to
the extent then vested, under Sections 9.02, 9.03, 9.09, 9.10,
9.11 and 9.15.
ARTICLE 2
CONDITIONS TO LOANS
Section 2.01. Conditions to Initial Loans. The
obligation of each Bank to make its initial Loan is subject to
the Administrative Agent's receipt of each of the following, in
form and substance and, in the case of the materials referred to
in clauses (a), (b), (c), (f), (g) and (h), certified in a manner
satisfactory to the Administrative Agent:
(a) a certificate of the Corporate Secretary or an
Assistant Secretary of the Borrower, dated on or around the
Agreement Date but prior to the requested date for the making of
such Loan, substantially in the form of Schedule 2.01(a), to
which shall be attached copies of the resolutions and by-laws
referred to in such certificate;
(b) a copy of the certificate of incorporation of the
Borrower, certified, on or around the Agreement Date but prior to
the requested date for the making of such Loan, by the Secretary
of State or other appropriate official of the Borrower's
jurisdiction of incorporation;
(c) a good standing certificate with respect to the
Borrower and each Restricted Subsidiary, issued on or around the
Agreement Date but prior to the requested date for the making of
such Loan by the Secretary of State or other appropriate official
of such Person's jurisdiction of incorporation;
(d) an opinion of Kathleen A. Gallichio, Esq., as
general counsel of the Borrower, and Jones, Day, Reavis & Pogue,
special counsel for the Borrower, dated on or around the
Agreement Date but prior to the requested date for the making of
such Loan, in the form of Schedule 2.01(d)-1 and 2.01(d)-2,
respectively;
(e) an opinion of Winthrop, Stimson, Putnam & Roberts,
dated on or around the Agreement Date but prior to the requested
date for the making of such Loan, in form of Schedule 2.01(e);
(f) a copy of each Governmental Approval and other
consent or approval listed on Schedule 3.03;
(g) a certificate of the president or chief financial
officer of the Borrower, dated the Agreement Date setting forth
the manner and degree of detail in which the Borrower will make
the calculations required by paragraph 3 of Schedules 5.01(a) and
5.01(b);
<PAGE> 12
(h) a duly executed Domestic Note and Eurodollar Note
for each Bank; and
(i) evidence satisfactory to the Administrative Agent
that each bank's commitment to lend under (i) the credit
agreement dated as of March 15, 1991 among the Borrower, the
banks listed on the signature pages thereof and Credit Suisse,
New York Branch, as Agent, and (ii) each other credit facility
pursuant to which any bank has committed to lend to the Borrower,
other than the Indenture dated as of January 15, 1987 between
Kemper Corporation and The Chase Manhattan Bank, N.A., as Trustee
shall have terminated, no advances under such credit agreement or
facilities shall be outstanding, and all amounts due and payable
to the banks and agent under such credit agreement or facilities
shall have been paid in full.
Section 2.02. Conditions to Each Loan. The obligation
of each Bank to make each Loan requested to be made by it,
including its initial Loan, is subject to the determination of
such Bank that each of the following conditions have been
fulfilled:
(a) the Administrative Agent shall have received a
notice of borrowing with respect to such Loan complying with the
requirements of Section 1.02;
(b) each Representation and Warranty shall be true and
correct in all material respects at and as of the time such Loan
is to be made, both with and without giving effect to such Loan
and all other Loans to be made at such time and to the
application of the proceeds thereof;
(c) no Default shall have occurred and be continuing
at the time such Loan is to be made or would result from the
making of such Loan and all other Loans to be made at such time
or from the application of the proceeds thereof;
(d) such Bank shall have received such materials as it
may have requested pursuant to Section 5.01(d); and
(e) such Loan will not contravene any Applicable Law
applicable to such Bank.
Each notice of borrowing shall constitute a
Representation and Warranty by the Borrower made as of the time
of the making of the requested Loans that the conditions
specified in clauses (b) and (c) have been fulfilled as of such
time, except, in the case of clause (c), for Defaults of which
the Borrower shall have notified the Banks prior to 4:00 p.m.
(Chicago time) on the Business Day before the requested date for
the making of such Loans.
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES
In order to induce each Bank to enter into this
<PAGE> 13
Agreement and to make each Loan requested to be made by it, the
Borrower represents and warrants as follows:
Section 3.01. Organization; Power; Qualification. The
Borrower and each Restricted Subsidiary are corporations duly
organized, validly existing and in good standing under the laws
of their respective jurisdictions of incorporation, have the
corporate power and authority to own their respective properties
and to carry on their respective businesses as now being and
hereafter proposed to be conducted and are duly qualified and in
good standing as foreign corporations, and are authorized to do
business, in all jurisdictions in which the character of their
respective properties or the nature of their respective
businesses requires such qualification or authorization, except
for qualifications and authorizations the lack of which, singly
or in the aggregate, has not had and will not have a Materially
Adverse Effect on the Borrower and the Restricted Subsidiaries
taken as a whole.
Section 3.02. Subsidiaries. Schedule 3.02 sets forth,
as of the Agreement Date, all of the Subsidiaries (other than
Subsidiaries which have assets of less than $100,000 and no known
material Liabilities), their jurisdictions of incorporation and,
with respect to the Restricted Subsidiaries, the percentages of
the various classes of their Capital Securities owned by the
Borrower or another Restricted Subsidiary and, with respect to
all Subsidiaries, indicates which Subsidiaries are Consolidated
Subsidiaries. As of the Agreement Date, the Borrower and each
Restricted Subsidiary, as the case may be, has the unrestricted
right to vote, and (subject to limitations imposed by Applicable
Law) to receive dividends and distributions on, all Capital
Securities indicated on Schedule 3.02 as owned by the Borrower or
such Restricted Subsidiary. All such Capital Securities have
been duly authorized and issued and are fully paid and
nonassessable. Either (i) the Consolidated Net Worth less an
amount equal to the aggregate amount of the Borrower's and the
Restricted Subsidiaries' equity in Unrestricted Subsidiaries is
equal to at least 80% of the Consolidated Net Worth or (ii) the
Required Banks have failed to designate, in accordance with the
terms of this Agreement and within 30 days after notice by the
Borrower to the Administrative Agent that the Consolidated Net
Worth less an amount equal to the aggregate amount of the
Borrower's and the Restricted Subsidiaries' equity in
Unrestricted Subsidiaries is less than 80% of the Consolidated
Net Worth, such additional Subsidiaries as Restricted
Subsidiaries as are necessary such that Consolidated Net Worth
less an amount equal to the aggregate amount of the Borrower's
and the Restricted Subsidiaries' equity in Unrestricted
Subsidiaries is equal to at least 80% of Consolidated Net Worth.
As of the Agreement Date, no Subsidiary, other than a Restricted
Subsidiary, had total assets equal to or in excess of 5% of the
total assets of the Borrower and the Consolidated Subsidiaries,
on a consolidated basis.
Section 3.03. Authorization; Enforceability;
Required Consents; Absence of Conflicts. The Borrower has the
power, and has taken all necessary action (including any
necessary stockholder action) to authorize it, to execute,
deliver and perform in accordance with their respective terms
this Agreement and the Notes and to borrow hereunder in the
<PAGE> 14
unused amount of the Commitments. This Agreement has been duly
executed and delivered by the Borrower and is, and each of the
Notes when delivered to the Administrative Agent and completed
according to the tenor of this Agreement will be, a legal, valid
and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms except as enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and general principles
of equity. The execution, delivery and performance in accordance
with their respective terms by the Borrower of this Agreement and
the Notes, and each borrowing hereunder, whether or not in the
amount of the unused Commitments, do not and (absent any change
in any Applicable Law or applicable Contract) will not (a)
require any Governmental Approval or any other consent or
approval, including any consent or approval of any Subsidiary or
any consent or approval of the stockholders of the Borrower or
any Subsidiary, other than Governmental Approvals and other
consents and approvals that have been obtained, are final and not
subject to review on appeal or to collateral attack, are in full
force and effect and, in the case of any such required under any
Applicable Law or Contract as in effect on the Agreement Date,
are listed on Schedule 3.03, or, in the case of any Subsidiary
other than a Restricted Subsidiary, Governmental Approvals or
other consents or approvals the lack of which, alone or in the
aggregate, would not have a Materially Adverse Effect on the
Borrower and the Restricted Subsidiaries, taken as a whole, or on
the Borrower's ability to perform its obligations hereunder or on
this Agreement or the Notes or (b) violate or conflict with,
result in a breach of, constitute a default under, or result in
or require the creation of any Lien upon any assets of the
Borrower or any Restricted Subsidiary under, (i) any Contract to
which the Borrower or any Restricted Subsidiary is a party or by
which the Borrower or any Restricted Subsidiary or any of their
respective properties may be bound except for any Contract the
violation of which, or the existence of a default under, would
not, alone or in the aggregate, have a Materially Adverse Effect
on the Borrower and the Restricted Subsidiaries taken as a whole
or on the ability of the Borrower to perform its obligations
hereunder or on this Agreement or the Notes or (ii) any
Applicable Law.
Section 3.04. Litigation. Except as set forth on
Schedule 3.04 or in the Borrower's Annual Report on Form 10-K for
the period ended December 31, 1992, the Borrower's Quarterly
Reports on Form 10-Q for the periods ended March 31 or June 30
1993, in each case, as filed by the Borrower with the Securities
and Exchange Commission, there are not, in any court or before
any arbitrator of any kind or before or by any governmental or
non-governmental body, any actions, suits or proceedings pending
or threatened (nor, to the knowledge of the Borrower and the
Restricted Subsidiaries, is there any basis therefor) against or
in any other way relating to or affecting (a) the Borrower or any
Subsidiary or any of their respective businesses or properties or
(b) this Agreement or the Notes, which are reasonably likely,
singly or in the aggregate, to have a Materially Adverse Effect
on (x) the Borrower and the Restricted Subsidiaries taken as a
whole or (y) this Agreement or the Notes.
Section 3.05. Environmental Compliance. (a) To the
<PAGE> 15
best of the Borrower's knowledge, the Borrower and its
Subsidiaries have duly complied with, and their respective
Premises are in compliance with, the provisions of all federal,
state, and local environmental, health, and safety laws, codes
and ordinances, and all rules and regulations promulgated
thereunder (collectively, "Environmental Laws"), except to the
extent that noncompliance with such Environmental Laws would not
have a Materially Adverse Effect on the Borrower and the
Restricted Subsidiaries taken as a whole.
(b) To the best of the Borrower's knowledge, the
Borrower and its Subsidiaries have been issued and will maintain
all required federal, state, and local permits, licenses,
certificates, and approvals relating to (i) air emissions, (ii)
discharges to surface water or groundwater, (iii) noise
emissions, (iv) solid or liquid waste disposal, (v) the use,
generation, storage, transportation, or disposal of toxic or
hazardous substances or wastes (intended hereby and hereafter to
include any and all such materials listed in any Environmental
Laws as hazardous or potentially hazardous), or (vi) other
environmental, health, or safety matters, except to the extent
that the failure to have obtained or to maintain such permits,
licenses, certificates and approvals would not have a Materially
Adverse Effect on the Borrower and the Restricted Subsidiaries
taken as a whole.
(c) To the best of the Borrower's knowledge, neither
the Borrower nor any of its Subsidiaries has, with respect to its
Premises, received notice of, or knows or reasonably suspects
facts which might constitute, any violation of any Environmental
Laws, except to the extent that any such violations would not
have a Materially Adverse Effect on the Borrower and the
Restricted Subsidiaries taken as a whole.
(d) To the best of the Borrower's knowledge, except in
accordance with a valid governmental permit, license,
certificate, or approval, there has been no emission, spill,
release, or discharge into or upon (i) the air, (ii) soils or any
improvements located thereon, (iii) surface water or groundwater,
or (iv) the sewer, septic system or waste treatment, storage or
disposal system servicing the Premises, of any toxic or hazardous
substances or wastes at or from the Premises during such time as
either the Borrower or any of its Subsidiaries has held title to,
or leased, the Premises which would have a Materially Adverse
Effect on the Borrower and the Restricted Subsidiaries taken as a
whole.
(e) To the best of the Borrower's knowledge, there has
been no complaint, order, directive, claim, citation, or notice
by any governmental authority with respect to (i) air emissions,
(ii) spills, releases, or discharges to soils or improvements
located thereon, surface water, groundwater or the sewer, septic
system or waste treatment, storage or disposal systems servicing
the Premises, (iii) noise emissions, (iv) solid or liquid waste
disposal, (v) the use, generation, storage, transportation, or
disposal of toxic or hazardous substances or waste, or (vi) other
environmental, health, or safety matters affecting the Borrower
or any of its Restricted Subsidiaries or any of their respective
Premises.
<PAGE> 16
Section 3.06. No Adverse Change or Event. From
December 31, 1992, no change in the business, assets,
Liabilities, financial condition, results of operations or
business prospects of the Borrower or any Subsidiary has
occurred, and no event has occurred or failed to occur, that has
had or might have, either alone or in conjunction with all other
such changes, events and failures, a Materially Adverse Effect on
(a) the Borrower and the Restricted Subsidiaries taken as a whole
or (b) this Agreement or the Notes. Any change in the business,
assets, Liabilities, financial condition, results of operations
or business prospects of the Borrower or any Subsidiary disclosed
in the Borrower's Annual Report on Form 10K for the period ending
December 31, 1992, Quarterly Reports on Form 10Q for the periods
ending March 31 or June 30, 1993 or Current Reports on Form 8K
dated December 30, 1992, and August 20, 1993, shall not
constitute a change individually or in the aggregate which has
had such a Materially Adverse Effect.
Section 3.07. Taxes. United States Federal income tax
returns of the Borrower and its Consolidated Subsidiaries have
been examined and closed through the fiscal year ended December
31, 1983. The Borrower and its Consolidated Subsidiaries have
filed all United States Federal income tax returns and all other
material tax returns which are required to be filed by them and
have paid all taxes shown to be due pursuant to such returns or
pursuant to any income tax assessment relating to such returns or
the periods covered thereby received by the Borrower, except to
the extent that failure to so file or the failure to so pay, as
the case may be, together with all other such failures, would not
have a Materially Adverse Effect on the Borrower and the
Restricted Subsidiaries taken as a whole.
ARTICLE 4
CERTAIN COVENANTS
From the Agreement Date and until the Repayment Date,
A. The Borrower shall and shall cause each Restricted
Subsidiary to:
Section 4.01. Preservation of Existence and
Properties, Scope of Business, Compliance with Law, Payment of
Taxes and Claims, Preservation of Enforceability. (a) Preserve
and maintain its corporate existence and all of its other
franchises, licenses, rights and privileges, (b) preserve,
protect and obtain all Intellectual Property, and preserve and
maintain in good repair, working order and condition all other
properties, required for the conduct of its business, (c)
maintain the substantial portion of the business of the Borrower
and the Restricted Subsidiaries, taken as a whole, in businesses
in substantially the same fields as the businesses conducted by
the Borrower and its Restricted Subsidiaries on the Agreement
Date or other businesses related to diversified financial
services, (d) comply with Applicable Law, (e) pay or discharge
when due all Taxes and all Liabilities that might become a Lien
on any of its properties and (f) take all action and obtain all
consents and Governmental Approvals required so that its
obligations hereunder and under the Notes will at all times be
legal, valid and binding and enforceable in accordance with their
<PAGE> 17
respective terms, except that this Section 4.01 (other than
clauses (a), in so far as it requires the Borrower to preserve
its corporate existence, (c) and (f)) shall not apply in any
circumstance where (x) noncompliance, together with all other
noncompliances with this Section 4.01, will not have a Materially
Adverse Effect on (A) the Borrower and the Restricted
Subsidiaries taken as a whole or (B) this Agreement or the Notes
or (y), in the case of clauses (a) and (b), noncompliance results
from the cessation of the corporate existence of a Restricted
Subsidiary or the cessation of franchises, licenses, rights or
privileges as a result of any transaction to which Section 4.06,
4.07 or 4.12 is by its express terms inapplicable so long as such
cessation would not result in a Materially Adverse Effect on the
Borrower and the Restricted Subsidiaries taken as a whole.
Section 4.02. Insurance. Maintain insurance with
responsible insurance companies against at least such risks and
in at least such amounts as is customarily maintained by similar
businesses, or as may be required by Applicable Law.
Section 4.03. Use of Proceeds. Use the proceeds of
the Loans only for general corporate purposes, which shall
include, but not be limited to, the acquisition of assets,
including assets constituting a going concern, whether by stock
purchase or otherwise. None of the proceeds of any of the Loans
shall be used in any manner which would violate or cause any Bank
to be in violation of Regulations G, U or X of the Board of
Governors of the Federal Reserve System. If requested by any
Bank, the Borrower shall complete and sign Part I of a copy of
Federal Reserve Form U-1 referred to in Regulation U and deliver
such copy to such Bank.
B. The Borrower shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly:
Section 4.04. Guaranties. Be obligated, at any time,
in respect of any Guaranty, except that this Section 4.04 shall
not apply to Permitted Guaranties.
Section 4.05. Liens. Permit to exist, at any time,
any Lien upon any of its properties or assets of any character,
whether now owned or hereafter acquired, or upon any income or
profits therefrom, except that this Section 4.05 shall not apply
to Permitted Liens.
Section 4.06. Merger or Consolidation. Merge or
consolidate with any Person, except that, if after giving effect
thereto no Default would exist, this Section 4.06 shall not apply
to (a) any merger or consolidation of the Borrower with any one
or more Persons, provided that the Borrower shall be the
continuing Person, (b) any merger or consolidation of any
Restricted Subsidiary with any one or more Persons, provided that
the continuing Person shall, after giving effect to such merger
or consolidation, be a Subsidiary, and (c) any transaction and
disposition to which Section 4.07 or 4.12 (other than by
reference to this Section 4.06) is by its express terms
inapplicable.
Section 4.07. Disposition of Assets. Sell, lease,
license, transfer or otherwise dispose of any asset or interest
<PAGE> 18
therein, except that this Section 4.07 shall not apply to (a) any
disposition of any asset or interest therein in the ordinary
course of business, (b) any disposition of any obsolete or
retired property not used in its business, (c) any disposition of
any asset or interest therein to the Borrower or to a Restricted
Subsidiary, (d) any disposition of the Capital Securities of any
Subsidiary other than a Restricted Subsidiary, (e) any
disposition of Unrestricted Margin Stock, (f) any disposition of
any assets or interest therein (including Capital Securities of
any Restricted Subsidiary) for fair market value, as determined
by the Board of Directors of the Borrower or such Restricted
Subsidiary, as the case may be, (g) any transfer of any assets
(of the type represented by the line items "Joint Venture
Mortgage Loans", "Third Party Mortgage Loans", "Other Real
Estate-Related Investments", "Other Loans and Investments" and
"Other Accounts and Notes Receivable" on the Borrower's
consolidated financial statements delivered in accordance with
Section 5.01 hereof), or any interest therein, to a special
purpose corporation, limited partnership, trust or similar entity
in exchange for certificates or other securities issued by such
entity representing ownership of similar interests in such
similar assets or interests therein, and (h) any transaction to
which any of the other provisions of this Agreement (other than
Section 4.10) is by its express terms inapplicable.
Section 4.08. Taxes of Other Persons. (a) File a
consolidated tax return with any other Person other than, in the
case of the Borrower, a Consolidated Subsidiary and, in the case
of any such Restricted Subsidiary, the Borrower or a Consolidated
Subsidiary, or (b) except as required by Applicable Law, pay or
enter into any Contract (other than any tax indemnification or
similar arrangements in connection with a merger or consolidation
or the disposition of assets or issuance or disposition of
Capital Securities or any interest therein pursuant to any
transaction to which Section 4.06, 4.07 or 4.12 by its express
terms is inapplicable) to pay any Taxes owing by any Person other
than the Borrower or a Consolidated Subsidiary.
Section 4.09. Benefit Plans. (a) Establish any
Benefit Plan, or amend any Benefit Plan, in either case in any
manner that in the reasonable good faith estimate of the
Borrower's actuary would increase, on a consolidated basis, the
aggregate Unfunded Benefit Liabilities under all Benefit Plans
maintained by Borrower or its ERISA Affiliates to an amount in
excess of $25,000,000, provided, however, that the foregoing
shall not prevent Borrower or a Restricted Subsidiary from
establishing or amending any Benefit Plan to the extent necessary
to comply with applicable law; or (b) amend any Benefit Plan,
except to the extent necessary to comply with applicable law, if
after giving effect to such amendment Borrower or any Restricted
Subsidiary would be required to post security pursuant to Section
401(a)(29) of the Code.
Section 4.10. Transactions with Affiliates. Effect
any transaction with any Affiliate (or Affiliates thereof), other
than another Subsidiary or the Borrower, which, taken together
with all such transactions engaged in by the Borrower and
Restricted Subsidiaries with such Affiliate (and Affiliates
thereof) is on a basis materially less favorable than would at
the time be obtainable for a comparable transaction in arms-
<PAGE> 19
length dealing with an unrelated third party, provided that this
Section 4.10 shall not apply to transactions with Fidelity Life
Association or Lumbermens Mutual Casualty Company (or its
Affiliates which are not Affiliates of the Borrower or any
Restricted Subsidiary) relating to asset management, insurance
and other services all as carried on in accordance with the
Borrower's and Restricted Subsidiaries' customary business
practice as in effect on, or announced prior to, the Agreement
Date.
Section 4.11. Limitation on Restrictive Covenants.
Permit to exist, at any time, any consensual restriction limiting
the ability (whether by covenant, event of default, subordination
or otherwise but not merely as a result of any requirement to pay
principal or interest on Indebtedness or dividends or other
payments on preferred stock or other similar requirements which
would limit the availability of funds at such Restricted
Subsidiary or as a result of any commitments to any regulatory
authority made by the Borrower or any Restricted Subsidiary to
the extent that such restriction, together with all such other
restrictions, has not and, in the reasonable determination of the
Banks, will not have a Materially Adverse Effect on the Borrower
or its ability to perform its obligations hereunder) of any
Restricted Subsidiary to (a) pay dividends or make any other
distributions on shares of its capital stock held by the Borrower
or any other Restricted Subsidiary, (b) pay any obligation owed
to the Borrower or any other Restricted Subsidiary, (c) make any
loans or advances to or investments in the Borrower or in any
other Restricted Subsidiary, (d) transfer any of its property or
assets to the Borrower or any other Restricted Subsidiary, or (e)
create any Lien upon its property or assets whether now owned or
hereafter acquired or upon any income or profits therefrom,
except that this Section 4.11 shall not apply to Permitted
Restrictive Covenants.
Section 4.12. Issuance or Disposition of Capital
Securities. Issue any of its Capital Securities or sell,
transfer or otherwise dispose of any Capital Securities of any
Restricted Subsidiary, except that this Section 4.12 shall not
apply to (a) any issuance by the Borrower of any of its Capital
Securities, (b) any issuance by a Restricted Subsidiary of any of
its Capital Securities to the Borrower or a Restricted
Subsidiary, (c) any issuance by a Restricted Subsidiary of any of
its Capital Securities to the holders of the common stock of such
Restricted Subsidiary made pro rata to the relative amounts of
such common stock held by such holders, (d) any disposition by
the Borrower or any Restricted Subsidiary of any Capital
Securities of a Restricted Subsidiary to the Borrower or a
Restricted Subsidiary, (e) any issuance or disposition of
Convertible Preferred Stock, Class B Common Stock or Floating
Rate Convertible Subordinated Debentures of Kemper Financial
Companies, Inc. and (f) any issuance or disposition of Capital
Securities for fair market value in connection with any
transaction to which Section 4.06 or 4.07 is by its express terms
inapplicable.
C. The Borrower shall not:
Section 4.13. Ratio of Consolidated Indebtedness to
Consolidated Net Worth. Permit Consolidated Indebtedness to
<PAGE> 20
exceed 50% of Consolidated Net Worth at any time.
Section 4.14. Minimum Net Worth. Permit Consolidated
Net Worth at any time to be less than $1,250,000,000.
Section 4.15. Interest Expense Coverage. Permit the
ratio of EBIT to Interest Expense for any period consisting of
four consecutive fiscal quarters ending on or after the Agreement
Date to be less than 1.5 to 1.0.
ARTICLE 5
FINANCIAL STATEMENTS AND INFORMATION
Section 5.01. Financial Statements and Information to
Be Furnished. From the Agreement Date and until the Repayment
Date, the Borrower shall furnish to each Bank:
(a) Quarterly Financial Statements; Officer's
Certificate. As soon as available and in any event within 50
days after the close of each of the first three quarterly
accounting periods in each fiscal year of the Borrower,
commencing with the quarterly period ending September 30, 1993:
(i) consolidated and consolidating (by business
segment) balance sheets of the Borrower and the Consolidated
Subsidiaries as at the end of such quarterly period and the
related consolidated and consolidating (by business segment)
statements of income, retained earnings and cash flows of
the Borrower and the Consolidated Subsidiaries for such
quarterly period and for the elapsed portion of the fiscal
year ended with the last day of such quarterly period,
setting forth in each case in comparative form the figures
for the corresponding periods of the previous fiscal year;
and
(ii) a certificate with respect thereto of the
president or chief financial officer of the Borrower in the
form of Schedule 5.01(a).
(b) Year-End Financial Statements; Accountants' and
Officer's Certificates. As soon as available and in any event
within 95 days after the end of each fiscal year of the Borrower,
commencing with the fiscal year ending December 31, 1993:
(i) consolidated and consolidating (by business
segment) balance sheets of the Borrower and the Consolidated
Subsidiaries as at the end of such fiscal year and the
related consolidated and consolidating (by business segment)
statements of income, retained earnings and cash flows of
the Borrower and the Consolidated Subsidiaries for such
fiscal year, setting forth in comparative form the figures
as at the end of and for the previous fiscal year;
(ii) an audit report of KPMG Peat Marwick, or
other independent certified public accountants of recognized
standing satisfactory to the Required Banks, on such of the
financial statements referred to in clause (i) as are
<PAGE> 21
consolidated financial statements, which report shall be in
scope and substance satisfactory to the Required Banks;
(iii) a certificate of such accountants addressed
to the Banks and in form and substance satisfactory to the
Required Banks confirming that (A) the Borrower is
authorized to deliver their report referred to in clause
(ii) to the Banks pursuant to this Agreement and (B) it is
their understanding that the Banks are relying on such
report and such certificate; and
(iv) a certificate of the president or chief
financial officer of the Borrower in the form of Schedule
5.01(b).
(c) Reports and Filings. (i) Promptly upon receipt
thereof, copies of all reports (other than management letters or
reports), if any, submitted to the Borrower or any Restricted
Subsidiary, or the Board of Directors of the Borrower or any
Restricted Subsidiary, by its independent certified public
accountants; (ii) as soon as practicable, copies of all such
financial statements and reports as the Borrower or any
Restricted Subsidiary shall send to its stockholders (other than
reports of the Restricted Subsidiaries sent to the Borrower in
the ordinary course of business) and of all registration
statements and all regular or periodic reports that the Borrower
or any Restricted Subsidiary shall file, or may be required to
file, as a reporting company subject to the reporting
requirements of the Securities Exchange Act of 1934 with the
Securities and Exchange Commission or any successor commission;
and (iii) in the case of Kemper Investors Life Insurance Company
and Federal Kemper Life Assurance Company, as soon as
practicable, copies of all year-end Annual Statements and
Quarterly Statements of the Condition and Affairs of such
entities filed with the Illinois Department of Insurance.
(d) Requested Information. From time to time and
promptly upon request of any Bank, such Information regarding
this Agreement, the Notes or the Loans and the business, assets,
Liabilities, financial condition, results of operations or
business prospects of the Borrower and the Subsidiaries as such
Bank may reasonably request, in each case in form and substance
and certified in a manner satisfactory to the requesting Bank.
(e) Notice of Defaults, Material Adverse Changes and
Other Matters. Prompt notice of: (i) any Default, (ii) any
change in the name of any Restricted Subsidiary, its jurisdiction
of incorporation, the percentages of the various classes of its
Capital Securities owned by the Borrower or another Subsidiary or
its status as a Consolidated or non-Consolidated Subsidiary,
(iii) the commencement of, or the occurrence or nonoccurrence of
any change or event relating to, any action, suit, proceeding or
investigation that would cause the Representation and Warranty
contained in Section 3.04 to be incorrect if made at such time,
(iv) any event or condition referred to in clauses (i) through
(vi) of Section 6.01(h), whether or not such event or condition
shall constitute an Event of Default, (v) any amendment of the
certificate of incorporation or by-laws of the Borrower and (vi)
any change in the Implied Senior Rating (as defined in the
definition of Applicable Facility Fee Rate and Applicable
<PAGE> 22
Margin).
Section 5.02. Accuracy of Financial Statements and
Information.
(a) Historical Financial Statements. The Borrower
hereby represents and warrants that (i) Schedule 5.02(a) sets
forth a complete and correct list of the financial statements
submitted by the Borrower to the Banks in order to induce them to
execute and deliver this Agreement, (ii) such financial
statements present fairly, in accordance with Generally Accepted
Accounting Principles, the consolidated and consolidating (by
business segment) financial position of the Borrower and the
Consolidated Subsidiaries as at their respective dates and the
consolidated and consolidating (by business segment) results of
operations, retained earnings and, as applicable, changes in
financial position or cash flows of the Borrower and such
Subsidiaries for the respective periods to which such statements
relate, and (iii) except as disclosed or reflected in such
financial statements, as at June 30, 1993, neither the Borrower
nor any Subsidiary had any Liability, contingent or otherwise, or
any unrealized or anticipated loss, that, singly or in the
aggregate, has, had or could reasonably be expected to have a
Materially Adverse Effect on the Borrower and the Consolidated
Subsidiaries taken as a whole.
(b) Future Financial Statements. The financial
statements delivered pursuant to Section 5.01(a) or (b) shall
present fairly, in accordance with Generally Accepted Accounting
Principles (except for changes therein or therefrom that are
described in the certificate or report accompanying such
statements and that have been approved in writing by the Chief
Financial Officer of the Borrower or, in the case of the
financial statements delivered pursuant to Section 5.01(b), the
Borrower's then current independent certified public
accountants), the consolidated and consolidating (by business
segment) financial position of the Borrower and the Consolidated
Subsidiaries as at their respective dates and the consolidated
and consolidating (by business segment) results of operations,
retained earnings and cash flows of the Borrower and such
Subsidiaries for the respective periods to which such statements
relate, and the furnishing of the same to the Banks shall
constitute a representation and warranty by the Borrower made on
the date the same are furnished to the Banks to that effect and
to the further effect that, except as disclosed or reflected in
such financial statements, as at the respective dates thereof,
neither the Borrower nor any Subsidiary had any Liability,
contingent or otherwise, or any unrealized or anticipated loss,
that, singly or in the aggregate, has had or could reasonably be
expected to have a Materially Adverse Effect on the Borrower and
the Consolidated Subsidiaries taken as a whole.
(c) Historical Information. The Borrower hereby
represents and warrants that all Information furnished to the
Administrative Agent or the Banks by or on behalf of the Borrower
prior to the Agreement Date in connection with or pursuant to
this Agreement and the relationship established hereunder, at the
time the same was so furnished, but in the case of Information
dated as of a prior date, as of such date, in the case of any
Information prepared in the ordinary course of business, was
<PAGE> 23
complete and correct in all material respects in the light of the
purpose prepared, and, in the case of any Information the
preparation of which was requested by any Bank, was complete and
correct in all material respects to the extent necessary to give
such Bank true and accurate knowledge of the subject matter
thereof, and, with respect to any Information which has been
filed with the SEC, (x) did not contain any untrue statement of a
material fact, and (y) did not omit to state a material fact
necessary in order to make the statements contained therein not
misleading in the light of the circumstances under which they
were made.
(d) Future Information. All Information furnished to
the Administrative Agent or the Banks by or on behalf of the
Borrower on or after the Agreement Date in connection with or
pursuant to this Agreement or in connection with or pursuant to
any amendment or modification of, or waiver of rights under, this
Agreement, shall, at the time the same is so furnished, but in
the case of Information dated as of a prior date, as of such
date, in the case of any Information prepared in the ordinary
course of business, be complete and correct in all material
respects in the light of the purpose prepared, and, in the case
of any Information required by the terms of this Agreement or the
preparation of which was requested by any Bank, be complete and
correct in all material respects to the extent necessary to give
the Banks true and accurate knowledge of the subject matter
thereof, and, with respect to any such Information filed or to be
filed with the SEC, (x) not contain any untrue statement of a
material fact, and (y) not omit to state a material fact
necessary in order to make the statements contained therein not
misleading in the light of the circumstances under which they
were made, and the furnishing of the same to the Administrative
Agent or any Bank shall constitute a representation and warranty
by the Borrower made on the date the same are so furnished to
such effect.
Section 5.03. Additional Covenants Relating to
Disclosure. From the Agreement Date and until the Repayment
Date, the Borrower shall and shall cause each Restricted
Subsidiary to:
(a) Accounting Methods and Financial Records.
Maintain a system of accounting, and keep such books, records and
accounts (which shall be true and complete in all material
respects), as may be required or necessary to permit (i) the
preparation of financial statements required to be delivered
pursuant to Section 5.01(a) and (b) and (ii) the determination of
the Borrower's compliance with the terms of this Agreement.
(b) Visits and Inspections. Permit, or, in the case
of properties, books, records or Persons not within its immediate
control, promptly take such actions as are reasonably practicable
in order to permit, representatives (whether or not officers or
employees) of any Bank, from time to time, as often as may be
reasonably requested, to (i) visit and inspect any properties of
the Borrower and each Restricted Subsidiary, (ii) inspect and
make extracts from the books and records of the Borrower and each
Restricted Subsidiary, including management letters prepared by
their respective independent certified public accountants, and
(iii) discuss with any director, any principal officers and the
<PAGE> 24
independent certified public accountants of the Borrower and each
Restricted Subsidiary, the respective businesses, assets,
Liabilities, financial conditions, results of operations and
business prospects of the Borrower and each Subsidiary.
ARTICLE 6
DEFAULT
Section 6.01. Events of Default. Each of the
following shall constitute an Event of Default, whatever the
reason for such event and whether it shall be voluntary or
involuntary, or within or without the control of the Borrower or
any Subsidiary, or be effected by operation of law or pursuant to
any judgment or order of any court or any order, rule or
regulation of any governmental or nongovernmental body:
(a) Any payment of principal of or interest on any of
the Loans or the Notes or of the facility fee shall not be made
when and as due (whether at maturity, by reason of notice of
prepayment or acceleration or otherwise) and in accordance with
the terms of this Agreement and the Notes and, in the case of
interest and facility fees, such non-payment shall continue for
three Business Days;
(b) Any Representation and Warranty shall at any time
prove to have been incorrect or misleading in any material
respect when made;
(c) The Borrower shall default in the performance or
observance of
(i) any term, covenant, condition or agreement
contained in Section 4.01(a) (insofar as such Section
requires the preservation of the corporate existence of the
Borrower), 4.01(f), 4.03, 4.04 through 4.09, 4.11 through
4.15, 5.01(e)(i) or 5.03(b);
(ii) any term, covenant, condition or agreement
contained in this Agreement (other than a term, covenant,
condition or agreement a default in the performance or
observance of which is elsewhere in this Section
specifically dealt with) and, if capable of being remedied,
such default shall continue unremedied for a period of 30
days; or
(iii) an Event of Default under (and as defined in)
the Long Term Facility shall have occurred and be
continuing;
(d) (i) The Borrower or any Restricted Subsidiary
shall fail to pay, in accordance with its terms and when due and
payable (after giving effect to any applicable grace period,
which in the case of any Guaranty of Indebtedness, shall be
deemed not less than five Business Days after the underlying
Indebtedness became due), any of the principal of or interest on
any Indebtedness (other than the Loans or the Long Term Loans) in
<PAGE> 25
an aggregate principal amount in excess of $10,000,000, (ii) the
maturity of any such Indebtedness shall, in whole or in part,
have been accelerated, or any such Indebtedness shall, in whole
or in part, have been required to be prepaid prior to the stated
maturity thereof, in accordance with the provisions of any
Contract evidencing, providing for the creation of or concerning
such Indebtedness, or (iii) (A) any event shall have occurred and
be continuing that permits (or, with the passage of time or the
giving of notice or both, would permit) any holder or holders of
such Indebtedness, any trustee or agent acting on behalf of such
holder or holders or any other Person so to accelerate such
maturity or require any such prepayment and such event has
continued unremedied and unwaived for a period of five Business
Days and (B) if the Contract evidencing, providing for the
creation of or concerning such Indebtedness provides for a cure
period for such event, such event shall not be cured prior to the
end of such cure period, except that no such failure to pay any
amount that has become due and payable by virtue of an
acceleration, no such acceleration or required prepayment, and no
such event, based solely upon a breach of any agreement or
condition that restricts the ability of the Borrower or any
Subsidiary to sell, pledge or otherwise dispose of Unrestricted
Margin Stock and that is contained in any Contract to which any
Bank or an "affiliate" (as defined in Regulation U) of any Bank
is a party shall constitute an Event of Default;
(e) A default shall be continuing under any Contract
(other than a Contract relating to Indebtedness, to which clause
(d) of this Section 6.01 is applicable) binding upon the Borrower
or any Restricted Subsidiary, except a default that, together
with all other such defaults, has not had and will not have a
Materially Adverse Effect on (i) the Borrower and the Restricted
Subsidiaries taken as a whole or (ii) the Agreement or the Notes;
(f) (i) The Borrower or any Subsidiary other than a
Real Estate Joint Venture Subsidiary that is not a Restricted
Subsidiary shall (A) commence a voluntary case under the Federal
bankruptcy laws (as now or hereafter in effect), (B) file a
petition seeking to take advantage of any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts, (C) consent to
or fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such
bankruptcy laws or other laws, (D) apply for, or consent to, or
fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or the like of itself or of a
substantial part of its assets, domestic or foreign, (E) admit in
writing its inability to pay, or generally not be paying, its
debts (other than those that are the subject of bona fide
disputes) as they become due, (F) make a general assignment for
the benefit of creditors, or (G) take any corporate action for
the purpose of effecting any of the foregoing; or
(ii) (A) A case or other proceeding shall be
commenced against the Borrower or any Subsidiary other than a
Real Estate Joint Venture Subsidiary that is not a Restricted
Subsidiary seeking (1) relief under the Federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic
or foreign, relating to bankruptcy, insolvency, reorganization,
<PAGE> 26
winding up or composition or adjustment of debts, or (2) the
appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower or any Subsidiary, or of all or any
substantial part of the assets, domestic or foreign, of the
Borrower or any Subsidiary, and such case or proceeding shall
continue undismissed or unstayed for a period of 60 days, or (B)
an order granting the relief requested in such case or proceeding
against the Borrower or any Subsidiary (including an order for
relief under such Federal bankruptcy laws) shall be entered;
(g) A judgment or order shall be entered against the
Borrower or any Restricted Subsidiary by any court, and (i) in
the case of a judgment or order for the payment of money, either
(A) such judgment or order shall continue undischarged and
unstayed for a period of 30 days in which the aggregate amount of
all such judgments and orders exceeds $10,000,000 or (B)
enforcement proceedings shall have been commenced upon such
judgment or order and (ii) in the case of any judgment or order
for other than the payment of money, such judgment or order
could, together with all other such judgments or orders, have a
Materially Adverse Effect on the Borrower and the Restricted
Subsidiaries taken as a whole;
(h) (i) Any Termination Event shall occur with respect
to any Benefit Plan, (ii) any Accumulated Funding Deficiency,
whether or not waived, shall exist with respect to any Benefit
Plan maintained by Borrower or an ERISA Affiliate, or with
respect to any other employee benefit plan maintained by Borrower
or an ERISA Affiliate that is subject to Section 412 of the Code,
(iii) the Borrower or any ERISA Affiliate shall engage in any
Prohibited Transaction involving any Benefit Plan maintained by
the Borrower or an ERISA Affiliate, (iv) the Borrower or any
ERISA Affiliate shall be in "default" (as defined in ERISA
Section 4219(c)(5)) with respect to payments owing to a
Multiemployer Benefit Plan as a result of the Borrower's or any
ERISA Affiliate's complete or partial withdrawal (as described in
ERISA Section 4203 or 4205) from such Multiemployer Benefit Plan,
(v) the Borrower or any ERISA Affiliate shall fail to pay when
due an amount (other than premium payments to the PBGC) that is
payable by it to the PBGC or to a Benefit Plan in accordance with
Title IV of ERISA, or (vi) a proceeding shall be instituted by a
fiduciary of any Multiemployer Benefit Plan against the Borrower
or any ERISA Affiliate to enforce ERISA Section 515 and such
proceeding shall not have been dismissed within 60 days
thereafter, except that no event or condition referred to in
clauses (i) through (vi) shall constitute an Event of Default if
it, together with all other such events or conditions at the time
existing, has not had, and will not have, a Materially Adverse
Effect on the Borrower and the Consolidated Subsidiaries taken as
a whole;
(i) Any person or group of persons acting in concert
acquires, in the aggregate, 50% or more of any class of voting
stock of the Borrower; or
(j) Any Real Estate Joint Venture Subsidiary that is
not a Restricted Subsidiary shall take any action, or have any
action taken against or with respect to it, voluntarily or
involuntarily, which would result in an Event of Default under
Section 6.01(f) but for the express reference to Real Estate
<PAGE> 27
Joint Venture Subsidiaries therein which individually or in the
aggregate with such actions taken by or against any other Real
Estate Joint Venture Subsidiary, has had or is reasonably likely
to have a Materially Adverse Effect on the Borrower and the
Consolidated Subsidiaries taken as a whole.
Section 6.02. Remedies upon Event of Default. During
the continuance of any Event of Default (other than one specified
in Section 6.01(f)) and in every such event, the Administrative
Agent, upon notice to the Borrower, may do either or both of the
following: (a) declare, in whole or, from time to time, in part,
the principal of and interest on the Loans and the Notes and all
other amounts owing under this Agreement to be, and the Loans and
the Notes and all such other amounts shall thereupon and to that
extent become, due and payable and (b) terminate, in whole or,
from time to time, in part, the Commitments. Upon the occurrence
of an Event of Default specified in Section 6.01(f),
automatically and without any notice to the Borrower, (a) the
principal of and interest on the Loans and the Notes and all
other amounts owing under this Agreement shall be due and payable
and (b) the Commitments shall terminate. Presentment, demand,
protest or notice of any kind (other than the notice provided for
in the first sentence of this Section 6.02) are hereby expressly
waived.
ARTICLE 7
ADDITIONAL CREDIT FACILITY PROVISIONS
Section 7.01. Mandatory Suspension and Conversion of
Fixed Rate Loans. A Bank's obligations to make, continue or
convert into Fixed Rate Loans shall be suspended, all such Bank's
outstanding Loans of that Type shall be converted on the last day
of their applicable Interest Periods (or, if earlier, in the case
of clause (c) below, on the last day such Bank may lawfully
continue to maintain Loans of that Type or, in the case of clause
(d) below, on the day determined by such Bank to be the last
Business Day before the effective date of the applicable
restriction) into, and all pending requests for the making or
continuation of or conversion into Loans of such Type by such
Bank shall be deemed requests for, Base Rate Loans, if:
(a) on or prior to the determination of an interest
rate for a Fixed Rate Loan of that Type for any Interest
Period, the Administrative Agent determines that for any
reason appropriate information is not available to it for
purposes of determining the Adjusted CD Rate or the Adjusted
Eurodollar Rate, as the case may be, for such Interest
Period;
(b) on or prior to the first day of any Interest
Period for a Fixed Rate Loan of that Type, such Bank
reasonably determines that the Adjusted CD Rate or the
Adjusted Eurodollar Rate, as the case may be, as determined
by the Administrative Agent for such Interest Period would
not accurately reflect the cost to such Bank of making,
continuing or converting into a Fixed Rate Loan of such Type
for such Interest Period;
<PAGE> 28
(c) at any time such Bank reasonably determines that
any Regulatory Change makes it unlawful or impracticable for
such Bank or its applicable Lending Office to make, continue
or convert any Fixed Rate Loan of that Type, or to comply
with its obligations hereunder in respect thereof; or
(d) such Bank reasonably determines that, by reason of
any Regulatory Change, such Bank or its applicable Lending
Office is restricted, directly or indirectly, in the amount
that it may hold of (i) a category of liabilities that
includes deposits by reference to which, or on the basis of
which, the interest rate applicable to Fixed Rate Loans of
that type is directly or indirectly determined or (ii) the
category of assets that includes Fixed Rate Loans of that
Type.
If, as a result of this Section 7.01, any Loan of any Bank that
would otherwise be made or maintained as or converted into a
Fixed Rate Loan of any Type for any Interest Period is instead
made or maintained as or converted into a Base Rate Loan, then,
unless the corresponding Loan of each of the other Banks is also
to be made or maintained as or converted into a Base Rate Loan,
such Loan shall be treated as being a Fixed Rate Loan, as the
case may be, of such Type for such Interest Period for all
purposes of this Agreement (including the timing, application and
proration among the Banks of interest payments, conversions and
prepayments) except for the calculation of the interest rate
borne by such Loan. The Administrative Agent shall promptly
notify the Borrower and each Bank of the existence or occurrence
of any condition or circumstance specified in clause (a) above,
and each Bank shall promptly notify the Borrower and the
Administrative Agent of the existence or occurrence of any
condition or circumstance specified in clause (b), (c) or (d)
above applicable to such Bank's Loans, but the failure by the
Administrative Agent or such Bank to give any such notice shall
not affect such Bank's rights hereunder.
Section 7.02. Regulatory Changes. If in the
reasonable determination of any Bank (a) any Regulatory Change or
the application of any provision of Applicable Law relating to
capital adequacy shall directly or indirectly (i) reduce the
amount of any sum received or receivable by such Bank with
respect to any Loan or the return to be earned by such Bank on
any Loan, (ii) impose a cost on such Bank or any Affiliate of
such Bank that is attributable to the making or maintaining of,
or such Bank's commitment to make, any Loan, (iii) require such
Bank or any Affiliate of such Bank to make any payment on or
calculated by reference to the gross amount of any amount
received by such Bank hereunder or under any Note or (iv) reduce,
or have the effect of reducing, the rate of return on the capital
of such Bank or any Affiliate of such Bank allocable to any Loan
or such Bank's commitment to make any Loan and (b) such
reduction, increased cost or payment shall not be fully
compensated for by an adjustment in the applicable rates of
interest payable hereunder, then the Borrower shall pay to such
Bank such additional amounts as such Bank reasonably determines
will, together with any adjustment in the applicable rates of
interest payable hereunder, fully compensate for such reduction,
increased cost or payment, such amounts to be paid, in the case
<PAGE> 29
of those applicable to prior periods, within 15 days after
request by such Bank for such payment or, in the case of those
applicable to future periods, on the dates specified, or
determined in accordance with a method specified, by such Bank.
Each Bank will promptly notify the Borrower of any Regulatory
Change of which it has knowledge that will entitle such Bank to
compensation pursuant to this Section 7.02, but the failure to
give such notice shall not affect such Bank's right to such
compensation provided that no Bank shall be entitled to receive
any payment to compensate it for such costs incurred prior to the
ninetieth day preceding the date on which the Bank gives such
notice to the Borrower.
Section 7.03. Change of Lending Office. If an event
occurs with respect to a Lending Office of any Bank that
obligates the Borrower to pay any amount under Section 1.10(c),
makes operable the provisions of clause (b) or (c) of Section
7.01 or entitles such Bank to make a claim under Section 7.02,
such Bank shall, if requested by the Borrower, use reasonable
efforts to designate another Lending Office or Offices the
designation of which will reduce the amount the Borrower is so
obligated to pay, eliminate such operability or reduce the amount
such Bank is so entitled to claim, provided that such designation
would not, in the sole and absolute discretion of such Bank, be
disadvantageous to such Bank in any manner or contrary to such
Bank's policies. Each Bank may at any time and from time to time
change any Lending Office and shall give notice of any such
change to the Administrative Agent and the Borrower. Except in
the case of a change in Lending Offices made at the request of
the Borrower, the designation of a new Lending Office by any Bank
shall not obligate the Borrower to pay any amount to such Bank
under Section 1.10(c), make operable the provisions of clause (b)
or (c) of Section 7.01 or entitle such Bank to make a claim under
Section 7.02 if such obligation, the operability of such clause
or such claim results solely from such designation and not from a
subsequent Regulatory Change.
Section 7.04. Funding Losses. The Borrower shall pay
to each Bank, upon request, such amount or amounts as such Bank
reasonably determines are necessary to compensate it for any
loss, cost or expense incurred by it as a result of (a) any
payment, prepayment or conversion of a Fixed Rate Loan on a date
other than the last day of an Interest Period for such Fixed Rate
Loan or (b) a Fixed Rate Loan for any reason not being made or
converted (other than as a result of such Bank wrongfully failing
to fund its Loan or permit such conversion), or any payment of
principal thereof or interest thereon not being made, on the date
therefor determined in accordance with the applicable provisions
of this Agreement. At the election of such Bank, and without
limiting the generality of the foregoing, but without
duplication, such compensation on account of losses may include
an amount equal to the excess of (i) the interest that would have
been received from the Borrower under this Agreement on any
amounts to be reemployed during an Interest Period or its
remaining portion over (ii) the interest component of the return
that such Bank reasonably determines it could have obtained had
it placed such amount on deposit in the interbank Dollar market
selected by it for a period equal to such Interest Period or its
remaining portion.
Section 7.05. Determinations. In making the
<PAGE> 30
determinations contemplated by Sections 7.01, 7.02 and 7.04, each
Bank may make such reasonable estimates, assumptions, allocations
and the like that such Bank in good faith determines to be
appropriate, but such Bank's selection thereof in accordance with
this Section 7.05, and the determinations made by such Bank on
the basis thereof, shall be final, binding and conclusive upon
the Borrower, except, in the case of such determinations, for
manifest errors in computation or transmission. Each Bank shall
furnish to the Borrower upon request a certificate outlining in
reasonable detail the computation of any amounts claimed by it
under this Article 7 and the assumptions underlying such
computations.
ARTICLE 8
THE AGENTS
Section 8.01. Appointment and Powers. Each Bank
hereby irrevocably appoints and authorizes The First National
Bank of Chicago, and The First National Bank of Chicago hereby
agrees, to act as the agent of such Bank under this Agreement
with such powers as are delegated to the Administrative Agent by
the terms hereof, together with such other powers as are
reasonably incidental thereto. The Administrative Agent's duties
shall be purely ministerial and it shall have no duties or
responsibilities except those expressly set forth in this
Agreement and shall not be required under any circumstances to
take any action that, in its judgment, is contrary to this
Agreement or Applicable Law or would expose it to Liability. The
Administrative Agent shall not, by reason of its serving as the
Administrative Agent, be a trustee or other fiduciary for any
Bank.
Section 8.02. Limitation on Administrative Agent's and
Co-Agents' Liability. Neither the Administrative Agent nor any
Co-Agent nor any of their respective directors, officers,
employees or agents shall be liable or responsible to any Bank
for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own
willful misconduct, gross negligence or knowing violations of
law. Neither the Administrative Agent nor any Co-Agent shall be
responsible to any Bank for (a) any recitals, statements,
representations or warranties contained in this Agreement or in
any certificate or other document referred to or provided for in,
or received by any of the Banks under, this Agreement, (b) the
validity, effectiveness or enforceability of this Agreement or
the Notes or any such certificate or other document or (c) any
failure by the Borrower to perform any of its obligations under
this Agreement or the Notes. The Administrative Agent may employ
agents and attorneys-in-fact selected by it in good faith and
shall not be responsible for the negligence or misconduct of any
such agents or attorneys-in-fact. The Administrative Agent shall
be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telex,
telecopier, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by
<PAGE> 31
the Administrative Agent. As to any matters not expressly
provided for by this Agreement, the Administrative Agent shall in
all cases be fully protected in acting, or in refraining from
acting, under this Agreement in accordance with instructions
signed by the Required Banks, and such instructions of the
Required Banks and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
Section 8.03. Defaults. The Administrative Agent
shall not be deemed to have knowledge of the occurrence of a
Default (other than the non-payment to it of facility fees or
principal of or interest on the Loans) unless the Administrative
Agent has received notice from a Bank or the Borrower specifying
such Default and stating that such notice is a "Notice of
Default". In the event that the Administrative Agent receives
such a notice of the occurrence of a Default, the Administrative
Agent shall give prompt notice thereof to the Banks. In the
event of any Default, the Administrative Agent shall (subject to
Section 8.05(b)) (a) in the case of a Default that constitutes an
Event of Default, take either or both of the actions referred to
in clauses (a) and (b) of the first sentence of Section 6.02 if
so directed by the Required Banks, and (b) in the case of any
Default, take such other action with respect to such Default as
shall be reasonably directed by the Required Banks; provided
that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall
not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall deem
advisable in the best interests of the Banks.
Section 8.04. Rights as a Bank. Each Person acting as
the Administrative Agent or as a Co-Agent that is also a Bank
shall, in its capacity as a Bank, have the same rights and powers
under this Agreement as any other Bank and may exercise the same
as though it were not acting as the Administrative Agent or as a
Co-Agent, and the term "Bank" or "Banks" shall include such
Person in its individual capacity. Each Person acting as the
Administrative Agent or as a Co-Agent and its Affiliates may
(without having to account therefor to any Bank) accept deposits
from, lend money to and generally engage in any kind of banking,
trust or other business with the Borrower and its Affiliates as
if it were not acting as the Administrative Agent or as a Co-
Agent, and such Person and its Affiliates may accept fees and
other consideration from the Borrower and its Affiliates for
services in connection with this Agreement or otherwise without
having to account for the same to the Banks.
Section 8.05. Indemnification. (a) The Banks agree
to indemnify the Administrative Agent and each Co-Agent (to the
extent not reimbursed by the Borrower hereunder), ratably on the
basis of the respective principal amounts of the Loans
outstanding made by the Banks (or, if no Loans are at the time
outstanding, ratably on the basis of their respective
Commitments), for any and all Liabilities, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Administrative
Agent or any such Co-Agent (including the costs and expenses that
the Borrower is obligated to pay hereunder) in any way relating
to or arising out of this Agreement or any other documents
<PAGE> 32
contemplated thereby or referred to therein or the transactions
contemplated thereby or the enforcement of any of the terms
thereof or of any such other documents, provided that no Bank
shall be liable for any of the foregoing to the extent they arise
from willful misconduct, gross negligence or knowing violations
of law by the party to be indemnified.
(b) Notwithstanding any other provision of this
Agreement, the Administrative Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall
be indemnified to its satisfaction by the Banks against any and
all Liability and expense that may be incurred by it by reason of
taking or continuing to take any such action.
Section 8.06. Non-Reliance on the Administrative
Agent, the Co-Agents and Other Banks. Each Bank agrees that it
has, independently and without reliance on the Administrative
Agent, any Co-Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its
own credit analysis of the Borrower and its own decision to enter
into this Agreement, and that it will, independently and without
reliance upon the Administrative Agent, any Co-Agent or any other
Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis
and decisions in taking or not taking action under this Agreement
or its Notes. Neither the Administrative Agent nor any Co-Agent
shall be required to keep itself informed as to the performance
or observance by the Borrower of this Agreement or any other
document referred to or provided for herein or to inspect the
properties or books of the Borrower or any Subsidiary. Except
for notices, reports and other documents and information
expressly required to be furnished to the Banks by the
Administrative Agent under this Agreement, neither the
Administrative Agent nor any Co-Agent shall have any duty or
responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or
business of the Borrower or any Subsidiary that may come into the
possession of the Administrative Agent or any of its Affiliates.
Section 8.07. Resignation or Removal of the
Administrative Agent. Subject to the appointment and acceptance
of a successor Administrative Agent as provided below, the
Administrative Agent may at any time give notice of its
resignation to the Banks and the Borrower and the Administrative
Agent may be removed at any time with cause by the Required
Banks. Upon receipt of any such notice of resignation or upon
any such removal, the Required Banks may, after consultation with
the Borrower, appoint a successor Administrative Agent which
shall be a Bank unless otherwise agreed to by the Borrower (which
in any case shall be a commercial bank with not less than
$250,000,000 of capital). If no successor Administrative Agent
shall have been so appointed by the Required Banks and shall have
accepted such appointment within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Administrative Agent,
then the retiring Administrative Agent may, on behalf of the
Banks and after consultation with the Borrower, appoint a
successor Administrative Agent. Upon the acceptance by any
Person of its appointment as a successor Administrative Agent,
such Person shall thereupon succeed to and become vested with all
<PAGE> 33
the rights, powers, privileges, duties and obligations of the
retiring Administrative Agent and the retiring Administrative
Agent shall be discharged from its duties and obligations as
Administrative Agent under this Agreement. After any retiring
Administrative Agent's resignation or removal as Administrative
Agent, the provisions of this Article 8 shall continue in effect
for its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as the Administrative Agent.
ARTICLE 9
MISCELLANEOUS
Section 9.01. Notices and Deliveries. (a) Manner of
Delivery. All notices, communications and materials (including
all Information) to be given or delivered pursuant to this
Agreement shall, except in those cases where a telephone notice
is expressly permitted, be in writing (which shall include telex
or telecopy transmissions). Notices under Sections 1.02, 1.03,
1.04(c), 1.06, 1.08 and 6.02 may be by telephone, promptly, in
the case of each notice other than one under Section 6.02,
confirmed in writing. In the event of a discrepancy between any
telephonic notice and any written confirmation thereof, such
written confirmation shall be deemed the effective notice except
to the extent that the Administrative Agent has acted in reliance
on such telephonic notice.
(b) Addresses. All notices, communications and
materials to be given or delivered pursuant to this Agreement
shall be given or delivered at the following respective addresses
and telex, telecopier and telephone numbers and to the attention
of the following individuals or departments:
(i) if to the Borrower, to it at:
Kemper Corporation C-4
Route 22 and Kemper Drive
Long Grove, Illinois 60049
Telex No.:
Telecopier No.: 708-320-4695
Telephone No.: 708-320-2412
Attention: Treasurer
with a copy to:
Kemper Corporation
Route 22 and Kemper Drive
Long Grove, Illinois 60049
Attention: Kathleen Gallichio,
General Counsel
(ii) if to the Administrative Agent, to it at:
The First National Bank of Chicago
One First National Plaza, Suite 0085
Chicago, Illinois 60670
<PAGE> 34
Telecopier No.: 312-732-4033
Telephone No.: 312-732-9565
Attention: Cynthia W. Priest
with a copy to:
The First National Bank of Chicago
One First National Plaza,
Suite 0353
Chicago, Illinois 60670
Attention: Fotis Theodore
Telecopier No.: 312-732-2038
Telephone No.: 312-732-7217
(iii) if to any Bank, to it at the address or
telex, telecopier or telephone number and to the
attention of the individual or department, set
forth below such Bank's name under the heading
"Notice Address" on Annex A or, in the case of a
Bank that becomes a Bank pursuant to an
assignment, set forth under the heading "Notice
Address" in the Notice of Assignment given to the
Borrower and the Administrative Agent with respect
to such assignment;
or at such other address or telex, telecopier or telephone number
or to the attention of such other individual or department as the
party to which such information pertains may hereafter specify
for the purpose in a notice specifically captioned "Notice of
Change of Address" given to (x) if the party to which such
information pertains is the Borrower, the Administrative Agent
and each Bank, (y) if the party to which such information
pertains is the Administrative Agent, the Borrower and each Bank
and (z) if the party to which such information pertains is a
Bank, the Borrower and the Administrative Agent.
(c) Effectiveness. Each notice and communication and
any material to be given or delivered pursuant to this Agreement
shall be effective or deemed delivered or furnished (i) if sent
by registered or certified mail, postage prepaid, return receipt
requested, on the third Business Day after such notice,
communication or material, addressed as above provided, is
delivered to a United States post office and a receipt therefor
is issued thereby, (ii) if given by any other means of physical
delivery, when such notice, communication or material is
delivered to the appropriate address as above provided, (iii) if
sent by telex, when such notice, communication or material is
transmitted to the appropriate number determined as above
provided in this Section 9.01 and the appropriate answer-back is
received, (iv) if sent by telecopier, when such notice,
communication or material is transmitted to the appropriate
telecopier number as above provided and is received at such
number, and (v) if given by telephone, when communicated to the
individual or any member of the department specified as the
individual or department to whose attention notices,
communications and materials are to be given or delivered, or, in
<PAGE> 35
the case of notice by the Administrative Agent to the Borrower
under Section 6.02 given by telephone as above provided, if any
individual or any member of the department to whose attention
notices, communications and materials are to be given or
delivered is unavailable at the time, to any other officer of the
Borrower, except that notices of a change of address, telex,
telecopier or telephone number or individual or department to
whose attention notices, communications and materials are to be
given or delivered, and notices to the Administrative Agent under
Sections 1.02, 1.03(c), 1.05, 1.07 and 1.09(g), shall not be
effective, and materials to be furnished to any Bank pursuant to
Article 5 shall not be deemed furnished, until received, and such
notices to the Administrative Agent shall not be deemed received
until received by the officer of the Administrative Agent
responsible, at the time, for the administration of this
Agreement.
(d) Reasonable Notice. Any requirement under
Applicable Law of reasonable notice by the Administrative Agent
or the Banks to the Borrower of any event in connection with, or
in any way related to, this Agreement or the Notes or the
exercise by the Administrative Agent or the Banks of their rights
hereunder and thereunder shall be met if notice of such event is
given to the Borrower in the manner prescribed above at least 10
days before (i) the date of such event or (ii) the date after
which such event will occur.
Section 9.02. Expenses; Indemnification. (a) Whether
or not any Loans are made hereunder, the Borrower shall:
(i) pay or reimburse the Administrative Agent,
each Co-Agent and each Bank for all transfer, documentary,
stamp and similar taxes, and all recording and filing fees,
payable in connection with, arising out of, or in any way
related to, the execution, delivery and performance of this
Agreement or the Notes or the making of the Loans;
(ii) pay or reimburse the Administrative Agent and
each Co-Agent for all costs and expenses (including fees and
disbursements of legal counsel and other experts employed or
retained by the Administrative Agent and each Co-Agent)
incurred by the Administrative Agent and each Co-Agent in
connection with, arising out of, or in any way related to
(A) the negotiation, preparation, execution and delivery of
(1) this Agreement and the Notes and (2) whether or not
executed, any waiver, amendment or consent under or to this
Agreement or the Notes, (B) the administration of and any
operations under this Agreement, (C) consulting with respect
to any matter in any way arising out of, related to, or
connected with, this Agreement, including (1) the
protection, preservation, exercise or enforcement of any of
the rights of the Administrative Agent or the Banks under or
related to this Agreement or the Notes or (2) the
performance of any of the obligations of the Administrative
Agent or the Banks under or related to this Agreement or the
Notes, or (D) protecting, preserving, exercising or
enforcing any of the rights of the Administrative Agent, the
Co-Agents or the Banks under or related to this Agreement or
the Notes;
<PAGE> 36
(iii) pay or reimburse each Bank for all costs and
expenses (including fees and disbursements of legal counsel
and other experts employed or retained by such Bank)
incurred by such Bank in connection with, arising out of, or
in any way related to (A) consulting during a Default with
respect to (i) the protection, preservation, exercise or
enforcement of any of its rights under or related to this
Agreement or the Notes or (ii) the performance of any of its
obligations under or related to this Agreement or the Notes
or (B) protecting, preserving, exercising or enforcing
during a Default any of its rights under or related to this
Agreement or the Notes; and
(iv) indemnify and hold each Indemnified Person
harmless from and against all losses (including judgments,
penalties and fines) suffered, and pay or reimburse each
Indemnified Person for all costs and expenses (including
fees and disbursements of legal counsel and other experts
employed or retained by such Indemnified Person) incurred,
by such Indemnified Person in connection with, arising out
of, or in any way related to (A) any Credit Agreement
Related Claim (whether asserted by such Indemnified Person
or the Borrower or any other Person), including the
prosecution or defense thereof and any litigation or
proceeding with respect thereto (whether or not, in the case
of any such litigation or proceeding, such Indemnified
Person is a party thereto), or (B) any investigation,
governmental or otherwise, arising out of, related to, or in
any way connected with, any Credit Agreement Related Claim,
whether or not asserted, except that the foregoing indemnity
shall not be applicable (I) to any loss suffered by any
Indemnified Person to the extent such loss is determined by
a judgment of a court that is binding on the Borrower and
such Indemnified Person, final and not subject to review on
appeal, to be the result of acts or omissions on the part of
such Indemnified Person constituting (w) gross negligence,
(x) willful misconduct, (y) knowing violations of law or (z)
in the case of claims by the Borrower against such
Indemnified Person, such Indemnified Person's failure to
observe any other standard applicable to it under any of the
other provisions of this Agreement or, but only to the
extent not waivable thereunder, Applicable Law, (II) in the
case of any action by an Indemnified Party against the
Borrower, where judgment is rendered wholly against such
Indemnified Person or (III) to any losses or costs and
expenses of any Bank incurred in connection with, or arising
out of, or in any way related to any Credit Agreement
Related Claim asserted by or against such Bank by or against
any other Bank or the Administrative Agent or any Co-Agent.
(b) All amounts payable by the Borrower under Section
9.02(a) shall be immediately due upon request for the payment
thereof.
Section 9.03. Rights Cumulative. Each of the rights
and remedies of the Administrative Agent, the Co-Agents and the
Banks under this Agreement and the Notes shall be in addition to
all of their other rights and remedies under this Agreement, the
Notes and Applicable Law, and nothing in this Agreement or the
Notes shall be construed as limiting any such rights or remedies.
<PAGE> 37
Section 9.04. Disclosures; Confidentiality. Unless
otherwise agreed to in writing by the Borrower, each of the
Administrative Agent, the Co-Agents and the Banks agrees:
(a) to keep confidential any information supplied to
it by the Borrower or its Subsidiaries or their respective agents
or representatives under or in connection with the Loan Documents
or the transactions contemplated thereby, whether furnished
before or after the date hereof, which (i) was not already in the
Administrative Agent's, such Co-Agent's or such Bank's possession
prior to any disclosure by the Borrower, any Subsidiary or their
respective agents or representatives, (ii) is not or does not
become public other than (A) as a result of an action by the
Administrative Agent, any Co-Agent or any Bank contrary to the
terms of this Section or (B) by the action of any other person or
entity contrary to the terms of a confidentiality agreement with
the Borrower to which such person or entity is bound and such
violation by such person or entity is known to the Administrative
Agent, such Co-Agent or such Bank, and (iii) is not derived
solely from such public information and other information not
otherwise subject to the terms of this Section (collectively,
"Confidential Information"); provided that the Administrative
Agent, each Co-Agent and each Bank may disclose Confidential
Information, as long as such disclosure does not and will not
violate the Administrative Agent's, such Co-Agent's or such
Bank's duties under applicable state or federal securities laws
regarding disclosure of nonpublic information, (I) to the
Administrative Agent, any Co-Agent or any Bank, (II) to the
extent required by Applicable Law or legal process reasonably
believed by the Administrative Agent, any Co-Agent or any Bank to
compel disclosure, (III) to counsel for the Administrative Agent,
such Co-Agent or such Bank or to their respective accountants,
(IV) to the extent necessary or appropriate in connection with
any litigation relating to a Credit Agreement Related Claim to
which the Administrative Agent, such Co-Agent or such Bank is a
party, (V) to the extent necessary or appropriate for the
purposes of protecting, preserving or exercising any rights under
the Loan Documents during the continuance of an Event of Default,
or (VI) to any actual or prospective assignee of or participant
in any or all of such Bank's rights and obligations under the
Loan Documents, provided that, prior to the disclosure of any
Confidential Information, each such actual or prospective
assignee or participant has agreed in writing for the benefit of
the Borrower that it will comply with the terms of this Section
to the same extent as if it were a Bank;
(b) to the extent reasonably practicable, provide the
Borrower with prompt notice of any request in a judicial,
administrative or governmental proceeding which requires the
Administrative Agent, any Co-Agent or any Bank to disclose any
Confidential Information so that the Borrower may seek an
appropriate protective order; provided, however, that if the
Administrative Agent, any Co-Agent or any Bank is, with the
advice of counsel, compelled to make immediate or prompt
disclosure of any Confidential Information or else stand liable
for contempt or other censure or penalty, the Administrative
Agent, such Co-Agent or such Bank will not delay disclosure in
order to (i) provide the Borrower with the notice to in this
paragraph (although the Administrative Agent, such Co-Agent or
<PAGE> 38
such Bank will endeavor to provide the Borrower with such prior
notice) or (ii) preserve the benefits that the Borrower may
realize from a protective order; and
(c) in the case of any Bank, any Co-Agent or the
Administrative Agent, on or after the date such Bank (including
the Administrative Agent and any Co-Agent in its capacity as a
Bank) ceases to have any Commitments or outstanding Loans or
other amounts owing to it hereunder, and in the case of the
Agent, ceases to act as Administrative Agent hereunder, upon the
Borrower's written request, endeavor to deliver to the Borrower
or destroy all Confidential Information in written or tangible
form identified in such request and all written or tangible
material reflecting any Confidential Information, without
retaining any copies, summaries, analyses or extracts thereof,
except that none of the Administrative Agent, the Co-Agents and
the Banks shall be obligated to deliver or destroy any written or
tangible materials, including summaries, analyses and extracts
which reflect any Confidential Information or contain any
Confidential Information which has been substantially integrated
with information not subject to the confidential treatment
discussed in this Section so long as the Administrative Agent,
such Co-Agent or such Bank continues to keep such materials
confidential in accordance with the terms of this Section.
Section 9.05. Amendments; Waivers. Any term,
covenant, agreement or condition of this Agreement or the Notes
may be amended, and any right under this Agreement or the Notes
may be waived, if, but only if, such amendment or waiver is in
writing and is signed by the Required Banks and, if the rights
and duties of the Administrative Agent are affected thereby, by
the Administrative Agent and, in the case of an amendment, by the
Borrower; provided, however, that no amendment or waiver shall be
effective, unless in writing and signed by each Bank affected
thereby, to the extent it (i) changes the amount of such Bank's
Commitment, (ii) reduces the principal of or the rate of interest
on such Bank's Loans or Notes or the facility fees payable to
such Bank hereunder, (iii) postpones any date fixed for any
payment of principal of or interest on such Bank's Loans or Notes
or the facility fees payable to such Bank hereunder or (iv)
amends this Section 9.05 or any provision of this Agreement
requiring the consent or other action of all of the Banks.
Unless otherwise specified in such waiver, a waiver of any right
under this Agreement or the Notes shall be effective only in the
specific instance and for the specific purpose for which given.
No election not to exercise, failure to exercise or delay in
exercising any right, nor any course of dealing or performance,
shall operate as a waiver of any right of the Administrative
Agent, any Co-Agent or any Bank under this Agreement, the Notes
or Applicable Law, nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or
the exercise of any other right of the Administrative Agent, any
Co-Agent or any Bank under this Agreement, the Notes or
Applicable Law.
Section 9.06. Set-Off; Suspension of Payments and
Performance. The Administrative Agent, each Co-Agent and each
Bank is hereby authorized by the Borrower, at any time and from
time to time, without notice, (a) during any Event of Default, to
set off against, and to appropriate and apply to the payment of,
<PAGE> 39
the Liabilities of the Borrower under this Agreement and the
Notes (whether owing to such Person or to any other Person that
is the Administrative Agent, a Co-Agent or a Bank and whether
matured or unmatured, fixed or contingent or liquidated or
unliquidated) any and all Liabilities owing by such Person or any
of its Affiliates to the Borrower (whether payable in Dollars or
any other currency, whether matured or unmatured and, in the case
of Liabilities that are deposits, whether general or special,
time or demand and however evidenced and whether maintained at a
branch or office located within or without the United States) and
(b) during any Default, to suspend the payment and performance of
such Liabilities owing by such Person or its Affiliates and, in
the case of Liabilities that are deposits, to return as unpaid
for insufficient funds any and all checks and other items drawn
against any such deposits.
Section 9.07. Sharing of Recoveries. (a) Each Bank
agrees that, if, for any reason, including as a result of (i) the
exercise of any right of counterclaim, set-off, banker's lien or
similar right, (ii) its claim in any applicable bankruptcy,
insolvency or other similar law being deemed secured by a Debt
owed by it to the Borrower, including a claim deemed secured
under section 506 of the Bankruptcy Code, or (iii) the allocation
of payments by the Administrative Agent or the Borrower in a
manner contrary to the provisions of Section 1.11, such Bank
shall receive payment of a proportion of the aggregate amount due
and payable to it hereunder as principal or interest or facility
fees that is greater than the proportion received by any other
Bank in respect of the aggregate of such amounts due and payable
to such other Bank hereunder, then the Bank receiving such
proportionately greater payment shall purchase participations
(which it shall be deemed to have done simultaneously upon the
receipt of such payment) in the Loans and the rights of the other
Banks hereunder so that all such recoveries with respect to such
amounts due and payable hereunder (net of costs of collection)
shall be pro rata based on the outstanding Loans held by each
Bank prior to its giving effect to such set-off; provided that if
all or part of such proportionately greater payment received by
the purchasing Bank is thereafter recovered by or on behalf of
the Borrower from such Bank, such purchases shall be rescinded
and the purchase prices paid for such participations shall be
returned to such Bank to the extent of such recovery, but without
interest (unless the purchasing Bank is required to pay interest
on the amount recovered to the Person recovering such amount, in
which case the selling Bank shall be required to pay interest at
a like rate). The Borrower expressly consents to the foregoing
arrangements and agrees that any holder of a participation in any
rights hereunder so purchased or acquired pursuant to this
Section 9.07(a) shall, with respect to such participation, be
entitled to all of the rights of a Bank under Sections 7.02,
7.04, 7.05, 9.02 and 9.06 and may exercise any and all rights of
set-off with respect to such participation as fully as though the
Borrower were directly indebted to the holder of such
participation for Loans in the amount of such participation.
(b) Each Bank agrees to exercise any right of
counterclaim, set-off, banker's lien or similar right that it may
have in respect of the Borrower in a manner so as to apportion
the amount subject to such exercise, on a pro rata basis, between
(i) obligations of the Borrower for amounts subject to the
<PAGE> 40
sharing provisions of Section 9.07(a) and (ii) other Liabilities
of the Borrower.
Section 9.08. Assignments and Participations.
(a) Assignments. The Borrower may not assign any of
its rights or obligations under this Agreement or the Notes
without the prior written consent of each Bank, and no assignment
of any such obligation shall release the Borrower therefrom
unless each Bank shall have consented to such release in a
writing specifically referring to the obligation from which the
Borrower is to be released. No Bank may assign any or all of its
rights and obligations under this Agreement and the Notes to any
person (other than another Bank) provided that (i) any Bank may
assign any or all of its rights under this Agreement and the
Notes as security to a Federal Reserve Bank or to an Affiliate of
such Bank, and, (ii) with the consent of the Borrower which
consent shall not be unreasonably withheld, any Bank may assign
any or all of such rights and obligations to one or more
commercial banks. Upon request, against receipt of the existing
Notes of the assignor Bank, the Borrower shall execute new Notes
to the assignee and, in the case of partial assignments, the
assignor Bank appropriately reflecting such assignment.
(b) Participations. Each Bank may from time to time
sell or otherwise grant participations to one or more Eligible
Participants in any or all of its rights and obligations under
this Agreement and the Notes without the consent of the Borrower;
provided, however, that (i) no Bank may grant to any holder of a
participation the right to require such Bank to take or omit to
take any action hereunder except that a Bank may grant to any
such holder the right to require such holder's consent to (A)
reduce the principal of or the rate of interest on such Bank's
Loans or Notes or the facility fees payable to such Bank
hereunder, (B) postpone any date fixed for any payment of
principal of or interest on such Bank's Loans or Notes or the
facility fees payable to such Bank hereunder or (C) the
assignment by the Borrower of any of its rights or obligations
under the Loan Documents, (ii) each participation agreement shall
provide that the holder of the participation shall be subject to
the obligations set forth in Section 9.04 to the same extent as
if it were a Bank, and (iii) no such grant of a participation
shall relieve any Bank of its obligations hereunder and the
Borrower shall be entitled to deal solely with the Banks (and
their respective assignees) for all purposes of this Agreement
and the Notes.
(c) Rights of Assignees and Participants. Each
assignee of the rights of any Bank under this Agreement and the
Notes, if and to the extent the applicable assignment agreement
so provides, (i) shall, with respect to its assignment, be
entitled to all of the rights of a Bank and (ii) may exercise any
and all rights of set-off or banker's lien with respect thereto.
Each assignee of, and each holder of a participation in, the
rights of any Bank under this Agreement, if and to the extent the
applicable assignment or participation agreement so provides,
shall be entitled to all the rights of a Bank under Article 7 (as
fully, in the case of a participant, as though it were a Bank);
provided, however, that no assignee and no holder of a
participation shall be entitled to any amounts that would
<PAGE> 41
otherwise be payable to it with respect to its assignment or
participation under Section 7.02 unless (x) such amounts are
payable in respect of Regulatory Changes that become effective or
are implemented or first required or expected to be complied with
after the date the applicable assignment or participation
agreement was executed or (y) in the case of participations, such
amounts would have been payable to the Bank that granted such
participation if such participation granted had not been made.
Section 9.09. Governing Law. This Agreement and the
Notes (including matters relating to the Maximum Permissible
Rate) shall be construed in accordance with and governed by the
law of the State of New York (without giving effect to its
conflict of laws principles).
Section 9.10. Judicial Proceedings; Waiver of Jury
Trial. Any judicial proceeding brought against the Borrower with
respect to any Credit Agreement Related Claim may be brought in
any court of competent jurisdiction in the City of New York, and,
by execution and delivery of this Agreement, the Borrower (a)
accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any final, nonappealable
judgment rendered thereby in connection with any Credit Agreement
Related Claim and (b) irrevocably waives any objection it may now
or hereafter have as to the venue of any such proceeding brought
in such a court or that such a court is an inconvenient forum.
The Borrower hereby waives personal service of process and
consents that service of process upon it may be made by certified
or registered mail, return receipt requested, at its address
specified or determined in accordance with the provisions of
Section 9.01(b), and service so made shall be deemed completed on
the third Business Day after such service is deposited in the
mail. Nothing herein shall affect the right of the
Administrative Agent, any Co-Agent, any Bank or any other
Indemnified Person to serve process in any other manner permitted
by law or shall limit the right of the Administrative Agent, any
Co-Agent, any Bank or any other Indemnified Person to bring
proceedings against the Borrower in the courts of any other
jurisdiction. Any judicial proceeding by the Borrower against
the Administrative Agent, any Co-Agent or any Bank involving any
Credit Agreement Related Claim shall be brought only in a court
located in, in the case of the Administrative Agent, the City and
State of New York and, in the case of a Co-Agent or a Bank, the
jurisdiction in which such Co-Agent's or Bank's principal United
States office is located. THE BORROWER, THE ADMINISTRATIVE
AGENT, EACH CO-AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING ANY CREDIT AGREEMENT RELATED
CLAIM.
Section 9.11. LIMITATION OF LIABILITY. NEITHER THE
ADMINISTRATIVE AGENT NOR THE CO-AGENTS NOR THE BANKS NOR ANY
OTHER INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT
TO, AND THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO
SUE FOR, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED
BY THE BORROWER IN CONNECTION WITH ANY CREDIT AGREEMENT RELATED
CLAIM.
Section 9.12. Reference Banks. Each Reference Bank
shall furnish to the Administrative Agent timely information for
<PAGE> 42
the purpose of determining the CD Rate and the Eurodollar Rate.
If any Reference Bank shall notify the Administrative Agent that
thenceforth it shall not be able to furnish such information in a
timely manner or shall assign all of its Loans or Commitment to a
Person that is not an Affiliate of such Reference Bank, the
Administrative Agent shall, with the consent of the Required
Banks and after consultation with the Borrower, appoint another
Bank as a Reference Bank in place of such Reference Bank.
Section 9.13. Severability of Provisions. Any
provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or affecting
the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by Applicable Law, the
Borrower hereby waives any provision of Applicable Law that
renders any provision hereof prohibited or unenforceable in any
respect.
Section 9.14. Counterparts. This Agreement may be
signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto were
upon the same instrument.
Section 9.15. Survival of Obligations. Except as
otherwise expressly provided herein, the rights and obligations
of the Borrower, the Administrative Agent, the Banks and the
other Indemnified Persons under Sections 1.03, 1.08, 1.09, 1.10
and 1.11 and Articles 8 and 9 shall survive the Repayment Date.
Section 9.16. Entire Agreement. This Agreement and
the Notes embody the entire agreement among the Borrower, the
Administrative Agent, the Co-Agents and the Banks relating to the
subject matter hereof and supersede all prior agreements,
representations and understandings, if any, relating to the
subject matter hereof.
Section 9.17. Successors and Assigns. All of the
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns.
Section 9.18. Nonreliance on Margin Stock. Each Bank
represents and warrants to the Borrower that it in good faith is
not relying upon any Margin Stock as collateral in the extension
or maintenance of the credit provided for in this Agreement.
ARTICLE 10
INTERPRETATION
Section 10.01. Definitional Provisions. (a) Defined
Terms. For the purposes of this Agreement:
"Accumulated Funding Deficiency" has the meaning
ascribed to that term in Section 302 of ERISA.
<PAGE> 43
"Adjusted CD Rate" means, for any Interest Period, a
rate per annum equal to the sum (rounded upward, if necessary, to
the next higher 1/100 of 1%) of (i) the rate obtained by dividing
(A) the CD Rate for such Interest Period by (B) a percentage
equal to 1 minus the Reserve Requirement in effect from time to
time during such Interest Period plus (ii) the Assessment Rate in
effect from time to time during such Interest Period.
"Adjusted Eurodollar Rate" means, for any Interest
Period, a rate per annum (rounded upward, if necessary, to the
next higher 1/16 of 1%) equal to the rate obtained by dividing
(i) the Eurodollar Rate for such Interest Period by (ii) a
percentage equal to 1 minus the Reserve Requirement in effect
from time to time during such Interest Period.
"Administrative Agent" means The First National Bank of
Chicago, as agent for the Banks under the Credit Agreement, and
any successor Administrative Agent appointed pursuant to Section
8.07.
"Affiliate" means, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such first Person; unless otherwise specified,
"Affiliate" means an Affiliate of the Borrower.
"Agent's Office" means the address of the
Administrative Agent specified in or determined in accordance
with the provisions of Section 9.01(b).
"Agreement" means this Agreement, including all
schedules, annexes and exhibits hereto.
"Agreement Date" means the date set forth as such on
the last signature page hereof.
"Applicable Facility Fee Rate" means, a facility fee on
the daily amount of each Bank's Commitment (without regard to
usage) for each day from the Agreement Date to the Termination
Date at a rate of .225% per annum.
"Applicable Law" means, anything in Section 9.09 to the
contrary notwithstanding, (i) all applicable common law and
principles of equity and (ii) all applicable provisions of all
(A) constitutions, statutes, rules, regulations and orders of
governmental bodies (including, but not limited to, guidelines or
policies published or imposed by governmental bodies or other
bodies having supervisory authority over the Person subject to
such Applicable Law), (B) Governmental Approvals and (C) orders,
decisions, judgments and decrees of all courts (whether at law or
in equity or admiralty) and arbitrators.
"Applicable Margin" means, on the Agreement Date, in
the case of Base Rate Loans, 0%, in the case of Eurodollar Rate
Loans, .50%, and, in the case of CD Rate Loans, .625%.
Thereafter, the Applicable Margin shall be adjusted, such
adjustment to be based on the aggregate utilized portion of the
Commitments as of any day in accordance with the following
schedule:
<PAGE> 44
Applicable Margin Applicable Margin
For Base Rate For Eurodollar Applicable Margin
Loans Rate Loans For CD Rate Loans
Greater Greater Greater
33-1/3% than 33-1/3% 33-1/3% than 33-1/3% 33-1/3% than 33-1/3%
Commitment Commitment Commitment Commitment Commitment Commitment
Utilization Utilization Utilization Utilization Utilization Utilization
0% 0% .50% .75% .625% .875%
Adjustments to the Applicable Margin, if any, shall be
effective, to the extent such adjustment occurs as a result of
changes in utilization of the Commitments, on the day such change
occurs.
"Assessment Rate" means, at any time, the annual rate
(rounded upwards, if necessary, to the next higher 1/100th of 1%)
then estimated by the Administrative Agent as the net annual
assessment rate that will be employed in determining the annual
assessment payable by The First National Bank of Chicago to the
Federal Deposit Insurance Corporation (or any successor) for
insuring domestic Dollar time deposits at such bank.
"Bank" means (i) any Person listed on the signature
pages hereof following the Administrative Agent or (ii) any
successor or assignee of any Bank, including any assignee
pursuant to Section 1.13 or Section 9.08(a).
"Base Financial Statements" means the most recent,
audited, consolidated balance sheet of the Borrower and the
Consolidated Subsidiaries referred to in Schedule 5.02(a) and the
related statements of income, retained earnings and, as
applicable, changes in financial position or cash flows for the
fiscal year ended with the date of such balance sheet.
"Base Rate" means, for any day, a rate per annum equal
to the higher of (i) the Prime Rate for such day and (ii) the sum
of the Federal Funds Rate for such day plus 1/2% per annum.
"Base Rate Loan" means any Loan the interest on which
is, or is to be, as the context may require, computed on the
basis of the Base Rate.
"Benefit Plan" means, at any time, any employee benefit
plan (other than a Multiemployer Benefit Plan), subject to Title
IV of ERISA in respect of which Borrower or any ERISA Affiliate
is, or at any time within five years immediately preceding the
time in question was, an "Employer" (as defined in Section 3(5)
of ERISA).
"Borrower" means Kemper Corporation, a Delaware
corporation, and its successors and assigns.
"Business Day" means any day other than a Saturday,
Sunday or other day on which banks in New York City or Chicago
are authorized to close.
<PAGE> 45
"Capital Security" means, with respect to any Person,
(i) any share of capital stock of such Person or (ii) any
security convertible into, or any option, warrant or other right
to acquire, any share of capital stock of such Person.
"CD Rate" means, for any Interest Period, the rate per
annum determined by the Administrative Agent to be the average
(rounded upward, if necessary, to the next higher 1/100 of 1%) of
the rates per annum determined, respectively, by each Reference
Bank to be the prevailing rate per annum (similarly rounded) bid
at approximately 9:00 a.m. (Chicago time) (or as soon thereafter
as is practicable) on the first day of such Interest Period by
two or more New York certificate of deposit dealers of recognized
standing selected by such Reference Bank for the purchase at face
value of certificates of deposit of such Reference Bank in the
secondary market in an amount comparable to the principal amount
of the CD Rate Loan of such Reference Bank to which such Interest
Period applies and with a maturity comparable to such Interest
Period. If any Reference Bank is unable or otherwise fails to
furnish the Administrative Agent with appropriate rate
information in a timely manner, the Administrative Agent shall
determine the CD Rate based on the rate information furnished by
the remaining Reference Banks.
"CD Rate Loan" means any Loan, other than a Bid Loan,
the interest on which is, or is to be, as the context may
require, computed on the basis of the Adjusted CD Rate.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commitment" of any Bank means (i) the amount set forth
opposite such Bank's name under the heading "Commitment" on Annex
A, or, in the case of a Bank that becomes a Bank pursuant to an
assignment, the amount of the assignor's Commitment assigned to
such Bank, in either case as the same may be reduced from time to
time pursuant to Section 1.07 or increased or reduced from time
to time pursuant to assignments in accordance with Section
9.08(a), or (ii) as the context may require, the obligation of
such Bank to make Loans in an aggregate unpaid principal amount
not exceeding such amount.
"Consolidated Indebtedness" means, at any time, the
consolidated Indebtedness of the Borrower and the Consolidated
Subsidiaries as of such time, provided that, for purposes of
calculation of the covenant set forth in Section 4.13,
Consolidated Indebtedness shall not include (i) Indebtedness of
Kemper Clearing Corp. incurred in the ordinary course of its
clearing business to the extent that assets of Kemper Clearing
Corp. have been pledged to secure such Indebtedness pursuant to
agreements to pledge or the like in the ordinary course of
business, (ii) Real Estate Joint Venture Indebtedness, or
Guaranties thereof, of Real Estate Joint Venture Subsidiaries
which are not Consolidated Subsidiaries and (iii) Real Estate
Joint Venture Indebtedness, or Guaranties thereof, of Real Estate
Joint Venture Subsidiaries which are Consolidated Subsidiaries to
the extent of the value of the assets securing such Indebtedness
or, in the case of any such Guaranty, to the extent of the value
of the assets which, upon funding such Guaranty, would either be
<PAGE> 46
owned directly or indirectly by the guarantor or would secure the
obligations owed to the guarantor as a result of such funding.
"Consolidated Net Worth" means, at any time, the
consolidated stockholders' equity of the Borrower and the
Consolidated Subsidiaries provided that, for purposes of
calculating the covenant contained in Section 4.13, Consolidated
Net Worth shall exclude (a) the value of all assets of Kemper
Clearing Corp. or Real Estate Joint Venture Subsidiaries pledged
to secure Indebtedness excluded from Consolidated Indebtedness in
accordance with the definition thereof to the extent such value
exceeds such secured Indebtedness, (b) the value of all assets
pledged to secure collateralized mortgage obligations,
collateralized bond obligations or other similar obligations
excluded from the definition of "Indebtedness" in an amount equal
to such obligations to the extent such value exceeds such
obligations and (c) unrealized gain (or loss) on fixed rate
securities held as investments by the Borrower or any of its
Consolidated Subsidiaries.
"Consolidated Subsidiary" means, with respect to any
Person at any time, any Subsidiary or other Person the accounts
of which would be consolidated with those of such first Person in
its consolidated financial statements as of such time; unless
otherwise specified, "Consolidated Subsidiary" means a
Consolidated Subsidiary of the Borrower.
"Contract" means (i) any agreement (whether bi-lateral
or uni-lateral or executory or non-executory and whether a Person
entitled to rights thereunder is so entitled directly or as a
third-party beneficiary), including an indenture, lease or
license, (ii) any deed or other instrument of conveyance, (iii)
any certificate of incorporation or charter and (iv) any bylaw.
"Credit Agreement Related Claim" means any claim
(whether sounding in tort, contract or otherwise) in any way
arising out of, related to, or connected with, this Agreement,
the Notes or the relationship established hereunder or
thereunder, whether such claim arises or is asserted before or
after the Agreement Date or before or after the Repayment Date.
"Debt" means any Liability that constitutes "debt" or
"Debt" under section 101(11) of the Bankruptcy Code or under the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any analogous Applicable Law.
"Default" means any condition or event that constitutes
an Event of Default or that with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default.
"Dollars" and the sign "$" mean lawful money of the
United States of America.
"Domestic Lending Office" of any Bank means (i) the
branch or office of such Bank set forth below such Bank's name
under the heading "Domestic Lending Office" on Annex A or, in the
case of a Bank that becomes a Bank pursuant to an assignment, the
branch or office of such Bank designated by such assignee Bank in
a notice entitled "Domestic Lending Office" given to the Borrower
and the Administrative Agent with respect to such assignment or
<PAGE> 47
(ii) such other branch or office of such Bank designated by such
Bank from time to time as the branch or office at which its
Domestic Rate Loans are to be made or maintained. Each Bank may
from time to time designate separate Domestic Lending Offices for
its Base Rate Loans and CD Rate Loans, in which case all
references to the Domestic Lending Office of such Bank shall be
deemed to refer to either or both of such Offices, as the context
may require.
"Domestic Note" means any promissory note in the form
of Exhibit A-1.
"Domestic Rate Loan" means any CD Rate Loan or Base
Rate Loan.
"EBIT" means, for any period, the net income or loss
from continuing operations of the Borrower and its Consolidated
Subsidiaries for such period as reflected in the Borrower's
consolidating statements of income as required by Sections
5.01(a)(i) and 5.01(b)(i), from the operations reflected in the
segments designated, as of June 30, 1993, "Asset Management,"
"Securities Brokerage" and "Corporate and Other," plus, to the
extent deducted in determining such net income or loss, (i)
federal income tax expense, (ii) interest expense of the Borrower
and Kemper Financial Companies, Inc. (in each case, on an
unconsolidated basis but excluding intercompany items between the
Borrower and its Subsidiaries) and (iii) any special mention
litigation or restructuring charges of Kemper Securities, Inc.
taken during such period.
"Eligible Participant" means (i) any commercial bank,
savings and loan institution or savings bank organized under the
laws of the United States, or any State thereof, (ii) any
commercial bank organized under the laws of any other country
that is a member of the Organization for Economic Cooperation and
Development ("OECD"), or a political subdivision of any such
country, provided that such bank is acting through a branch,
agency or Affiliate located in the country in which it is
organized or another country that is also a member of the OECD,
(iii) the central bank of any country that is a member of the
OECD or (iv) any other financial institution of recognized
standing other than an insurance company, pension fund or mutual
fund except to the extent the Borrower has consented to such
insurance company, pension fund or mutual fund.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" means any Person, including a
Subsidiary or other Affiliate, that is a member of any group of
organizations within the meaning of Code Sections 414(b), (c),
(m) or (o) of which the Borrower is a member.
"Eurodollar Business Day" means any Business Day on
which dealings in Dollar deposits are carried on in the London
interbank market and on which commercial banks are open for
domestic and international business (including dealings in Dollar
deposits) in London, England.
"Eurodollar Lending Office" of any Bank means (i) the
<PAGE> 48
branch or office of such Bank set forth below such Bank's name
under the heading "Eurodollar Lending Office" on Annex A or, in
the case of a Bank that becomes a Bank pursuant to an assignment,
the branch or office of such Bank designated by such assignee
Bank in a notice entitled "Eurodollar Lending Office" in the
Notice of Assignment given to the Borrower with respect to such
assignment or (ii) such other branch or office of such Bank
designated by such Bank from time to time as the branch or office
at which its Eurodollar Rate Loans are to be made or maintained.
"Eurodollar Note" means any promissory note in the form
of Exhibit A-2.
"Eurodollar Rate" means, for any Interest Period, the
rate per annum determined by the Administrative Agent to be the
average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the rates per annum determined, respectively, by each
Reference Bank to be the rate at which such Reference Bank
offered or would have offered to place with first-class banks in
the London interbank market deposits in Dollars in amounts
comparable to the Eurodollar Rate Loan of such Reference Bank to
which such Interest Period applies, for a period equal to such
Interest Period, at 11:00 a.m. (London time) on the second
Eurodollar Business Day before the first day of such Interest
Period. If any Reference Bank is unable or otherwise fails to
furnish the Administrative Agent with appropriate rate
information in a timely manner, the Administrative Agent shall
determine the Eurodollar Rate based on the rate information
furnished by the remaining Reference Banks.
"Eurodollar Rate Loan" means any Loan the interest on
which is, or is to be, as the context may require, computed on
the basis of the Adjusted Eurodollar Rate.
"Event of Default" means any of the events specified in
Section 6.01.
"Extension Date" has the meaning set forth in Section
1.01.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if no
such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate
(similarly rounded) quoted to The First National Bank of Chicago
on such day on such transactions as determined by the
Administrative Agent.
"Fixed Rate Loan" means any CD Rate Loan or Eurodollar
Rate Loan.
"Generally Accepted Accounting Principles" means (i) in
the case of the Base Financial Statements, generally accepted
<PAGE> 49
accounting principles at the time of the issuance of the Base
Financial Statements, and (ii) in all other cases, the accounting
principles followed in the preparation of the Base Financial
Statements.
"Governmental Approval" means any authorization,
consent, approval, license or exemption of, registration or
filing with, or report or notice to, any governmental unit.
"Guaranty" of any Person means any obligation,
contingent or otherwise, of such Person (i) to pay any Liability
of any other Person or to otherwise protect, or having the
practical effect of protecting, the holder of any such Liability
against loss (whether such obligation arises by virtue of such
Person being a partner of a partnership or participant in a joint
venture or by agreement to pay, to keep well, to purchase assets,
goods, securities or services or to take or pay, or otherwise) or
(ii) incurred in connection with the issuance by a third Person
of a Guaranty of any Liability of any other Person (whether such
obligation arises by agreement to reimburse or indemnify such
third Person or otherwise). The word "Guarantee" when used as a
verb has the correlative meaning.
"Indebtedness" of any Person means (whether, in each
case, such obligation is with full or limited recourse) (i) any
obligation of such Person for borrowed money, (ii) any obligation
of such Person evidenced by a bond, debenture, note or other
similar instrument, (iii) any obligation of such Person to pay
the deferred purchase price of property or services, except a
trade account payable that arises in the ordinary course of
business but only if and so long as the same is payable on
customary trade terms, (iv) any obligation of such Person as
lessee under a capital lease, (v) any Mandatorily Redeemable
Stock of such Person owned by any Person other than such Person
or an Indebtedness-Free Subsidiary of such Person (the amount of
such Mandatorily Redeemable Stock to be determined for this
purpose as the higher of the liquidation preference of and the
amount payable upon redemption of such Mandatorily Redeemable
Stock), (vi) any obligation of such Person to purchase securities
or other property that arises out of or in connection with the
sale of the same or substantially similar securities or property,
provided, that for the purpose of calculating compliance with
Section 4.13, Indebtedness of the type set forth in this clause
(vi) shall only be included to the extent such Indebtedness
exceeds the fair market value of the securities or other property
required to be so purchased, (vii) any non-contingent obligation
of such Person to reimburse any other Person in respect of
amounts paid under a letter of credit or other Guaranty issued by
such other Person, to the extent that such reimbursement
obligation remains outstanding after it becomes non-contingent,
(viii) any obligation with respect to an interest rate or
currency swap or similar obligation obligating such Person to
make payments, whether periodically or upon the happening of a
contingency, except that if any agreement relating to such
obligation provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligation shall be the net
amount thereof, (ix) any Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right,
<PAGE> 50
contingent or otherwise, to be secured by) a Lien (other than
Liens incurred in the ordinary course of business in connection
with securities lending activities) on any asset of such Person,
and (x) Indebtedness of others Guaranteed by such Person,
provided, that if Indebtedness of the type set forth in this
clause (x) is undertaken in connection with an acquisition,
disposition, restructuring or refinancing of assets, stock or
other property by the Borrower or any of its Subsidiaries, such
Indebtedness shall be included for the purposes of calculating
compliance with Section 4.13 only to the extent such Indebtedness
exceeds the sum of the value of the assets, stock or other
property, directly or indirectly, securing such Indebtedness and
any reserve maintained in connection with such assets, stock or
other property; provided, that, the term "Indebtedness" shall not
include (a) nonrecourse collateralized mortgage obligations,
nonrecourse collateralized bond obligations or similar
nonrecourse collateralized obligations or (b) letters of credit
or bonds or similar instruments issued in the normal course of
business by the Borrower or any Subsidiary guaranteeing
Indebtedness of third parties except to the extent the obligation
under any such instrument has become non-contingent.
"Indebtedness-Free Subsidiary" means any wholly owned
Subsidiary that has no Indebtedness other than the Loans and
Indebtedness owing to the Borrower or another Indebtedness-Free
Subsidiary.
"Indemnified Person" means any Person that is, or at
any time was, the Administrative Agent, a Co-Agent, a Bank, an
Affiliate of the Administrative Agent, a Co-Agent or a Bank or a
director, officer, employee or agent of any such Person.
"Information" means written data, certificates,
reports, statements (including financial statements), opinions of
counsel, documents and other information.
"Intellectual Property" means (i) (A) patents and
patent rights, (B) trademarks, trademark rights, trade names,
trade name rights, corporate names, business names, trade styles,
service marks, logos and general intangibles of like nature and
(C) copyrights, in each case whether registered, unregistered or
under pending registration and, in the case of any such that are
registered or under pending registration, whether registered or
under pending registration under the laws of the United States or
any other country, (ii) reissues, continuations, continuations-
in-part and extensions of any Intellectual Property referred to
in clause (i), and (iii) rights relating to any Intellectual
Property referred to in clause (i) or (ii), including rights
under applications (whether pending under the laws of the United
States or any other country) or licenses relating thereto.
"Interest Expense" means, with respect to any period,
the aggregate interest expense of the Borrower and Kemper
Financial Companies, Inc. (in each case, on an unconsolidated
basis but excluding intercompany items between the Borrower and
its Subsidiaries) during such period plus an amount equal to (x)
the aggregate amount of dividends paid during such period by the
Borrower on its preferred stock divided by (y) a percentage equal
to 1 minus the maximum federal income tax rate applicable to the
Borrower during such period.
<PAGE> 51
"Interest Payment Date" means the last day of March,
June, September and December of each year.
"Interest Period" means a period commencing, in the
case of the first Interest Period applicable to a Fixed Rate
Loan, on the date of the making of, or conversion into, such
Loan, and, in the case of each subsequent, successive Interest
Period applicable thereto, on the last day of the immediately
preceding Interest Period, and ending, depending on the Type of
Loan, in the case of Eurodollar Interest Periods, on the same day
in the first, second, third, sixth or, if available from all of
the Banks, in their discretion, ninth or twelfth calendar month
thereafter, and, in the case of CD Interest Periods, on the day
30, 60, 90, 180 or, if available from all of the Banks, in their
discretion, 270 or 360 days thereafter, except that (i) any
Interest Period that would otherwise end on a day that is not a
Business Day or, in the case of a Eurodollar Interest Period or a
CD Interest Period for CD Rate Loans being converted into
Eurodollar Rate Loans, a Eurodollar Business Day shall be
extended to the next succeeding Business Day or Eurodollar
Business Day, as the case may be, unless, in the case of a
Eurodollar Interest Period, such Eurodollar Business Day falls in
another calendar month, in which case such Interest Period shall
end on the next preceding Eurodollar Business Day and (ii) any
Eurodollar Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month in which
such Interest Period ends) shall end on the last Eurodollar
Business Day of a calendar month. "CD Interest Period" and
"Eurodollar Interest Period" mean, respectively, an Interest
Period applicable to a CD Rate Loan and a Eurodollar Rate Loan.
"Lending Office" of any Bank means the Domestic Lending
Office or the Eurodollar Lending Office of such Bank.
"Liability" of any Person means (in each case whether
with full or limited recourse) any indebtedness, liability,
obligation, covenant or duty of or binding upon, or any term or
condition to be observed by or binding upon, such Person or any
of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or
tortious, liquidated or unliquidated, whether arising under
Contract, Applicable Law, or otherwise, now existing or hereafter
arising, and whether or not (i) for the payment of money or the
performance or non-performance of any act or (ii) an allowable
claim under the Bankruptcy Code, and includes any Indebtedness or
Debt of such Person.
"Lien" means, with respect to any property or asset (or
any income or profits therefrom) of any Person (in each case
whether the same is consensual or nonconsensual or arises by
Contract, operation of law, legal process or otherwise) (i) any
mortgage, lien, pledge, attachment, levy or other security
interest of any kind thereupon or in respect thereof or (ii) any
other arrangement, express or implied, under which the same is
subordinated, transferred, sequestered or otherwise identified so
as to subject the same to, or make the same available for, the
payment or performance of any Liability in priority to the
payment of the ordinary, unsecured creditors of such Person. For
<PAGE> 52
the purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset that it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" means any advance made pursuant to Section
1.01(a).
"Long Term Commitment" means a Commitment as such term
is defined in the Long Term Facility.
"Long Term Facility" means the Credit Agreement dated
as of November 1, 1993 among the parties hereto which agreement
provides for a commitment from the Banks thereunder to make
advances during a period commencing on the Agreement Date and
ending on the Maturity Date.
"Long Term Loan" means a Loan as such term is defined
in the Long Term Facility.
"Mandatorily Redeemable Stock" means, with respect to
any Person, any share of such Person's capital stock to the
extent that it is (i) redeemable, payable or required to be
purchased or otherwise retired or extinguished, or convertible
into any Indebtedness or other Liability of such Person, (A) at a
fixed or determinable date, whether by operation of a sinking
fund or otherwise, (B) at the option of any Person other than
such Person or (C) upon the occurrence of a condition not solely
within the control of such Person, such as a redemption required
to be made out of future earnings or (ii) convertible into
Mandatorily Redeemable Stock; provided that Mandatorily
Redeemable Stock shall not include (i) Kemper Financial
Companies, Inc., Class B Common Stock (in a maximum aggregate
amount not exceeding $40,000,000) or (ii) Kemper Financial
Companies, Inc. Convertible Preferred Stock; provided further
that any stock excluded by the preceding proviso shall be
excluded from the calculation of the equity of such Person.
"Margin Stock" means "margin stock" as defined in
Regulation U.
"Materially Adverse Effect" means (i) with respect to
any Person, an effect that would result in a material adverse
change from the perspective of a lender under a credit facility
substantially similar to that provided for under this Agreement
in any of such Person's business, assets, Liabilities, financial
condition, results of operations or business prospects, (ii) with
respect to a group of Persons "taken as a whole", an effect that
would result in a material adverse change from the perspective of
a lender under a credit facility substantially similar to that
provided for under this Agreement in any of such Persons'
business, assets, Liabilities, financial conditions, results of
operations or business prospects taken as a whole on, where
appropriate, a consolidated basis in accordance with Generally
Accepted Accounting Principles but, in any case, with respect to
the Borrower and the Restricted Subsidiaries taken as a whole,
excluding all other Subsidiaries and (iii) with respect to this
Agreement and the Notes, any adverse effect, WHETHER OR NOT
MATERIAL, on the binding nature, validity or enforceability
<PAGE> 53
thereof as obligations of the Borrower.
"Maturity Date" means November 1, 1996.
"Maximum Permissible Rate" means, with respect to
interest payable on any amount, the rate of interest on such
amount that, if exceeded, could, under Applicable Law, result in
(i) civil or criminal penalties being imposed on the payee or
(ii) the payee's being unable to enforce payment of (or, if
collected, to retain) all or any part of such amount or the
interest payable thereon.
"Multiemployer Benefit Plan" means any employee benefit
plan that is a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Note" means any Domestic Note or Eurodollar Note.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Guaranty" means any Guaranty that is (i) an
endorsement of a check for collection in the ordinary course of
business, (ii) a Guaranty of and only of the obligations of the
Borrower under this Agreement and the Notes, (iii) a Guaranty of
Liabilities of the Borrower or any of its Subsidiaries, a Trust
or a partnership in which the Borrower or any of its Restricted
Subsidiaries is a general partner but only to the extent that
such Guaranty Guarantees Liabilities of such partnership and not
Liabilities of any of the partners to such partnership other than
the Borrower or any of its Restricted Subsidiaries (iv) an
obligation undertaken in connection with employees' Indebtedness
incurred to finance the purchase of certain Floating Rate
Convertible Subordinated Debentures of Kemper Financial
Companies, Inc. in the ordinary course of business, (v) an
obligation to redeem or purchase, as applicable, Kemper Financial
Companies, Inc. Class B Common Stock or Convertible Preferred
Stock, (vi) Guaranties constituting commitments to refinance
Indebtedness owed by any Subsidiary or Trust (so long as such
Indebtedness is included in the calculation of Consolidated
Indebtedness for purposes of Section 4.13), (vii) any policy of
insurance issued by or similar financial commitment made by any
Subsidiary which is an insurance company in the ordinary course
of business, (viii) an obligation undertaken in connection with
an acquisition, disposition, restructuring or refinancing of
assets, stock or other property, including, without limitation,
any obligation, or any extension, renewal or modification of any
obligation, to credit enhance or purchase Indebtedness to which
such assets, stock or other property being restructured,
refinanced, acquired or disposed of is subject, (ix) Guaranties
issued in the ordinary course of business with respect to a
financial services product, (x) an obligation undertaken in
connection with self-insurance or similar arrangements, (xi) a
commitment to purchase or sell securities in the ordinary course
of business or a Guaranty thereof, (xii) a Real Estate Joint
Venture Commitment or a Guaranty thereof, (xiii) Guaranties of
any Subsidiary existing on the date such Subsidiary is designated
a Restricted Subsidiary in accordance with the definition of
"Restricted Subsidiary", (xiv) a Guarantee of real estate leases
of the Borrower or any Subsidiary, (xv) a bond, letter of credit,
or similar instrument issued by the Borrower, or a Guaranty of a
<PAGE> 54
bond or similar instrument, in an amount not to exceed
$137,400,000, plus interest and costs payable in connection with
the following described judgment, required to stay any proceeding
to enforce or execute the judgment entered in April 20, 1992 in
Conticommodity Services, Inc. v. Prescott Ball & Turben, Inc.,
Civil Action No. H-9181 in the U.S. District Court for the
Southern District of Texas, Houston Division or any modification
or amendment of such judgment or any other judgment entered in
such proceeding or in connection with any settlement of any such
judgment, (xvi) a bond or similar instrument issued by the
Borrower, or a Guaranty of a bond or similar instrument, in an
amount not to exceed the amount of any judgment entered in
connection with the following described litigation, plus interest
and costs payable in connection therewith, required to stay any
proceeding to enforce or execute any judgment entered in In Re
Melridge, Inc. Securities Litigation, in the U.S. District Court
for the District of Oregon, or any modification or amendment of
any such judgment or any other judgment entered in such
proceeding or in connection with any settlement of any such
judgment, and (xvii) other Guaranties of Liabilities which,
together with the aggregate amount of Liabilities secured by
Liens permitted under clause (xiii) of the definition of
Permitted Liens, does not exceed $25,000,000.
"Permitted Lien" means: (i) a Lien securing and only
securing the obligations of the Borrower under this Agreement and
the Notes; (ii) any Lien securing a tax, assessment or other
governmental charge or levy or the claim of a materialman,
mechanic, carrier, warehouseman or landlord for labor, materials,
supplies or rentals incurred in the ordinary course of business,
but only if payment thereof shall not at the time be required to
be made in accordance with Section 4.01(e) and foreclosure,
distraint, sale or other similar proceedings shall not have been
commenced; (iii) any Lien on the properties and assets of a
Subsidiary of the Borrower securing an obligation owing to the
Borrower or a Restricted Subsidiary; (iv) any Lien consisting of
a deposit or pledge made in the ordinary course of business in
connection with, or to secure payment of, obligations under
worker's compensation, unemployment insurance or similar
legislation; (v) any Lien arising pursuant to an order of
attachment, distraint or similar legal process arising in
connection with legal proceedings, but only if and so long as the
execution or other enforcement thereof is not unstayed for more
than 30 days; (vi) any Lien existing on (A) any property or asset
of any Person at the time such Person becomes a Subsidiary or (B)
any property or asset at the time such property or asset is
acquired by the Borrower or a Subsidiary, but only, in the case
of either (A) or (B), if and so long as (1) such Lien was not
created in contemplation of such Person becoming a Subsidiary or
such property or asset being acquired, (2) such Lien is and will
remain confined to the property or asset subject to it at the
time such Person becomes a Subsidiary or such property or asset
is acquired and to fixed improvements thereafter erected on such
property or asset, (3) such Lien secures only the obligation
secured thereby at the time such Person becomes a Subsidiary or
such property or asset is acquired and (4) the obligation secured
by such Lien is not in default; (vii) any Lien in existence on
the Agreement Date to the extent set forth on Schedule 4.05, but
only, in the case of each such Lien, to the extent it secures an
obligation outstanding on the Agreement Date to the extent set
<PAGE> 55
forth on such Schedule; (viii) any Lien securing Purchase Money
Indebtedness but only if, in the case of each such Lien, (A) such
Lien shall at all times be confined solely to the property or
asset the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such
Lien and to fixed improvements thereafter erected on such
property or asset and (B) such Lien attached to such property or
asset within 30 days of the acquisition of such property or
asset; (ix) in the case of any Subsidiary which is an insurance
company, Liens on such Subsidiary's securities portfolio arising
out of such Subsidiary's ordinary course of business with
securities brokers; (x) Liens in connection with repurchase
agreements entered into in the ordinary course of business; (xi)
Liens on the assets of Kemper Clearing Corp. in connection with
Indebtedness incurred in the ordinary course of business of
Kemper Clearing Corp.; (xii) Liens incurred in the ordinary
course of business in connection with securities lending
activities; (xiii) other Liens on assets securing Liabilities
which, together with the aggregate amount of Indebtedness
Guaranteed by Guaranties permitted by clause (xv) of the
definition of Permitted Guaranties does not exceed $25,000,000;
or (xiv) any Lien constituting a renewal, extension or
replacement of a Lien constituting a Permitted Lien by virtue of
clause (vi), (vii), (viii), (ix), (x), (xi) or (xii) of this
definition, but only if (A) at the time such Lien is granted and
immediately after giving effect thereto, no Default would exist,
(B) such Lien is limited to all or a part of the property or
asset that was subject to the Lien so renewed, extended or
replaced and to fixed improvements thereafter erected on such
property or asset, (C) the principal amount of the obligations
secured by such Lien does not exceed the principal amount of the
obligations secured by the Lien so renewed, extended or replaced
and (D) the obligations secured by such Lien bear interest at a
rate per annum not exceeding the rate borne by the obligations
secured by the Lien so renewed, extended or replaced except for
any increase that is commercially reasonable at the time of such
increase; or (xiv) any Lien on Margin Stock if, at the time such
Lien is created, such Margin Stock constitutes Unrestricted
Margin Stock; or (xv) any Lien against any right, title or
interest of the Borrower or any of its Restricted Subsidiaries in
or to any assets, stock or other property received from a third
party as consideration in exchange for any assets, stock or other
property of the Borrower or any of its Restricted Subsidiaries
sold, assigned or otherwise conveyed to such third party.
"Permitted Restrictive Covenant" means (i) any covenant
or restriction contained in this Agreement, (ii) any covenant or
restriction binding upon any Person at the time such Person
becomes a Subsidiary of the Borrower if the same is not created
in contemplation thereof, (iii) any covenant or restriction of
the type contained in Section 4.05 that is contained in any
Contract evidencing or providing for the creation of or
concerning Purchase Money Indebtedness, (iv) any covenant or
restriction limiting the ability of (A) a general partner to
transfer or dispose of its interest in a general partnership or
(B) a limited or general partner to transfer or dispose of its
interest in a limited partnership, (v) any covenant or
restriction limiting the transfer or disposition of assets where
the disposition of such assets is restricted by Federal or state
securities law or other laws applicable of assets of that class
<PAGE> 56
or type, (vi) any covenant or restriction described in Schedule
4.11, but only to the extent such covenant or restriction is
there identified by specific reference to the provision of the
Contract in which such covenant or restriction is contained, or
(vii) any covenant or restriction that (A) is not more burdensome
than an existing Permitted Restrictive Covenant that is such by
virtue of clause (ii), (iii), (iv), (v), (vi) or (vii), (B) is
contained in a Contract constituting a renewal, extension or
replacement of the Contract in which such existing Permitted
Restrictive Covenant is contained and (C) is binding only on the
Person or Persons bound by such existing Permitted Restrictive
Covenant.
"Person" means any individual, sole proprietorship,
corporation, partnership, trust, unincorporated organization,
mutual company, joint stock company, estate, union, employee
organization, government or any agency or political subdivision
thereof or, for the purpose of the definition of "ERISA
Affiliate", any trade or business.
"Post-Default Rate" means the rate otherwise applicable
under Section 1.04(a) plus 2%.
"Premises" means any real property (i) to which the
Borrower or any of its Subsidiaries holds title or (ii) of which
the Borrower or any of its Subsidiaries is the lessee.
"Prime Rate" means, at any time, the rate of interest
publicly announced from time to time by The First National Bank
of Chicago as its "corporate base rate" (which rate may not be
such bank's lowest rate of interest).
"Prohibited Transaction" means any transaction that is
prohibited under Code Section 4975 or ERISA Section 406 and not
exempt under Code Section 4975 or ERISA Section 408.
"Proposed Bank" has the meaning set forth in Section
1.12.
"Purchase Money Indebtedness" means (i) Indebtedness of
the Borrower or any Restricted Subsidiary that is incurred to
finance part or all of (but not more than) the purchase price of
a tangible asset, provided that (A) neither the Borrower nor any
Subsidiary had at any time prior to such purchase any interest in
such asset other than a security interest or an interest as
lessee under an operating lease and (B) such Indebtedness is
incurred within 30 days after such purchase, or (ii) Indebtedness
that (A) constitutes a renewal, extension or refunding of, but
not an increase in the principal amount of, Purchase Money
Indebtedness that is such by virtue of clause (i) or (ii) and (B)
bears interest at a rate per annum that is commercially
reasonable at the time such Indebtedness is incurred.
"Real Estate Joint Venture Commitment" means a Guaranty
in the ordinary course of business of the guarantor of Real
Estate Joint Venture Indebtedness with respect to which Guaranty
the guarantor has no presently due and unpaid payment obligation.
"Real Estate Joint Venture Indebtedness" means, at any
time, Indebtedness of Real Estate Joint Venture Subsidiaries
<PAGE> 57
incurred in the ordinary course of business whether or not
Guaranteed by the Borrower or any of its Subsidiaries.
"Real Estate Joint Venture Subsidiary" means any entity
(i) which is engaged primarily in the business of acquiring,
developing and/or owning real property and (ii) at least 50% of
the equity ownership interest of which, in the aggregate, is
owned directly or indirectly, or, upon the exercise of options or
other rights to acquire equity ownership interests, would be
owned directly or indirectly, by the Borrower and/or Subsidiaries
of the Borrower.
"Reference Banks" means Credit Suisse, The First
National Bank of Chicago, The Bank of New York, Continental Bank
N.A. and Bank of Montreal, and any replacement Reference Bank
appointed pursuant to Section 9.12.
"Regulation D" means Regulation D of the Board of
Governors of the Federal Reserve System and any successor
regulation.
"Regulation U" means Regulation U issued by the Board
of Governors of the Federal Reserve System (12 CFR 221.1 et seq.)
and any successor Regulation.
"Regulatory Change" means any Applicable Law,
interpretation, directive, request or guideline (whether or not
having the force of law), or any change therein or in the
administration or enforcement thereof, that becomes effective or
is implemented or first required or expected to be complied with
after the Agreement Date, whether the same is (i) the result of
an enactment by a government or any agency or political
subdivision thereof, a determination of a court or regulatory
authority, or otherwise or (ii) enacted, adopted, issued or
proposed before or after the Agreement Date, including any such
that imposes, increases or modifies any Tax, reserve requirement,
insurance charge, special deposit requirement, assessment or
capital adequacy requirement, but excluding any such that
imposes, increases or modifies any income or franchise tax
imposed upon a Bank by any jurisdiction (or any political
subdivision thereof) in which such Bank or any of its Lending
Offices is located.
"Removal Date" has the meaning set forth in Section
1.12.
"Repayment Date" means the later of (i) the termination
of the Commitments of all of the Banks (whether as a result of
the occurrence of the Maturity Date, reduction to zero pursuant
to Section 1.07, termination pursuant to Section 6.02 or
otherwise) and (ii) the payment in full of the Loans and all
other amounts payable or accrued hereunder.
"Reportable Event" means, with respect to any Benefit
Plan maintained by Borrower or any ERISA Affiliate, (i) the
occurrence of any of the events set forth in ERISA Section
4043(b) (other than a Reportable Event as to which the provision
of 30 days' notice to the PBGC is waived under applicable
regulations), or the regulations thereunder with respect to such
Benefit Plan, (ii) the incurrence of liability by the Borrower or
<PAGE> 58
any ERISA Affiliate under Section 4063 of ERISA as a result of
the withdrawal of Borrower or any ERISA Affiliate from any
Benefit Plan during a plan year in which it is a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, including a
cessation of operations that is treated as a withdrawal by a
"substantial employer" under Section 4068(f) of ERISA, (iii) any
event requiring the Borrower or any ERISA Affiliate to provide
security to such Benefit Plan under Code Section 401(a)(29) or
(iv) any failure by Borrower or any ERISA Affiliate to make a
payment required by Code Section 412(m) with respect to such
Benefit Plan.
"Representation and Warranty" means any representation
or warranty made pursuant to or under (i) Section 2.02, Article
3, Section 5.02 or any other provision of this Agreement or (ii)
any amendment to, or waiver of rights under, this Agreement,
WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR WARRANTY
REFERRED TO IN CLAUSE (i) OR (ii) OF THIS DEFINITION (EXCEPT, IN
EACH CASE, TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE
INFORMATION THAT IS THE SUBJECT MATTER THEREOF IS WITHIN THE
KNOWLEDGE OF THE BORROWER.
"Required Banks" means, at any time, Banks having more
than 66 2/3% of the aggregate amount of the Commitments of the
Banks.
"Reserve Requirement" means, at any time, the then
current maximum rate for which reserves (including any marginal,
supplemental or emergency reserve) are required to be maintained
under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding five billion Dollars
against (i) in the case of a CD Rate Loan, negotiable
certificates of deposit in an amount of $100,000 or more with a
term comparable to the Interest Period applicable to such Loan
and (ii) in the case of a Eurodollar Rate Loan, "Eurocurrency
liabilities", as that term is used in Regulation D. The Adjusted
CD and Adjusted Eurodollar Rates shall be adjusted automatically
on and as of the effective date of any change in the applicable
Reserve Requirement.
"Restricted Subsidiary" means those Subsidiaries set
forth on Schedule 3.02, as such Schedule may be amended, modified
or replaced by the Borrower with the consent of the
Administrative Agent and the Banks from time to time; provided,
that, Kemper Financial Services, Inc., or any successor to
substantially all of the asset management business of Kemper
Financial Services, Inc. as conducted on the Agreement Date, at
all times shall be a Restricted Subsidiary; and, provided,
further, that if the Consolidated Net Worth less an amount equal
to the aggregate amount of Borrower's and the Restricted
Subsidiaries' equity in Unrestricted Subsidiaries at any time is
less than 80% of the Consolidated Net Worth, the Required Banks
may, by notice from the Administrative Agent to the Borrower,
designate one or more other Subsidiaries as "Restricted
Subsidiaries", solely to the extent necessary, such that, after
giving effect to such designation, the Consolidated Net Worth
less an amount equal to the aggregate amount of Borrower's and
the Restricted Subsidiaries' equity in Unrestricted Subsidiaries
is equal to at least 80% of the Consolidated Net Worth; provided,
further, however, that, in making any such designation, the
<PAGE> 59
Required Banks shall, to the extent possible, designate
Subsidiaries which would not, solely as a result of such
designation, cause the Borrower and the Restricted Subsidiaries
to be out of compliance with the terms and provisions of this
Agreement.
"Subsidiary" means, with respect to any Person, any
other Person (i) the securities of which having ordinary voting
power to elect a majority of the board of directors (or other
persons having similar functions) or (ii) other ownership
interests which ordinarily constitute a majority voting interest,
are at the time, directly or indirectly, owned or controlled by
such first Person, or by one or more of its Subsidiaries, or by
such first Person and one or more of its Subsidiaries; unless
otherwise specified, "Subsidiary" means a Subsidiary of the
Borrower.
"Substituted Bank" has the meaning set forth in
Section 1.13.
"Trust" means, a Person that is a trust or a pooled
entity in which the Borrower and its Subsidiaries own a majority
of the certificates or other securities evidencing a beneficial
interest in such Person.
"Tax" means any Federal, State or foreign tax,
assessment or other governmental charge or levy (including any
withholding tax) upon a Person or upon its assets, revenues,
income or profits.
"Termination Date", with respect to any Bank, shall
mean the date as determined in accordance with Section 1.01.
"Termination Event" means, with respect to any Benefit
Plan maintained by Borrower or any ERISA Affiliate, (i) any
Reportable Event with respect to such Benefit Plan, (ii) the
provision by Borrower or any ERISA Affiliate of a notice of
intent to terminate such Benefit Plan in a distress termination
under ERISA Section 4041(c), (iii) the institution of proceedings
to terminate such Benefit Plan under ERISA Section 4042 or (iv)
the appointment of a trustee to administer such Benefit Plan
under ERISA Section 4042, provided that a Termination Event shall
not include any of the events specified on Schedule 10.01.
"Total Commitment" means, as to any Bank, the sum of
its Commitment and Long Term Commitment, and, as to all of the
Banks, the aggregate sum of all Banks' Commitments and Long Term
Commitments.
"Trust" means, a Person that is a trust or a pooled
entity in which the Borrower and its Subsidiaries own a majority
of the certificates or other securities evidencing a beneficial
interest in such Person.
"Type" means, with respect to Loans, any of the
following, each of which shall be deemed to be a different "Type"
of Loan: Base Rate Loans, CD Rate Loans having a 30-day Interest
Period, CD Rate Loans having a 60-day Interest Period, CD Rate
Loans having a 90-day Interest Period, CD Rate Loans having a
180-day Interest Period, CD Rate Loans having a 270-day Interest
<PAGE> 60
Period, CD Rate Loans having a 360-day Interest Period,
Eurodollar Rate Loans having a one-month Interest Period,
Eurodollar Rate Loans having a two-month Interest Period,
Eurodollar Rate Loans having a three-month Interest Period,
Eurodollar Rate Loans having a six-month Interest Period,
Eurodollar Rate Loans having a nine-month Interest Period and
Eurodollar Rate Loans having a twelve-month Interest Period. Any
CD Rate Loan or Eurodollar Rate Loan having an Interest Period
with a duration that differs from the duration specified for a
Type of CD Rate Loan or Eurodollar Rate Loan, as the case may be,
listed above solely as a result of the operation of clauses (i)
and (ii) of the definition of "Interest Period" shall be deemed
to be a Loan of such above-listed Type notwithstanding such
difference in duration of Interest Periods.
"Unfunded Benefit Liabilities" means, with respect to
any Benefit Plan at any time, the amount of unfunded benefit
liabilities of such Benefit Plan at such time as determined under
ERISA Section 4001(a)(18).
"Unrestricted Margin Stock" means, at any time, any
Margin Stock having an aggregate value at such time not exceeding
the Unrestricted Margin Stock Amount at such time; provided that
(i) if, at any time, any shares of Margin Stock are subject to
Liens securing obligations owing to Persons other than the Banks
but the aggregate value of such encumbered shares is less than
the Unrestricted Margin Stock Amount, then "Unrestricted Margin
Stock" means, at such time, (A) such encumbered shares and (B)
any other shares of Margin Stock having an aggregate value equal
to the amount by which the Unrestricted Margin Stock Amount
exceeds the aggregate value of such encumbered shares and (ii)
if, at any time, the aggregate value of Margin Stock subject to
Liens securing obligations owing to Persons other than the Banks
exceeds the Unrestricted Margin Stock Amount, then "Unrestricted
Margin Stock" means, at such time, any such encumbered shares
having an aggregate value not exceeding the Unrestricted Margin
Stock Amount.
"Unrestricted Margin Stock Amount" means, at any time,
the minimum aggregate value of Margin Stock that must not be
subject to the covenants set forth in Section 4.05 or 4.07 at
such time so that (i) the aggregate value of Margin Stock that is
subject to the covenants set forth in Section 4.05 or 4.07 at
such time does not exceed (ii) 25% of the aggregate value of
assets (excluding intercompany items) of the Borrower and its
Subsidiaries that are subject to the covenants set forth in
Section 4.05 or 4.07 at such time.
"Unrestricted Subsidiary" means each Subsidiary of the
Borrower which is not a Restricted Subsidiary.
(b) Other Definitional Provisions. (i) Except as
otherwise specified herein, all references herein (A) to any
Person shall be deemed to include such Person's successors and
assigns, (B) to any Applicable Law defined or referred to herein
shall be deemed references to such Applicable Law as the same may
have been or may be amended or supplemented from time to time and
(C) to this Agreement, any Note or any Contract defined or
referred to herein shall be deemed references to this Agreement,
such Note or such Contract (and, in the case of any Note or other
<PAGE> 61
instrument, any instrument issued in substitution therefor) as
the terms thereof may have been or may be amended, supplemented,
waived or otherwise modified from time to time.
(ii) When used in this Agreement, the words
"herein", "hereof" and "hereunder" and words of similar import
shall refer to this Agreement as a whole and not to any provision
of this Agreement, and the words "Article", "Section", "Annex",
"Schedule" and "Exhibit" shall refer to Articles and Sections of,
and Annexes, Schedules and Exhibits to, this Agreement unless
otherwise specified.
(iii) Whenever the context so requires, the
neuter gender includes the masculine or feminine, the masculine
gender includes the feminine, and the singular number includes
the plural, and vice versa.
(iv) Any item or list of items set forth
following the word "including", "include" or "includes" is set
forth only for the purpose of indicating that, regardless of
whatever other items are in the category in which such item or
items are "included", such item or items are in such category,
and shall not be construed as indicating that the types of items
in the category in which such item or items are "included" are
limited to such items or to items similar to such items.
(v) Except as otherwise specified therein, all
terms defined in this Agreement shall have the meanings herein
ascribed to them when used in the Notes or any certificate,
opinion or other document delivered pursuant hereto.
Section 10.02. Accounting Matters. Unless otherwise
specified herein, all accounting determinations hereunder and all
computations utilized by the Borrower in complying with the
covenants contained herein shall be made, all accounting terms
used herein shall be interpreted, and all financial statements
required to be delivered hereunder shall be prepared, in
accordance with Generally Accepted Accounting Principles, except,
in the case of such financial statements other than the Base
Financial Statements for changes therein or therefrom (x) that
have been certified and approved by the Chief Financial Officer
of the Borrower and, in the case of the financial statement
delivered in accordance with Section 5.01(b) may from time to
time be approved in writing by the independent certified public
accountants who are at the time, in accordance with Section
5.01(b), reporting on the Borrower's financial statements and (y)
as may be required by any governmental body having supervisory
power over the Borrower or any of its Subsidiaries to the extent
such changes are described therein and have been noted by such
accountants.
Section 10.03. Representations and Warranties. All
Representations and Warranties shall be deemed made (a) in the
case of any Representation and Warranty contained in this
Agreement at the time of its initial execution and delivery, at
and as of the Agreement Date, (b) in the case of any
Representation and Warranty contained in this Agreement or any
other document at the time any Loan is made, at and as of such
time and (c) in the case of any particular Representation and
Warranty, wherever contained, at such other time or times as such
<PAGE> 62
Representation and Warranty is made or deemed made in accordance
with the provisions of this Agreement or the document pursuant
to, under or in connection with which such Representation and
Warranty is made or deemed made.
Section 10.04. Captions. Captions to Articles,
Sections and subsections of, and Annexes, Schedules and Exhibits
to, this Agreement are included for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose or in any way affect the meaning or construction of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers all as
of the Agreement Date.
KEMPER CORPORATION
By /s/ JOHN H. FITZPATRICK
Name: John H. Fitzpatrick
Title: Executive Vice President & CFO
THE FIRST NATIONAL BANK OF CHICAGO,
individually, and as
Administrative Agent
By /s/ CYNTHIA W. PRIEST
Name: Cynthia W. Priest
Title: Assistant Vice President
CREDIT SUISSE, individually,
and as a Co-Agent
By /s/ WILLIAM P. MURRAY
Name: William P. Murray
Title: Member of Senior Management
By /s/ KRISTINN R. KRISTINSSON
Name: Kristinn R. Kristinsson
Title: Associate
BANK OF MONTREAL, individually,
and as a Co-Agent
By /s/ JEFFREY C. NICHOLSON
Name: Jeffrey C. Nicholson
Title: Director
<PAGE> 63
THE BANK OF NEW YORK, individually,
and as a Co-Agent
By /s/ TIMOTHY J. STAMBAUGH
Name: Timothy J. Stambaugh
Title: Vice President
CONTINENTAL BANK N.A.,
individually, and as a Co-Agent
By /s/ ANN M. BENSCHOTER
Name: Ann M. Benschoter
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ W. J. BROWN
Name: W. J. Brown
Title: Vice President
THE BANK OF TOKYO, CHICAGO BRANCH
By /s/ DINO G. JANIS
Name: Dino G. Janis
Title: Vice President
M & I MARSHALL & ILSLEY BANK
By /s/ STEPHEN F. GEIMER
Name: Stephen F. Geimer
Title: Vice President
MELLON BANK, N.A.
By /s/ SALLY D. JONES
Name: Sally D. Jones
Title: Vice President
THE NORTHERN TRUST COMPANY
<PAGE> 64
By /S/ CAROLYN L. NYREN
Name: Carolyn L. Nyren
Title: 2nd Vice President
SHAWMUT BANK CONNECTICUT, N.A.
By /s/ DANIEL P. TOWLE
Name: Daniel P. Towle
Title: Vice President
UNITED MISSOURI BANK, N.A.
By /s/ DOUGLAS F. PAGE
Name: Douglas F. Page
Title: Executive Vice President
THE YASUDA TRUST & BANKING CO., LTD.,
CHICAGO BRANCH
By /s/ JOSEPH C. MEEK
Name: Joseph C. Meek
Title: Vice President & Manager
Agreement Date:
<PAGE> 1
EXHIBIT 10.4(b)
December 20, 1993
Kemper Financial Companies, Inc.
1 Kemper Drive
Long Grove, IL 60049
Attention: John W. Burns
Treasurer
RE: Amendment to Purchase Agreement dated October 24, 1986
Gentlemen:
We refer to the above-described Agreement, as amended from time to time
(the "Agreement"), between Kemper Financial Companies, Inc. ("Purchaser")
and the First National Bank of Chicago ("Bank").
The Purchaser has requested that Sections 3.5 and 3.7 of the Agreement be
amended. This is to advise you that the Bank hereby agrees to amend the
Agreement as follows:
1. Section 3.5 of the Agreement is amended by deleting it in its entirety
and substituting therefor the following:
"3.5. (Intentionally Omitted)"
2. Section 3.7 is amended by deleting it in its entirety and substituting
therefor the following:
"3.7. Net Worth. The Purchaser and its subsidiaries will maintain at
all time a Consolidated Net Worth of at least $300,000,000.
"Consolidated Net Worth" shall be determined in accordance with
generally accepted accounting principles except that there shall be
excluded from Consolidated Net Worth the effects of unrealized gains
or losses on fixed rate securities held as investments by Purchaser or
its consolidated subsidiaries."
3. Article IV is amended by adding the following new Section 4.13
thereto:
"4.13. The Consolidated Indebtedness of Kemper Corporation and its
subsidiaries shall exceed 50% of its Consolidated Net Worth."
Capitalized terms used herein and not otherwise defined herein shall have
the meanings set forth for such terms in that certain Credit Agreement
dated as of November 1, 1993 by and among Kemper Corporation, the Bank, as
Administrative Agent, and the banks party thereto (the "Kemper Agreement").
For purposes hereof, such definitions in the Kemper Agreement, together
with any related definitions, are hereby incorporated herein by reference,
mutatis mutandis, and shall be deemed to continue in effect for the benefit
of the Bank (as if it held a Note under the Kemper Agreement), whether or
not said provisions otherwise remain in effect and whether or not the
<PAGE> 2
Kemper Agreement remains in effect or is terminated, provided any
amendments or modifications to said definitions in the Kemper Agreement
shall be deemed to amend or modify this Agreement.
Except for the amendments herein contained, the terms, conditions and
covenants of the Agreement remain in full force and effect and are hereby
ratified and confirmed.
If this letter sets forth our agreement regarding the amendments herein
contained, please sign and return the enclosed copy of this letter. Upon
receipt by the Bank of a copy hereof signed by the Purchaser, these
amendments shall be effective as of the date first above written.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /S/CYNTHIA W. PRIESH
TITLE: Assistant Vice President
Accepted and agreed to:
KEMPER FINANCIAL COMPANIES, INC.
By: /s/JOHN W. BURNS
TITLE: Chief Accounting Officer
DATE: December 23, 1993
<PAGE> 1
EXHIBIT 10.14(c)
FIRST AMENDMENT TO THE SPONSORS' AGREEMENT
This First Amendment to the Sponsors' Agreement (the "Amendment") is
effective as of the 2nd day of August, 1993 by and between Lumbermens
Mutual Casualty Company, an Illinois mutual property casualty insurance
company ("Lumbermens") and Kemper Corporation, a Delaware corporation
("Kemper").
Whereas, Lumbermens and Kemper entered into a Sponsors' Agreement dated as
of April 1, 1991, in connection with the formation and operation of Kemper
Risk Management Services, a general partnership (the "Partnership"); and
Whereas, Kemper National Services, Inc., a subsidiary of Lumbermens, and
National Loss Control Service Corporation ("NATLSCO"), a subsidiary of
Kemper, were the general partners in the Partnership; and
Whereas, Lumbermens and Kemper are entering into an agreement wherein
Lumbermens would acquire all the capital stock of NATLSCO and another
Kemper subsidiary in exchange for Kemper Common stock (the "Exchange
Agreement"); and
Whereas, it is a condition to the execution, delivery and performance of
the Exchange Agreement by Lumbermens that the Sponsors' Agreement be
amended.
Now Therefore, in consideration of the premises and of the mutual covenants
contained herein, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree
as follows:
1. Article I, Section 1.2 of the Sponsors' Agreement is hereby
deleted in its entirety.
2. Article I, Section 1.3 of the Sponsors' Agreement is hereby
amended and restated to read as follows:
"Each Sponsor, for itself and its affiliates,
agrees during the term of the partnership not
to engage in the risk management business."
3. Article I, Section 1.4 of the Sponsors' Agreement is
hereby deleted in its entirety.
4. Article I, Section 1.5(b) of the Sponsors' Agreement is
hereby deleted in its entirety.
5. Article II of the Sponsors' Agreement is hereby deleted
in its entirety.
6. Article IV, Section 4.1 of the Sponsors' Agreement is
hereby amended and restated to read as follows:
"Kemper shall cause its employees who serve on
the Partnership Board of Directors to resign as
<PAGE> 2
of the effective date of this Amendment. Not-
withstanding anything to the contrary in the
Sponsors or Partnership Agreements, Kemper shall
have no further rights with respect to the
appointment or removal of members of the Partnership
Board of Directors."
7. Article IV, Section 4.3(b) of the Sponsors' Agreement
shall be amended and restated as follows:
"The Partnership Dispute Resolution Panel shall
be composed of three members, each appointed by
the Chief Executive Officer ("CEO") of Lumbermens.
The panel members shall consist of those members
of Lumbermens' management that the CEO, in his
sole discretion, may designate."
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written.
LUMBERMENS MUTUAL CASUALTY COMPANY
By: /s/ W. L. White
Title: _____________________
KEMPER CORPORATION
By: /s/ J. H. Fitzpatrick
Title ______________________
GCP/df
3693-3
<PAGE> 1
EXHIBIT 10.18(b)
FIRST AMENDMENT DATED AUGUST 1, 1993
TO THE STOCK EXCHANGE AGREEMENT
FIRST AMENDMENT dated August 1, 1993 to the Stock Exchange Agreement
by and between LUMBERMENS MUTUAL CASUALTY COMPANY, an Illinois mutual
property-casualty insurance company ("Lumbermens"), and KEMPER CORPORATION,
a Delaware Corporation ("Kemper").
WHEREAS, Kemper and Lumbermens are parties to a Stock Exchange
Agreement dated March 18, 1993; and
WHEREAS, Kemper and Lumbermens wish to amend such Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in the Agreement and herein, Lumbermens and Kemper
covenant and agree as follows:
1. Section 11.1(f) of the Agreement is replaced with the following:
(f) On the Final Settlement Date, (x) Lumbermens shall cause KRE
to promptly deliver to Kemper stock certificates, mortgages or other
evidences of ownership representing all Remaining Rejected Assets,
duly endorsed or otherwise transferred to the name or for the account
of Kemper, (y) if the Final Settlement Amount is positive, Kemper
shall deliver the Final Settlement Amount to KRE by wire transfer of
immediately available funds, and (z) if the Final Settlement Amount is
negative, then Lumbermens shall deliver to Kemper the absolute value
of the Final Settlement Amount by either (i) wire transfer of
immediately available funds, (ii) delivering to Kemper a number of
shares of Kemper Common Stock equal to the absolute value of the Final
Settlement Amount divided by the Price Per Share or (iii) delivery to
Kemper a combination of cash and shares of Kemper Common Stock
sufficient to satisfy the absolute value of the Final Settlement
Amount. Notwithstanding anything in the preceding sentence to the
contrary, the amount of cash delivered by Lumbermens pursuant to the
preceding sentence shall not result in a Cash Limitation Fraction of
20 percent or more.
2. Section 11.1(g) is stricken.
3. Section 11.2 is amended by adding after the definition, "Capital
Distribution," the following:
"Cash Limitation Fraction" shall mean a fraction the numerator of
which is the amount of cash to be delivered by Lumbermens to Kemper on
the Final Settlement Date and the denominator of which is the sum of
the absolute value of the Final Settlement Amount plus the total
number of shares of Kemper Common Stock to be delivered by Lumbermens
to Kemper on the Closing Date multiplied by the closing price per
share of Kemper Common Stock on the Closing Date as reported in the
Wall Street Journal.
4. The definition "Final Settlement Date" contained in Section 11.2
is amended by inserting after the word "Period" a comma and the
<PAGE> 2
words "or such earlier date as the parties may agree."
IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly
executed on the day and year first above written.
KEMPER CORPORATION LUMBERMENS MUTUAL
CASUALTY COMPANY
By: /s/ J. H. FITZPATRICK By: /s/ W. L. WHITE
Title: Exec V.P. - C.F.O. Title: EXEC V.P. & CFO
<PAGE> 1
EXHIBIT 10.19(b)
MASTER LIMITED PARTNERSHIP AGREEMENT
THIS MASTER LIMITED PARTNERSHIP AGREEMENT (this "Agreement") is
made and entered into as of July 15, 1993 by and among KILICO REALTY
CORPORATION, an Illinois corporation ("KILICO Realty"); FKLA REALTY
CORPORATION, an Illinois corporation ("FKLA Realty"); FEDERAL KEMPER LIFE
ASSURANCE COMPANY, an Illinois insurance corporation ("FKLA"); KEMPER
INVESTORS LIFE INSURANCE COMPANY, an Illinois insurance corporation
("KILICO"); KR BLACK MOUNTAIN, INC., a Delaware corporation ("KRBM"); KR
VENTURE WAY, INC., a Delaware corporation ("KRVW"); KR BRANNAN RESOURCES,
INC., a Delaware corporation ("KRBR"); KR CRANBURY, INC., a Delaware
corporation ("KR Cran"); KR SEAGATE/GATEWAY NORTH, INC., a Delaware
corporation ("KRS/G"); KR CLAY CAPITAL, INC., a Delaware corporation
("KR Clay"); KR DELTA WETLANDS, INC., a Delaware corporation ("KRDW"); KR
LAFAYETTE APARTMENTS, INC., a Delaware corporation ("KR Lafayette"); KR
RED HILL ASSOCIATES, INC., a Delaware corporation ("KRRH"); KR AVONDALE
REDMOND, INC., a Delaware corporation ("KRAR"); AMERICAN MOTORISTS INSURANCE
COMPANY, an Illinois insurance corporation ("AMICO"); AMICO REALTY
CORPORATION, an Illinois corporation ("AMICO Realty"); KEMPER REALTY
CORPORATION, a Florida corporation ("K Realty"); KEMPER PORTFOLIO CORP., a
Delaware corporation ("KPC"); and KFC PORTFOLIO CORP., a Delaware
corporation ("KFCPC").
WHEREAS, the parties hereto, Kemper Corporation, a Delaware
corporation ("Kemper"), Lumbermens Mutual Casualty Company, an Illinois mutual
insurance company ("Lumbermens"), Economy Fire & Casualty Company, an
Illinois insurance corporation, and Kemper Reinsurance Company, an Illinois
insurance corporation, have entered into that certain Agreement to Form
Partnership, dated as of March 18, 1993 (the "Formation Agreement");
WHEREAS, pursuant to the Formation Agreement, the parties hereto
have agreed to form a limited partnership (the "Partnership") pursuant to
the Revised Uniform Limited Partnership Act of the State of Delaware, as
amended (the "Act"), upon the terms and subject to the conditions set
forth in this Agreement;
WHEREAS, (i) the Kemper Joint Venturers (as defined in the Formation
Agreement) shall contribute to the Partnership 100% of their respective
equity interests in each of the Kemper Joint Ventures listed on Schedule A
hereto (the "Kemper Joint Ventures"), or such lesser percentage as shall
not result in termination of the Kemper Joint Ventures as partnerships under
the Internal Revenue Code, together with 100% of their interests in the
related Joint Venture Agreements (as hereinafter defined) and the
Lumbermens Joint Venturers shall contribute to the Partnership 100% of
their respective equity interests in each of the Lumbermens Joint Ventures
listed on Schedule B hereto (the "Lumbermens Joint Ventures") (the Kemper
Joint Ventures and Lumbermens Joint Ventures being collectively referred to
herein as the "Joint Ventures"), or such lesser percentage as shall not
result in termination of the Lumbermens Joint Ventures as partnerships
under the Internal Revenue Code, together with 100% of their interests in
the related Joint Venture Agreements, (ii) KPC and KFCPC shall contribute
to the Partnership 100% of their respective equity interests in
Kemper/Bedford Properties, Inc., a Delaware corporation ("KBP") and 100%
<PAGE> 2
of their interests in the KBPI Stockholders Agreement (as hereinafter
defined), (iii) subject to Section 15A of the Formation Agreement, FKLA,
KRAR, KILICO, KILICO Realty and KRBR (the "Kemper Participating
Mortgagees") shall contribute to the Partnership, pursuant to the
Participation Agreement (as defined below), participating interests in all
of their respective rights to receive Additional Interest (as defined in
the Participation Agreement) under each of the Participating Mortgage Loan
Documents relating to the Participating Mortgage Projects (each as defined
in the Formation Agreement), (iv) subject to Section 15A of the Formation
Agreement, KRRH and KRS/G (the "Kemper Optionees") shall each contribute to
the Partnership 100% of their respective option rights with respect to the
Option Properties (as defined in the Formation Agreement); and (v) AMICO
Realty shall contribute to the Partnership 100% of its equity interests in
Memory Gardens, Inc., a California corporation ("Memory Gardens").
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and undertakings herein set forth, the parties hereto agree as
follows:
ARTICLE I
FORMATION AND ORGANIZATION
Section 1.1. Formation of the Partnership. The Managing General
Partners, the General Partners and the Limited Partners hereby form the
Partnership as a limited partnership pursuant to the Act, upon the terms and
subject to the conditions set forth in this Agreement. Except as
expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership shall be
governed by the Act. The partnership interest of each Partner in the
Partnership shall be personal property for all purposes. The Managing
General Partners shall, promptly after the execution and delivery of this
Agreement, cause an executed original of a certificate of limited
partnership to be filed for record on behalf of the Partnership in the
office of the Secretary of State of Delaware. The Managing General
Partners shall also cause to be made, from time to time, further filings to
reflect any matter with respect to which such filing is required under the
Act.
Section 1.2. Name of Partnership.
The name of the Partnership shall be "KLMLP, L.P." All business
of the Partnership shall be conducted under the name of the
Partnership, and title to all property (real, personal and mixed) owned by
or leased to the Partnership shall either be held in such name or in the
name of such nominee or trust for the benefit of the Partnership as shall
be selected by the Managing General Partners. The Managing General
Partners shall file or cause to be filed on behalf of the Partnership such
partnership or assumed or fictitious name certificates as may from time to
time be required by law or as may be appropriate, in the judgment of the
Managing General Partners.
Section 1.3. Registered Agent and Office; Principal Office.
The registered agent and registered office of the Partnership in the
State of Delaware shall be The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801. The principal office of the Partnership shall
be c/o Kemper National Insurance Companies, One Kemper Drive, Long Grove,
Illinois 60049, Attention: Chief Financial Officer. The registered agent
and office, and the principal office of the Partnership, may be changed
from time to time as determined by the Managing General Partners with
notice to each Partner.
<PAGE> 3
Section 1.4. Term. The Partnership shall
commence upon the filing of the Certificate of Limited Partnership in
accordance with the Act and shall continue in existence until the close of
Partnership business on December 31, 2018, or until the earlier termination
of the Partnership in accordance with the provisions of this Agreement.
ARTICLE II
DEFINITIONS
Section 2.1. General Definitions.
All terms which are capitalized and not otherwise defined
herein or in the recitals hereto shall be defined as defined in the
Formation Agreement, as the Formation Agreement is in effect on the date
hereof but in any event giving effect to the provisions of Section 15A(h)
of the Formation Agreement. The following terms shall have the meanings
set forth below, unless the context otherwise requires:
"Certificate of Limited Partnership" means the Certificate of
Limited Partnership for the Partnership filed with the Secretary of State of
Delaware, as such certificate may be amended or restated from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
"Contributed Property" means the assets described in Schedule E
hereto which are to be contributed to the Partnership by each of the
Partners pursuant to Section 4.1 hereof.
"General Partner" shall mean FKLA Realty and each Person, other
than the Managing General Partners, designated as a general partner of the
Partnership pursuant to the terms of this Agreement.
"General Partner Unit" means a Unit representing an interest of a
General Partner in the Partnership.
"Joint Venture Agreements" means the joint venture agreements
entered into by the Joint Venturers and other parties signatory thereto
with respect to the Partnership Joint Ventures, as amended from time to
time.
"Joint Venturers" means the Kemper Joint Venturers and the
Lumbermens Joint Venturers.
"KBPI Stockholders Agreement" means the Stockholders Agreement
dated as of December 23, 1986 between Bedford Properties, Inc. and various
Kemper companies signatory thereto, as such agreement may be amended or
restated from time to time.
"Kemper Managing General Partner" means KILICO Realty or any
successor thereto designated and admitted to the Partnership in accordance
with the terms of this Agreement.
"Kemper Partners" shall mean all Partners which are Affiliates of
Kemper, and "Kemper Partner" shall mean any one of the Kemper Partners,
individually.
"Limited Partner" means each of the Persons listed on Schedule D
<PAGE> 4
attached hereto and made a part hereof (or any other Person), in its
capacity as a limited partner of the Partnership pursuant to the terms of
this Agreement.
"Limited Partner Unit" means a Unit representing an interest of a
Limited Partner in the Partnership.
"Losses" means the net losses of the Partnership as determined
for Federal income tax purposes and each item of income, gain, loss or
deduction entering into the computation thereof.
"Lumbermens Managing General Partner" means AMICO Realty or any
successor thereto designated and admitted to the Partnership in accordance
with the terms of this Agreement.
"Lumbermens Partners" shall mean all Partners which are
Affiliates of Lumbermens.
"Majority Partners" means Partners holding more than 50% of the
Units held by Partners.
"Management Agreement" means the Management Agreement dated as of
July 31, 1992, by and among KBPI, KREMCO, Peter B. Bedford and the other
parties signatory thereto, as such agreement may be amended or restated
from time to time.
"Managing General Partner" means each of the Kemper Managing
General Partner and the Lumbermens Managing General Partner, in its
capacity as a managing general partner of the Partnership pursuant to the
terms of this Agreement.
"Managing General Partner Unit" means a Unit representing an
interest of a Managing General Partner in the Partnership.
"Participation Agreement" means that certain Participation
Agreement of even date herewith by and among FKLA, KILICO Realty, KILICO,
KRBR, KRAR and the Partnership.
"Partner" means a General Partner, a Limited Partner or a
Managing General Partner.
"Partnership Joint Ventures" means, collectively, the Joint
Ventures and all other joint ventures (if any) in which the Partnership
acquires an interest hereafter.
"Profit" means the net income of the Partnership as determined
for Federal income tax purposes and each item of income, gain, loss or
deduction entering into the computation thereof.
"Unit" means an interest of a Partner in the Partnership, which
may be a General Partner Unit, a Limited Partner Unit or a Managing General
Partner Unit.
ARTICLE III
PURPOSE AND BUSINESS
Section 3.1. Purposes of the Partnership. The purpose
and nature of the business to be conducted by the Partnership shall be to
<PAGE> 5
acquire, own, hold, operate, improve, manage, finance, refinance,
lease, sell, dispose of and otherwise deal with the Contributed Property (or
any part thereof) and the other assets of the Partnership, now owned or
hereafter acquired.
Section 3.2. Powers. The Partnership shall
be empowered to do any and all acts and things necessary, appropriate,
proper, advisable, incidental to, or convenient for the furtherance and
accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership consistent with the Act,
including, without limitation:
(a) to borrow money and issue evidences of indebtedness,,
and to secure the same by mortgages, deeds of trust, security interests,
pledges, or other liens on all or any part of the Contributed Property and
other assets of the Partnership, and to invest in, or lend money or
otherwise provide financial accommodations on a secured or unsecured basis
to the Real Estate Projects (or any of them);
(b) to secure and maintain insurance against liability or
other loss with respect to the activities and assets of the Partnership;
(c) to employ or retain such Persons as may be necessary or
appropriate for the conduct of the Partnership's business, including
permanent, temporary, or part-time employees and independent attorneys,
accountants, consultants, and contractors;
(d) to acquire, own, maintain, use, lease, sublease,
manage, finance, refinance, operate, improve, sell, exchange, transfer, or
otherwise deal with respect to the Contributed Property and other assets of
the Partnership, whether now owned or hereafter acquired, as may be
necessary or convenient for the purposes and business of the Partnership;
(e) to incur expenses and to enter into, guarantee,
perform, and carry out contracts or commitments of any kind, to assume
obligations, and to execute, deliver, acknowledge, and file documents in
furtherance of the purposes and business of the Partnership; and
(f) to pay, collect, compromise, arbitrate, litigate, or
otherwise adjust, contest, or settle any and all claims or demands of or
against the Partnership.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND RETURN OF CAPITAL
Section 4.1. Capital Contributions.
On the date hereof, each Partner shall contribute to the
Partnership the Contributed Property set forth opposite such Partner's name
on Schedule E hereto in exchange for the number of Managing General Partner
Units (in the case of Managing General Partners), General Partner Units (in
the case of General Partners) or Limited Partner Units (in the case of
Limited Partners) set forth opposite such Partner's name on Schedule E
hereto. Unless agreed to by all Partners, the Partnership shall not issue
any additional Units. Unless otherwise agreed to by both Managing General
Partners, no additional capital contribution shall be required from any
Partner, except as provided in Sections 5.5 and 12.3(c) hereof. The
Partners agree and acknowledge that the number of Units set forth on
Schedule E hereto is a good faith preliminary allocation based upon the
information available on the date hereof, and the number of Units set forth
<PAGE> 6
on Schedule E is subject to revision on or before December 31, 1993 upon
obtaining additional information. The Units allocable to the Lumbermens
Partners may be finally allocated by written notice from the Lumbermens
Managing General Partner to the Kemper Managing General Partner provided
that such notice is received by the Kemper Managing General Partner no
later than December 31, 1993; and provided further, that in no event shall
the aggregate number of Units allocated to the Lumbermens Partners exceed
the aggregate number of Units allocated to the Lumbermens Partners set
forth on Schedule E. The Units allocable to the Kemper Partners may be
finally allocated by written notice from the Kemper Managing General Partner
to the Lumbermens Managing General Partner provided that such notice is
received by the Lumbermens Managing General Partner no later than December
31, 1993; and provided further, that in no event shall the aggregate number
of Units allocated to the Kemper Partners exceed the aggregate number of
Units allocated to the Kemper Partners set forth on Schedule E.
Section 4.2. Return of Capital; Interest Thereon. Except as
otherwise expressly provided in this Agreement, no Partner shall have any
right to demand the return of any capital contribution or all or any portion
of such Partner's Capital Account. No Partner shall be entitled to receive
interest on such Partner's capital contribution.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
Section 5.1. Tax Allocations.
Except as provided in Sections 5.2 and 5.4, for Federal, state and local
income tax purposes, the Profits and Losses of the Partnership shall be
allocated as of the end of each fiscal year of the Partnership to each
Partner in proportion to the number of Units held by such Partner at the
time of such allocation; provided, however, that if any Partner contributes
property to the Partnership having a fair market value that differs from
its adjusted basis for Federal income tax purposes, such allocations shall
be made in accordance with Section 704(c) of the Code and regulations
thereunder.
Section 5.2. Transfers. In the case of
any transfer of a Unit or Units, allocations pursuant to Section 5.1 shall
be made to the transferor and transferee based upon (a) an interim closing
of the books as of the opening of business on the first day of the month in
which the transfer occurred and (b) the assumption that the transferee
became a Partner with respect to the transferred Units at the opening of
business on such first day, provided, that if proposed or final Treasury
Regulations under Section 706(d) of the Code do not permit such an
allocation, the Managing General Partners, without the consent of (but
after notice to) the General Partners and the Limited Partners, may amend
this Section 5.2 (and make the allocations described in Section 5.1) to
reflect the allocation permitted by such Treasury Regulations which
allocate to a transferee the maximum amount of the Partnership's Profits or
Losses with respect to the transferred Unit for the month in which the
transfer occurs.
Section 5.3. Distributions. The Managing General Partners shall
have discretion as to the making and timing of distributions (other than in
connection with the dissolution and liquidation of the Partnership) subject
to Section 5.5 below and the following provisions:
<PAGE> 7
(a) The Managing General Partners shall cause the
Partnership to retain funds necessary or appropriate to cover its reasonable
business needs, which shall include reserves against possible or contingent
losses and the payment or making provision for the payment, when due,
of obligations of the Partnership including, but not limited to, (i)
obligations secured by, or by a lien on, or a security interest in, the
Contributed Property (or any part thereof) and other assets of the
Partnership, and (ii) loans and investments to be made by the
Partnership pursuant to Section 5.5 below;
(b) No distributions (other than in connection with the
dissolution and liquidation of the Partnership) shall be made other
than in cash; and
(c) All distributions shall be made pro rata based
upon the number of Units held by each Partner.
Section 5.4. Allocations. (a) General Rule. For each taxable
year of the Partnership, Profits and Losses (determined without including the
income, gains, losses and deductions that are allocated pursuant to
Section 5.4(b)) shall be allocated among the Partners in proportion to their
Units.
(b) Special Allocations.
(i) Income and gain.
(A) If in any taxable year ending after the date hereof there is
a net decrease in Partnership Minimum Gain of any Partnership Joint
Venture that is attributable to a reduction in the amount of such
Partnership Joint Venture's Nonrecourse Liability that is allocable to
the Partnership or its Partners, then, to the extent that Nonrecourse
Deductions attributable to such Partnership Joint Venture for a period
ending on or prior to the date hereof were allocated to any Partner
(or its predecessor), there shall be allocated to such Partner or
Partners an amount of gross income and gain for such year (and, if
necessary, subsequent years) equal to such decrease (and if to more
than one such Partner, in proportion to the Nonrecourse Deductions
attributable to such Partnership Joint Venture that were allocated to such
Partners for all periods ending on or prior to the date hereof). The
allocation made pursuant to this Section 5.4(b)(i)(A) shall be made
prior to the allocation described in Section 5.4(b)(i)(B).
(B) If in any taxable year ending after the date hereof there is
a net decrease in Partnership Minimum Gain (or Partnership Minimum Gain
of any Partnership Joint Venture that is attributable to a reduction in
the amount of such Partnership Joint Venture's Nonrecourse Liability
that is allocable to the Partnership or its Partners) that was not
reflected in an allocation made pursuant to Section 5.4(b)(i)(A), then,
to the extent that any Partner (or its predecessor) was allocated
Nonrecourse Deductions attributable to the Partnership (or such
Partnership Joint Venture) for any period ending after the date hereof,
there shall be allocated to such Partner or Partners an amount of gross
income and gain for such year (and, if necessary, subsequent years)
equal to such decrease (and if to more than one such Partner, in
proportion to the Nonrecourse Deductions attributable to the Partnership
(or such Partnership Joint Venture) that were allocated to such
Partners for all periods beginning after the date hereof).
(C) If in any taxable year ending after the date hereof there is
a net decrease in Partner Minimum Gain of any Partnership Joint
Venture that is attributable to a reduction in the amount of such
Partnership Joint
<PAGE> 8
Venture's Partner Nonrecourse Debt that is allocable to the Partnership or
its Partners, then, to the extent that Partner Nonrecourse Deductions
attributable to such Partnership Joint Venture for a period ending on or
prior to the date hereof were allocated to any Partner (or its
predecessor), there shall be allocated to such Partner or Partners an
amount of gross income and gain for such year (and, if necessary,,
subsequent years) equal to such decrease (and if to more than one such
Partner, in proportion to the Partner Nonrecourse Deductions attributable
to such Partnership Joint Venture that were allocated to such Partners for
all periods ending on or prior to the date hereof). The allocation made
pursuant to this Section 5.4(b)(i)(C) shall be made prior to the allocation
described in Section 5.4(b)(i)(D).
(D) If in any taxable year ending after the date hereof there is a
net decrease in Partner Minimum Gain (or Partner Minimum Gain of any
Partnership Joint Venture that is attributable to a reduction in the amount
of such Partnership Joint Venture's Partner Nonrecourse Debt that is
allocable to the Partnership or its Partners) that was not reflected in an
allocation made pursuant to Section 5.4(b)(i)(C), then, to the extent that
any Partner (or its predecessor) was allocated Partner Nonrecourse
Deductions attributable to the Partnership or such Partnership Joint
Venture for any period ending after the date hereof, there shall be
allocated to such Partner or Partners an amount of gross income and gain
for such year (and, if necessary, subsequent years) equal to such decrease
(and if to more than one such Partner, in proportion to the amount of
Partner Nonrecourse Deductions attributable to the Partnership or such
Partnership Joint Venture that were allocated to such Partners for all
periods beginning after the date hereof).
(E) If (w) the Kemper Partners' share of allowable deductions for
interest paid or accrued by the Kemper Joint Ventures for the period from
the Effective Date (as defined in the Formation Agreement) through and
including the date hereof with respect to amounts furnished by the
Lumbermens Investors (as defined in the Formation Agreement) or their
affiliates pursuant to paragraph 11 of the Formation Agreement exceeds (x)
the Lumbermens Partners' share of allowable deductions for interest paid or
accrued by the Lumbermens Joint Ventures for such period with respect to
amounts furnished by the Kemper Investors (as defined in the Formation
Agreement) or their affiliates pursuant to said paragraph 11, then for the
taxable year of the Partnership ending December 31, 1993 (and, if
necessary, subsequent years), there shall be allocated to the Kemper
Entities (as defined in the Formation Agreement) that are Partners in the
Partnership an amount of gross income and gain equal to such excess. If
(y) the Lumbermens Partners' share of allowable deductions for interest
paid or accrued by the Lumbermens Joint Ventures for the period from said
Effective Date through and including the date hereof with respect to
amounts furnished by the Kemper Investors or their affiliates pursuant to
paragraph 11 of the Formation Agreement exceeds (z) the Kemper Partners'
share of allowable deductions for interest paid or accrued by the Kemper
Joint Ventures for such period with respect to amounts furnished by the
Lumbermens Investors or their affiliates pursuant to said paragraph 11,
then, for the fiscal year of the Partnership ending December 31, 1993 (and,
if necessary, subsequent years), there shall be allocated to the Lumbermens
Entities that are Partners in the Partnership an amount of income and gain
equal to such excess. The amount of gross income allocated pursuant to the
first two sentences of this Section 5.4(b)(i)(E) shall be allocated among
the Kemper Entities or the Lumbermens Entities, as the case may be, that
are Partners in the Partnership in proportion to their then respective
number of Units.
<PAGE> 9
(F) Any allocation otherwise required pursuant to Section
5.4(b)(i)(A) or (B) shall not apply to a Partner to the extent that: (1)
such Partner's share of the net decrease in Partnership Minimum Gain is
caused by a guarantee, refinancing or other change in the instrument
evidencing a Nonrecourse Liability of the Partnership or Partnership Joint
Venture which causes such liability to become a partially or wholly
recourse liability or a Partner Nonrecourse Debt, and such Partner bears
the economic risk of loss (within the meaning of Treasury Regulation
1.752-2) for such changed liability; (2) such Partner's share of the net
decrease in Minimum Gain results from the repayment of a Nonrecourse
Liability (or the increase in the basis of property subject to a
Nonrecourse Liability) of the Partnership or Partnership Joint Venture,
which repayment (or increase in basis) is made using funds contributed by
such Partner to the capital of the Partnership; (3) the Internal Revenue
Service, pursuant to Treasury Regulation 1.704-2(f)(4), waives the
requirement of such allocation in response to a request for such waiver
made by the Tax Matters Partner on behalf of the Partnership; or (4)
additional exceptions to the requirement of such allocation are established
by revenue rulings issued by the Internal Revenue Service pursuant to
Treasury Regulation 1.704-2(f)(5), which exceptions apply to such
Partner, as determined by the Managing General Partners. Similarly, any
allocation otherwise required pursuant to Section 5.4(b)(i)(C) or (D) shall
not apply to a Partner to the extent that (1) such Partner's share of the
net decrease in Partner Minimum Gain results from the repayment of a
Partner Nonrecourse Debt (or the increase in the basis of property subject
to a Partner Nonrecourse Debt), which repayment (or increase in basis) is
made using funds contributed by such Partner to the capital of the
Partnership; or (2) additional exceptions described in clause (3) or (4) of
the preceding sentence apply.
(ii) Deductions and losses.
(A) Notwithstanding any provisions of this Section 5.4, any Partner
Nonrecourse Deductions shall be allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Treas. Reg. 1.704-2(i). Recourse debt that is made nonrecourse to the
Kemper Partners or the Lumbermens Partners under paragraph 13 of the
Formation Agreement shall be treated as "materially modified" within the
meaning of the Preamble to the regulations promulgated under Code Section
752 contained in Treasury Decision 8380, 1992-1 C.B. 218.
(B) Deductions for costs and expenses incurred in connection with the
examination or contest of a tax return relating to a Pre MLP Item (as
defined in Section 12.3(c)) shall be allocated in the manner described in
said Section 12.3(c).
(iii) Certain Offsetting Allocations. The allocations set forth in
Sections 5.4(b)(i)(B), 5.4(b)(i)(D), and 5.4(b)(ii)(A) and the allocation
of Nonrecourse Deductions pursuant to Section 5.4(a) (the "Regulatory
Allocations") are intended to comply with certain requirements of the
Treasury Regulations. It is the intent of the Partners that, to the extent
possible, all Regulatory Allocations shall be offset with special
allocations of other items of Partnership income, gains, deductions and
losses pursuant to this Section 5.4(b)(iii). Therefore, notwithstanding
any other provision of this Section 5.4 (other than the Regulatory
Allocations), the Managing General Partners shall make such offsetting
special allocations in whatever manner they determine appropriate so that,
after such offsetting allocations are made, the aggregate amount of Profits
and Losses (determined without including the income, gains, losses and
<PAGE> 10
deductions that are allocated pursuant to Sections 5.4(b)(i)(A),
5.4(b)(i)(C), 5.4(b)(i)(E) (only to the extent of any gross income
allocated thereunder), 5.4(b)(ii)(B) and the last sentence of Section
5.4(c)(iv)(z)) allocated to each Partner, is to the extent possible, equal
to the cumulative amount of such Profits and Losses (determined without
including the income, gains, losses and deductions that are allocated
pursuant to Sections 5.4(b)(i)(A), 5.4(b)(i)(C), 5.4(b)(i)(E) (only to the
extent of any gross income allocated thereunder), 5.4(b)(ii)(B) and the
last sentence of Section 5.4(c)(iv)(z)) that would have been allocated to
such Partner if the Regulatory Allocations were not part of the Agreement
and all Partnership Profits and Losses (determined without including the
income, gains, losses and deductions that are allocated pursuant to
Sections 5.4(b)(i)(A), 5.4(b)(i)(C), 5.4(b)(i)(E) (only to the extent of
any gross income allocated thereunder), 5.4(b)(ii)(B) and the last sentence
of Section 5.4(c)(iv)(z)) were allocated pursuant to Section 5.4(a).
(c) Reporting Positions.
(i) The Contributed Property is property described in Section 704(c)
of the Code. Subject to Section 6.1, the Managing General Partners shall
jointly agree on the method to be used by the Partnership for reporting
items of income, gain, loss and deduction with respect to the difference
between the fair market value and adjusted basis of the Contributed
Property. If at the time that the Partnership files its Tax Returns the
Managing General Partners conclude that there is substantial authority
(within the meaning of Section 6662(d)(2)(B) of the Code) for the position
that because none of the Contributed Property is depreciable or amortizable
property, any deferred gain with respect to the Contributed Property will
be subject to Section 704(c) of the Code only on disposition of the
Contributed Property by the Partnership, the Partnership's Tax Returns will
be filed on that basis.
(ii) If the Managing General Partners, pursuant to Section 6.1,
jointly agree that an election under Section 754 of the Code should be made
in connection with the transfer of the interest in that Joint Venture to
the Partnership, each such Joint Venture shall take the position that the
fair market value of its assets is equal to the amount of its debts.
(iii) The special allocations set forth in Sections 5.4(b)(1)(A)
through (D) shall be taken into account in determining other Partnership
allocations, including allocations required by Section 704(c) of the Code
and shall be applied in a manner so that the effect of such allocations is
not duplicated.
(iv) With respect to allocations pursuant to Section 5.4(b)(i)(A) or
(C), if the Internal Revenue Service or any state or local taxing authority
takes the position that the amount of income or gain to be allocated to a
Partner in any taxable year pursuant to either such Section exceeds the
amount of Nonrecourse Deductions or Partner Nonrecourse Deductions that
were actually allocated to such Partner (and such Partner's predecessor) in
prior years, the Partnership shall:
(y) notwithstanding the provisions of Section 12.0 and the second
sentence of Section 12.3(a), if the statute of limitation for filing an
amended return and claiming a refund for such prior years has not expired,
file or cause to be filed amended partnership returns for such prior years
allocating an amount of Nonrecourse Deductions or Partner Nonrecourse
Deductions to such Partner (or such Partner's predecessor) in an amount
equal to the excess of the amount of income or gain proposed to be
allocated to such Partner over the amount of Nonrecourse Deductions or
<PAGE> 11
Partner Nonrecourse Deductions previously allocated to such Partner (or
such Partner's predecessor), and
(z) notwithstanding the provisions of Section 12.0 and the second
sentence of Section 12.3(a), if the Managing General Partner which is the
same as, or the affiliate of, the Partner in issue so requests, contest the
proposed allocation of income or gain and take the position that the
minimum gain chargeback provisions of the Regulations apply only to
Nonrecourse Deductions and Partner Nonrecourse Deductions that were
actually allocated to a Partner, not to Nonrecourse Deductions and Partner
Nonrecourse Deductions that could or should, under the Regulations, have
been allocated to such Partner, it being agreed that any proposed
allocation of income or gain that is the subject of this Section 5.4(c)(iv)
shall be treated as a Pre MLP Item (and the Partner with respect to which
the taxing authority takes the position that the amount of income or gain
to be allocated exceeds the amount of Nonrecourse Deductions or Partner
Nonrecourse Deductions that were actually allocated to such Partner (or
such Partner's predecessor) in prior years shall be treated as a Pre MLP
Partner) for purposes of Section 12.3(c). To the extent that it is
ultimately determined, as a result of such contest, that the amount of
Partnership Minimum Gain or Partner Minimum Gain of the Partnership
attributable to Nonrecourse Deductions or Partner Nonrecourse Deductions of
a Joint Venture Partnership for a period ending on or prior to the date
hereof must be computed in accord with the manner in which such Deductions
were allocable to the partners of the Partnership Joint Venture, the term
"allocable" shall be substituted for the term "allocated" in Sections
5.4(b)(i)(A) and (C) with respect to such period and any income, gain,
deduction or loss attributable to such determination shall be allocated to
the Partners that were partners (or successors to partners) in the
Partnership Joint Venture for such period.
(v) If any Partner's share of Partnership Minimum Gain is reduced as
a result of the transactions contemplated by the Formation Agreement and
such Partner is also deemed to receive a distribution from the Partnership
as a result of a reduction in such Partner's share of Partnership
liabilities, any resulting allocation of income or gain pursuant to the
minimum gain chargeback provisions of Section 5.4 shall be deemed to occur
before the deemed distribution is made.
(d) Compliance with Section 704(b). It is the intent of the
Partners that all allocations of Profit and Loss comply with the economic
effect equivalence rule of Treas. Reg. 1.704-1(b)(2)(ii)(i) or be deemed
to be in accordance with the Partners' interests in the Partnership and, to
the extent not inconsistent therewith, the other provisions of Treas. Reg.
1.704-1(b) and 1.704-2 and such allocations shall be interpreted and
applied in a manner consistent with such provisions of the Regulations. In
the event that the Managing General Partners determine that it is prudent
to modify the manner in which Profits and Losses are allocated in order to
comply with such Regulations or such allocations are modified as a result
of any action by any taxing authority, the Managing General Partners shall
make such modifications, provided that any such modified allocation shall
be offset with special allocations of Partnership income, gain, loss or
deduction so that, to the extent feasible, on a present value after-tax
basis, each Partner's allocations equal the allocations that would have
been made if no such modifications had occurred. In the event the
provisions of this Agreement provide insufficient guidance on how Profits
and Losses should be allocated or unanticipated events might otherwise
cause this Agreement not to comply with Treas. Regs. 1.704-1(b),
1.704-1(b)(2)(ii)(i) and 1.704-2, the Managing General Partners may make
any appropriate modification in such allocations, subject to the foregoing
<PAGE> 12
proviso.
(e) Nonrecourse Liabilities. For purposes of determining a
Partner's proportionate share of the "excess nonrecourse liabilities" of
the Partnership (or any lower tier partnership) within the meaning of
Treas. Reg. 1.752-3(a)(3) such liabilities shall be allocated among the
Partners in proportion to the number of Units held by each Partner at the
time of such allocation.
(f) Definitions, Successor Regulations. The following
definitions shall apply for purposes of this Section 5.4:
Nonrecourse Deductions. "Nonrecourse Deductions" has the
same meaning set forth in Treas. Reg. 1.704-2(b)(1) The amount of
Nonrecourse Deductions for a Partnership fiscal year shall be determined
according to the provisions of Treas. Reg. 1.704-2(c).
Nonrecourse Liability. "Nonrecourse Liability" has the same
meaning set forth in Treas. Reg. 1.752-1(a)(2).
Partner Nonrecourse Debt. "Partner Nonrecourse Debt" means
the amount of any liability of the Partnership with respect to which a
Partner or a person related (within the meaning of Treas. Reg. 1.752-4(b)
to a Partner bears the economic risk of loss (within the meaning of Treas.
Reg. 1.752-2(b)).
Partner Nonrecourse Deductions. "Partner Nonrecourse
Deductions" shall be given the same meaning as in Treas. Reg. 1.704-2(i).
The amount of Partner Nonrecourse Deductions with respect to a Partner
Nonrecourse Debt for a Partnership fiscal year shall be determined
according to the provisions of Treas. Reg. 1.704-2(i)(2).
Partner Minimum Gain. "Partner Minimum Gain means the
excess of (y) the amount of Partnership Minimum Gain which would exist if
Partner Nonrecourse Debts were Nonrecourse Liabilities over (z) Partnership
Minimum Gain. The amount of Partner Minimum Gain (and the net increase or
decrease in Partner Minimum Gain for any Partnership fiscal year) shall be
determined in a manner consistent with the provisions of Treas. Reg.
1.704-2(d) and 1.704-2(g)(3).
Partnership Minimum Gain. "Partnership Minimum Gain" shall
have the same meaning as set forth in Treas. Reg. 1.704-2(b)(2) and
1.704-2(d). The amount of Partnership Minimum Gain (and the net increase
or decrease in Partnership Minimum Gain for any Partnership fiscal year)
shall be determined according to the provisions of Treas. Reg.
1.704-2(d).
All references to a Treasury Regulation shall include any successor
regulation thereto.
Section 5.5. Reinvestment of Certain Distributions.
(a) Consistent with the terms of the Master
Amendments (as defined in the Formation Agreement), the Partnership shall
not accept, receive or retain any dividend, distribution, return on or of
equity, payment of Additional Interest (as defined in the Formation
Agreement) or other similar payment from, any Real Estate Project (as
defined in the Formation Agreement) until all indebtedness, including
principal and accrued and unpaid interest and including any Intermediate
Loan (as defined in the Formation Agreement), incurred with respect to such
Real Estate Project has been paid in full. Until all Kemper Loans and
<PAGE> 13
Lumbermens Loans (as defined in the Formation Agreement) have been paid in
full, the Partnership shall reinvest all dividends, distributions, returns
on or of equity, payments of Additional Interest and other similar payments
from any Real Estate Project received by the Partnership net of a reserve
for income taxes. Such reinvestments shall be equal in amounts as between
the Kemper Investors and the Lumbermens Investors and shall be in the form
of contributions by the Partnership to the equity of, or junior unsecured
advances by the Partnership to, the Real Estate Projects as set forth in
Sections 5.5(b) and 5.5(c) below (such form of reinvestment to be as
mutually agreed upon by Managing General Partners). The reserve for income
taxes described in this Section 5.5(a) shall be in an amount equal to the
product of the highest federal marginal rate of income tax (expressed as a
percentage) imposed on the net capital gains of a corporation for the
taxable year (the "Measurement Year") preceding the taxable year in which
the distribution occurs and the excess of (i) the cumulative taxable income
(including net capital gains) for the period from the Closing Date until
the last day of the Measurement Year (the "Measurement Period") over (ii)
the cumulative amount of tax losses (including capital losses) of the
Partnership for the Measurement Period, provided, that the cumulative
taxable income (including net capital gains and excluding the amount of any
income or gain that would have been allocated under the terms of the
Omnibus Amendment to either a Kemper Investor or a Lumbermens Investor, but
for the contribution of such Partner's equity interest in a Real Estate
Project to the Partnership, up to an amount equal to the losses previously
allocated to either such Partner prior to the Closing Date pursuant to the
Omnibus Amendment) described in clause (i) shall not include any taxable
income (including net capital gains) to the extent such taxable income
resulted in a distribution of a tax reserve pursuant to this Section
5.5(a). (For purposes of calculating the tax reserve, taxable income, tax
losses and net capital gains and losses shall be determined by reference to
such amounts as reported by the Partnership in its federal income tax
return for the relevant years.) Such reserve shall be distributed to the
Partners in proportion to their Units. The timing of each such
distribution shall be as agreed upon by the Managing General Partners.
As an illustration of the computation and distribution of the tax
reserve, if the taxable income (loss) of the Partnership for 1993, 1994 and
1995 were $200, ($100) and $500, respectively, and the marginal tax rate on
net capital gains for each year were 34%, in 1994 the Partnership would
establish a tax reserve with respect to 1993 of $68 ($200 x .34) and
distribute such amount among the Partners in proportion to the number of
Units held by each Partner; no tax reserve would be established in 1995
with respect to 1994; and in 1996 the Partnership would establish a tax
reserve of $136 (($500 -$100) x .34) and distribute such amount among the
Partners in proportion to the number of Units held by each Partner.
Similarly, if the taxable income (loss) of the Partnership for 1993, 1994
and 1995 were ($100), $200 and $500, respectively, no tax reserve would be
established in 1994 with respect to 1993; in 1995 the Partnership would
establish a tax reserve of $34 (($200-$100) x .34) with respect to 1994 and
distribute $34 among the Partners in accordance with the number of Units
held by each Partner; and in 1996 the Partnership would establish a tax
reserve of $170 (($500-$100+$100) x .34) with respect to 1995 and
distribute such amount among the Partners in proportion to the number of
Units held by each Partner.
(b) The contributions to equity or junior unsecured financings
described in Section 5.5(a) shall be provided, first, to those Real Estate
Projects (other than Real Estate Projects which have been excluded pursuant
to paragraph 15A of the Formation Agreement) which have outstanding
<PAGE> 14
recourse indebtedness owing to lenders that are not Kemper, FLA, Lumbermens
or Affiliates of any of them and as to which claims by such lenders in
respect of such indebtedness are pending, threatened or reasonably likely
to arise within 180 days thereof, and such contributions to equity or
junior unsecured financings shall be used for the purpose of paying or
satisfying those claims as agreed to by the Managing General Partners.
(c) Next, such contributions to equity or junior unsecured
financings shall be provided to those Real Estate Projects (other than Real
Estate Projects which have been excluded pursuant to paragraph 15A of the
Formation Agreement) having outstanding Kemper Loans and/or Lumbermens
Loans and shall be used for the repayment of such Kemper Loans and
Lumbermens Loans as set forth below.
In any calendar quarter such contributions to equity or junior
unsecured financings shall be made (i) to those Real Estate Projects having
outstanding Kemper Loans for the sole purpose of applying the same to
Kemper Loans in an amount equal to the then current Kemper Loan Percentage
(as defined in the Formation Agreement) multiplied by the aggregate amount
of such contributions or financings, and (ii) to those Real Estate Projects
having outstanding Lumbermens Loans for the sole purpose of applying the
same to Lumbermens Loans in an amount equal to the then current Lumbermens
Loan Percentage (as defined in the Formation Agreement) multiplied by the
aggregate amount of such contributions or financings. Such capital
contributions or junior unsecured financings shall be made to Real Estate
Projects so as to permit the application of the respective percentage
thereof to the Kemper Loans and the Lumbermens Loans, as the case may be,
in the following order of priority: first, to senior secured Lumbermens
Loans and senior secured Kemper Loans as to which Deficiencies (as defined
in the Formation Agreement) exist, until such Deficiencies have been
eliminated in full; second, to junior secured Lumbermens Loans and junior
secured Kemper Loans as to which Deficiencies exist, until such
Deficiencies have been eliminated in full; third, to senior unsecured
Lumbermens Loans and senior unsecured Kemper Loans as to which Deficiencies
exist, until such Deficiencies have been eliminated in full; fourth, to
junior unsecured Lumbermens Loans and junior unsecured Kemper Loans as to
which Deficiencies exist, until such Deficiencies have been eliminated in
full; and last, to secured and unsecured Kemper Loans and secured and
unsecured Lumbermens Loans, until such loans are paid in full. Any Kemper
Loans or Lumbermens Loans that are not paid in full upon the sale,
foreclosure or refinancing of a Real Estate Project shall not be terminated
or forgiven, but for purposes of this Agreement shall become or shall
remain in existence as unsecured loans, shall constitute Deficiencies in
their entirety and shall be repaid in accordance with the priorities set
forth above. After all of the Kemper Loans and Lumbermens Loans have been
repaid, there shall be no further obligation to reinvest distributions.
Subject to the ordering of priorities set forth above, within each class of
Kemper Loans, the Kemper Managing General Partner shall be entitled to
designate which Kemper Loans shall be paid down and the amount to be
applied to each such loan from that portion of each equity contribution or
junior unsecured financing allocated to those loans in accordance with this
paragraph. Subject to the ordering of priorities set forth above, within
each class of Lumbermens Loans, the Lumbermens Managing General Partner
shall be entitled to designate which Lumbermens Loans shall be paid down
and the amount to be applied to each such loan from that portion of each
equity contribution or junior unsecured financing allocated to those loans
in accordance with this Section 5.5(c).
(d) All reinvestments by the Partnership shall be applied in the
priority set forth above to the Kemper Loans or Lumbermens Loans,
<PAGE> 15
respectively, notwithstanding the priority level at which other
reinvestments are then being applied (for example, the Kemper Loan Percentage
of a particular reinvestment may be applied to Deficiencies on senior
secured Kemper Loans of a Real Estate Project while the Lumbermens Loan
Percentage of such reinvestment may be applied to Deficiencies on
unsecured Lumbermens Loans owing by the same or a different Real Estate
Project that has outstanding senior secured Kemper Loans, so long as no
Deficiency exists as to a Lumbermens Loan with a higher priority). The
existence and amount of Deficiencies as to any class of loans shall be
recalculated quarterly, and even if Deficiencies have been previously
eliminated as to any class of loans, new Deficiencies may result from
declines in market values or the accrual of interest on the applicable
loan, which new Deficiencies shall thereafter be eliminated in the order
of priority set forth above.
Section 5.6. Disgorgement of Distributions. If any Managing
General Partner or General Partner shall at any time be required to
satisfy a claim against the Partnership out of the separate assets of such
Managing General Partner or General Partner (a "Personal Claim"), then
each Limited Partner shall be liable to the Partnership for an amount equal
to the lesser of (i) such Limited Partner's pro rata share of such
Personal Claim, based on the ratio which the number of Units held by
such Limited Partner bears to the aggregate number of Units held by all
Partners, and (ii) the aggregate amount of distributions made to such
Limited Partner by the Partnership since the date hereof. Payment of
any such liability by a Limited Partner shall not constitute a capital
contribution by such Limited Partner and shall not entitle such Limited
Partner to any additional Units or any other right hereunder, except that
if the applicable Managing General Partner or General Partner shall
thereafter recover all or any portion of any amount paid to satisfy a
Personal Claim, then such Managing General Partner or General Partner
shall promptly refund each Limited Partner's share of such recovery, to
the extent originally paid by such Limited Partner.
ARTICLE VI
GENERAL MANAGEMENT, ACCOUNTING AND ADMINISTRATIVE MATTERS
Section 6.1. Authority of Managing General Partners. Subject to the
provisions of the Act and the other provisions of this Agreement, the
Managing General Partners shall jointly but not severally have the full
power and authority to manage and control the conduct and operations of
the Partnership's business, and no other Partner (including, without
limitation, any General Partner) shall have any such power and authority.
The Managing General Partners shall jointly but not severally possess,
and may jointly but not severally exercise, all of the rights and powers
of a general partner as provided in (but subject to the limitations and
restrictions of) the Act as now in effect or as hereafter from time to
time amended. Except as provided in Article XVI hereof, neither Managing
General Partner shall have any power or authority to exercise any right or
power hereunder, or to take any action whatsoever with respect to the
Partnership, without the express written approval of the other Managing
General Partner. It is the intention of the parties hereto that the
Managing General Partners will cooperate with respect to any decisions they
make and actions they take regarding the Partnership, the Real Estate
Projects, the KBPI Stockholders Agreement, the Joint Venture Agreements,
the Management Agreement, the Participation Agreement and other
underlying agreements (the "Related Agreements"). No General Partner or
Limited Partner will take any action with respect to any of the
Contributed Property or any other property of the Partnership, whether
pursuant to authority granted under any Related
<PAGE> 16
Agreement as a joint venturer or stockholder, through any director
nominated by it or otherwise, without the express approval of both Managing
General Partners. If the Managing General Partners do not agree as to
whether an action should be taken hereunder, or what action should be taken
hereunder, whether with respect to a particular Real Estate Project, the
KBPI Stockholders Agreement, the Participation Agreement, any Related
Agreement or otherwise, then no action shall be taken. Subject to the
foregoing provisions of this Section 6.1, the Managing General Partners and
the General Partners shall, for purposes of the Act, constitute general
partners of the Partnership. No provision herein shall be deemed to limit
the rights or remedies of any Partner in its capacity as a lender with
respect to any Real Estate Project or the right of any Partner to make
Unilateral Fundings under and in accordance with the Formation Agreement.
Section 6.2. Duties of Managing General Partners; Compensation.
During the existence of the Partnership, the Managing
General Partners shall devote such time and effort to the Partnership
business as may be necessary to promote the interest of the Partnership and
the mutual interests of the Partners. In the performance of their duties
hereunder the Managing General Partners shall exercise good faith in all
activities relating to the conduct of the business of the Partnership and
shall undertake in good faith, and take reasonable steps to carry out, the
development, operation and maintenance of the business of the Partnership.
Except as both Managing General Partners shall otherwise agree in writing,
each Managing General Partner shall be responsible for all expenses it
incurs on behalf of the Partnership in connection with the Partnership's
business. Other than as jointly agreed to by both Managing General
Partners, no Managing General Partner shall be entitled to any compensation
from the Partnership for services rendered to the Partnership.
Section 6.3. Limit on Liability of Managing General Partners.
Neither Managing General Partner, in its capacity as a general partner of
the Partnership, nor any director, officer employee or agent of either
Managing General Partner, shall be liable to the Partnership or to the
other Partners for any loss or liability incurred in connection with any
act performed or omitted by such Managing General Partner, director,
officer, employee or agent, except to the extent it may be liable in the
capacity as a General Partner with the other General Partners, unless such
loss or liability is incurred in connection with (a) a breach or violation
by such Managing General Partner, director, officer, employee or agent of
any of its fiduciary duties to the Partners under the Act or otherwise, or
a breach or violation by such Managing General Partner of any of its
express duties or obligations under this Agreement, or (b) the willful
misconduct or gross negligence of such Managing General Partner, director,
officer, employee or agent. Notwithstanding the foregoing, no director,
officer, employee or agent of a Managing General Partner shall have any
liability to the Partners for any breach or violation by such Managing
General Partner of any of its express duties or obligations under this
Agreement, unless such breach or violation also constitutes a breach of such
Managing General Partner's fiduciary duties hereunder.
Section 6.4. Other Activities of the Partners. Each of the
Partners, and each Person directly or indirectly owning an interest in any
Partner, may enter into, participate in or continue to participate in, or be
employed by, directly or indirectly, businesses or business activities in
addition to those relating to the business of the Partnership, and neither
the Partnership nor any Partners thereof, as such, shall have any rights by
virtue of this Agreement in any such business activities.
Section 6.5. Transactions with Affiliates. The Partnership may
<PAGE> 17
transact business with any Person notwithstanding the fact that such
Person may be an Affiliate of a Partner or that any Partner or its
Affiliates may be otherwise related to or have an interest in such Person
so long as the Partner so affiliated or otherwise having such relation or
interest discloses such affiliation, relation or interest to the Managing
General Partners prior to such transaction and, other than in the case of a
transaction with a Person that is an Affiliate of both Kemper and Lumbermens,
such employment or transaction is approved in writing by both of the
Managing General Partners. Neither the Partnership nor the other Partners
shall have any right in any income or profits in connection with any such
employment or transactions.
Section 6.6. Indemnification.
The Partnership may, with the written approval of the Majority Partners,
indemnify any Partner (including, without limitation, the Managing General
Partners) or any other Person from and against such claims and liabilities
as the Majority Partners shall determine.
ARTICLE VII
MANAGEMENT OF JOINT VENTURES
Section 7.1. Limitation on Actions.
Each Partner agrees that with respect to each Partnership Joint
Venture and the Joint Venture Agreement relating thereto, the Partnership
will not take, and no Partner shall cause the Partnership to take or agree
to take, any action without the prior written approval of both Managing
General Partners. Without limiting the foregoing, the Partnership shall
not take any of the following actions without the prior written approval of
both Managing General Partners (it being understood that the following
limitations shall not restrict any Partner from acting in its individual
capacity):
(a) consent to or approve or take any action with respect to (i)
any Major Decisions, Overall Development Plan or Project Development Plan
(each as defined in the applicable Joint Venture Agreement), (ii) any
action, agreement or other matter requiring the consent or approval of the
Venturers (as defined in the applicable Joint Venture Agreement) under the
applicable Joint Venture Agreement, including the approval of any transfer
of interests in the Partnership Joint Venture or (iii) any action,
agreement or other matter requiring consent or approval of the joint
venturers under the Management Agreement;
(b) withdraw or give written notice of withdrawal from any
Partnership Joint Venture, or default or exercise its remedies as a
Nondefaulting or Nonwithdrawing Party (as defined in the applicable Joint
Venture Agreement) under the applicable Joint Venture Agreement;
(c) approve, direct or make any expenditure or payment on behalf
of any Partnership Joint Venture or approve or incur any obligation on
behalf of such Partnership Joint Venture;
(d) submit a dispute under any Joint Venture Agreement to
arbitration;
(e) acquire or agree to acquire any interests in property
located in the Area of Interest (as defined in the applicable Joint Venture
Agreement);
<PAGE> 18
(f) approve, direct or acquiesce in the termination of KREMCO as
the Manager (as defined in each Joint Venture Agreement) of the
Partnership Joint Venture pursuant to the applicable Joint Venture Agreement,
the Management Agreement or otherwise;
(g) except as provided in Sections 5.5 and 12.3(c) hereof,
contribute to the capital of, or advance funds to, any Partnership Joint
Venture;
(h) consent to, approve or take any action to dissolve,
liquidate or otherwise wind up the affairs of any Partnership Joint
Venture; or
(i) take any other action under any Joint Venture Agreement or
otherwise with respect to any Partnership Joint Venture.
In furtherance of the foregoing, if the Managing General Partners
have not agreed to approve or consent to an action within 20 days of any
request for consent or approval of the Partnership as a venturer under
the applicable Joint Venture Agreement (or if such consent or approval is
required in less than 20 days, then prior to any date on which such consent
or approval would be deemed given under the applicable Joint Venture
Agreement), the Managing General Partners shall immediately provide notice to
the other venturer(s) to the applicable Partnership Joint Venture that the
Partnership objects to the proposed action. If the Managing General
Partners do not agree as to whether the Partnership shall purchase any
other joint venturer's interests or sell the Partnership's interests in
a Partnership Joint Venture in response to any offer by a Withdrawing
Party (as defined in the applicable Joint Venture Agreement) under
Section 6.07(a) of the applicable Joint Venture Agreement, then the
Majority Partners shall make such decision. If Partners constituting the
Majority Partners are unable to agree on such a decision, then the
Partnership shall elect to sell its interests pursuant to such section.
Section 7.2. Limitations on Partners Individually. Each Partner agrees
that it shall not, without the prior written consent of the Majority
Partners, acquire or agree to acquire any equity interests in property,
or manage or agree to manage any property, located in the Area of Interest
(as defined in the applicable Joint Venture Agreement); provided that any
Partner may acquire such an interest if the Partnership has previously
declined to acquire such interest on the same or substantially similar
terms, and provided further that any Partner may acquire any such interest by
foreclosure thereon, purchase thereof at a foreclosure sale, or acceptance of
a deed in lieu of foreclosure thereon.
ARTICLE VIII
MANAGEMENT OF KBPI
Section 8.1. Actions Requiring Approval.
The Partners agree that, unless approved in writing by both Managing
General Partners, the Partnership shall not take or agree to take, and no
Partner shall cause the Partnership to take or agree to take, any actions
with respect to KBPI or any KBPI Subsidiary and the KBPI Stockholders
Agreement. Without limiting the foregoing, the Partnership shall not,
without the written approval of both Managing General Partners:
(a) consent to or approve of any Policy Book, Project
Development Plan or Budget (each as defined in the KBPI Stockholders
<PAGE> 19
Agreement) or any action, agreement or other matter requiring the consent
or approval of the stockholders or the board of directors of KBPI under the
KBPI Stockholders Agreement, including the transfer of any KBPI capital
stock;
(b) withdraw or give written notice of withdrawal from the KBPI
Stockholders Agreement, or default or exercise its remedies as a
Nondefaulting or Nonwithdrawing Party (as defined in the KBPI Stockholders
Agreement) under the KBPI Stockholders Agreement;
(c) consent to, approve or take any action to dissolve,
liquidate or otherwise wind up the affairs of KBPI or any KBPI Subsidiary;
(d) submit a dispute under the KBPI Stockholders Agreement to
arbitration;
(e) approve, direct or acquiesce in the termination of the
Management Agreement or of KREMCO as the Manager (as defined in the
Management Agreement) of any of the K/B Properties (as defined in the
Management Agreement);
(f) except as provided in Section 5.5 hereof, contribute to the
capital of, or advance funds to, KBPI or any KBPI Subsidiary; or
(g) take any other action under the KBPI Stockholders Agreement
or otherwise with respect to KBPI or any KBPI Subsidiary.
In furtherance of the foregoing, if the Managing General Partners do not
agree as to whether an action should be taken by KBPI or any KBPI
Subsidiary, or what action should be taken by KBPI or any KBPI Subsidiary,
with respect to any issue presented to the board of directors of the
applicable corporation, then Partners constituting the Majority Partners
shall make such decision. If Partners constituting the Majority Partners
cannot agree, then each Managing General Partner shall cause the directors
of KBPI or such KBPI Subsidiary, as applicable, nominated by such Managing
General Partner to take such actions as are necessary under the
circumstances so that KBPI or such KBPI Subsidiary, as applicable, takes no
action with respect to the issue in question. If the Managing General
Partners do not agree as to whether the Partnership shall purchase the
interests of another KBPI Stockholder or sell interests in KBPI in response
to an offer by a Withdrawing Party (as defined in the KBPI Stockholders
Agreement) under Section 6.07 of the KBPI Agreement, the Majority Partners
shall make such decision. If Partners constituting the Majority Partners
are unable to agree on such a decision, the Partnership shall sell its
interests pursuant to such section.
Section 8.2. Boards of Directors.
(a) The Managing General Partners shall have equal
representation on the board of directors of KBPI and on the board of
directors of each KBPI Subsidiary.
(b) Each Managing General Partner shall nominate one-half of the
nominees to the board of directors of KBPI and each KBPI Subsidiary that
the Partnership is entitled to elect pursuant to the KBPI Stockholders
Agreement. The Partnership shall vote its shares of KBPI capital stock (i)
to elect to the board of directors of KBPI, and to cause KBPI to elect to
the board of directors of each KBPI Subsidiary, the nominees to each such
board of directors nominated by each Managing General Partner, (ii) to
remove any director of KBPI or any KBPI Subsidiary nominated by either
Managing General Partner if so requested in writing by such Managing
<PAGE> 20
General Partner and (iii) to fill any vacancy on the board of directors of
KBPI or any KBPI Subsidiary with a director nominated by the Managing
General Partner who nominated the director whose position has become
vacant. The Partnership shall not vote for the removal of any KBPI or KBPI
subsidiary director except as set forth in Section 8.2(b)(ii) or as agreed
by both Managing General Partners.
ARTICLE IX
MANAGEMENT OF PARTICIPATING MORTGAGE PROJECTS,
OPTION PROPERTIES, MEMORY GARDENS AND OTHER REAL ESTATE
Section 9.1. Limitation on Actions.
Unless both Managing General Partners expressly approve such
action, the Partnership will not (i) take any action whatsoever under the
Participation Agreement, or otherwise with respect to a Participating
Mortgage Project or the related Participating mortgage Loan Documents, or
(ii) take any action whatsoever with respect to an Option Property, under
any option agreement or otherwise, or with respect to Memory Gardens.
Section 9.2. Management of Other Real Estate. If the Partnership
shall acquire title to any real estate, as a result of foreclosure,
acquisition or otherwise, which is not governed by a Joint Venture Agreement
or the KBPI Stockholders Agreement, the Partnership shall operate such real
estate in a manner consistent with the provisions of this Agreement.
ARTICLE X
RIGHTS AND OBLIGATIONS
OF LIMITED PARTNERS AND GENERAL PARTNERS
Section 10.1. Limitation of Liability of Limited Partners. Except
as otherwise provided herein or under applicable law, no Limited Partner
shall have any liability for the losses, debts or other obligations of the
Partnership.
Section 10.2. Control; Management of Business. No Limited Partner
or General Partner shall participate in the control (within the meaning of
the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for, or otherwise
bind, the Partnership.
ARTICLE XI
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 11.1. Records and Accounting.
The Managing General Partners shall keep or cause to be kept
at the principal office of the Partnership books and records with respect
to the Partnership's business including, but not limited to, all books and
records necessary to provide to the Partners any information, lists and
copies of documents required to be provided pursuant to the Act. The books
of the Partnership shall be maintained on an accrual basis.
Section 11.2. Fiscal Year.
The fiscal year of the Partnership shall be the calendar year.
<PAGE> 21
Section 11.3. Reports.
(a) As soon as practicable, but in no event later than 90 days
after the close of each fiscal year of the Partnership, the Managing General
Partners shall provide to each Partner an annual report containing financial
statements of the Partnership for such fiscal year, presented in accordance
with the manner in which the Partnership's Federal income tax returns are
filed, including a balance sheet and statements of operations, Partners'
equity and changes in financial position.
(b) Promptly after a Managing General Partner shall become aware
of the same, such Managing General Partner shall send each Partner
(including, without limitation, the other Managing General Partner) a
notice of:
(i) any action, proceeding or investigation before any court,
arbitration, or any governmental agency or instrumentality, pending or
threatened against or affecting the Partnership or any Partner in its
capacity as a partner;
(ii) any material claim made against the Partnership or the
Partnership's property;
(iii) any incurrence, renewal or refinancing or payment or other
discharge of indebtedness of the Partnership involving more than $10,000,
other than the payment or discharge of obligations specifically assumed (or
taken subject to) by the Partnership in accordance with the terms of such
obligations; or
(iv) any other material event affecting the Partners or the
Partnership.
ARTICLE XII
TAX MATTERS
Section 12.0. General. Except as provided in Sections
5.4(c)(iv), 12.1(b) and 12.3(a), the treatment and resolution of all tax
matters, including, without limitation, preparation of tax returns, making
tax elections, all actions of the Tax Matters Partner and the conduct of
all tax contests, shall be subject to the limitations on power and
authority of the Managing General Partners as provided in Section 6.1
hereto.
Section 12.1. Preparation of Tax Returns.
(a) The Managing General Partners shall
arrange for the preparation and timely filing of all returns of Partnership
income, gains, deductions, losses and other items required of the
Partnership for Federal, state and local income tax purposes. The
classification, realization and recognition of income, gain, losses and
deductions and other items shall be on the accrual method of accounting for
Federal income tax purposes.
(b) Not less than 120 days before the due date (determined after
taking into account all extensions obtained by the Tax Matters Partner) for
the filing of the Partnership's Federal, state and local income tax returns
and income tax reports (collectively, together with any amendments to such
returns and reports, "Tax Returns") for any year, the Tax Matters Partner
shall deliver to the Managing General Partner which is not the Tax Matters
<PAGE> 22
Partner (the "Other Managing General Partner") for its review and written
comments (as described below) draft copies of the Partnership's Tax Returns
for such taxable year (which drafts shall be prepared by the Partnership's
accountants). On or before the 20th day following the receipt by the other
Managing General Partner of such drafts, the Other Managing General Partner
may provide the Tax Matters Partner with written notice of its suggested
changes to such draft Tax Returns, which the Tax Matters Partner shall
consider in good faith for inclusion in the Tax Returns to be filed for the
taxable year. If the Tax Matters Partner and the Other Managing General
Partner cannot agree upon the form and substance of a Tax Return, the form
and substance of such Tax Return shall be determined in odd numbered years
by the Kemper Managing General Partner and in even numbered years by the
Lumbermens Managing General Partner, and absent such an agreement
concerning the form and substance of such returns, the provisions of
Section 12.4 shall not apply to any tax item that is the subject of such
disagreement. The Tax Matters Partner shall provide the Other Managing
General Partner with a copy of the Tax Returns filed by the Partnership.
Each of the Managing General Partners agrees to cause KREMCO or its
successor as manager of the Joint Ventures to follow the procedures
described in this Section 12.1(b) with respect to draft and final Tax
Returns.
Section 12.2. Tax Elections. Except as otherwise
provided herein, the Managing General Partners shall jointly,
in their sole discretion as they may agree, determine whether to make any
available election pursuant to the Code, including, without limitation, the
election under Section 754 of the Code. The Partnership shall elect under
Section 709 of the Code to amortize its organizational expenses on a
straight-line basis over a period of sixty months.
Section 12.3. Tax Matters Partner.
(a) The Kemper Managing General Partner is designated the Tax
Matters Partner (as defined in Section 6231 of the Code), and, subject to
the provisions of this Section 12.3, is authorized and required to
represent the Partnership (at the Partnership's expense) in connection with
all examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend
Partnership funds for professional services and costs associated therewith.
Notwithstanding the preceding sentence, the Tax Matters Partner shall not,
without the prior written consent of the Other Managing General Partner:
(i) bind any Partner to any settlement agreement with any taxing authority,
(ii) enter into any extension of the period within which any taxing
authority may make assessments with respect to the Partnership (or any
Partnership Joint Venture) or any Partner thereof, or (iii) file any
petition for readjustment of partnership tax items with respect to a final
partnership administrative adjustment pursuant to Section 6226 of the Code,
make a request for an administrative adjustment of partnership tax items
pursuant to Section 6227 of the Code, or file a petition for adjustment of
partnership tax item pursuant to Section 6228 of the Code, it being
understood that nothing in this sentence shall preclude any Partner from
entering into a settlement agreement on its own behalf and at its own
expense, provided that any Partner entering into any such settlement
agreement shall notify each other Partner at least fifteen days prior to
taking such action. If the Tax Matters Partner does not obtain such
consent to take any such action described in clause (iii) of the preceding
sentence, no other Partner shall be permitted to take such action absent
the consent of both Managing General Partners, except that nothing shall
preclude any Partner from taking any such action with respect to any items
as to which the provisions of Section 12.4 do not apply by reason of the
<PAGE> 23
provisions in the third sentence of Section 12.1(b). All Partners
specifically acknowledge, without limiting the general applicability of
this Section 12.3(a), that the Tax Matters Partner shall not be liable,
responsible or accountable in damages or otherwise to the Partnership or
any other Partner with respect to any action taken by it in its capacity as
the Tax Matters Partner which is not in violation of its obligations set
forth below. The Managing General Partner shall be reimbursed for all
reasonable expenses incurred by it in its capacity as the Tax Matters
Partner.
(b) In addition to any rights conferred on the Other Managing
General Partner by the foregoing provisions of this Article XII, and by the
Code, or any other federal, state or local law in respect of any adjustment
at the Partnership level of any "partnership item," as defined in Section
6231(a)(3) of the Code (or any comparable provisions of state and local
income tax laws):
(i) The Tax Matters Partner shall furnish promptly to the
Internal Revenue Service a written statement, in accordance with Temporary
Treasury Regulation 301.6223(c)-lT (or any successor thereto) in order to
cause the Internal Revenue Service to mail to the Other Managing General
Partner all notices described in Section 6223(a) of the Code or any
corresponding provision of any successor Federal internal revenue law (and
comparable provisions of state and local income tax laws);
(ii) The Tax Matters Partner shall deliver to the Other managing
General Partner a copy of any material notice, letter, proposed adjustment,
notice regarding rights to appeal, request for information, request for
inspection of documents, subpoena and any other item of correspondence or
other communication or document, including notice of any matter described
in Section 6223(a) or Section 6223(g) of the Code or the Treasury Regu-
lations thereunder (and comparable provisions of state and local income tax
laws), received by such Tax Matters Partner (in its capacity as Tax Matters
Partner) from the Internal Revenue Service or any state or local taxing
authority which is directly related to an administrative proceeding (as
defined in Section 6223(a) of the Code (and comparable provisions of state
and local income tax laws)) (an "Administrative Proceeding") with respect
to the Partnership;
(iii) The Tax Matters Partner shall inform promptly the other
Managing General Partner of any material oral request for information
received by such Tax Matters Partner (in its capacity as Tax Matters
Partner) from, or conference with, the Internal Revenue Service or any
state or local taxing authority which is directly related to an
Administrative Proceeding with respect to the Partnership;
(iv) The Tax Matters Partner shall confer with the other
Managing General Partner and its counsel before responding to any material
notice, letter, proposed adjustment, notice regarding rights to appeal,
request for information, request for inspection of documents, subpoena or
other correspondence or item of communication or document received by such
Tax Matters Partner (in its capacity as Tax Matters Partner) from, or oral
request made by, the Internal Revenue Service or any state or local taxing
authority which is directly related to an Administrative Proceeding with
respect to the Partnership;
(v) The Other Managing General Partner and its counsel shall
have the right, at the expense of the Partnership, to participate in, or
with respect to, any federal, state or local partnership level income tax
matter: (A) any audit of any federal, state or local Tax Return filed by or
on
<PAGE> 24
behalf of the Partnership; (B) any conference with the Internal Revenue
Service or any state or local taxing authority; (C) any settlement
negotiation with the Internal Revenue Service or any state or local taxing
authority; (D) the decision whether or not to pursue (y) litigation, and
the selection of the litigation forum, if any, of any final partnership
administrative adjustment, or (z) any request for an administrative
adjustment of partnership items; (E) the negotiation of a settlement of any
petition filed in the United States Tax Court; (F) the negotiation of a
settlement of any refund suit in any United States District Court or the
United States Claims Court; (G) the decision whether or not to pursue an
appeal of a decision of the United States Tax Court, a United States
District Court or the United States Claims Court and the negotiation of a
settlement of such appeal; and (H) the negotiation of a settlement of any
litigation concerning a state or local income tax matter of the Partnership;
and
(vi) Not later than fifteen days prior to the filing of any of
the following documents (or such shorter period as is reasonable under the
circumstances), the Tax Matters Partner shall provide to the Other Managing
General Partner (or mutatis mutandis to the extent action is taken by the
Other Managing General Partner) drafts of such documents and consider in
good faith any comments which the Other Managing General Partner may make
with respect thereto: (A) responses to any 30-day letter or similar
document issued to the Partnership by the Internal Revenue Service or any
state or local taxing authority; (B) documents concerning the settlement of
any proposed adjustment of the Partnership's taxable income; (C) requests
for an administrative adjustment to any partnership level income tax matter
to be filed with the Internal Revenue Service (or any similar document to
be filed with any state or local taxing authority); (D) petitions and
briefs to be filed by or on behalf of the Partnership in the United States
Tax Court and any other documents relating to any case pending before such
court or the settlement of any such case; (E) pleadings and briefs to be
filed by or on behalf of the Partnership in a refund suit in any United
States District Court or the United States Claims Court and any other
documents relating to any case pending before such court or the settlement
of any such case; (F) pleadings and briefs to be filed by or on behalf of
the Partnership in an appeal of a decision of the United States Tax court,
a United States District Court or the United States Claims Court and any
other documents relating to any such appeal or the settlement of such
appeal; and (G) pleadings and briefs to be filed by or on behalf of the
Partnership in any litigation concerning a state or local income tax matter
of the Partnership and any other documents relating to any such litigation
or the settlement of any such litigation.
(vii) For purposes of Section 12.1 and this Section 12.3, the
term "income tax" shall include (A) state franchise taxes that are based on
net income, and (B) interest and penalties associated with income taxes.
(c) If the Partnership incurs any costs or expenses (exclusive
of any taxes, interest or penalties) in connection with the examination or
contest of the Partnership's Tax Returns by a taxing authority (or the
examination or contest of the Tax Returns of any partnership (including the
Partnership Joint Ventures) in which the Partnership is a partner), the
Partners (in relationship to their Units) shall contribute to the
Partnership an amount equal to such costs and expenses and any deduction
for such costs and expenses shall be allocated among the Partners in
proportion to their Units. Notwithstanding the preceding sentence, to the
extent that the costs or expenses (exclusive of any taxes, interest or
penalties) incurred in connection with the examination or contest of a Tax
Return are, in the opinion of the Managing General Partners, reasonably
<PAGE> 25
attributable to events or occurrences which occurred on or prior to the
date hereof (a "Pre MLP Item"), the Managing General Partners shall jointly
determine how such costs shall be shared among the Kemper Partner or
Lumbermens Partner, as the case may be, that was the partner in the
partnership (including any Partnership Joint Venture) that was the subject
of such examination or contest (the "Pre MLP Partner") and the other
Partners and each Partner shall contribute to the Partnership an amount
equal to the share of such costs and expenses so determined. To the extent
that a Partner makes a contribution to the Partnership pursuant to this
Section 12.3(c), the deduction allowable to the Partnership for the costs
and expenses of contesting the related Pre MLP Item shall be allocated to
such Partner. No contribution made pursuant to this Section 12.3(c) shall
increase the contributing Partner's Units.
Section 12.4. Consistent Reporting.
Except as otherwise agreed by the Managing General Partners,
for Federal, state and local income tax purposes the Partners shall report
all items of income, gain, loss and deduction attributable to the
Partnership, the character and timing of such items and the sharing of the
Partnership's liabilities (and that of any lower tier partnership)
consistent with the manner in which such items and share of liabilities are
reported by the Partnership on its tax returns. For Federal, state and
local income tax purposes, any Partner that is required to recognize any
income, gain, loss or deduction arising from the formation of the
Partnership or the transfer of the Contributed Property to the Partnership
or the transactions contemplated by the Formation Agreement will recognize
such income, gain, loss or deduction of such Partner as having accrued
prior to such formation and contribution, it being agreed that the Partners
will treat such formation and contribution and the transactions
contemplated by the Formation Agreement as constituting transactions
subject to Section 721 of the Code.
Section 12.5. Classification as a Partnership.
The Managing General Partners shall (i) at no time take any action or cause
the Partnership to take any action which would result in the Partnership
either being treated as a publicly traded partnership taxable as provided in
Section 7704 of the Code or being classified as an association
for Federal income tax purposes, rather than as a partnership, and
(ii) make reasonable, good faith and diligent efforts to exercise
their discretion in the performance of their duties and responsibilities
hereunder in such a manner as to cause the Partnership to remain
classified as a partnership for Federal income tax purposes, rather
than as an association, and to prevent the Partnership from being treated
as a publicly traded partnership taxable as provided in Section 7704 of the
Code. If any events occur that may affect the Partnership's status as a
partnership for Federal income tax purposes (including a change in the
Code, the Treasury Regulations or case law), the Managing General Partners
shall agree in good faith to cause steps to be taken by the Partnership and
the Partners to maintain classification of the Partnership as a partnership
for Federal income tax purposes.
ARTICLE XIII
TRANSFER OF UNITS
Section 13.1. Transfer. (a) The term
"transfer," with respect to a Unit or Units shall mean a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange, distribution,
<PAGE> 26
transfer, grant of participating interest, agreement to vote partnership
interests, or any other disposition in whole or in part (including, without
limitation, any legal, beneficial or economic interest), whether voluntary
or involuntary, by operation of law or otherwise.
(b) No Managing General Partner, General Partner or Limited
Partner may withdraw from the Partnership other than as a result of a
transfer of all of such Partner's Units in accordance with the terms of
this Agreement.
(c) Notwithstanding any provision hereof to the contrary, no
Unit or Units shall be transferred except as expressly permitted by this
Article XIII. Any transfer or purported transfer of a Unit or Units not so
expressly permitted shall be null and void, except to the extent required
by operation of law. No transferee of any Unit or Units, whether
transferred (i) in violation of this Article XIII (even if required by
operation of law) or (ii) in accordance with this Article XIII, shall
become a Partner unless both Managing General Partners (or in the case of
Units held by a Managing General Partner, the other Managing General
Partner) consents in writing to such transferee becoming a Partner, which
consent may be given or withheld in the sole discretion of the Managing
General Partner(s) with or without cause, provided, however, that in the
case of a transfer that meets the requirements of Section 13.2(a) through
(d) to a Person who is a Partner prior to such transfer, the transferor
need not furnish the opinion described in Section 13.2(e) and the
transferee shall, without the consent of the Managing General Partner(s),
be entitled to all rights of the transferor with respect to the transferred
Unit. Any transferee who is not admitted as a Partner shall be entitled,
to the extent assigned, only to the allocations of income, gain, loss,
deduction and credit and distributions to which the assigning Partner would
have been entitled and shall not be entitled, except to the extent required
by operation of law, to any of the other rights of a Partner.
Section 13.2. Transfer of Units.
A Partner shall not transfer any of its Units except in the event each of
the following conditions is met:
(a) the transferee is an 80% or more owned Affiliate of Kemper
(in the case of a transfer by a Kemper Partner), or an 80% or more owned
Affiliate of Lumbermens (in the case of a transfer by a Lumbermens
Partner);
(b) the transfer does not violate the then applicable Federal
and state securities law or rules;
(c) the transfer does not affect the Partnership's existence or
qualification as a limited partnership under the Act;
(d) the transfer does not result in a tax-exempt entity, within
the meaning of Section 168(h)(2) of the Code, becoming a Partner; and
(e) prior to such transfer, the Partnership receives an opinion,
from counsel satisfactory to both Managing General Partners and in form and
substance satisfactory to both Managing General Partners, to the effect set
forth in (b) and (c) above. Such opinion of counsel shall also include an
opinion to the effect that such transfer would not result in the
termination of the Partnership (and, in the case of a transfer by either
Managing General Partner, would not result in the Partnership becoming
taxable as a corporation) for Federal income tax purposes or in the
Partnership being treated as a publicly-traded partnership taxable as
<PAGE> 27
provided in Section 7704 of the Code, if either managing General Partner
determines that any such termination or treatment could reasonably be
expected to affect the Partnership or any Partner adversely.
ARTICLE XIV
WITHDRAWAL OF PARTNERS;
WITHDRAWAL OR REMOVAL OF MANAGING GENERAL PARTNERS
Section 14.1. Voluntary Withdrawal. Except as provided in Section
13.1, no General Partner or Limited Partner shall voluntarily withdraw from
the Partnership at any time during the term of the Partnership.
Section 14.2. Withdrawal of Managing General Partners.
No Managing General Partner shall withdraw, resign or retire as a Managing
General Partner without the prior written approval of the other Managing
General Partner unless (i) a new Managing General Partner is appointed by the
withdrawing, resigning or retiring Managing General Partner and expressly
assumes all the rights and obligations of the withdrawing, resigning or
retiring Managing General Partner hereunder, and (ii) the withdrawing,
resigning or retiring Managing General Partner transfers its Units to such
new Managing General Partner in accordance with Sections 13.1(c) and 13.2.
ARTICLE XV
ADMISSION OF PARTNERS
Section 15.1. Admission of a Managing General Partner.
A substitute or successor Managing General Partner designated in accordance
with Article XIV shall be admitted as, or become, a substitute or successor
Managing General Partner concurrently with the withdrawal of the predecessor
Managing General Partner and the substitute or successor Managing General
Partner shall carry on the business of the Partnership with the remaining
Managing General Partner without dissolution of the Partnership.
Section 15.2. Admission of General Partners and Limited.
The transferee of a Unit or Units from a General Partner or a Limited
Partner in accordance with Sections 13.1(c) and 13.2 shall be admitted as a
General Partner or a Limited Partner, as the case may be. The Managing
General Partners may, by mutual agreement, admit new General Partners or
Limited Partners or, with the consent of a Limited Partner, convert such
Limited Partner to a General Partner. If any new Partner is admitted in
accordance with the foregoing sentence, the Managing General Partners may,
by mutual agreement, reallocate the Units held by the Partners in order to
assign Units to such new Partner.
ARTICLE XVI
TERMINATION AND DISSOLUTION
Section 16.1. Dissolution. (a) The
Partnership shall not be dissolved by the admission of a Limited Partner or
a General Partner or by the admission of a successor Managing General
Partner, in each case in accordance with the terms of this Agreement. The
Partnership shall not be dissolved by the withdrawal of any Partner.
(b) The Partnership shall dissolve, and its affairs shall be
<PAGE> 28
wound up, upon:
(i) the expiration of its term as provided in Section 1.4;
(ii) the occurrence of any event (other than an event described
in Section 16.1(b)(iii)) that under the Act results in a Managing General
Partner ceasing to be a general partner of the Partnership (other than by
withdrawal in accordance with Section 14.2);
(iii) the bankruptcy or the dissolution of either Managing
General Partner;
(iv) the sale of all or substantially all of the Contributed
Property and other assets of the Partnership; or
(v) any other date selected by both Managing General Partners;
provided, that the Partnership shall not be dissolved upon an event
described in Section 16.1(b)(ii) or (iii) if, within 90 days after such
event, all Partners agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date of such event,
of a successor to the affected Managing General Partner, which appointment
shall be made by the Kemper Partners if the affected Managing General
Partner is the Kemper Managing General Partner, and by the Lumbermens
Partners if the affected Managing General Partner is the Lumbermens
Managing General Partner.
For purposes of this Section 16.1, bankruptcy of a Managing
General Partner shall be deemed to have occurred when (i) it commences a
voluntary proceeding seeking liquidation, reorganization or other relief
under any bankruptcy, insolvency or other similar law now or hereafter in
effect, (ii) it is adjudged as bankrupt or insolvent, or has entered
against it a final and nonappealable order for relief under any bankruptcy,
insolvency or similar law now or hereafter in effect, (iii) it executes and
delivers a general assignment for the benefit of its creditors, (iv) it
files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any proceeding of
the nature described in clause (i) above, (v) it seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for it
or for all or any substantial part of its properties, (vi) any proceeding
seeking liquidation, reorganization or other relief under any bankruptcy,
insolvency or other similar law now or hereafter in effect has not been
dismissed within 120 days after the commencement thereof, (vii) the
appointment without its consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within 90 days of such
appointment, or (viii) an appointment referred to in clause (vii) is not
vacated within 90 days after the expiration of any such stay.
Section 16.2. Continuation of the Business of the Partnership
after Dissolution; Liquidating Trustee.
(a) Subject to Section 16.1 and the provisions of the Act, dissolution of the
Partnership shall be effective on the day on which the event occurs giving
rise to the dissolution, but the Partnership shall not terminate until the
Partnership's Certificate of Limited Partnership shall have been cancelled
and the assets of the Partnership shall have been distributed as provided
herein (the period between dissolution and the termination of the
Partnership being hereinafter referred to as the "Dissolution Period").
During the Dissolution Period, if dissolution has occurred because one or
both of the Managing General Partners has withdrawn from the Partnership,
<PAGE> 29
then the Kemper Partners may appoint a new Kemper Managing General Partner
(if the Kemper Managing General Partner has withdrawn), and the Lumbermens
Partners may appoint a new Lumbermens Managing General Partner (if the
Lumbermens Managing General Partner has withdrawn). During the Dissolution
Period, if no such replacement Managing General Partner has been appointed,
the affairs of the Partnership shall be conducted by, and all powers
conferred on the Managing General Partners hereunder shall be exercised by,
the remaining Managing General Partner, if any, or if no Managing General
Partner remains, then by a liquidator or liquidating committee approved by
the Majority Partners, acting as a trustee (the "Liquidating Trustee") for
purposes of liquidation. The Liquidating Trustee shall be entitled to
receive such compensation for its services as may be approved by the
Majority Partners, and may be removed at any time, with or without cause,
by the Majority Partners. Upon dissolution, removal or resignation of the
Liquidating Trustee, the Majority Partners shall appoint a successor
Liquidating Trustee (who shall have and succeed to all rights, powers and
duties of the original Liquidating Trustee).
(b) Except as expressly provided in this Article XVI, the
Liquidating Trustee approved in the manner provided herein shall have and
may exercise, without further authorization or consent of any of the
parties hereto, all of the powers conferred upon the Managing General
Partners under the terms of this Agreement (but subject to all of the
applicable limitations, contractual and otherwise, upon the exercise of
such powers) to the extent necessary or desirable in the good faith
judgment of the Liquidating Trustee to carry out the duties and functions
of the Liquidating Trustee hereunder for and during such period of time as
shall be reasonably required in the good faith judgment of the Liquidating
Trustee to complete the winding up and liquidation of the Partnership as
provided for herein.
Section 16.3. Distribution on Liquidation.
If the Partnership shall dissolve in accordance with the terms of this
Article XVI, the Partnership shall complete any business then in progress and
commence to wind up its affairs, liquidate its assets and apply and
distribute the proceeds therefrom and all other Partnership assets in the
following rank and order:
(a) to pay all expenses of liquidation and all debts and
liabilities of the Partnership, in the order provided by law;
(b) to establish any reserves deemed necessary for contingent or
unforeseen liabilities of the Partnership, if any; and
(c) to distribute all remaining assets to the Partners pro rata
in accordance with the number of Units held by each Partner.
Section 16.4. Distributions in Kind.
Notwithstanding the provisions of Section 16.3 that require the
liquidation of the assets of the Partnership, if the Majority Partners
(other than the Managing General Partner as to whom the event described in
Section 16.1 has occurred) consent in writing, the Partnership may retain
some or all of the assets of the Partnership for distribution in kind in
accordance with the provisions of Section 16.3. Assets that are
distributed in kind may be divided among the Partners or distributed to the
Partners as tenants in common, as may be approved in writing by such
remaining Partners, with each Partner receiving property having a relative
fair market value determined in accordance with the percentage of the total
number of Units held by each Partner.
<PAGE> 30
Section 16.5. Cancellation of Certificate of Limited
Partnership. Upon the completion of the distribution of Partnership cash
and property as provided in sections 16.3 and 16.4, the Partnership shall
be terminated, and the Certificate of Limited Partnership and all
qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be cancelled and such
other actions as may be necessary to terminate the Partnership shall be
taken.
Section 16.6. Reasonable Time for Winding Up.
A reasonable time shall be allowed for the orderly winding up of the business
and affairs of the Partnership and the liquidation of its assets pursuant to
Section 16.3 in order to maximize any gains or minimize any losses otherwise
attendant upon such winding up and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 16.7. Waiver of Partition. Each Partner hereby waives any
right to partition of the Partnership's property.
ARTICLE XVII
MISCELLANEOUS
Section 17.1. No Conflicting Agreements or Actions.
No Partner shall enter into any agreements or arrangements of any kind with
any Person that are inconsistent with the provisions of this Agreement.
Each Partner agrees that it will not, in its capacity as an equity holder,
take any action or pursue any remedies under any joint venture agreement,
stockholders agreement or any other agreement relating to the Real Estate
Projects which is inconsistent with, or in contravention of, the agreements
set forth herein. In the event of a conflict between any other provisions of
this Agreement and the provisions of the Formation Agreement, Management
Agreement, KBPI Stockholders Agreement or any Joint Venture Agreement, the
provisions of such other agreement shall govern, except that nothing in any
such other agreement shall override (i) the right and obligation of each
Managing General Partner to make decisions and take actions jointly with
the other Managing General Partner hereunder, or (ii) the obligation of
each Limited Partner and each General Partner to take no action with
respect to the Real Estate Projects, the Joint Ventures, KBPI or any KBPI
Subsidiaries, the Participating Mortgage Projects or the Option Properties,
in its capacity as an equity holder without the consent of both Managing
General Partners except as expressly set forth herein.
Section 17.2. Information. To the extent that any Partner receives
a notice or other information regarding any Real Estate Project, as a
stockholder, joint venturer or otherwise, which notice or information has not
been delivered to the Managing General Partners, such Partner shall promptly
deliver such notice or information to the Managing General Partners.
Without limiting the foregoing, if any Partner receives notice of any of the
events or claims described in Section 11.3(b) from any Person other than one
of the Managing General Partners, such Partner shall promptly notify the
Managing General Partners thereof. The Lumbermens Managing General Partner
shall deliver to the Kemper Managing General Partner a copy of any notice or
other information delivered to the Lumbermens Managing General Partner at the
address set forth in Section 1.3 hereof.
Section 17.3. Injunctive Relief.
The Partners acknowledge that a breach of the provisions of this Agreement
can not be compensated adequately by money damages. Accordingly, any party
<PAGE> 31
hereto shall be entitled, in addition to any other right or remedy
available to it, to an injunction restraining such breach or threatened
breach and to specific performance of any provision of this Agreement, and
in either case no bond or other security shall be required in connection
therewith. If any action shall be brought in equity to enforce any of the
provisions of this Agreement, no party hereto shall raise the defense that
there is an adequate remedy at law.
Section 17.4. Successors and Assigns.
This Agreement shall, subject to the limitations on transfers
of interests and assignment of rights contained herein, be binding upon,
and shall inure to the benefit of, the respective legal representatives,
heirs, executors, administrators, successors and assigns of the parties.
Section 17.5. Governing Law; Consent to Jurisdiction.
(a) This Agreement shall be deemed to be made under and governed by and
construed in accordance with the internal laws of the State of Delaware,
without regard to principles of conflicts of laws.
(b) Each party to this Agreement (i) hereby irrevocably submits
to the non-exclusive jurisdiction of any state or federal court sitting in
the State of Illinois for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the
suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Nothing in this
paragraph shall affect or limit any right to bring any suit, action or
proceeding in any other jurisdiction where the same may be brought and
adjudicated.
Section 17.6. Notices. All notices or
other communications required or permitted hereunder shall be in writing
and shall be deemed given, delivered and received (a) when delivered, if
delivered personally, (b) four days after mailing when sent by registered
or certified mail and (c) the next business day after delivery to a private
courier service, when delivered to a private courier service providing
documented overnight service, in each case as follows:
(a) If to any Lumbermens Partner:
c/o Lumbermens Mutual Casualty Company
Route 22 and Kemper Drive
Long Grove, Illinois 60049
Attention: Chief Financial Officer
and General Counsel
Telecopy: (708) 540-4550
(b) If to any Kemper Partner:
c/o Kemper Corporation
Route 22 and Kemper Drive
Long Grove, Illinois 60049
Attention: Chief Financial Officer
and General Counsel
Telecopy: (708) 540-4694
with a copy to:
<PAGE> 32
Kemper Financial Services, Inc.
120 South LaSalle Street
Chicago, Illinois 60603
Attention: Executive Vice President,
Real Estate Investments
or to such other address as such party may indicate by a notice delivered
to the other parties hereto.
Section 17.7. Severability. If any term or condition of this
Agreement, or application thereof to any Person or circumstance, shall to any
extent be held invalid or unenforceable, the remainder of this Agreement, or
application of such term or condition to Persons or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected
thereby and shall remain in full force and effect.
Section 17.8. Amendment; Waiver.
(a) This Agreement may be amended by the written approval of the Managing
General Partners and the Majority Partners (which may include the Managing
General Partners); provided, however, that no such amendment shall, without
the consent of all Partners, change or alter this Section 17.8, extend the
term of the Partnership, reduce the number of Units held by any Partner
(except as contemplated by Section 15.2), increase the obligations of any
Partner or, except as provided in Section 5.2, modify the percentage of
Profits or Losses allocated to, or the percentage of distributions to be
made to, any Partner or modify the provisions of Section 4.1; and provided,
further, that no such amendment shall become effective until the
Partnership shall have received an opinion, from counsel satisfactory to
the Managing General Partners and in form and substance satisfactory to the
Managing General Partners, to the effect that such amendment will not
adversely affect the classification of the Partnership as a partnership for
Federal income tax purposes, and that such amendment is not prohibited by
the Partnership Agreement or the Act. Any such amendment shall be embodied
in an instrument signed by the Managing General Partners and by the
Majority Partners and shall be adhered to and have the same effect from and
after its effective date as if the same had been originally embodied in and
formed a part of this Agreement.
(b) Any waiver by any party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver
must be evidenced by a writing signed by the party against whom the waiver
is sought to be enforced.
Section 17.9. Counterparts.
This Agreement may be executed in any number of counterparts, each of which,
when so executed, shall be deemed an original, and all of which, taken
together, shall constitute one agreement.
Section 17.10. Titles and Captions.
All article or section titles or captions in this Agreement are
for convenience only. They shall not be deemed part of this Agreement and
in no way define, limit, extend or describe the scope or intent of any
provisions hereof. Except as specifically provided otherwise, references
to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
<PAGE> 33
Section 17.11. Pronouns and Plurals.
Whenever the context may require, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns, pronouns and verbs shall include the
plural and vice versa.
Section 17.12. Further Action.
The parties shall execute and deliver all documents, provide all information
and take or refrain from taking action as may be necessary or appropriate
to achieve the purposes of this Agreement.
Section 17.13. Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
Section 17.14. No Third Party Beneficiaries.
No provision of this Agreement shall be construed to give any Person not a
party hereto any legal or equitable right, remedy or claim under or in
respect hereof.
Section 17.15. Entire Agreement.
This Agreement, including all Schedules attached hereto, the Formation
Agreement and the agreements contemplated by the Formation Agreement and
executed on or before the date hereof constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede all
other understandings, written or oral, with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Master
Limited Partnership Agreement as of the day and year first above written.
KILICO REALTY CORPORATION KR CLAY CAPITAL, INC.
/S/ J. H. FITZPATRICK /S/ JOHN E NEAL
By: By:
Vice President
Its: Its:
FEDERAL KEMPER LIFE ASSURANCE KR LAFAYETTE APARTMENTS, INC.
COMPANY ISI JOHN E NEAL
/S/ J. H. FITZPATRICK
By: By:
Vice President
Its: Its:
KEMPER INVESTORS LIFE FKLA REALTY CORPORATION
INSURANCE COMPANY
/S/ J. H. FITZPATRICK /S/ J. H. FITZPATRICK
By: By:
Vice President Vice President
Its: Its:
KR VENTURE WAY, INC. KR DELTA WETLANDS, INC.
/S/ JOHN E NEAL /S/ JOHN E NEAL
By: By:
<PAGE> 34
Its: Its:
KR CRANBURY, INC. KR BLACK MOUNTAIN, INC.
/S/ JOHN E NEAL /S/ JOHN E NEAL
By: By:
Its: Its:
KR BRANNAN RESOURCES, INC. KR SEAGATE/GATEWAY NORTH, INC.
/S/ JOHN E NEAL /S/ JOHN E NEAL
By: By:
Its: Its:
KR RED HILL ASSOCIATES, INC.
/S/ JOHN E NEAL
By:
Its:
KR AVONDALE REDMOND, INC. AMERICAN MOTORISTS INSURANCE
COMPANY
/S/ JOHN E NEAL /S/ W L WHITE
By: By:
Executive Vice President
Its: Its:
AMICO REALTY CORPORATION KEMPER REALTY CORPORATION
/S/ W L WHITE /S/ W L WHITE
By: By:
Executive Vice President Executive Vice President
Its: Its:
KEMPER PORTFOLIO CORP. KFC PORTFOLIO CORP.
/S/ J. H. FITZPATRICK /S/ J. H. FITZPATRICK
By: By:
Vice President Vice President
Its: Its:
<PAGE> 1
EXHIBIT 10.22(a)
REINSURANCE AGREEMENT
(the "Agreement")
between
KEMPER INVESTORS LIFE INSURANCE COMPANY
(the "Reassured")
and
FIDELITY LIFE ASSOCIATION,
A MUTUAL LEGAL RESERVE COMPANY
(the "Reinsurer")
WHEREAS, the Reassured desires that the portion of its business
comprised of the policies and contracts identified in Exhibit A
hereto (the "Policies") be reinsured on a coinsurance basis by
the Reinsurer as contemplated by this Agreement; and
WHEREAS, the Reinsurer desires to provide the Reassured with the
reinsurance as contemplated by this Agreement;
NOW, THEREFORE, for and in consideration of the foregoing
premises, and the covenants and agreements hereinafter set forth,
it is agreed by the Reassured and the Reinsurer as follows:
ARTICLE I
BUSINESS REINSURED
(a) Reinsurance Coverage. As of 12:01 a.m., May 1, 1991 (the
"Effective Date"), the Reassured agrees to cede and hereby
does cede to the Reinsurer, and the Reinsurer agrees to
assume and hereby does assume from the Reassured, on a 100%
coinsurance basis (1) all of the Policies which are in force
as of the Effective Date and (2) any additional Renuity
Policies issued after the Effective Date and before July 1,
1991.
(b) Policy Defenses. The Reinsurer's liability under this
Agreement shall follow the interest and fortune of the
Reassured in all respects and be subject to the terms and
conditions of the Policies, including any and all defenses
or offsets against the benefits, claims and actions on the
Policies as would have been available to the Reassured had
this Agreement not been made.
(c) Policy Forms. The Policies shall include all the forms
issued by the Reassured with respect to the Policies and any
riders or endorsements thereto. The Reassured shall not
issue any new policies or contracts on any of said forms
from and after the Effective Date, except Renuity Policies
may be sold until but not including July 1, 1991.
(d) Other Reinsurance. The Reassured shall ensure that none of
the Policies shall be subject to any reinsurance other than
as provided by this Agreement or as arranged or consented to
<PAGE> 2
by the Reinsurer.
(e) Parties to Agreement. This Agreement is for indemnity
reinsurance solely between the Reassured and the Reinsurer.
The acceptance of reinsurance hereunder shall not create any
right or legal relation whatever between the Reinsurer and
the owner, insured or beneficiary under any Policy, and the
Reassured shall be and remain solely liable to such owner,
insured or beneficiary under any Policy.
ARTICLE II
DURATION OF AGREEMENT
(a) No Cancellation. Neither the Reassured nor the Reinsurer
shall have any right to unilaterally cancel or terminate
this Agreement.
(b) Indefinite Duration. Unless cancelled or terminated by
mutual consent, this Agreement shall continue in force for
so long as the Reassured shall remain liable in respect of
any Policy.
ARTICLE III
ADMINISTRATION, LOSSES, REPORTING AND SETTLEMENTS
(a) Servicing. The Reassured shall continue to administer and
service the Policies and to handle the settlement of all
payments, benefits, claims, losses and obligations in
respect thereof. The administration, servicing and other
handling of the Policies shall be conducted at all times in
the Reassured's name, and the Reinsurer shall be bound by
the Reassured's administration, servicing and handling of
the Policies.
(b) Policy Benefits. Any dollar amounts which the Reassured
reasonably determines to be payable pursuant to the Policies
shall be timely paid directly by the Reassured. Such
payments shall be reimbursed by the Reinsurer in accordance
with the administrative procedures set forth on Exhibit B
hereto.
(c) Expenses. In the event that the Reassured shall incur any
of the following listed expenses and costs in respect of the
Policies, the Reinsurer shall reimburse the Reassured for
such expenses and costs in accordance with the
administrative procedures set forth on Exhibit B hereto:
(i) commissions due agents or other distributors (reduced
by charge-backs or return commissions, if any); and
(ii) unusual litigation-related expenses, including, but not
necessarily limited to, penalties, attorney's fees and
interest imposed automatically by statute against the
Reassured and those arising solely out of a judgment
rendered against the Reassured in a suit for Policy
benefits, but expressly excluding the following:
<PAGE> 3
1. routine investigative or administrative expenses;
2. expenses incurred in connection with a dispute or
contest arising out of conflicting claims of
entitlement to Policy proceeds or benefits which
the Reassured admits are payable; and
3. expenses, fees, settlements or judgments arising
out of or in connection with claims against the
Reassured for punitive, exemplary or other
extra-contractual damages.
(d) Subsequent Pays. All premiums, additional deposits and
other amounts attributable to the Policies, including
Renuity Policies sold through June 30, 1991, collected by
the Reassured on or after the Effective Date shall be
credited to the Reinsurer in accordance with the settlement
procedures set forth on Exhibit B hereto.
(e) Reports. In addition to any reports set forth on Exhibit B,
each party shall provide to the other such additional
reports and such other data on a basis as is reasonably
necessary or mutually agreeable to enable each party to
timely make, complete and file its respective financial
statements and regulatory filings.
ARTICLE IV
CONSIDERATION
(a) Reserve Transfer. On August 15, 1991 (the "Transfer Date"),
the Reassured shall wire transfer, to an account designated
by the Reinsurer, the U.S. dollar amount (the "Transfer
Amount") calculated as follows:
(i) the difference between the reserves related to the
Policies, as reflected on the Reassured's April
30, 1991 statutory financial statements, and the
unadjusted ceding commission defined in section
(b) below; plus
(ii) interest, calculated on a 30/360 basis at the rate
of eight and one-half percent (8.5%) per year, for
the period from the Effective Date to the Transfer
Date, on the amount specified in (i) above; plus
(iii) any and all premiums, additional deposits and
other amounts attributable to the Policies
collected during each of the calendar months of
May, June and July, 1991; less
(iv) the service fee, as described in section (c)
below, for each of the calendar months of May,
June and July, 1991; less
(v) any payments made, and costs and expenses
incurred, by the Reassured pursuant to Article
III, sections (b) and (c) above, during each of
<PAGE> 4
the calendar months of May, June and July, 1991;
less
(vi) interest, calculated on a 30/360 basis at the rate
of eight and one-half percent (8.5%) per year, for
a three-month period, on one-half of the remainder
determined by subtracting the amount specified in
(iii) above collected during May 1991 from the sum
of the amount specified in (iv) and (v) above for
said month of May; less
(vii) interest, calculated on a 30/360 basis at the rate
of eight and one-half percent (8.5%) per year, for
a two-month period, on one-half of the remainder
determined by subtracting the amount specified in
(iii) above collected during June 1991 from the
sum of the amount specified in (iv) and (v) above
for said month of June; less
(viii) interest, calculated on a 30/360 basis at the rate
of eight and one-half percent (8.5%) per year, for
a one-month period, on one-half of the remainder
determined by subtracting the amount specified in
(iii) above collected during July 1991 from the
sum of the amount specified in (iv) and (v) above
for said month of July.
(b) Ceding Commission. The Ceding Commission payable by the
Reinsurer shall be US $19.0 million, adjusted as set forth
in Exhibit B.
(c) Service Fee. As consideration for the servicing pursuant to
Article III, section (a) above, the Reinsurer shall pay the
Reassured monthly, in accordance with the administrative
procedures set forth on Exhibit B, a service fee of
one-twelfth of the multiple of $25.00 times the number of
Policies in force on the first day of the applicable month.
(d) Monthly Advances. The Reinsurer shall deposit with the
Reassured on a monthly basis an Advance, as defined and set
forth in Exhibit B.
ARTICLE V
INSOLVENCY
(a) No Diminution. In the event of the insolvency of the
Reassured, the reinsurance payable under this Agreement
shall be payable, without diminution because of the
Reassured's insolvency, by the Reinsurer to the Reassured's
liquidator, receiver or statutory successor on the basis of
the claim or claims allowed on said reinsurance against the
Reassured by any court of competent jurisdiction or any
justice or judge thereof, or by any receiver, liquidator or
statutory successor having authority to determine and allow
such claims. It is agreed, however, that the liquidator,
receiver or statutory successor of the Reassured must give
written notice to the Reinsurer of the pendency of a claim
against the Reassured on this Agreement within a reasonable
time after such claim is filed in the insolvency proceeding
<PAGE> 5
and that during the pendency of such claim, the Reinsurer
may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which it may deem
available to the Reassured or its liquidator, receiver or
statutory successor. The expense thus incurred by the
Reinsurer shall be chargeable, subject to court approval,
against the Reassured as a part of the expense of
liquidation to the extent of a proportionate share of the
benefits which may accrue to the Reassured solely as a
result of the defense undertaken by the Reinsurer.
(b) Right of Offset. Any debts or credits, matured or
unmatured, liquidated or unliquidated, regardless of when
they arose or were incurred, in favor of or against either
the Reassured or the Reinsurer with respect to this
Agreement or with respect to any other claim of one party
against the other are deemed mutual debts or credits, as the
case may be, and shall be set off, and only the balance
shall be allowed or paid.
ARTICLE VI
ARBITRATION
(a) Binding Arbitration. Any dispute or other matter in
question between the Reassured and the Reinsurer arising out
of or relating to the interpretation, performance or breach
of this Agreement shall be settled by arbitration.
(b) Procedures. Except as provided herein, arbitration shall be
based, insofar as applicable, upon the procedures of the
American Arbitration Association. Arbitration shall be
initiated by the delivery of a written notice of demand for
arbitration by one party to the other within a reasonable
time after the dispute has arisen. Each party shall appoint
an individual as arbitrator, and the two so appointed shall
then appoint a third arbitrator. If either party refuses or
neglects to appoint an arbitrator within sixty days of
receipt by either party of the written notice of demand
given and received as set forth above, the other party may
appoint the second arbitrator. If the two arbitrators do
not agree on a third arbitrator within sixty days of their
appointment, each of the arbitrators shall nominate three
individuals. Each arbitrator shall then decline two of the
nominations presented by the other arbitrator. The third
arbitrator shall then be chosen from the remaining two
nominations by drawing lots. The arbitrators shall be
active or retired executive officers or directors of life
insurance companies. The arbitrators shall not have a
personal or financial interest in the result of the
arbitration or in either of the Reinsured or the Reassured.
The arbitration hearings shall be held in Chicago, Illinois,
unless another place shall be mutually agreed. Each party
shall submit its case to the arbitrators within sixty days
of the selection of the third arbitrator or within such
longer period as may be agreed by the arbitrators. The
arbitrators shall not be obliged to follow judicial
formalities or the rules of evidence except to the extent
required by governing law. The decision rendered by a
<PAGE> 6
majority of the arbitrators shall be final and binding on
all parties. Such decision shall be a condition precedent
to any right of legal action arising out of the arbitrated
dispute which either party may have against the other.
Judgment upon the award rendered may be entered in any court
having jurisdiction thereof.
(c) Expenses. Each party shall pay the fees and expenses of its
own arbitrator and one-half of the fees and expenses of the
third arbitrator. All other expenses of the arbitration
shall be equally divided between the parties.
(d) Choice of Law. This Agreement shall be governed by and
construed in accordance with the substantive laws of the
State of Illinois.
ARTICLE VII
INADVERTENT ERRORS
(a) Errors. Inadvertent delay, errors or omissions (an "Error")
made in connection with this Agreement or any transaction
hereunder shall not relieve either party from any liability
which would have attached had such Error not occurred.
(b) Corrections. Any Error shall be rectified by the party
causing the same as soon as reasonably possible after
discovery by restoring the other party to the position it
would have been in had the Error not occurred.
ARTICLE VIII
EXTRA-CONTRACTUAL INDEMNIFICATION
(a) Damages. Punitive, exemplary or other extra-contractual
damages arising in connection with the Policies shall be
borne by the Reassured, and the Reassured shall hold the
Reinsurer harmless against all claims, damages, awards,
losses or expenses attributable thereto, except to the
extent the same result from the Reinsurer's acts or
omissions (other than the Reinsurer's accepting or
specifying crediting rates as described in Exhibit B).
(b) Survival. The provisions of this ARTICLE VIII shall survive
the term or termination of this Agreement for any reason.
ARTICLE IX
EFFECTIVENESS
The effectiveness of this Agreement shall be subject to and
conditioned upon (i) the approval of this Agreement by each
party's respective board of directors or executive committee
thereof, and (ii) the receipt of any and all necessary legal or
regulatory approvals including but not limited to those required
by any state insurance department or the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976, as amended.
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
THE REASSURED: THE REINSURER:
Kemper Investors Life Fidelity Life Association,
Insurance Company a Mutual Legal Reserve Company
By: By:
Name: Name:
Title: Title:
<PAGE> 1
EXHIBIT-10.22(b)
REINSURANCE AGREEMENT
(the "Agreement")
between
KEMPER INVESTORS LIFE INSURANCE COMPANY
(the "Reassured")
and
FIDELITY LIFE ASSOCIATION,
A MUTUAL LEGAL RESERVE COMPANY
(the "Reinsurer")
WHEREAS, the Reassured desires that the portion of its business
comprised of the policies and contracts identified in Exhibit A
hereto (individually, a "Policy" and collectively, the
"Policies") be reinsured on a coinsurance basis by
the Reinsurer as contemplated by this Agreement; and
WHEREAS, the Reinsurer desires to provide the Reassured with the
reinsurance as contemplated by this Agreement;
NOW, THEREFORE, for and in consideration of the foregoing
premises, and the covenants and agreements hereinafter set forth,
it is agreed by the Reassured and the Reinsurer as follows:
ARTICLE I
BUSINESS REINSURED
(a) Reinsurance Coverage. As of 12:01 a.m., December 1, 1992
(the "Effective Date"), the Reassured agrees to cede and
hereby does cede to the Reinsurer, and the Reinsurer agrees
to assume and hereby does assume from the Reassured, on a
100% coinsurance basis, all the Policies which are in force
as of the Effective Date and any additional Policies, except
the Kemper Choice Policies, issued after the Effective Date
and before December 31, 1992.
(b) Policy Defenses. The Reinsurer's liability under this
Agreement shall follow the interest and fortune of the
Reassured in all respects and be subject to the terms and
conditions of the Policies, including any and all defenses
or offsets against the benefits, claims and actions on the
Policies as would have been available to the Reassured had
this Agreement not been made.
(c) Policy Forms. The Policies shall include all the forms
issued by the Reassured with respect to the Policies and any
riders or endorsements thereto.
(d) Other Reinsurance. The Reassured shall ensure that none of
the Policies shall be subject to any reinsurance other than
as provided by this Agreement or as arranged or consented to
by the Reinsurer.
<PAGE> 2
(e) Parties to Agreement. This Agreement is for indemnity
reinsurance solely between the Reassured and the Reinsurer.
The acceptance of reinsurance hereunder shall not create any
right or legal relation whatever between the Reinsurer and
the owner, insured or beneficiary under any Policy, and the
Reassured shall be and remain solely liable to such owner,
insured or beneficiary under any Policy.
ARTICLE II
DURATION OF AGREEMENT
(a) No Cancellation. Neither the Reassured nor the Reinsurer
shall have any right to unilaterally cancel or terminate
this Agreement.
(b) Indefinite Duration. Unless cancelled or terminated by
mutual consent, this Agreement shall continue in force for
so long as the Reassured shall remain liable in respect of
any Policy.
ARTICLE III
ADMINISTRATION, LOSSES, REPORTING AND SETTLEMENTS
(a) Servicing. The Reassured shall continue to administer and
service the Policies and to handle the settlement of all
payments, benefits, claims, losses and obligations in
respect thereof. The administration, servicing and other
handling of the Policies shall be conducted at all times in
the Reassured's name, and the Reinsurer shall be bound by
the Reassured's administration, servicing and handling of
the Policies.
(b) Policy Benefits. Any dollar amounts which the Reassured
reasonably determines to be payable pursuant to the Policies
shall be timely paid directly by the Reassured. Such
payments shall be reimbursed by the Reinsurer in accordance
with the administrative procedures set forth on Exhibit B
hereto.
(c) Expenses. In the event that the Reassured shall incur any
of the following listed expenses and costs in respect of the
Policies, the Reinsurer shall reimburse the Reassured for
such expenses and costs in accordance with the
administrative procedures set forth on Exhibit B hereto:
i. commissions due agents or other distributors (reduced
by charge-backs or return commissions, if any); and
ii. unusual litigation-related expenses, including, but not
necessarily limited to, penalties, attorney's fees and
interest imposed automatically by statute against the
Reassured, and those arising solely out of a judgment
rendered against the Reassured in a suit for Policy
benefits, but expressly excluding the following:
<PAGE> 3
1. routine investigative or administrative expenses;
2. expenses incurred in connection with a dispute or
contest arising out of conflicting claims of
entitlement to Policy proceeds or benefits which
the Reassured admits are payable; and
3. expenses, fees, settlements or judgments arising
out of or in connection with claims against the
Reassured for punitive, exemplary or other
extra-contractual damages.
(d) Subsequent Pays. All premiums, additional deposits and
other amounts attributable to the Policies collected by
the Reassured on or after the Effective Date shall be
credited to the Reinsurer in accordance with the settlement
procedures set forth on Exhibit B hereto.
(e) Reports. In addition to any reports set forth on Exhibit B,
each party shall provide to the other such additional
reports and such other data on a basis as is reasonably
necessary or mutually agreeable to enable each party to
timely make, complete and file its respective financial
statements and regulatory filings.
ARTICLE IV
CONSIDERATION
(a) Reserve Transfer. On or before December 31, 1992,
following execution of this Agreement (the "Transfer Date"),
the Reassured shall transfer to the Reinsurer various assets
and cash and/or cash equivalents with a value equal to the
reserves related to the Policies as reflected on the
Reassured's November 30, 1992 statutory financial statement
(the "Transfer Amount"). The Transfer Amount shall consist
of:
i. those assets identified in Exhibit C; plus
ii. additional cash and/or cash equivalents necessary for
the Transfer Amount to equal the amount of the reserves
related to the Policies as of November 30, 1992; plus
iii. interest, calculated on a 30/360 basis at the rate of
seven percent (7.0%) per year for the period from the
Effective Date to the Transfer Date, on the amount of
the reserves specified in section (a) above increased
by one-half of the collections specified in (iv) below,
reduced by the Ceding Commission specified in (vi)
below, and further reduced by one-half of the service
fee and one-half of the payments made and costs and
expenses incurred specified in (v) and (vii),
respectively, below; plus
iv. any and all premiums, additional deposits and other
amounts attributable to the Policies collected from the
Effective Date to the Transfer Date; less
<PAGE> 4
v. the service fee, as described in section (c) below, for
each month from the Effective Date to the Transfer
Date; less
vi. the Ceding Commission defined in section (b) below; and
less
vii. any payments made, and costs and expenses incurred, by
the Reassured pursuant to Article III, sections (b) and
(c) above, from the Effective Date to the Transfer
Date.
The Reinsurer and the Reassured agree to cooperate in
preparing any and all documents and taking any actions
deemed necessary or advisable to effect the transfers
contemplated herein.
(b) Ceding Commission. The Ceding Commission payable by the
Reinsurer shall be U.S. $12.0 million.
(c) Service Fee. As consideration for the servicing pursuant to
Article III, section (a) above, the Reinsurer shall pay the
Reassured monthly, in accordance with the administrative
procedures set forth on Exhibit B, a service fee of
one-twelfth of the multiple of $25.00 times the number of
Policies in force on the first day of the applicable month.
(d) Monthly Advances. The Reinsurer shall deposit with the
Reassured on a monthly basis an Advance, as defined and set
forth in Exhibit B.
ARTICLE V
INSOLVENCY
(a) No Diminution. In the event of the insolvency of the
Reassured, the reinsurance payable under this Agreement
shall be payable, without diminution because of the
Reassured's insolvency, by the Reinsurer to the Reassured's
liquidator, receiver or statutory successor on the basis of
the claim or claims allowed on said reinsurance against the
Reassured by any court of competent jurisdiction or any
justice or judge thereof, or by any receiver, liquidator or
statutory successor having authority to determine and allow
such claims. It is agreed, however, that the liquidator,
receiver or statutory successor of the Reassured must give
written notice to the Reinsurer of the pendency of a claim
against the Reassured on this Agreement within a reasonable
time after such claim is filed in the insolvency proceeding
and that during the pendency of such claim, the Reinsurer
may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which it may deem
available to the Reassured or its liquidator, receiver or
statutory successor. The expense thus incurred by the
Reinsurer shall be chargeable, subject to court approval,
against the Reassured as a part of the expense of
liquidation to the extent of a proportionate share of the
benefits which may accrue to the Reassured solely as a
result of the defense undertaken by the Reinsurer.
<PAGE> 5
(b) Right of Offset. Any debts or credits, matured or
unmatured, liquidated or unliquidated, regardless of when
they arose or were incurred, in favor of or against either
the Reassured or the Reinsurer with respect to this
Agreement are deemed mutual debts or credits, as the case
may be, and shall be set off, and only the balance
shall be allowed or paid.
ARTICLE VI
ARBITRATION
(a) Binding Arbitration. Any dispute or other matter in
question between the Reassured and the Reinsurer arising out
of or relating to the interpretation, performance or breach
of this Agreement shall be settled by arbitration.
(b) Procedures. Except as provided herein, arbitration shall be
based, insofar as applicable, upon the procedures of the
American Arbitration Association. Arbitration shall be
initiated by the delivery of a written notice of demand for
arbitration by one party to the other within a reasonable
time after the dispute has arisen. Each party shall appoint
an individual as arbitrator, and the two so appointed shall
then appoint a third arbitrator. If either party refuses or
neglects to appoint an arbitrator within sixty days of
receipt by either party of the written notice of demand
given and received as set forth above, the other party may
appoint the second arbitrator. If the two arbitrators do
not agree on a third arbitrator within sixty days of their
appointment, each of the arbitrators shall nominate three
individuals. Each arbitrator shall then decline two of the
nominations presented by the other arbitrator. The third
arbitrator shall then be chosen from the remaining two
nominations by drawing lots. The arbitrators shall be
active or retired executive officers or directors of life
insurance companies. The arbitrators shall not have a
personal or financial interest in the result of the
arbitration or in either of the Reinsured or the Reassured.
The arbitration hearings shall be held in Chicago, Illinois,
unless another place shall be mutually agreed. Each party
shall submit its case to the arbitrators within sixty days
of the selection of the third arbitrator or within such
longer period as may be agreed by the arbitrators. The
arbitrators shall not be obliged to follow judicial
formalities or the rules of evidence except to the extent
required by governing law. The decision rendered by a
majority of the arbitrators shall be final and binding on
all parties. Such decision shall be a condition precedent
to any right of legal action arising out of the arbitrated
dispute which either party may have against the other.
Judgment upon the award rendered may be entered in any court
having jurisdiction thereof.
(c) Expenses. Each party shall pay the fees and expenses of its
own arbitrator and one-half of the fees and expenses of the
third arbitrator. All other expenses of the arbitration
shall be equally divided between the parties.
<PAGE> 6
(d) Choice of Law. This Agreement shall be governed by and
construed in accordance with the substantive laws of the
State of Illinois.
ARTICLE VII
INADVERTENT ERRORS
(a) Errors. Inadvertent delay, errors or omissions (an "Error")
made in connection with this Agreement or any transaction
hereunder shall not relieve either party from any liability
which would have attached had such Error not occurred.
(b) Corrections. Any Error shall be rectified by the party
causing the same as soon as reasonably possible after
discovery by restoring the other party to the position it
would have been in had the Error not occurred.
ARTICLE VIII
EXTRA-CONTRACTUAL INDEMNIFICATION
(a) Damages. Punitive, exemplary or other extra-contractual
damages arising in connection with the Policies shall be
borne by the Reassured, and the Reassured shall hold the
Reinsurer harmless against all claims, damages, awards,
losses or expenses attributable thereto, except to the
extent the same result from the Reinsurer's acts or
omissions (other than the Reinsurer's accepting or
specifying crediting rates as described in Exhibit B).
(b) Survival. The provisions of this ARTICLE VIII shall survive
the term or termination of this Agreement for any reason.
ARTICLE IX
AGREEMENT
This Agreement, and any and all documents necessary to effect the
transfer of the Transfer Amount as described in Article IV
section (a) above, represent the entire contract between the
Reassured and the Reinsurer and may be amended or altered only by
a written addendum signed by each of the Parties.
ARTICLE X
EFFECTIVENESS
The effectiveness of this Agreement shall be subject to and
conditioned upon (i) the approval of this Agreement by each
party's respective board of directors or executive committee
thereof, and (ii) the receipt of any and all necessary legal or
regulatory approvals including but not limited to those required
by any state insurance department or the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976, as amended.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the Effective Date.
<PAGE> 7
THE REASSURED: THE REINSURER:
Kemper Investors Life Insurance Fidelity Life Association,
Company a Mutual Legal Reserve Company
By: By:
Name: Name:
Title: Title:
Date: Date:
<PAGE> 1
EXHIBIT-10.22(c)
THIS REINSURANCE AGREEMENT
is made between
FIDELITY LIFE ASSOCIATION,
A MUTUAL LEGAL RESERVE COMPANY
Long Grove, Illinois 60049
(hereinafter referred to as "the Reinsurer")
and
FEDERAL KEMPER LIFE ASSURANCE COMPANY
Long Grove, Illinois 60049
(hereinafter referred to as "the Company")
The following Articles, qualified by the
Exhibits of the Agreement, will form
the basis of the Agreement.
TABLE OF CONTENTS
ARTICLES
<TABLE>
<CAPTION>
Page
<S> <C>
I. Business Covered - Forms and Manuals - Underwriting and 1
Issue Rules.
II. Amounts of Coverage - Facultative Coverage. 2
III. Plan of Reinsurance - Reinsurance Allowances - Tax 3
Credits - Conversions.
IV. Mode of Cession - Papers for Automatic Cessions - Data 5
Notification.
V. Premium Accounting. 6
VI. Liability - Conditional or Interim Receipt Liability - 7
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C> <C>
Amount and Duration - Currency.
VII. Policy Changes - Lapses and Cancellations - Reinstatements - 9
Unearned Premium.
VIII. Increase in Retention - Recapture. 11
IX. Claims. 13
X. Oversights - Arbitration. 14
XI. Insolvency. 15
XII. Alterations to Agreement - Parties to Agreement - 16
Inspection of Records.
XIII. Duration of Agreement - Severability - Benefit - 17
Construction.
</TABLE>
EXHIBITS
A. The Ceding Company's Retention Limits.
B. The Reinsurer's Automatic Acceptance Limits.
C. Business Covered and Schedules of Terms.
ARTICLE I
Business This Agreement applies to all insurance policies and supple-
Covered mentary benefits and riders attached thereto, set out in
Exhibit C. These policies, benefits and riders will be at
the rates shown in the rate materials and will provide the
coverages shown in the policy forms supplied to the
Reinsurer and in force at the date of this Agreement.
The Company agrees to cede to the Reinsurer and the
Reinsurer agrees to accept automatically, in accordance
with the terms of this Agreement, amounts of the above
life insurance and benefits that exceed the Company's
retention. The Company's retention limits are set out in
Exhibit A.
The amounts retained by the Company on the business covered
by this Agreement shall not be reinsured by the Company on
any basis whatsoever without the agreement of the
Reinsurer.
Forms and The Company agrees to file with the Reinsurer, copies of
Manuals all appropriate policy forms, rate manuals, retention
<PAGE> 3
schedules, application forms, receipts, underwriting
questionnaires (e.g., financial, smokers, etc.),
authorization forms for release of medical information and
other related material. If new material is published, or
changes made in the material already filed, the Company
agrees to promptly provide the Reinsurer with copies of
such material.
The Company hereby declares that its forms are in accord
with current M.I.B. regulations.
Underwriting The Company hereby declares and agrees that all policies
and Issue and benefits covered under this Agreement shall be issued
Rules in accordance with the Company's normal underwriting rules
for each such policy and/or benefit which are in effect at
the commencement date of this Agreement. These rules
shall be provided to the Reinsurer on request and any
material change in these rules shall be subject to the
approval of the Reinsurer before being applied to policies
and benefits to be covered by this Agreement.
ARTICLE II
Amounts of Except as provided below for facultative coverage, when-
Coverage ever the Company retains its full retention (as at the time
of underwriting) on any one life, taking into account the
age and mortality classification of the life insured in
question, the Company shall cede to the Reinsurer all the
excess up to the limits specified in Exhibit B. The
Reinsurer agrees to accept such business automatically.
It is understood that the amount retained by the Company
shall include its retention under any previous issues.
Facultative If the Company receives an application that meets any of
Coverage the criteria below, the reinsurance shall be on a
facultative basis:
(a) applications for amounts in excess of the Company's
retention and the Reinsurer's automatic coverage;
(b) applications on any one life if the total of the new
reinsurance and the amount already reinsured on that
life under this Agreement and all other Agreements
with the Reinsurer exceeds the automatic acceptance
limits set out in Exhibit B;
(c) applications on lives under which the Company intends
to retain none of the risk or less than its
appropriate retention for the age and rating;
(d) applications on any one life if the total of the
application and all amounts currently applied for,
together with the amount already in force on that one
life exceeds the jumbo limit set out in Exhibit B;
<PAGE> 4
(e) applications on any life, if that life has been
offered on a facultative basis to the Reinsurer or
any other reinsurer.
Any application for a policy on a plan shown in Exhibit C
may be offered facultatively.
The relevant terms and conditions of this Agreement shall
apply to those facultative applications that are accepted
by the Reinsurer.
ARTICLE III
Plan of Reinsurance under this Agreement shall be on either a YRT
Reinsurance or a Coinsurance basis. The basis for each particular plan
is specified in Exhibit C. The Reinsurer shall not parti-
cipate in any policy fees, unless specified otherwise in
Exhibit C.
Reinsurance The reinsurance allowances for coinsured business are set
Allowances out in Exhibit C.
The Reinsurer shall pay to the Company the following
allowances on extra premiums:
(a) Substandard Table Ratings - the same allowances as
those on the base plan.
(b) Permanent Flat Extras (payable for more than 5 years)
- the same allowances as those on the base plan.
(c) Temporary Flat Extras (payable for 5 years or fewer) -
a 10% allowance each year.
The Reinsurer will pay the same allowances on Waiver of
Premium riders as on the base plans to which they are
attached.
The above terms shall apply unless specified otherwise in
Exhibit C.
The Reinsurer reserves the right to modify allowances if
the Company changes the premium schedules on mortality
charges for a plan.
Tax Credits Except in those instances where the Reinsurer is taxed
directly and independently on premiums collected by it
from the Company, the Reinsurer shall reimburse the
Company for taxes on reinsurance premiums paid to the
Reinsurer by the Company as a deduction in the tax
statement of the Company. By mutual agreement, such tax
reimbursement shall be at an average tax rate unless the
Company requests reimbursement at the exact tax rate. The
above terms shall apply unless specified otherwise in
Exhibit C.
<PAGE> 5
Conversions In the event of the conversion of a policy reinsured
hereunder, the policy arising from the conversion shall be
reinsured with the Reinsurer. The amount to be
reinsured
Conversions shall be determined on the same basis as used for the
(Cont.) original policy (e.g., excess of retention, quota share),
but shall not exceed the amount reinsured as at the date
of the conversion unless mutually agreed otherwise.
If the contract arising from a conversion is on a plan that
is:
(a) reinsured on a coinsurance basis with the Reinsurer,
the appropriate premium, based on the one charged the
insured, shall be used and the policy year for the
purpose of allowance rates shall be based on the
duration of the original policy.
(b) reinsured on a YRT basis with the Reinsurer, the
appropriate YRT rate, based on the insured's age at
the time of conversion and the duration as measured
from the time of conversion, shall be used and any
allowance shall be based on the duration of the
original policy.
(c) not covered by any reinsurance agreement with the
Reinsurer, reinsurance shall be on a YRT basis using
YRT rates at the attained age and duration of the
original policy.
The above terms shall apply unless specified otherwise in
Exhibit C.
ARTICLE IV
Mode of Automatic Cessions
Cession The Company shall self-administer all automatic cessions.
Facultative Cessions
The Company may apply for reinsurance by sending to the
Reinsurer copies of all pertinent papers, including the
original application, medical examination, inspection
reports, physician's statements, urinalyses, and all other
information which the Company may have relating to the
insurability of the risk along with an application for
reinsurance. The Company shall indicate on the
application that the cession is to be processed on a
self-administered basis.
After consideration of the reinsurance application and
papers, the Reinsurer shall promptly inform the Company of
its underwriting decision. If the underwriting decision
is acceptable to the Company and the Company's policy is
subsequently placed in force in accordance with the
Company's placement rules, the Company shall notify the
<PAGE> 6
Reinsurer in accordance with the method agreed with the
Reinsurer. The Company shall indicate that the cession is
to be processed on a self-administered basis.
If any application to the Reinsurer is not to be placed
with the Reinsurer, the Company shall advise the Reinsurer
in writing (indicating the reason for non-placement) so
that the Reinsurer can complete its records.
Papers for Copies of the medical and other papers shall be sent for
Automatic automatic reinsurance of any life at the request of the
Cessions Reinsurer.
Data For all business reinsured under this Agreement, the
Notification Company shall provide the Reinsurer with the necessary
information for billing and financial reporting purposes.
ARTICLE V
Premium The Company undertakes to send to the Reinsurer during
Accounting each month an account showing all first year and renewal
premiums which became due during the previous month. Also
included will be any adjustments made necessary by changes
in reinsurance effective during the previous month, or
changes due to any agreed errors on a previous account.
The balance due shall then become payable. If the balance
so calculated is due to the Reinsurer, the Company shall
forward a remittance in settlement with the account. If
the balance is due to the Company, the Reinsurer shall
forward a remittance in settlement within fifteen (15)
days of receipt of the account.
ARTICLE VI
Liability The Reinsurer shall indemnify the Company for the amount of
the Company's contractual insurance reinsured hereunder.
The liability of the Reinsurer shall commence
simultaneously with that of the Company for all cessions
ceded and accepted by the Reinsurer in accordance with the
terms of this Agreement. If, however, a case is offered
facultatively to any other reinsurer, the liability of the
Reinsurer shall commence when the Reinsurer has received
notice in such written form as agreed to by the Reinsurer,
that the Reinsurer's offer has been accepted, provided
that in no case will the Reinsurer's offer be deemed to be
still open after sixty (60) days have elapsed from the
date of the final offer, unless the Reinsurer explicitly
states in writing that the offer is extended for a period
of time.
The Reinsurer may assume liability for claims arising prior
to the time of notification if it is shown to the
satisfac- tion of the Reinsurer that the policy would have
<PAGE> 7
been reinsured with the Reinsurer.
Conditional For claims admitted by the Reinsurer that have arisen
Interim under the conditional receipt or interim receipt coverage
Receipt the liability of the Reinsurer on a per life basis shall
Liability not exceed the lesser of:
(a) the automatic acceptance limits or
(b) an amount equal to the amount of insurance for which
the Company is liable as specified on the conditional
receipt or interim receipt less the Company's maximum
retention had the life in question been underwritten
as standard. The Company's retention shall include
any net amounts retained then by the Company in
respect of the life. The Company's maximum
conditional receipt amount is $250,000.
Amount and The liability of the Reinsurer for all cessions under this
Duration Agreement shall cease at the same time as the liability of
the Company ceases and shall not exceed the Company's
contractual liability under the terms of its policies.
Notwithstanding the foregoing, the Reinsurer at its option,
on fifteen (15) days notice to the Company in writing, may
terminate its liability for any reinsurance for which the
reinsurance premiums have not been paid within (60) days
after billing.
Currency All cessions under this Agreement shall be effected in the
same currency as the original policy and the premiums and
liabilities shall be expressed and payable in that
currency.
ARTICLE VII
Policy Changes to policies reinsured under this Agreement shall be
Changes made in accordance with the provisions set out below.
If the change affects the plan, the amount of reinsurance,
premiums or commissions under the cession, the Company
shall inform the Reinsurer in the subsequent Reinsurance
Report.
On facultative cessions, any plan changes shall be subject
to the Reinsurer's approval.
For plan changes and replacements which are made in
accordance with the Company's new business underwriting
rules, the reinsurance terms shall be agreed by the
Company and the Reinsurer.
Increase in Amount and Reunderwriting
<PAGE> 8
(a) Automatic Cessions
Any reunderwriting, including any change in rating or
class, or non-contractual increase in amount at risk
for any cession shall be subject to the Company's
full new business issue underwriting rules or as
agreed otherwise with the Reinsurer. If the amount
of the policy shall increase above the jumbo limit or
if the amount to be reinsured exceeds the automatic
coverage limits, the increase shall be subject to the
Reinsurer's approval.
(b) Facultative Cessions
Any non-contractual increase or reunderwriting,
including any change in rating or class, shall be
subject to the Reinsurer's approval.
Reductions
If on a life reinsured hereunder any portion of the
insurance carried by the Company shall be reduced or
terminated, the amount of reinsurance carried by the
Company on that life shall be reduced by a like amount as
of the date and time of the termination of the original
insurance. Should the amount of insurance terminated
exceed the total amount of reinsurance carried by the
Company on the life, all such reinsurance shall be
terminated.
The reduction shall be applied first to the reinsurance
directly applicable to the Company's policy which is
reduced or cancelled, the reinsurance being reduced by an
amount which shall be the same proportion of the amount of
insurance terminated that the Reinsurer's share bore to
the total amount of reinsurance under that particular
policy.
If any portion of the terminated insurance was retained by
the Company, a reduction equal to the amount of such
retention shall be made in the reinsurance in force under
all other policies on the life, if any, each reinsurer
sharing in the reduction according to its proportion of
that reinsurance on the life not directly applicable to
the policy of the Company which was terminated. The
principle to be observed being always that the retention
of the Company is to be maintained unchanged.
Special Changes
If any special or unusual change, which is not covered
above and which may affect the terms of the cession in
question, is requested, the Reinsurer's approval shall be
obtained before such a change becomes effective.
Lapses and When a reinsured policy lapses, or is cancelled, the
Cancellations cession in question shall be cancelled. If the Company
allows extended or paid-up insurance following a lapse,
the reinsurance will be appropriately amended. If the
<PAGE> 9
Company allows the policy to remain in force under its
automatic premium loan regulations, the reinsurance shall
continue unchanged and in force as long as such
regulations remain in effect, except as provided for
otherwise in this Agreement.
Reinstatements If a policy reinsured on an automatic basis is reinstated
in accordance with its terms or the rules of the Company,
the reinsurance shall be reinstated automatically by the
Reinsurer. Notification of reinstatement shall be mailed
to the office of the Reinsurer not later than four weeks
after the reinstatement of the original policy. The
approval of the Reinsurer must be obtained before any
policy reinsured on a facultative basis may be reinstated.
Unearned The Company shall take credit, without interest, for any
Premium unearned premiums, net of allowances, arising due to
reductions or cancellations or death claims, in its
account. The Company shall pay the balance of arrears of
premiums due under a reinstated cession, if the
policyholder is required to do so.
ARTICLE VIII
Increase in The reinsurance under this Agreement shall be maintained in
Retention force without reduction except as specifically provided for
elsewhere in this Agreement.
The Company may increase its limits of retention on new
business being issued at any time by giving written notice
to the Reinsurer of the new limits of retention and the
effective date of such new retention schedule. The
Company's retention limits are set out in Exhibit A.
Recapture The Company may apply the new limits of retention to
existing reinsurance and reduce reinsurance in force in
accordance with the following rules.
(a) The Company shall give the Reinsurer written notice of
its intention to apply the new limits of retention to
existing business.
(b) Such reductions shall be made on the next anniversary
of each cession affected but no reduction shall be
made until such reinsurance has been in force for 10
years, unless a different recapture period is
specified in Exhibit C.
(c) A reduction may be made only if the Company retained
its maximum limit of retention for the plan, age and
mortality rating at the time the policy was issued.
(d) Any class of fully reinsured business or any classes
of risks for which the Company established special
<PAGE> 10
retention limits less than the Company's maximum
retention limits for the plan, age and mortality
rating at the time the policy was issued, are not
eligible for reduction.
(e) A reduction may be made only if the Company has
applied its increase in retention in a consistent
manner to all categories of its normal retention
limits.
In applying its new retention to existing reinsurance, the
rating at the time of issue and the issue age of the
existing reinsurance shall be used to determine the amount
of the Company's new retention.
Recapture Recapture as provided herein shall be optional with the
(Cont.) Company, but if any reinsurance is recaptured, all
reinsurance eligible for recapture under the provisions of
this Article must be recaptured. However, if the small
amount of reinsurance in force on one or more plans makes
it impractical to recapture on such policies, recapture
will still be allowed on plans with substantial amounts of
reinsurance in force.
If there is reinsurance in other companies on risks
eligible for recapture, the necessary reduction is to be
applied pro rata to the total outstanding reinsurance.
The Reinsurer shall not be liable, after the effective date
of recapture, for any cessions or portions of such
cessions eligible for recapture, which the Company has
overlooked. The Reinsurer shall be liable only for a
credit of the premiums, received after the recapture date,
less any commission or allowance and without interest.
If there is a Waiver of Premium (W.P.) claim in effect when
recapture takes place, the W.P. claim shall stay in effect
until the W.P. claim terminates. The Reinsurer shall not
be liable for any other benefits, including the basic life
risk, that are eligible for recapture. All such eligible
benefits shall be recaptured as if there were no W.P.
claim.
If there is an extension of that W.P. claim under the terms
of the Company's policy, the Reinsurer shall pay its share
of the W.P. benefit, provided the Company pays to the
Reinsurer all W.P. premiums for the period from the date
of recapture.
ARTICLE IX
Claims 1. In the case of a claim on a reinsured policy, whether
claim payment is made under the strict policy conditions
or compromised for a less amount, the settlement made by
the Company shall be unconditionally binding upon the
Reinsurer. If the whole risk on any particular claim is
carried by the Reinsurer and the claim is contestable, the
<PAGE> 11
Reinsurer shall be consulted before admission or
acknowledgement of the claim is made by the Company.
However, such consultation shall not impair the Company's
freedom to determine the proper action on the claim and
the settlement made by the Company shall still be
uncondition- ally binding on the Reinsurer.
2. The Company shall furnish the Reinsurer with copies of
the proofs of claims, together with any information the
Company may possess in connection with the claim. Payment
in settlement of the reinsurance under a claim approved
and paid by the Company for a life reinsured hereunder
shall be made by the Reinsurer upon the receipt of the
claim papers.
3. The Reinsurer shall share in the expense of any
contest or compromise of a claim in the same proportion
that the net amount at risk reinsured with the Reinsurer
bears to the total net risk of the Company under all
policies on that life being contested by the Company, and
shall share in the total amount of any reduction in
liability in the same proportion. Compensation of
salaried officers and employees of the Company shall not
be considered covered expenses.
4. In the event of an increase or reduction in the amount
of the Company's insurance on any policy reinsured here-
under because of a misstatement of age or sex being
established after the death of the Insured, the Company
and the Reinsurer shall share in such increase or
reduction in proportion to their respective net amounts at
risk under such policy.
5. If a claim is approved for Waiver of Premium benefit
on a policy reinsured hereunder, the Company shall
continue to pay premiums for reinsurance except the
premium for Disability reinsurance. The Reinsurer shall
continue to pay to the Company the normal coinsurance
allowances on such premiums. The Reinsurer shall also pay
its proportionate share of the premiums waived on the
original policy including the premiums for benefits that
remain in effect during disability.
ARTICLE X
Oversights It is agreed that in the event that any unintentional or
accidental failure to comply with the terms of this
Agreement can be shown to be the result of a
misunderstand- ing, oversight or clerical error, both
parties shall be restored to the position they would have
occupied had the misunderstanding, oversight or clerical
error not occurred.
Arbitration Any controversy or claim arising out of, or relating to
this contract, or the breach thereof, shall be settled by
arbitration, and the arbitrators, who shall regard this
Agreement from the standpoint of practical business as
well as the law, are empowered to determine as to the
<PAGE> 12
interpre- tation of the treaty obligation.
Each party shall appoint one arbitrator and these two
arbitrators shall select a third arbitrator within two
weeks of the appointment of the second. The second
arbitrator is to be selected within two weeks after the
notice is provided that the first arbitrator is selected.
If either party declines to appoint an arbitrator or
should the two arbitrators not agree on the choice of the
third, then the appointment shall be left to the President
for the time being of the American Arbitration
Association. All three arbitrators must be officers of
Life Insurance Companies or Life Reinsurance Companies
excluding, however, officers of the two parties to this
Agreement, their affiliates or subsidiaries or past
employees of any of these entities. The place of meeting
of the arbitrators shall be decided by a majority vote of
the arbitrators. The written decision of a majority of
the arbitrators shall be final and binding on both parties
and their respective successors and assigns. All costs of
the arbitration and expenses and fees of the arbitrators
shall be borne equally by the parties.
The arbitrators shall render a decision within four months
of the appointment of the third arbitrator, unless both
parties agree otherwise. In the event no decision is
rendered within four months, new arbitrators shall be
selected as above.
Alternatively, if both parties consent, any controversy may
be settled by arbitration in accordance with the rules of
the American Arbitration Association.
Judgment upon the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof.
It is specifically the intent of both parties that these
arbitration provisions shall replace and be in lieu of any
statutory arbitration provision, if the law so permits.
ARTICLE XI
Insolvency In the event of the insolvency of either the Reinsurer or
the Company, any amounts owed by the Company to the
Reinsurer and by the Reinsurer to the Company with respect
to this Agreement shall be set-off and only the balance
shall be paid.
The Reinsurer shall be liable only for the amounts
reinsured and shall not be or become liable for any
amounts or reserves to be held by the company on policies
reinsured under this Agreement.
All reinsurance under this Agreement shall be payable by
the Reinsurer directly to the Company, its liquidator,
receiver or statutory successor, on the basis of the
liability of the Company under the policy or policies
reinsured without diminution because of the insolvency of
the Company. It is understood, however, that in the event
<PAGE> 13
of such insolvency, the liquidator or receiver or
statutory successor of the Company shall give written
notice of the pendency of a claim against the Company on
the policy reinsured within a reasonable time after such
claim is filed in the insolvency proceedings, and that
during the pendency of such claim the Reinsurer may
investigate such claim and interpose, at its own expense,
in the proceedings where such claim is to be adjudicated,
any defense or defenses which it may deem available to the
Company or its liquidator or receiver or statutory
successor.
It is further understood that the expense thus incurred by
the Reinsurer shall be chargeable, subject to court
approval, against the Company as part of the expense of
liquidation to the extent of a proportionate share of the
benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer. Where
two or more reinsurers are involved in the same claim and
a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with
the terms of the reinsurance Agreement as though such
expense had been incurred by the Company.
ARTICLE XII
Alterations Any alteration which may from time to time become necessary
to Agreement in this Agreement shall be made by amendment or by
correspondence attached to the Agreement embodying such
alterations as may be agreed upon and taken as part of
this Agreement and equally binding.
Parties to This is an Agreement solely between the Company and the
Agreement Reinsurer. The acceptance of reinsurance hereunder shall
not create any right or legal relation between the
Reinsurer and the insured, beneficiary, or any other party
to any policy of the Company which may be reinsured
hereunder.
Inspection The Reinsurer shall have the right, at any reasonable time,
of Records to inspect at the office of the Company all records, books
and documents relating to the insurance under this
Agreement.
ARTICLE XIII
Duration of This Agreement is effective as of January 1, 1989 and is
Agreement unlimited as to its duration. It may be made inapplicable
to future insurance either in whole or in part by either
party giving at least ninety (90) days notice to that
effect by registered letter addressed to the other party
at its office as stated on the first page of this
Agreement. During the period of such ninety (90) days the
Reinsurer shall continue to participate in all insurance
<PAGE> 14
coming under the terms of this Agreement. Further, the
Reinsurer remains liable for all cessions existing at the
date of the expiration set forth in the notice until their
natural expiration, unless the parties mutually decide
otherwise or as specified otherwise in this Agreement.
Severability In the event that any of the provisions herein contained
shall be invalid or unenforceable, such declaration or
adjudication shall in no manner affect or impair the
validity or the enforceability of the other and remaining
provisions of this Agreement and such other and remaining
provisions shall remain in full force and effect as though
such invalid or unenforceable provisions or clauses had
not been herein included or made a part of this Agreement.
Benefit Except as herein otherwise provided, this Agreement shall
be binding upon the parties hereto and their respective
successors and assigns.
Construction This Agreement shall be construed and administered in
accordance with the laws of the State of Illinois and the
rights and obligations of this Agreement shall, at all
times, be regulated under the laws of the State of
Illinois.
Made in duplicate and executed by both parties.
Signed for and on behalf of FIDELITY LIFE ASSOCIATION, A MUTUAL LEGAL
RESERVE COMPANY
Long Grove, this day of , 19
Signed for and on behalf of FEDERAL KEMPER LIFE ASSURANCE COMPANY
Long Grove, this day of , 19
<PAGE> 1
EXHIBIT 10.23
TERMINATION PROTECTION AGREEMENT
AGREEMENT effective March 17, 1994 between Kemper Corporation
("Kemper") and _______________ (the "Executive").
Executive is a skilled and dedicated employee who has important
management responsibilities and talents which benefit the Kemper Companies.
Kemper believes that its best interests will be served if Executive is
encouraged to remain with the Kemper Companies. Kemper has determined that
Executive's ability to perform Executive's responsibilities and utilize
Executive's talents for the benefit of the Kemper Companies, and the Kemper
Companies' ability to retain Executive as an employee, will be
significantly enhanced if Executive is provided with fair and reasonable
protection from the risks of a change in ownership or control of Kemper.
Accordingly, Kemper and Executive agree as follows:
1. Defined Terms.
Unless otherwise indicated, capitalized terms used in this
Agreement which are defined in Schedule A shall have the meanings set forth
in Schedule A.
2. Effective Date; Term.
This Agreement shall be effective as of March 17, 1994 (the
"Effective Date") and shall remain in effect thereafter. Kemper may
terminate this Agreement by giving Executive at least one (1) year advance
written notice of termination of the Agreement. Notwithstanding the
foregoing, this Agreement shall, if in effect on the date of a Change of
Control, remain in effect for at least three (3) years following such
Change of Control, and such additional time as may be necessary to give
effect to the terms of the Agreement.
3. Change of Control Benefits.
If Executive's employment with the Kemper Companies is terminated
at any time within the three (3) years following a Change of Control by a
member of the Kemper Companies without Cause, or by Executive for Good
Reason (the effective date of either such termination hereafter referred to
as the "Termination Date"), Executive shall be entitled to the benefits
provided hereafter in this Section 3 and as set forth in this Agreement.
If Executive's employment by a member of the Kemper Companies is terminated
prior to a Change of Control at the request of any individual or entity
acquiring ownership and control of Kemper, this Agreement shall become
effective upon the subsequent occurrence of a Change of Control involving
such acquiror, and Executive's Termination Date shall be deemed to have
occurred immediately following the Change of Control, and therefore
Executive shall be entitled to the benefits provided hereafter in this
Section 3 and as set forth in this Agreement.
(a) Severance Benefits. Within two (2) business days after the
Termination Date, Kemper shall pay Executive a lump sum amount, in cash,
equal to:
<PAGE> 2
(i) three (3) times the sum of:
(A) Executive's Base Salary,
(B) Executive's Target Bonus, and
(C) Executive's Equity Equivalent; and
(ii) Executive's Target Bonus multiplied by a fraction, the
numerator of which shall equal the number of days Executive was
employed by the Kemper Companies in the calendar year in which the
Termination Date occurs and the denominator of which shall equal 365.
(b) Continued Welfare Benefits. Until the earlier of the third
anniversary of the Termination Date or the date on which Executive becomes
employed by a new employer, Kemper shall, at its expense, provide Executive
with medical, dental, life insurance, disability and accidental death and
dismemberment benefits at the highest level provided to Executive during
the period beginning immediately prior to the Change of Control and ending
on the Termination Date; provided, however, that if Executive becomes
employed by a new employer which maintains a major medical plan (or its
equivalent) that either (i) does not cover Executive with respect to a
pre-existing condition which was covered under the applicable Kemper
Companies' major medical plan, or (ii) does not cover Executive for a
designated waiting period, Executive's coverage under the applicable Kemper
Companies' major medical plan shall continue (but shall be limited in the
event of noncoverage due to a preexisting condition, to the preexisting
condition itself) until the earlier of the end of the applicable period of
noncoverage under the new employer's plan or the third anniversary of the
Termination Date.
(c) Payment of Accrued But Unpaid Amounts. Within two (2)
business days after the Termination Date, Kemper shall pay Executive (i)
any unpaid portion of Executive's Bonus accrued with respect to the full
calendar year ended prior to the Termination Date; and (ii) all
compensation previously deferred by Executive but not yet paid.
(d) Post-Retirement Welfare Benefits. On the Termination Date,
for purposes of determining Executive's eligibility for post-retirement
benefits under any welfare benefit plan (as defined in section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended) maintained by
a member of the Kemper Companies immediately prior to the Change of Control
and in which Executive participated, immediately prior to the Change of
Control, Executive shall be credited with the excess of three (3) years of
participation in the applicable medical plan and three (3) years of age
over the actual years and fractional years of participation and age
credited to Executive after the Change of Control. If, after taking into
account such participation and age, Executive would have been eligible to
receive such post-retirement benefits had Executive retired immediately
prior to the Change of Control, Executive shall receive, commencing on the
Termination Date, post-retirement benefits based on the terms and
conditions of the applicable plans in effect immediately prior to the
Change of Control.
(e) Supplemental Retirement and Profit Sharing Benefits.
(i) On the Termination Date, Executive shall become vested in
the benefits provided under the Kemper Corporation Supplemental Retirement
Plan or any successor plan (the "Supplemental Plan").
<PAGE> 3
(ii) Within two (2) business days after the Termination Date,
Kemper shall pay Executive a lump sum cash amount equal to the present
value of Executive's accrued benefit under the defined benefit and the
defined contribution portions of the Supplemental Plan as of the
Termination Date. For purposes of computing the lump sum present value of
the defined benefit portion of Executive's accrued benefit under the
Supplemental Plan, (A) Kemper shall credit Executive with the excess of
three (3) years of plan participation and service and three (3) years of
age for all purposes (including additional accruals and eligibility for
early retirement) over Executive's actual years and fractional years of
plan participation and service and age credited to Executive after the
Change of Control; and (B) Kemper shall apply the factors prescribed by the
Pension Benefit Guaranty Corporation for determining the actuarial
equivalent of a single sum payment of an immediate annuity for a plan
terminating on the Termination Date with insufficient assets. In
determining Executive's benefits under this paragraph (e)(ii), the terms of
the Supplemental Plan as in effect immediately prior to the Change of
Control, except as expressly modified in this paragraph (e), shall govern.
(iii) Within two (2) business days after the Termination
Date, Kemper shall pay the product of (A) three (3) times (B) eleven and
one-quarter percent (11.25%) times (C) the sum of Executive's Base Salary
and Target Bonus. However, the number three (3) in this paragraph
(e)(iii)(A) shall be reduced by one-twelfth (1/12) for each full calendar
month (up to thirty-six (36)) following the month in which the Change of
Control occurs, prior to Executive's Termination Date.
(f) Effect on Existing Plans. All Change of Control provisions
applicable to Executive and contained in any plan, program, agreement or
arrangement maintained on the Effective Date (or thereafter) by any member
of the Kemper Companies (including, but not limited to, any stock option,
restricted stock or pension plan) shall remain in effect through the date
of a Change of Control, and for such period thereafter as is necessary to
carry out such provisions and provide the benefits payable thereunder, and
may not be altered in a manner which adversely affects Executive without
Executive's prior written approval. No benefits shall be paid to
Executive, however, under any severance plan maintained generally for the
employees of a member of the Kemper Companies if Executive is eligible to
receive benefits under this Section 3.
(g) Outplacement Counseling. For the three (3) year period
following the Termination Date, Kemper shall reimburse all reasonable
expenses incurred by Executive for professional outplacement services by
qualified consultants selected by Executive.
4. Mitigation.
Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, and compensation earned from such employment or
otherwise shall not reduce the amounts otherwise payable under this
Agreement. No amounts payable under this Agreement shall be subject to
reduction or offset in respect of any claims which any member of the Kemper
Companies (or any other person or entity) may have against Executive.
5. Gross-up.
(a) In the event it shall be determined that any payment,
benefit or distribution (or combination thereof) by Kemper, any member of
the Kemper Companies, or one or more trusts established by any member of
<PAGE> 4
the Kemper Companies for the benefit of its employees, to or for the
benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, or otherwise) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax, together with any such
interest and penalties, hereinafter collectively referred to as the "Excise
Tax"), Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and the Excise Tax imposed upon
the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 5(c), all
determinations required to be made under this Section 5, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determination, shall be made by KPMG Peat Marwick or such other nationally
recognized certified public accounting firm as may be designated by
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to Kemper and Executive within fifteen (15) business days
of the receipt of notice from Executive that there has been a Payment, or
such earlier time as is requested by Kemper. In the event that the
Accounting Firm is serving as accountant or auditor for an individual,
entity or group effecting the change in ownership or effective control
(within the meaning of Section 280G of the Code), Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by Kemper. Any Gross-Up Payment, as determined
pursuant to this Section 5, shall be paid by Kemper to Executive within
five (5) days after the receipt of the Accounting Firm's determination. If
the Accounting Firm determines that no Excise Tax is payable by Executive,
it shall so indicate to Executive in writing. Any determination by the
Accounting Firm shall be binding upon Kemper and Executive. As a result of
the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by Kemper
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that Kemper exhausts its
remedies pursuant to Section 5(c) and Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by Kemper to or for the benefit of Executive.
(c) Executive shall notify Kemper in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
Kemper of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten (10) business days after Executive is
informed in writing of such claim and shall apprise Kemper of the nature of
such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the thirty
(30) day period following the date on which it gives such notice to Kemper
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If Kemper notifies Executive in writing
prior to the expiration of such period that it desires to contest such
claim, Executive shall:
<PAGE> 5
(1) give Kemper any information reasonably requested by Kemper
relating to such claim;
(2) take such action in connection with contesting such claim as
Kemper shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by Kemper;
(3) cooperate with Kemper in good faith in order to effectively
contest such claim; and
(4) permit Kemper to participate in any proceedings relating to
such claim;
provided, however, that Kemper shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), Kemper shall
control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct Executive to pay
the tax claimed and sue for a refund or contest the claim in any
permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Kemper shall
determine; provided, however, that if Kemper directs Executive to pay such
claim and sue for a refund, Kemper shall advance the amount of such payment
to Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect
to such advance; and provided, further, that if Executive is required to
extend the statute of limitations to enable Kemper to contest such claim,
Executive may limit this extension solely to such contested amount.
Kemper's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by
Kemper pursuant to Section 5(c), Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to Kemper's
complying with the requirements of Section 5(c)) promptly pay to Kemper the
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Executive of an
amount advanced by Kemper pursuant to Section 5(c), a determination is made
that Executive shall not be entitled to any refund with respect to such
claim and Kemper does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
6. Termination for Cause.
Nothing in this Agreement shall be construed to prevent Kemper or
<PAGE> 6
any member of the Kemper Companies from terminating Executive's employment
for Cause. If Executive is terminated for Cause, Kemper shall have no
obligation to make any payments under this Agreement, except for payments
that may otherwise be payable under then existing employee benefit plans,
programs and arrangements of the Kemper Companies.
7. Indemnification; Director's and Officer's Liability
Insurance.
Executive shall, after the Termination Date, retain all rights to
indemnification under applicable law or under the applicable Kemper
Companies' Certificate of Incorporation or By-Laws, as they may be amended
or restated from time to time. In addition, Kemper shall maintain
Director's and Officer's liability insurance on behalf of Executive, at the
level in effect immediately prior to the Termination Date, for the three
(3) year period following the Termination Date, and throughout the period
of any applicable statute of limitations.
8. Executive Covenants.
(a) Confidential Information. During the six (6) month period
following the Termination Date, Executive shall not disclose to any person,
or use to the significant disadvantage of any of the Kemper Companies, any
Confidential Information; provided that nothing contained in this Section 8
shall prevent Executive from being employed by a competitor of any of the
Kemper Companies or utilizing Executive's general skills, experience, and
knowledge, including those developed while employed by any of the Kemper
Companies.
(b) Release. In consideration for the protection and benefits
provided for under this Agreement, Executive hereby agrees to execute a
release substantially in the form of Schedule B.
9. Disputes.
Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in Chicago,
Illinois or, at the option of Executive, in the county where Executive then
resides, in accordance with the Rules of the American Arbitration
Association then in effect, except that if Executive institutes an action
relating to this Agreement, Executive may, at Executive's option, bring
that action in a court of competent jurisdiction. Judgment may be entered
on an arbitrator's award relating to this Agreement in any court having
jurisdiction.
10. Costs of Proceedings.
Kemper shall pay all costs and expenses, including attorneys'
fees and disbursements, at least monthly, of Executive in connection with
any legal proceeding (including arbitration), whether or not instituted by
a member of the Kemper Companies or Executive, relating to the
interpretation or enforcement of any provision of this Agreement, except
that if Executive instituted the proceeding and the judge, arbitrator or
other individual presiding over the proceeding affirmatively finds that
Executive instituted the proceeding in bad faith, Executive shall pay all
costs and expenses, including attorney's fees and disbursements, of
Executive. Kemper shall pay prejudgment interest on any money judgment
obtained by Executive as a result of such a proceeding, calculated at the
prime rate of The First National Bank of Chicago, as in effect from time to
time, from the date that payment should have been made to Executive under
<PAGE> 7
this Agreement.
11. Assignment.
Except as otherwise provided herein, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by Kemper and
Executive and their respective heirs, legal representatives, successors and
assigns. If Kemper shall be merged into or consolidated with another
entity, the provisions of this Agreement shall be binding upon and inure to
the benefit of the entity surviving such merger or resulting from such
consolidation. Kemper will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Kemper, by agreement in form
and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that
Kemper would be required to perform it if no such succession had taken
place. The provisions of this Section 11 shall continue to apply to each
subsequent employer of Executive hereunder in the event of any subsequent
merger, consolidation or transfer of assets of such subsequent employer.
12. Withholding.
Notwithstanding the provisions of Sections 4 and 5 hereof, Kemper
may, to the extent required by law, withhold applicable federal, state and
local income and other taxes from any payments due to Executive hereunder.
13. Applicable Law.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois applicable to contracts made and to
be performed therein.
14. Entire Agreement.
This Agreement constitutes the entire agreement between the
parties and, except as expressly provided herein, supersedes all other
prior agreements concerning the effect of a Change of Control on the
relationship between Kemper and the other members of the Kemper Companies
and Executive. This Agreement may be changed only by a written agreement
executed by Kemper and Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the 17th day of March, 1994.
KEMPER CORPORATION
/s/
______________________________
By:
/S/
_______________________________
Schedule A
CERTAIN DEFINITIONS
<PAGE> 8
As used in this Agreement, and unless the context requires a
different meaning, the following terms, when capitalized, have the meaning
indicated:
"Base Salary" means Executive's annual rate of base salary in
effect on the date of the Change of Control or the Termination Date,
whichever is higher.
"Bonus" means the amount payable to Executive under Kemper's
annual bonus plan with respect to a calendar year.
"Cause" means either of the following:
(1) Executive's willful malfeasance having a material adverse
effect on Kemper; or
(2) Executive's conviction of a felony;
provided, that any action or refusal by Executive shall not constitute
"Cause" if, in good faith, Executive believed such action or refusal to be
in, or not opposed to, the best interests of the Kemper Companies, or if
Executive shall be entitled, under applicable law or under an applicable
Kemper Companies' Certificate of Incorporation or By-Laws, as they may be
amended or restated from time to time, to be indemnified with respect to
such action or refusal.
"Change of Control" means the first to occur of any of the
following dates:
(1) the date the Kemper Board of Directors votes to approve and
recommends a stockholder vote to approve:
(A) any consolidation or merger of Kemper in which Kemper is not
the continuing or surviving corporation or pursuant to which shares of
Kemper's Common Stock would be converted into cash, securities or
other property, other than any consolidation or merger of Kemper in
which the holders of Kemper'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;
(B) 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 Kemper, other than any sale,
lease, exchange or other transfer to any corporation where Kemper
owns, directly or indirectly, at least eighty percent (80%) of the
outstanding voting securities of such corporation after any such
transfer; or
(C) any plan or proposal for the liquidation or dissolution of
Kemper; or
(2) the date any person (as such term us used in Section 13(d) of
the Securities Exchange Act of 1934, hereinafter the "1934 Act"), other
than one or more trusts established by Kemper for the benefit of employees
of Kemper 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 Kemper's outstanding Common Stock; or
(3) the date the Board of Directors of Kemper or any affiliate of
<PAGE> 9
Kemper (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:
(A) Kemper's Common Stock to be held of record by less than 300
persons; or
(B) Kemper'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;
(4) 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 Kemper shall cease for any reason to
constitute a majority thereof unless the election, or the nomination for
election by Kemper'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:
(A) any member of the Board of Directors of Kemper at the close
of business on May 16, 1990;
(B) any member of the Board of Directors of Kemper who succeeds
any Continuing Director described in subparagraph (A) above if such
successor was elected, or nominated for election by Kemper's
stockholders, by a majority of the Continuing Directors then still in
office; or
(C) any director elected, or nominated for election by Kemper's
stockholders to fill any vacancy or newly created directorship on the
Board of Directors of Kemper by a majority of the Continuing Directors
then still in office.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means nonpublic information relating
to the business plans, marketing plans, customers or employees of any of
the Kemper Companies other than information the disclosure of which cannot
reasonably be expected to adversely affect the business of the Kemper
Companies.
"Common Stock" means the $5 par value stock of Kemper.
"Equity Equivalent" means the sum of:
(i) the total number of shares subject to option comprising
Executive's target annual option award, for the calendar year
containing the Change of Control (or if no such target annual option
award has been set, the target annual option award for the prior year)
under Kemper's Long-Term Incentive Program, multiplied by the value
per share, determined using the Black-Scholes Option Pricing Model
assuming (a) the option exercise price component is the average daily
closing price of the Common Stock for the one (1) year period ending
six months prior to the Change of Control (the "Assumed Price"), and
(b) the stock price volatility component is the average daily closing
price of the Common Stock for the three (3) year period ending six (6)
months prior to the Change of Control; plus
<PAGE> 10
(ii) the number of shares of restricted Common Stock equal to
Executive's target annual restricted stock award, for the calendar year
containing the Change of Control (or if no such target annual restricted stock
award for the prior year) under Kemper's Long-Term Incentive Program,
multiplied by the Assumed Price.
"Good Reason" means any of the following actions, without
Executive's express prior written approval, other than due to Executive's
Permanent Disability or death:
(1) any diminution in Executive's titles, duties,
responsibilities, status or reporting relationship from the positions,
duties, responsibilities, status or reporting relationship existing
immediately prior to a Change of Control;
(2) the removal of Executive from, or any failure to re-elect
Executive to, any of the positions Executive holds immediately prior to a
Change of Control;
(3) the failure of any member of the Kemper Companies to pay
Executive's Base Salary, when due;
(4) any reduction of Executive's Base Salary or reduction of
Executive's Target Bonus or Equity Equivalent;
(5) a material reduction in Executive's employee or fringe
benefits;
(6) the change of Executive's principal place of employment to a
location more than 20 miles from Executive's principal place of employment
immediately prior to the Change of Control; or
(7) any material breach by any member of the Kemper Companies of
any provision of this Agreement.
"Kemper Companies" means Kemper and its subsidiaries and
affiliates and, after a Change of Control, any successor or successors
thereto.
"Permanent Disability" means Executive's inability, by reason of
any physical or mental impairment, to substantially perform the significant
aspects of his regular duties which inability is reasonably contemplated to
continue for at least one (1) year from its incurrence.
"Target Bonus" means the annual bonus payable to Executive for
the year in which a Change of Control occurs, calculated on the assumption
that Executive and one or more Kemper Companies or those entities or
business units within the Kemper Companies on whose performance Executive's
bonus depends achieve the applicable target performance goals established
under the applicable bonus plan with respect to that year. If no target
performance goals for the year in which the Change of Control occurs have
been set prior to the Change of Control, the Target Bonus shall be
determined by substituting, in the previous sentence, the prior year for
the year in which a Change of Control occurs.
Schedule B
SAMPLE
GENERAL RELEASE
<PAGE> 11
For good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the undersigned, with the intention of
binding himself/herself, his/her heirs, executors, administrators and
assigns, does hereby release, remise, acquit and forever discharge Kemper
Corporation, a Delaware corporation ("Kemper"), and its present and former
officers, directors, executives, agents, employees, affiliated companies,
divisions, subsidiaries, successors, predecessors and assigns (collectively
the "Released Parties"), of and from any and all claims, actions, causes of
action, demands, rights, damages, debts, sums of money, accounts, financial
obligations, suits, expenses, attorneys' fees and liabilities of whatever
kind or nature in law, equity, or otherwise, whether now known or unknown,
suspected or unsuspected, which the undersigned, individually or as a
member of a class, now has, owns or holds, or has at any time heretofore
had, owned or held against any Released Party, arising out of or in any way
connected with the undersigned's employment relationship with any of
Kemper, its subsidiaries, predecessors or affiliated entities, or the
termination thereof, including without limitation, any claim for severance
or vacation benefits, unpaid wages, salary or bonus, breach of contract,
wrongful discharge, impairment of economic opportunity, reimbursement for
fines paid, intentional infliction of emotional harm or other tort or
employment discrimination under any applicable federal, state or local
statute, provision, order or regulation including but not limited to, any
claim under Title VII of the Civil Rights Act ("Title VII"), the federal
Age Discrimination in Employment Act ("ADEA") and any similar or analogous
state statute) excepting only (i) those obligations of the Kemper Companies
under that certain Termination Protection Agreement between Kemper and the
undersigned effective March 17, 1994 (the "Agreement"), pursuant to which
this General Release is being executed and delivered, and (ii) any rights
to indemnification the undersigned may have under applicable corporate law,
the by-laws or certificate of incorporation of any Released Party or as an
insured under any D & O or liability insurance policy now or previously in
force.
The undersigned understands that by releasing employment
discrimination claims against the Released Parties, the undersigned also
forever releases and discharges any rights (s)he may have to file or
recover in a lawsuit (s)he may bring himself/herself on the same claims and
also any right the (s)he may have to any relief that (s)he might otherwise
be entitled to as a result of any proceedings instituted by the Equal
Employment Opportunity Commission or any other comparable enforcement
authority.
The undersigned acknowledges and agrees that neither the
Agreement nor this General Release is to be construed in any way as an
admission of any liability whatsoever by any Released Party under Title
VII, ADEA or any other federal or state statute or the principles of common
law, any such liability having been expressly denied.
The undersigned further declares and represents that (s)he has
carefully read and fully understands the terms of this General Release and
the Agreement, that (s)he has had the opportunity to seek the advice and
assistance of counsel with regard to this General Release and the
Agreement, and that (s)he knowingly and voluntarily, of his/her own free
will, without any duress, being fully informed and after due deliberate
action, accepts the terms of and signs the same as his/her own free act.
Dated: 3-17-94
/s/
_________________________
<PAGE> 1
Exhibit 10.24
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> 2
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> 3
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.
<PAGE> 1
EXHIBIT-13
RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Total operations
Kemper Corporation (including discontinued operations) recorded net income
of $235.5 million for 1993, compared with a net loss of $203.4 million in
1992 and net income of $204.5 million in 1991. The improvement in results
for 1993, compared with 1992, was primarily attributable to the gains
recognized on dispositions of discontinued operations, which more than
offset real estate-related losses, as well as improved operating results in
the asset management, life insurance and securities brokerage segments.
The net loss in 1992 primarily reflected real estate-related losses. (See
Investments beginning on page 29.)
Operating earnings totaled $115.5 million in 1993, compared with $37.3
million and $202.1 million in 1992 and 1991, respectively. Asset
management earnings rose in all three years. Although all segments other
than real estate showed improvements in 1993 over 1992, life insurance
accounted for most of the increase in the company's operating earnings.
Real estate joint venture operating losses adversely affected the life
insurance segment in 1992 and the real estate segment in 1993 and 1992.
The securities brokerage segment's operating earnings were reduced by
litigation-related expenses in both 1993 and 1992 and tax adjustments in
1992. As reflected in the table below, results for 1993 and 1992 include
adjustments to reflect the cumulative effect of changes in accounting
principles.
Stockholders' equity totaled $1.62 billion at December 31, 1993, compared
with $1.77 billion and $1.84 billion at year-end 1992 and 1991,
respectively. The 1993 decrease in nominal dollar value of stockholders'
equity was due to the company's acquisition of approximately 17.4 million
shares of its common stock valued at $610.2 million in exchange for the
stock of the company's reinsurance and risk management subsidiaries. This
acquisition of treasury stock was offset in part by the issuance of $260.0
million of preferred stock and $29.0 million of common stock, net income of
$235.5 million and an increase in unrealized appreciation on investments of
$40.6 million. The 1992 decrease in stockholders' equity primarily
reflected the year's net loss, which was partially offset by $71.5 million
of unrealized appreciation on investments.
<TABLE>
<CAPTION>
Summary of income (loss) by category
(in millions)
1993 1992 1991
Operating Operating
earnings(1) Realized Net earnings(1) Realized Net Realized Net
before SFAS investment income before SFAS investment income Operating investment income
SFAS 109 109(2) results(4) (loss) SFAS 106 106(3) results(4) (loss) earnings(1) results(4) (loss)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset management $ 98.2 $ 0.9 $ - $ 99.1 $ 90.3 $ (2.0) $ - $ 88.3 $ 85.0 $ - $ 85.0
Life insurance 87.5 2.7 (10.4) 79.8 46.2 (1.3) (70.4) (25.5) 92.7 (46.9) 45.8
Securities brokerage 1.8 (5.5) - (3.7) (28.4) (10.0) - (38.4) 6.2 - 6.2
Real estate (53.6) (5.7) (198.4) (257.7) (34.2) - (174.9) (209.1) (19.4) (21.4) (40.8)
Other (25.7) (4.3) 11.2 (18.8) (28.8) (1.2) - (30.0) (17.5) (2.6) (20.1)
Continuing
operations 108.2 (11.9) (197.6) (101.3) 45.1 (14.5) (245.3) (214.7) 147.0 (70.9) 76.1
Discontinued
operations 4.8 14.4 317.6 336.8 19.2 (12.5) 4.6 11.3 55.1 73.3 128.4
Total $113.0 $ 2.5 $ 120.0 $235.5 $ 64.3 $(27.0) $(240.7) $(203.4) $202.1 $2.4 $204.5
<FN>
(1) Net income (loss) excluding realized investment results.
(2) Effective January 1, 1993, the company adopted Statement of Financial
Accounting Standards (SFAS) 109, which changed the method of accounting
for deferred income taxes.
(3) Effective January 1, 1992, the company adopted SFAS 106, which changed the
method of accounting for certain postretirement benefits.
(4) See the table on page 53 in the note captioned Invested assets and related
income.
</TABLE>
<PAGE> 2
Book value per common share increased to $38.24 at December 31, 1993,
compared with $33.77 and $37.92 at year-end 1992 and 1991, respectively.
The increase in 1993 primarily reflects the reduced number of outstanding
common shares and the company's net income.
Net income (loss) per share in the following segment discussions is on a
primary basis.
Asset management
The asset management segment principally consists of Kemper Financial
Services, Inc. (KFS) and its subsidiaries, including Kemper Asset
Management Company, Kemper Service Company (KSVC) and INVEST Financial
Corporation.
<TABLE>
<CAPTION>
Selected financial highlights
(in millions, except per share data) Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Statement of Income
Investment management fees $238.3 $223.5 $194.7
Commission income 99.3 117.7 91.4
Distribution and redemption fees 75.0 75.6 100.1
Transfer agent revenue 68.8 55.4 45.3
Investment and other income 34.3 52.9 60.9
Total revenue 515.7 525.1 492.4
Operating expenses 293.8 297.1 246.0
Commission expense 113.5 130.6 98.0
Deferral of mutual fund
commissions and sales expense (71.1) (79.8) (35.4)
Amortization of deferred mutual
fund commissions and sales expense 48.0 40.0 54.4
Total expenses 384.2 387.9 363.0
Earnings before income tax 131.5 137.2 129.4
Income tax 33.3 46.9 44.4
Income before changes in
accounting 98.2 90.3 85.0
Changes in accounting 0.9 (2.0) -
Net income $ 99.1 $ 88.3 $ 85.0
Net income per share $ 2.31 $ 1.81 $ 1.77
</TABLE>
<PAGE> 3
The asset management segment's net income in 1993 rose primarily because of
increased revenue from investment management fees and transfer agent fees.
These revenue increases were offset by lower commission income and
investment and other income. In addition, the effective tax rate for 1993
was reduced by the reassessments of certain tax issues totaling $13.0
million.
In 1992, net income rose because of increased management fee revenue,
higher commission income and lower amortization of deferred mutual fund
acquisition costs. The 1992 revenue increase was largely offset by higher
commission expense, net of deferral and operating expenses.
The 1993 and 1992 increases in investment management fees are primarily
attributable to the growth in bond and stock funds, which have higher
margins than money market funds. In 1993, commission income decreased
$18.4 million after increasing $26.3 million in 1992, a year when asset
management operations earned record commissions from strong sales of
traditional load mutual funds. Distribution and redemption fee revenue
decreased in 1993 and 1992, compared with 1991, primarily due to the 1991
decision to lower such fees on KFS's spread-load (12b-1) mutual fund
products. Included in distribution and redemption fees are net
administrative service fees received by KFS from the Kemper mutual funds.
Transfer agent revenue in 1993 and 1992 increased primarily due to a rise
in the number of mutual fund shareholder accounts and related transaction
activity. The 1993 amount included $5.2 million in revenue from individual
retirement accounts (IRAs). Previously, the IRA fiduciary fees were
retained by Investors Fiduciary Trust Company, a 50 percent-owned investee
of KFS. In 1992, KSVC increased its transfer agent fee rates, which
generated increased revenue over 1991.
Certain affiliates in the securities brokerage and life insurance segments
reduced their use of data processing and operations services of KSVC late
in 1992. As a result, other income in 1993 declined approximately $13.6
million from 1992 and $16.4 million from 1991. Such decreases were
partially offset by reductions in related operating expenses.
Operating expenses decreased by $3.3 million in 1993, compared with 1992.
Included in 1993 operating expenses is a $10.0 million charge for the
settlement of certain legal proceedings related to option trading activity
in 1987. Operating expenses in 1993 decreased from 1992 because of the
above-mentioned KSVC services reduction, lower data processing maintenance
expenses and reduced advertising and sales promotion expenses. Advertising
and promotional expenses decreased $9.9 million in 1993, compared with 1992
when the company was heavily promoting its no-load mutual fund business
managed by Selected Financial Services, Inc. (Selected), a KFS subsidiary.
A new manager of these funds was appointed effective May 1, 1993. The loss
related to Selected, whose operations were closed in 1993, totaled
approximately $2.0 million after tax. Selected generated approximately
$6.7 million of net losses in the company's asset management results during
1992 and net income of $1.0 million in 1991.
In 1993, personnel expenses increased approximately $8.6 million in part
due to increased staffing for real estate investment management, transfer
agent operations and systems development. The increase in systems
development costs reflects KSVC's efforts to internalize shareholder
accounting for the transfer agent function to reduce future costs.
Overall, however, KFS reduced its employee count by 8.3 percent in 1993.
Operating expenses were higher in 1992 than in 1991, primarily reflecting
<PAGE> 4
new product and service initiatives resulting in higher personnel, data
processing and promotional costs.
Commission expense in 1993 decreased $17.1 million from 1992 due to lower
sales, with a similar decrease in the deferral of such mutual fund
commissions and sales expense. The 1992 increase of $32.6 million in
commission expense over 1991, which was principally due to strong sales of
spread-load mutual funds, was largely offset by the deferral of related
mutual fund commissions and sales expense. Amortization of deferred mutual
fund commission and sales expense increased $8.0 million in 1993 over 1992
due to the increased sales of spread-load mutual funds in 1992. Such
expenses decreased $14.4 million in 1992 from 1991. Approximately $8.3
million of the 1992 decline reflected improved retention of spread-load
mutual fund assets, which resulted in a shift in the amortization of such
deferred costs to later years in the amortization period. Both 1993 and
1992 reflected reductions in amortization expense, compared with 1991, as
there was a significant decrease in amortization for the high sales years
of 1985 and 1986.
<TABLE>
<CAPTION>
Assets under management
(in billions) At December 31
1993 1992 1991
<S> <C> <C> <C>
Mutual funds:
Bond $ 25.7 $ 24.6 $ 21.5
Stock 9.4 8.4 6.5
Money market 12.3 15.1 17.6
Investment advisory 4.7 4.3 4.5
Kemper Corporation
affiliates(1) 9.8 10.7 10.3
Kemper National Insurance
Companies(2) and other 7.4 6.2 5.5
Total $ 69.3 $ 69.3 $ 65.9
</TABLE>
[FN]
(1) The 1993 decline in assets managed for Kemper Corporation affiliates
reflects the loss of $0.7 billion of the invested assets of divested
primary property-casualty insurance companies.
(2) The Kemper National Insurance Companies consist of the company's former
affiliate, Lumbermens Mutual Casualty Company (Lumbermens) and Lumbermens'
affiliates, including since August 1993 the company's former subsidiary,
Kemper Reinsurance Company. Prior periods have been restated. (See
Discontinued operations on page 28.)
Bond and stock mutual fund assets under management increased $2.1 billion
in 1993 over 1992 due to investment performance and $0.7 billion of sales,
net of redemptions. The increase of $5.0 billion in 1992 over 1991 was
primarily due to strong sales. In 1993, sales of bond mutual funds,
particularly taxable bond funds, and sales of stock mutual funds fell from
the record 1992 levels. Assets under management also reflected the 1993
loss of approximately $1.0 billion of assets (primarily stock mutual funds)
previously managed by Selected.
While sales of bond and stock mutual funds in 1993 exceeded sales levels
<PAGE> 5
prior to 1992, they represented a smaller percentage of industrywide sales
based on Investment Company Institute (ICI) data. The company's share of
the industry's non-money market fund assets was 2.19 percent at December
31, 1993, compared with 2.77 percent and 3.05 percent at December 31, 1992
and 1991, respectively. The decrease in market share primarily reflects
increasing competition from securities brokerage and advisory firms, as
well as financial institutions, all emphasizing sales of their proprietary
products. In addition, market share was impacted by mutual fund
performance in an environment adverse to KFS's growth stock
orientation as well as the increased number of new competitor funds.
During 1993 and 1992, in the low interest rate environment, Kemper money
market fund assets decreased, compared with year-end 1991. Late in 1993, a
nonaffiliated broker withdrew its $1.5 billion money market account. Based
on ICI data, the company's money funds' market share declined to 2.18
percent at December 31, 1993, from 2.72 percent and 3.21 percent at
December 31, 1992 and 1991, respectively, due in part to the loss of the
previously mentioned account and to increased competition.
The asset management industry is becoming increasingly competitive, with
banks and brokerage firms offering proprietary products and with the
proliferation of products being offered in the marketplace. Individuals
are assuming greater control over their savings and retirements and are
placing greater emphasis on asset allocation and controlling risk. The
company has adopted certain business strategies to address these
competition issues, such as brand name marketing emphasizing long-term
investment performance, distribution through diversified channels, and cost
control and improved service through internalization of its shareholder
accounting system (scheduled for completion in late-1994). The company is
continuing to expand its product line to satisfy the needs of its
customers.
Life insurance
The life insurance segment consists of Federal Kemper Life Assurance
Company and Kemper Investors Life Insurance Company.
<TABLE>
<CAPTION>
Selected financial highlights
(in millions, except per share data) Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Statement of Income
Investment income $ 500.5 $ 568.6 $ 675.4
Premium revenue 157.7 135.9 123.9
Other income 79.0 79.7 75.2
Realized investment loss (10.7) (95.8) (71.1)
Total revenue 726.5 688.4 803.4
Benefits to policyholders 514.3 598.1 639.4
Commissions, taxes, licenses
and fees 76.2 98.7 98.6
Operating expenses 51.4 72.7 76.9
Deferral of policy
acquisition costs (104.5) (124.3) (127.9)
Amortization of deferred
policy acquisition costs 60.4 66.8 47.8
Total benefits and expenses 597.8 712.0 734.8
Earnings (loss) before
income tax 128.7 (23.6) 68.6
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Income tax 51.6 0.6 22.8
Income (loss) before changes
in accounting 77.1 (24.2) 45.8
Changes in accounting 2.7 (1.3) -
Net income (loss) $ 79.8 $ (25.5) $ 45.8
Realized investment loss,
net of tax $(10.4) $ (70.4) $(46.9)
Operating earnings $ 90.2 $ 44.9 $ 92.7
Per share:
Operating earnings $ 2.10 $ .92 $ 1.92
Net income (loss) $ 1.86 $ (.52) $ .92
</TABLE>
The life insurance segment reported improved net income in 1993, compared
with both 1992 and 1991. The improvement in 1993 was primarily the result
of lower realized investment losses, increases in spread income, favorable
mortality results and reductions in operating expenses. The net loss in
1992, compared with net income in 1991, reflects reduced investment income
as well as increased realized investment losses.
The segment's after-tax realized investment losses included real
estate-related losses of $65.8 million, $74.3 million and $60.3 million for
1993, 1992 and 1991, respectively, and after-tax write-downs and restructurings
of certain below investment-grade securities totaling $17.2 million, $27.5
million and $57.3 million for 1993, 1992 and 1991, respectively. These
losses were offset somewhat by other realized investment gains, primarily
from the sale of fixed maturities, of $72.6 million, $31.4 million and
$70.7 million in 1993, 1992 and 1991, respectively. (See Investments
beginning on page 29.)
Operating earnings for the life insurance segment improved in 1993,
compared with 1992, primarily due to increased spread income as crediting
rates declined at a faster rate than the decline in investment income.
Following a strategy implemented during 1992, the life insurance segment
continued to reduce crediting rates on its fixed annuity and
interest-sensitive life insurance products. Such reductions in crediting
rates occur on a gradual basis and can improve operating earnings over
time. Investment income was negatively impacted in 1993 and 1992, compared
with 1991, by lower investment yields on new money, a shift to
higher-quality, lower-yielding investments, foregone income on
nonperforming investments and reinsurance transactions in 1992 and 1991.
These transactions involved the transfer of over $900 million of
policyholder liabilities and the related invested assets. (See note
captioned Reinsurance on page 65.) Mitigating these factors somewhat were
the benefits from capital contributions of $70.0 million in 1993 and $205.8
million in 1991, as well as sales of certain real estate-related assets to
the company's real estate subsidiaries totaling $447.1 million in 1993 and
$192.3 million in 1992.
Premium revenue increased in each of the last three years due to increasing
renewal premiums on term life products despite declining sales of new term
life products. Surrender charge revenue was $11.8 million in 1993,
compared with $11.5 million and $15.2 million in 1992 and 1991,
respectively. The lower level in 1993 and 1992 reflected a reduction in
policyholder withdrawals, compared with 1991, in part due to the segment's
higher-quality invested assets and generally better industry conditions.
Policyholder withdrawal activity in the general account increased only
slightly during 1993, compared with 1992, primarily as a result of the
planned reductions in crediting rates. Included in other income are ceding
<PAGE> 7
commissions of $12.0 million and $10.0 million in 1992 and 1991,
respectively, resulting from the previously mentioned reinsurance
transactions. Also included in other income are administrative fees
received from the segment's separate account (variable annuity) products of
$18.1 million in 1993, compared with $14.3 million and $9.9 million in 1992
and 1991, respectively. Administrative fee revenue increased in 1993 and
1992 due to increases in separate account assets.
Operating expenses in 1993 declined by approximately 29 percent, compared
with 1992. The reduction was a result of continued expense control and the
integration of the two life insurance subsidiaries' operations and
management beginning in early 1992.
Commissions, taxes, licenses and fees and the deferral of policy
acquisition costs were lower in 1993, compared with 1992, reflecting lower
annuity sales. The amortization of policy acquisition costs increased
during 1993 and 1992 primarily as a result of a higher level of
nonperforming real estate-related assets. This reduced the present value
of future estimated gross profits, thereby accelerating the amortization of
policy acquisition costs. In addition, 1992 and 1991 included
approximately $22.5 million and $3.9 million of additional amortization,
respectively, from the previously mentioned reinsurance transactions.
Total life insurance in force grew to $91.3 billion at December 31, 1993,
compared with $84.2 billion and $73.4 billion at year-end 1992 and 1991,
respectively. Sales of term and other life products include both renewal
premiums and new product sales. The segment issued new life insurance
business in 1993 of $17.5 billion in face amount, down from $21.5 billion
in 1992, due in part to competitive conditions. The decrease in general
account annuity sales reflects the company's continuing strategy to direct
its sales efforts toward separate account products, which pose minimal
investment risk for the company and increase administrative fees earned.
Reflecting this strategy, the separate account sales for 1992 more than
doubled the 1991 level. These sales, however, declined in 1993 from the
1992 level primarily due to competitive conditions, in part reflecting the
life insurance subsidiaries' strength and performance
ratings.
To address its competition, the company has adopted certain business
strategies. These include additional reductions of real estate-related
assets; continued focus on existing and new term and variable annuity
products; distribution through diversified channels, with new emphasis on
INVEST's financial institution clients and Kemper Securities, Inc.'s
retail base; and ongoing efforts to continue as a low-cost provider of
insurance products and high-quality services to agents and policyholders
through the use of technology.
<TABLE>
<CAPTION>
Life insurance sales
(in millions) Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Annuities:
General account $ 322.2 $ 572.7 $ 720.1
Separate account 263.7 275.9 113.9
Total annuities 585.9 848.6 834.0
Life insurance:
Term and other 153.0 148.7 138.9
Interest-sensitive 79.2 79.7 78.5
Total life insurance 232.2 228.4 217.4
Total sales $ 818.1 $ 1,077.0 $ 1,051.4
</TABLE>
<PAGE> 8
Since year-end 1990, the company has taken many steps to improve the
financial strength and competitive marketing position of its life insurance
subsidiaries. These steps included adjustments in crediting rates;
reductions in below investment-grade securities; a strategy not to embark
on new real estate projects; additional provisions for real estate-related
losses; sales of $639.4 million of certain real estate-related investments
to the company's real estate subsidiaries; third-party sales and
refinancings of certain mortgage loans; approximately $900 million in
annuity reinsurance transactions with an affiliated mutual life insurance
company; a parental guarantee of any indebtedness; and capital
contributions of $275.8 million. The statutory surplus ratio for the
segment improved to 9.2 percent at December 31, 1993, from 7.9 percent at
December 31, 1992 and 1991 and 5.4 percent at year-end 1990.
Securities brokerage
The securities brokerage segment primarily consists of Kemper Securities,
Inc. (KSI).
<TABLE>
<CAPTION>
Selected financial highlights
(in millions, except per share data) Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Statement of Income
Commissions $467.0 $ 469.2 $430.5
Interest and dividend income 74.1 80.9 94.5
Securities gains, net 42.6 41.2 40.6
Investment banking fees 24.5 28.3 20.5
Other income 65.5 57.9 77.6
Total revenue 673.7 677.5 663.7
Production-related
compensation 262.1 270.8 250.2
Other operating expenses 366.2 381.2 343.4
Interest expense 46.9 53.0 63.6
Total expenses 675.2 705.0 657.2
Earnings (loss) before
income tax (1.5) (27.5) 6.5
Income tax
expense (benefit) (3.3) 0.9 0.3
Income (loss) before
changes in accounting 1.8 (28.4) 6.2
Changes in accounting (5.5) (10.0) -
Net income (loss) $ (3.7) $ (38.4) $ 6.2
Net income (loss)
per share $ (0.8) $ (.79) $ .13
</TABLE>
The segment's net losses for 1993 and 1992 include supplemental additions
to the segment's litigation reserves of $19.8 million after tax and $13.2
million after tax, respectively. The legal accrual additions were based
upon management's evaluation of pending legal matters in light of
then-current information. Results in 1992 also included an $11.0 million
<PAGE> 9
federal tax expense for various tax issues. Excluding the supplemental
legal accruals and the cumulative effect of changes in accounting
principles in both periods and the 1992 tax expense, net income for 1993
was $21.6 million, compared with a net loss of $4.2 million in 1992 and net
income of $6.2 million in 1991. The 1993 improvement in profitability was
a result of continued participation in the strong markets, increased
productivity of KSI's investment consultants, management's ongoing focus on
KSI's core retail brokerage business and a cost reduction program, which
included substantial reductions in support and other staff.
Total securities brokerage revenue decreased $3.8 million in 1993 from the
$677.5 million level in 1992. Commissions increased $38.7 million in 1992
over the 1991 level due to improved market conditions and increased
productivity of the retail sales force. Commissions in 1993 approximated
the 1992 level as a 14 percent increase in commission per investment
consultant (registered representative) offset a decrease in the number of
investment consultants. The company believes the number of investment
consultants decreased primarily due to rumors that KSI was for sale. In
mid-1993, the company reinforced, through public statements, compensation
arrangements and a new companywide management structure, its commitment to
the securities brokerage operations as a core distributor of the company's
financial and insurance products.
To further increase revenue both for the segment and from the financial and
insurance products of the asset management and life insurance segments, the
company adopted certain business strategies. These include, in addition to
KSI's ongoing retail focus, more coordination of the company's distribution
functions at both INVEST and KSI and an emphasis on increasing KSI's client
asset base. At year-end 1993, KSI's client accounts totaled approximately
$34 billion, of which $7 billion represented assets managed by KFS.
A decrease in interest and dividend income in 1993 of $6.8 million,
compared with 1992, was largely offset by a corresponding decrease in
interest expense of $6.1 million. These reductions are attributable to
lower interest rates and the disposition of mortgage-backed securities and
related bonds. Interest and dividend income decreased $13.6 million in
1992, compared with 1991, primarily due to lower interest rates. Net
securities gains remained stable in all three years, reflecting inventory
risk control and favorable market conditions.
Investment banking fees decreased $3.8 million in 1993 due to management's
decision to reorganize its investment banking operations. Investment
banking fees had increased $7.8 million in 1992 over 1991 as a result of
increased activity industrywide and KSI's greater level of participation in
corporate and public finance offerings. Other income in 1993 increased by
$7.6 million over 1992 primarily due to additional fees from retail
accounts. Other income in 1992 decreased $19.7 million from 1991 as KSI
focused its business on retail clients.
Total expenses decreased $29.8 million in 1993, compared with 1992.
Excluding the pretax supplemental legal charges of $30.0 million and $20.0
million in 1993 and 1992, respectively, total expenses decreased $39.8
million in 1993, compared with 1992, largely as a result of KSI's focus on
cost containment. Including the previously mentioned legal reserve
charges, litigation-related expenses in 1993 increased $5.4 million over
1992, after increasing $28.4 million in 1992 over 1991. As announced early
in 1994, this segment settled certain significant litigation matters within
established reserves.
Production-related compensation decreased $8.7 million in 1993, compared
<PAGE> 10
with 1992, primarily reflecting the reorganization of the investment
banking operations. Changes in retail product mix combined with continued
standardization of institutional payout allowed commission expense to
decrease even though commission revenue remained stable.
Production-related compensation had increased $20.6 million in 1992 over
1991 due to increased compensation for retail and institutional sales
personnel resulting from higher commission revenue.
Other operating expenses declined $15.0 million in 1993 from 1992 mainly
because non-production-related compensation and benefits decreased $7.8
million from 1992. Employee benefit costs for 1993 include an accrual of
$4.8 million for a supplemental retirement plan contribution as part of a
new equity participation program. In 1993, professional services expense
decreased $5.6 million, promotional expense decreased $2.6 million, and
other expenses decreased $5.0 million, reflecting cost control efforts.
Other operating expenses increased $37.8 million in 1992 from 1991,
primarily due to the previously mentioned litigation-related expenses.
Promotional expenses for 1992 increased $8.0 million over the 1991 level,
as KSI focused on its retail clients. Consolidation of operational and
administrative functions resulted in increased severance costs of $4.4
million in 1992.
Real estate
Subsidiaries within the real estate segment were part of the company's
other operations and corporate category in 1992 and 1991. The 1992 and
1991 amounts have been restated to reflect 1993 classifications.
<TABLE>
<CAPTION>
Selected financial highlights
(in millions, except per share data) Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Statement of Income
Joint venture operating losses $ (81.4) $ (56.3) $ (27.6)
Investment income and other 6.5 10.9 2.6
Realized investment loss (263.1) (263.9) (32.5)
Total revenue (338.0) (309.3) (57.5)
Operating expenses 4.0 6.7 2.1
Interest expense 4.1 0.8 2.0
Total expenses 8.1 7.5 4.1
Loss before income
tax benefit (346.1) (316.8) (61.6)
Income tax benefit (94.1) (107.7) (20.8)
Loss before changes
in accounting (252.0) (209.1) (40.8)
Changes in accounting (5.7)
Net loss $ (257.7) $ (209.1) $ (40.8)
Realized investment loss,
net of tax benefit $ (198.4) $ (174.9) $ (21.4)
Operating loss $ (59.3) $ (34.2) $ (19.4)
Per share:
Operating loss $ (1.39) $ (.70) $ (.40)
Net loss $ (6.02) $ (4.28) $ (.85)
</TABLE>
<PAGE> 11
Equity investments in certain joint ventures were accounted for in the
insurance company subsidiaries in first-half 1992 before the equity was
transferred to real estate subsidiaries. The segment's acquisition of
these assets, along with the company's treatment of certain loans as equity
investments in real estate (see Other real estate-related investments on
page 32), accounted for most of the difference between the joint venture
operating losses of $81.4 million in 1993 and $56.3 million in 1992. In
addition, the real estate subsidiaries, as equity owners in most of the
company's joint ventures, reported higher operating losses for 1993 and
1992 due to a combination of operating factors, primarily related to
adverse real estate market conditions in recent years. In 1993, the
company began recognizing 100 percent of the operating results of certain
joint ventures. Investment and other income decreased in 1993, with a
similar decrease in operating expenses, as Kemper Real Estate Management
Company became 50 percent owned and unconsolidated with the formation of a
master limited partnership with Lumbermens. (See Real estate
concentrations beginning on page 32.) Interest expense increased in 1993
primarily as a result of the increased amount of assets purchased by the
segment during the year. (See the discussion of SFAS 114 in the note
captioned Summary of significant accounting policies on page 48.)
The realized investment losses reflected higher reserves and write-downs in
1993 and 1992. The segment also realized a greater portion of the
company's additions to its provision for real estate-related losses because
of the real estate subsidiaries' increased holdings of recourse
obligations, including certain guarantees in favor of the life insurance
subsidiaries, and loans that are subordinate to loans by the life insurance
subsidiaries. The company intends to reduce both its real estate operating
losses and its total amount of real estate-related investments in the
future through strategic sales or other dispositions of real estate assets.
(See Real estate outlook on page 35.)
Discontinued operations
Discontinued operations primarily include the company's former primary
property-casualty insurance, reinsurance and risk management subsidiaries,
all of which were divested in 1993.
Net income for 1993 totaled $336.8 million, which includes gains on the
sales of discontinued operations of $296.8 million. Net income from
discontinued operations for 1992 and 1991 was $11.3 million and $128.5
million, respectively. (See note captioned Discontinued operations on page
54.)
Other operations and corporate
This category consists of the holding company income and expenses of both
Kemper Corporation and Kemper Financial Companies, Inc., a 96 percent-owned
downstream holding company.
The other operations and corporate category reported net losses before
changes in accounting principles of $14.4 million and $28.7 million in 1993
and 1992, respectively. The loss was lower in 1993 primarily due to
realized investment gains of $11.3 million, compared with zero in 1992.
The net loss for 1991 totaled $20.2 million.
INVESTMENTS
(continuing operations)
The company's invested assets predominately reflect investments of its life
<PAGE> 12
insurance and real estate subsidiaries. The company's principal investment
strategy is to maintain a balanced, well-diversified portfolio supporting
the insurance contracts written by its life insurance subsidiaries. The
company's subsidiaries make shifts in their investment portfolios depending
on, among other factors, the interest rate environment, liability durations
and changes in market and business conditions.
<TABLE>
<CAPTION>
Invested assets and cash
(in millions) At December 31
1993 1992
<S> <C> <C> <C> <C>
Cash and short-term
investments $ 967 11.6% $ 541 7.2%
Fixed maturities:
Investment-grade:
NAIC(1) Class 1 3,548 42.6 3,294 43.8
NAIC(1) Class 2 1,558 18.7 822 10.9
Below investment-grade:(2)
Performing 227 2.7 327 4.3
Nonperforming 0 0.0 80 1.1
Equity securities 99 1.2 106 1.4
Joint venture
mortgage loans 1,053 12.6 1,264 16.8
Third-party mortgage loans 154 1.8 345 4.6
Other real estate-related
investments 272 3.3 343 4.6
Other 447 5.5 400 5.3
Total (3) $8,325 100.0% $7,522 100.0%
<FN>
(1) National Association of Insurance Commissioners (NAIC).
- Class 1 = A- and above
- Class 2 = BBB- through BBB+
(2) Excludes $171 million, or 2.0%, and $193 million, or
2.6%, at December 31, 1993 and 1992, respectively,
of bonds carried in other real estate-related investments.
(3) See note captioned Financial instruments-off-balance-sheet risk
on page 61.
</TABLE>
The company is carrying its fixed maturity investment portfolio, which it
considers available for sale, at estimated market value, with the aggregate
unrealized appreciation or depreciation being recorded as a separate
component of equity, net of any applicable income tax effect. The
aggregate unrealized appreciation at December 31, 1993, was $120.6 million,
net of tax, or $3.67 per share, compared with unrealized appreciation of
$71.2 million, net of tax, or $1.44 per share, at December 31, 1992.
Market values are sensitive to movements in interest rates and other
economic developments and can be expected to fluctuate, at times
significantly, from period to period.
During each of the last three years, the company repositioned its fixed
maturity investments and increased the relative and absolute levels of
investment-grade fixed maturities and cash and short-term investments held.
At December 31, 1993, investment-grade fixed maturities and cash and short-
term investments accounted for 72.9 percent of the company's invested
assets and cash, compared with 61.9 percent at December 31, 1992.
Approximately 62 percent of the company's NAIC Class 1 bonds were rated AAA
or equivalent at year-end 1993.
<PAGE> 13
Approximately one-third of the company's investment-grade fixed maturities
at December 31, 1993 and 1992, were mortgage-backed securities. These
investments consist primarily of marketable mortgage pass-through
securities issued by the Government National Mortgage Association (GNMA),
the Federal National Mortgage Association (FNMA) or the Federal Home Loan
Mortgage Corporation (FHLMC) and other investment-grade securities
collateralized by mortgage pass-through securities issued by these
entities. The company has not made any material investments in
interest-only or other similarly volatile tranches of mortgage-backed
securities. The company's mortgage-backed investments are generally of AAA
credit quality.
Markets for the company's investments in mortgage-backed securities have
been and are expected to remain liquid. The weighted average expected life
of these investments was approximately five and one-half years at December
31, 1993, as derived from information on nationally recognized analytical
and quotation services making markets in these securities. Inasmuch as
most of these investments were purchased by the company at discounts,
prepayment activity is not expected to result in any material losses to the
company because any prepayment would generally accelerate the reporting of
the discounts as investment income. Given the credit quality, liquidity and
anticipated payment characteristics of the company's investments in
mortgage-backed securities, the company does not believe that they present
material risks.
Net investment income
The following table shows each segment's contribution to the company's net
investment income:
<TABLE>
<CAPTION>
Net investment income before taxes
(in millions) Year Ended December 31
1993 1992 1991
<S> <C> <C> <C>
Life insurance $500.5 $568.6 $675.4
Real estate (74.9) (51.0) (25.0)
Other and eliminations 1.2 4.7 3.6
Total $426.8 $522.3 $654.0
Investment yields:
Life insurance 6.48% 7.58% 9.06%
Total 5.39% 6.84% 8.56%
</TABLE>
Included in pretax net investment income is the company's share of the
operating losses from equity investments in real estate. The company's
share of real estate operating results, which generally has been 50
percent, increased to 100 percent on certain of its equity investments
beginning in 1993. The company's share of real estate operating losses
(excluding write-downs) totaled $92.3 million, $72.6 million and $37.8
million in 1993, 1992 and 1991, respectively. The operating results
consist of rental and other income less depreciation, interest and other
expenses. Such operating results exclude interest expense on loans by the
company which are on nonaccrual.
The company's pretax yields on its average invested assets are net of
foregone investment income equal to 81 basis points for 1993 and 1992 and
72 basis points for 1991. The company's total foregone investment income
<PAGE> 14
before tax on both nonperforming fixed maturity investments and nonaccrual
real estate-related investments was $62.0 million, $60.4 million and $53.5
million for 1993, 1992 and 1991, respectively. Foregone investment income
from the nonaccrual of real estate-related investments is net of the
company's share of interest expense on these loans excluded from the
company's share of joint venture operating results. Based on total
nonperforming securities and real estate-related investments on nonaccrual
status at December 31, 1993, the company estimates foregone investment
income in 1994 will decrease slightly compared with the 1993 level. Any
increase in nonperforming securities, and either worsening or stagnant real
estate conditions, would increase the expected adverse effect on the
company's 1994 investment income and realized investment results.
The company believes that future net investment income, results of
operations and cash flow will be affected by the company's current
investment policy emphasizing investment-grade, lower-yielding securities
and the reinvestment of new money at lower yields, as well as by real
estate fundings treated as equity investments, nonaccrual real estate loans
and joint venture operating losses. The company expects, however, that
such adverse effects should be offset to some extent by certain advantages
that it expects to realize over time from its other investment strategies,
its life insurance product mix and its continuing cost control measures.
Other mitigating factors include marketing advantages that could result
from the company having lower levels of investment risk and earnings
improvements from its life insurance operations' ability to adjust
crediting rates on annuities and interest-sensitive life products over
time.
Realized investment results
Reflected in the results from continuing operations are after-tax realized
investment losses of $197.6 million, $245.3 million and $70.9 million for
1993, 1992 and 1991, respectively. (See note captioned Invested assets and
related income beginning on page 51.) Real estate-related losses
increased, reflecting declining valuations in the real estate portfolio.
Fixed maturity write-downs decreased due to the increased quality
of the company's fixed maturity portfolio. Other realized gains of
$72.6 million, $31.4 million and $70.7 million in 1993, 1992 and 1991,
respectively, were also taken in the life insurance segment.
Unrealized gains and losses on fixed maturity investments are not reflected
in the company's results of operations. These changes in unrealized value
are included as a separate component of stockholders' equity, net of any
applicable income taxes. If and to the extent a fixed maturity investment
suffers an other-than-temporary decline in value, however, such security is
written down to net realizable value, and the write-down adversely impacts
net income.
The company regularly monitors its investment portfolio and as part of this
process reviews its assets for possible impairments of carrying value.
Because the review process includes estimates, there can be no assurance
that current estimates will prove accurate over time due to changing
economic conditions and other factors.
For mortgage loans and other real estate-related investments, reserves are
established when declines in collateral values, estimated in light of
current economic conditions and calculated in conformity with SFAS 114,
indicate a likelihood of loss. (See the discussion of SFAS 114 in the note
captioned Summary of significant accounting policies on page 48.) The
additions to the provision for real estate-related losses include increases
<PAGE> 15
to reserves on loans, write-downs to fair value of certain real
estate-related assets and the company's share of write-downs by joint
ventures.
A valuation allowance was established upon adoption of SFAS 109 to reduce
the deferred tax asset for real estate-related investment losses to the
amount that, based upon available evidence, is in management's judgment
more likely than not to be realized. (See note captioned Income tax on
page 57.)
Below investment-grade securities
(excluding real estate-related bonds)
At December 31, 1993, below investment-grade securities holdings (NAIC
classes 3 through 6) decreased to 2.7 percent of cash and invested assets,
compared with 5.4 percent at year-end 1992.
Below investment-grade securities are generally unsecured and often
subordinated to other creditors of the issuers. These issuers may have
relatively higher levels of indebtedness and be more sensitive to adverse
economic conditions than investment-grade issuers. Over the last three
years, the company significantly reduced its exposure to below
investment-grade securities. This strategy takes into account the more
conservative nature of today's consumer and the resulting demand for
higher-quality investments in the life insurance marketplace. The
company's below investment-grade holdings decreased through sales,
maturities, restructurings, market value adjustments and write-downs.
At December 31, 1993, below investment-grade securities of approximately 13
issuers were held by the company's continuing operations. Write-downs and
restructurings on below investment-grade securities in 1993 totaled $25.9
million pretax, compared with $29.9 million and $86.8 million in 1992 and
1991, respectively.
Real estate-related investments
The $1.48 billion real estate portfolio held by the company's continuing
operations constituted 17.7 percent of cash and invested assets at December
31, 1993, down from 25.9 percent at December 31, 1992. The real estate
portfolio consists of joint venture and third-party mortgage loans and
other real estate-related investments. The majority of the company's real
estate loans are on properties or projects where the company, Lumbermens or
their respective affiliates have taken ownership positions in joint
ventures with a small number of partners. (See notes captioned
Unconsolidated investees and Concentration of credit risk on pages 55 and
56, respectively.)
As reflected in the table on the following page, the company has continued
to fund both existing projects and legal commitments. The commitments were
$636.8 million at December 31, 1993. This amount represented a net
decrease of $134.2 million since year-end 1992, largely due to fundings in
1993. (The commitments also reflect an asset guarantee of $61.3 million
related to the sale of Kemper Reinsurance Company. See note captioned
Discontinued operations on page 54.) As of December 31, 1993, the company
expects to fund approximately $294.8 million of these commitments, along
with providing capital to existing projects. The commitments, along with
estimated costs to complete, are considered in the company's evaluation of
reserves and write-downs. (See note captioned Financial
instruments' off-balance-sheet risk on page 61.)
<PAGE> 16
Generally, at the inception of a real estate loan, the company anticipated
that it would roll over the loan and reset the interest rate at least one
time in the future, although the company is not legally committed to do so.
As a result of the current weakness in the real estate markets and fairly
restrictive lending practices by other lenders in this environment, the
company expects that all or most loans maturing in 1994 will be rolled
over, restructured or foreclosed.
Excluding the $78.2 million of real estate owned and a $94.7 million
deficit in the company's net equity investments in joint ventures (see
Other real estate-related investments on page 32), the company's real
estate loans (including real estate-related bonds) totaled $1,496.0 million
at December 31, 1993, after reserves and write-downs. Of this amount,
$867.9 million are on accrual status. Of these accrual loans, 57.3 percent
have terms requiring current periodic payments of their full contractual
interest, 26.7 percent require only partial payments or payments to the
extent of cash flow of the borrowers, and 16.0 percent defer all interest
to maturity.
Other real estate-related investments
The company's real estate-related bonds, all of which are presently rated
below investment-grade, were issued to the company by real estate finance
or development companies generally to provide financing for the company's
joint ventures for such purposes as land acquisition,
construction/development, refinancing debt, interest and other operating
expenses.
Like the bonds, the other real estate loans are notes receivable that
generally are unsecured. These loans have provided financing to joint
ventures for purposes similar to those funded by real estate-related
bonds.
The deficit in equity investments in real estate at December 31, 1993,
consists of $149.8 million of loans to Spanish projects (described on page
33), $55.6 million of unsecured loans to joint ventures treated as equity
investments, a $237.3 million deficit in the company's net equity
investments in joint ventures and reserves of $62.8 million. The deficit
includes the company's share of periodic operating results. The deficit is
considered in the company's evaluation of reserves and write-downs. The
company, as an equity owner, has the ability to fund, and historically has
elected to fund, operating requirements of certain joint ventures.
The company's real estate owned at December 31, 1993, includes $69.2
million of deeds in lieu of foreclosure and $9.0 million of certain
purchased properties. Real estate owned at December 31, 1993, is net of
$29.3 million of write-downs.
Real estate concentrations
The company's portfolio is distributed by property type and geographic
location. Real estate markets have been depressed in recent periods in
areas where most of the company's real estate portfolio is located.
Approximately half of the company's real estate holdings are in California
and Illinois. In California, real estate market conditions have continued
to be worse than in many other areas of the country.
<PAGE> 17
<TABLE>
<CAPTION>
Real estate portfolio
(in millions) Mortgage loans Other real estate-related investments
Real
Joint Third Other estate Equity
venture party Bonds loans owned investments Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $1,263.6 $345.0 $196.5 $46.1 $95.0 $5.0 $1,951.2(1)
Additions (deductions):
Fundings 103.5 6.2 49.7 33.7 24.4 207.0 424.5
Interest added to principal 34.4 2.8 .1 3.1 - - 40.4
Retained from discontinued operations 40.6 9.0 14.9 30.9 - - 95.4
Sales/Paydowns/Distributions (105.3) (95.5) (46.8) (17.5) (56.4) (18.6) (340.1)
Mortgage refinancing(2) (184.5) (77.7) - (3.8) - - (266.0)
Maturities (119.9) (14.0) (21.2) (58.3) - - (213.4)
Rollovers at maturity:
Principal 119.9 14.0 21.2 58.3 - - 213.4
Interest 20.1 - 1.7 9.8 - - 31.6
Operating losses - - - - - (92.3) (92.3)
Transfers to real estate owned (10.8) (27.6) - - 38.4 - -
Realized investment gains (losses)(3) (152.2) (13.0) (43.8) 27.9 (12.1) (167.6) (360.8)
Other transactions, net 44.0 4.7 1.9 (15.7) (11.1) (28.2) (4.4)
Balance at December 31, 1993 $1,053.4 $153.9 $174.2 $114.5 $78.2 $(94.7) $1,479.5(4)
</TABLE>
[FN]
(1) Net of $491.2 million reserve and write-downs. Excludes $141.7 million of
real estate-related accrued interest.
(2) Reflects cash received from a December 1993 third-party refinancing of
loans.
(3) See note captioned Invested assets and related income beginning on page 51.
(4) Net of $744.1 million reserve and write-downs. Excludes $80.7 million of
real estate-related accrued interest.
The company's real estate portfolio at December 31, 1993, also included
$149.8 million of loans carried as equity investments in real estate (net
of write-downs, foreign currency translations and cumulative operating
losses) related to land for office and retail development and residential
projects located in Spain. The Spanish projects represented approximately
10.1 percent of the company's real estate portfolio at December 31, 1993.
These investments, which began in the late 1980s, accounted for $41.3
million of the December 31, 1993, off-balance-sheet commitments, which the
company expects to fund, and $151.3 million of fundings during 1993.
Undeveloped land, including the Spanish projects, represented approximately
20.0 percent of the company's real estate portfolio at December 31, 1993.
To maximize the value of certain land and other projects, additional
development is proceeding or is planned. Such development of existing
projects may continue to require substantial funding, either from the
company or third parties. In the present real estate markets, third-party
financing can require credit enhancing arrangements from the company. The
values of development projects are dependent on a number of factors,
including obtaining necessary permits and market demand for the permitted
use of the property. There can be no assurance that such permits will be
obtained as planned or at all, nor that such expenditures will occur as
scheduled, nor that the company's plans with respect to such projects may
not change substantially.
At December 31, 1993, the company's loans to and investments in projects
with the Prime Group, Inc. or its affiliates, based in Chicago, represented
approximately $506.7 million, or 34.3 percent, of the company's real estate
<PAGE> 18
portfolio (including the previously mentioned Spanish projects, which are
Prime Group-related). (See note captioned Unconsolidated investees on page
55.) This amount includes $261.8 million in fundings during 1993. Prime
Group-related commitments accounted for $419.0 million of the
off-balance-sheet commitments at December 31, 1993, of which the company
expects to fund $117.7 million.
Effective January 1, 1993, the company formed a master limited partnership
(MLP) with Lumbermens and its subsidiaries. The assets of the MLP consist
of the equity interests each partner or its subsidiaries previously owned
in projects with Peter B. Bedford or his affiliates (Bedford), a
California-based real estate developer. As MLP partners, the company and
Lumbermens have participated in funding certain cash needs of the
Bedford-related projects. During 1993, the company provided $103.9 million
of fundings to projects with Bedford. At December 31, 1993, these projects
accounted for $145.7 million of the company's off-balance-sheet
commitments, of which the company expects to fund $129.1 million. The
company's equity interests in real estate that were affected by formation
of the MLP are held almost entirely in the company's real estate segment.
The MLP has reduced the company's share of the operating losses from
Bedford-related ventures that the company would otherwise have recorded.
The company records 50 percent of the operating results of the ventures
held by the new partnership. Of the company's real estate portfolio at
December 31, 1993, approximately $537.1 million, or 36.3 percent,
represented loans to and investments in MLP-owned joint ventures.
[Map - Geographic Composition of Real Estate Portfolio as of December 31,
1993.]
Pursuant to agreements entered into in January 1994, Bedford transferred to
the MLP and a Kemper affiliate all of Bedford's ownership interest in
ventures in which Bedford, the company, Lumbermens and their respective
subsidiaries previously shared ownership interests. Bedford was released
from certain recourse liabilities owed to the MLP, the ventures,
Lumbermens, the company and certain of their respective subsidiaries.
Because the company's reserve methodology does not take any credit for such
recourse and because the company in 1993 had already been recording 50
percent of the operating results of the related ventures, this transaction,
which simplifies the management of the company's portfolio, does not have
any material adverse impact on the company's results of operations or
financial condition.
[Pie Chart- Distribution of Real Estate at December 31, 1993]
Real estate reserve and troubled real estate
The company monitors its real estate portfolio and identifies changes in
the relevant real estate marketplaces, the economy and each borrower's
circumstances. The company establishes its provisions for real
estate-related losses on the basis of its valuations of the related real
estate, estimated in light of current economic conditions and calculated in
conformity with SFAS 114. The adoption of SFAS 114 in 1993 had no material
effect on the financial statements. The company evaluates its real
estate-related assets (including accrued interest) by estimating the
probabilities of loss utilizing various projections that include several
factors relating to the borrower, property, term of the loan, tenant
composition, rental rates, other supply and demand factors and overall
economic conditions. Because the company's real estate review process
includes estimates, there can be no assurance that current estimates will
prove accurate over time due to changing economic conditions and other
<PAGE> 19
factors.
The company's continuing operations' real estate reserve was allocated as
follows:
<TABLE>
<CAPTION>
Real estate reserve
(in millions)
Joint venture Third-party Other real
mortgage mortgage estate-related
loans loans investments Total
<S> <C> <C> <C> <C>
Balance at
12/31/91 $43.5 $14.9 $65.5 $123.9
1992 change
in reserve 53.5 (9.7) 180.5 224.3
Balance at
12/31/92 97.0 5.2 246.0 348.2
1993 change
in reserve 85.5 (5.2) 17.1 97.4
Ending balance
12/31/93 $182.5 $0.0 $263.1 $445.6
</TABLE>
In addition to the reserve, the company's provision for real estate-related
losses included cumulative write-downs totaling $317.0 million at December
31, 1993, and $143.1 million at December 31, 1992. The company's real
estate reserve and write-downs increased in 1993 and 1992 primarily due to
declining valuations in the company's real estate portfolio. The declining
valuations in 1993 reflected the company's view, based on economic data
then available, that there will be slower than previously anticipated
economic growth in the future and therefore slower absorption of real
estate, particularly undeveloped land. Due to the company's assessment for
slower economic growth, the company's plans with respect to certain
projects were changed to reflect deferrals of their commencement or
completion.
Beginning with the fourth quarter of 1992, the company decided to reserve
for its estimates of the entire current deficiency, based on net realizable
values, on its loans, without regard to credit available from the values of
other projects, collateral or guarantees. This decision recognized the
effect of the continuing depression in the real estate markets, which has
reduced the number of projects providing positive support to the real
estate portfolio.
The following table is a summary of the company's troubled real
estate-related investments (including discontinued operations):
<PAGE> 20
<TABLE>
<CAPTION>
Troubled real estate-related investments
(before reserves and write-downs)
(in millions) At December 31
1993 1992
<S> <C> <C>
Potential problem loans (1) $ 20.2 $ 254.0
Past due loans (2) 6.1 3.1
Nonaccrual loans (3) 1,127.8 823.8
Restructured loans (4)
(currently performing) 59.5 185.5
Real estate owned (5) 107.5 122.7
Total $1,321.1(6) $1,389.1
</TABLE>
[FN]
(1) These are real estate-related investments where the company, based on
known information, has serious doubts about the borrowers' abilities to
comply with present repayment terms and which the company anticipates may
go into nonaccrual, past due or restructured status.
(2) Interest more than 90 days past due but not on nonaccrual status.
(3) The company does not accrue interest on real estate-related
investments when the likelihood of collection of interest is doubtful. The
increase in nonaccrual loans in 1993 primarily reflects movement from the
potential problem loans category.
(4) The company defines a "restructuring" of debt as an event whereby the
company, for economic or legal reasons related to the debtor's financial
difficulties, grants a concession to the debtor it would not otherwise
consider. Such concessions either stem from an agreement between the
company and the debtor or are imposed by law or a court. By this
definition, restructured loans do not include any loan that, upon the
expiration of its term, both repays its principal and pays interest then
due from the proceeds of a new loan that the company, at its option, may
extend (roll over).
(5) Real estate owned includes foreclosures, deeds in lieu of foreclosure
and certain purchased property.
(6) Total reserves and cumulative write-downs are 57.7 percent of total
troubled real estate-related investments and 34.0 percent of the company's
total real estate portfolio before reserves and write-downs at December 31,
1993.
Real estate outlook
The company's real estate experience could continue to be adversely
affected by overbuilding and weak economic conditions in certain real
estate markets and by tight lending practices by banks and other lenders.
Stagnant or worsening economic conditions in the areas in which the company
has made loans, or additional adverse information becoming known to the
company through its regular reviews or otherwise, could result in higher
levels of problem loans or potential problem loans, reductions in the value
of real estate collateral and adjustments to the real estate reserve.
Potential accounting impacts from the company's real estate portfolio could
be material to the invested asset portfolio and future results of
operations.
Current conditions in the real estate markets are adversely affecting the
financial resources of certain of the company's joint venture partners.
Each partner, however, remains active in the control of its respective
joint ventures. In evaluating a partner's ability to meet its financial
commitments, the company considers the amount of all applicable debt and
the value of all properties within that portion of the company's portfolio
consisting of loans to and investments in joint ventures with such partner.
In 1993, the company began recognizing 100 percent of the operating results
of certain joint ventures. The additional operating results are being
<PAGE> 21
recorded primarily by the company's real estate subsidiaries, which are the
equity holders in such ventures.
Based on the level of troubled real estate-related investments the company
experienced in 1993 and 1992, the company anticipates additional
foreclosures and deeds in lieu of foreclosure in 1994. Any consolidation
accounting resulting from foreclosures would add the related ventures'
assets and senior third-party liabilities to the company's balance sheet
and eliminate the company's loans to such ventures.
Due to the adverse real estate environment affecting the company's
portfolio in recent years, the company has devoted significant attention to
its real estate portfolio, enhancing monitoring of the portfolio and
formulating specific action plans addressing nonperforming and potential
problem credits. Since 1991, the company has intensified its attention to
evaluating the asset quality, cash flow and prospects associated with each
of its projects.
The company is analyzing various potential transactions designed to reduce
the level of real estate-related investments on the company's balance
sheet. Specific types of transactions under consideration include loan
sales, property sales, mortgage refinancings and real estate investment
trusts.
Interest rates
Interest rate fluctuations primarily affect the life insurance segment.
The 1993 and 1992 interest rate environments were characterized by very low
short-term rates and a steeply sloped yield curve.
When maturing or sold investments are reinvested at lower yields in a low
interest rate environment, the company's life insurance subsidiaries can
adjust their crediting rates on fixed annuities and other interest-bearing
liabilities. However, competitive conditions and contractual commitments
do not always permit the reduction in crediting rates to fully or
immediately reflect reductions in investment yield, which can result in
narrower spreads.
As discussed above, the lower interest rate environment contributed to a
reduction in net investment income of the life insurance segment. Also,
lower crediting rates on annuities have influenced certain clients to seek
alternative products. The company mitigates this risk somewhat within its
life insurance segment by charging decreasing surrender fees when annuity
holders withdraw funds prior to maturity on certain annuity products.
Should interest rates rise, the life insurance subsidiaries' capital
resources would be adversely impacted by reduced unrealized capital gains
and possibly unrealized loss positions in their fixed maturity investments.
The company expects, however, that this decline would be offset by a
decrease in the present value of the life insurance subsidiaries'
liabilities and that their fixed-rate annuity products sales could increase
in a rising interest rate environment.
The company expects its asset management operations to continue to benefit
from the current interest rate environment. Among the alternative products
to which investors seeking total return and higher yields have been turning
are bond and stock mutual funds. Should interest rates rise, the company
would expect its money market product sales to increase.
LIQUIDITY AND CAPITAL RESOURCES
<PAGE> 22
Kemper Corporation and each of its subsidiaries carefully monitor cash and
short-term money market investments to maintain adequate balances for
timely payment of claims, expenses and taxes. In addition, regulatory
authorities establish minimum liquidity and capital standards for the asset
management, life insurance and securities brokerage companies. The major
ongoing sources of the company's liquidity are asset management fees,
securities brokerage commissions, collateralized bank borrowings by the
securities brokerage operations, collections of life insurance premium
revenue, deposits for annuities and interest-sensitive life contracts,
investment income, other operating revenue and cash provided from maturing
or sold investments. (See Investments beginning on page 29.) Kemper
Corporation also, from time to time, borrows funds and issues securities
for cash. During 1993, the company also received $380.3 million in cash
from the sales of discontinued property-casualty insurance operations.
Kemper Corporation receives interest on loans, dividends and payments for
federal income tax from its subsidiaries. Distributions to the parent are
restricted. (See note captioned Stockholders' equity' retained earnings on
page 60.)
The parent has used its resources for dividends to stockholders, corporate
interest and other holding company expenses, consolidated federal income
tax payments, common stock repurchases (treasury stock), acquisitions of
subsidiaries and additional investments in, or asset purchases from,
subsidiaries. In 1993, the company provided $517.1 million in cash to the
life insurance subsidiaries by purchasing from them $447.1 million of
certain real estate-related investments and contributing $70.0 million to
capital.
At December 31, 1993, Kemper Corporation had $164.0 million in cash and
short-term investments. The company expects to use most of these funds for
the purchases of real estate-related investments from the life insurance
subsidiaries to maintain and improve their regulatory capital positions.
Policyholder deposits decreased to $412.4 million for 1993 from $645.3
million for 1992, and policyholder withdrawals increased to $711.3 million
for 1993 from $691.9 million for 1992, primarily due to planned reductions
in crediting rates on fixed-rate annuities as well as increased
competition.
<TABLE>
<CAPTION>
Debt
(in millions) At December 31
1993 1992
<S> <C> <C>
Short-term debt $349.2 $396.3
Long-term debt 394.0 183.0
Convertible debentures
of subsidiary 45.7 78.9
</TABLE>
Short-term debt
The company has outstanding short-term loans with banks and other creditors
at interest rates that vary with short-term money market rates. Short-term
notes payable by the securities brokerage operations principally consist of
<PAGE> 23
collateralized bank loans and totaled $325.1 million at December 31, 1993,
compared with $200.1 million at December 31, 1992. The level of these
borrowings fluctuates daily depending upon market activity and customer
margin activity levels.
The company had $20.0 million due to banks at December 31, 1993, compared
with $163.4 million at December 31, 1992. Also, the company repaid $32.0
million of its medium-term notes which matured during 1993.
The company renegotiated its committed lines of credit with certain banks
effective November 1, 1993. The lines of credit total $325.0 million, with
$162.5 million expiring November 1, 1994, and $162.5 million expiring
November 1, 1996. These lines are unused and fully available. Interest
rates would generally approximate short-term bank corporate rates.
The company previously had an $80 million line of credit from Lumbermens,
which at December 31, 1993, was unused. On January 12, 1994, the company
and Lumbermens mutually agreed to cancel this line of credit.
Long-term debt
On September 22, 1993, the company issued $200 million of 6.875% Notes Due
2003. The net proceeds were primarily used to repay short-term debt as the
same became due.
Also included in long-term debt at December 31, 1993, are $65.5 million of
medium-term notes and $110.75 million of 8.80% Notes Due 1998, all issued
prior to 1992. (See note captioned Long-term debt and notes payable on page
60.)
Debt and insurance company ratings
Ratings have become an increasingly important factor in establishing the
competitive position of life insurance companies. Rating organizations
continue to review the financial performance and condition of life insurers
and their investment portfolios, including those of the company's life
insurance subsidiaries. Any reductions in Kemper Corporation's senior debt
ratings could adversely impact the company's financial flexibility by
limiting the company's access to capital or increasing its cost of
borrowings. Any reductions in the life insurance subsidiaries'
claims-paying ability or financial strength ratings could result in their
products being less attractive to consumers.
Ratings reductions for Kemper Corporation or its subsidiaries and other
financial events can also trigger obligations to fund certain real
estate-related commitments to take out other lenders. In such events,
those lenders can be expected to renegotiate their loan terms, although
they are not contractually obligated to do so. Such circumstances could
accelerate or increase the company's purchases of real estate-related
assets from its regulated life insurance subsidiaries to further support
their respective statutory capital positions.
Convertible debentures and
redeemable securities of subsidiary
Convertible debentures of subsidiary along with redeemable securities of
subsidiary represent employee interests in Kemper Financial Companies, Inc.
(KFC). KFC does not currently plan to issue any additional securities to
its employees. Employee terminations and debenture maturities during 1993
accounted for the $33.2 million reduction of convertible debentures. The
<PAGE> 24
outstanding debentures bear interest approximating the prime interest rate.
(See note captioned Convertible debentures of subsidiary on page 60.)
The redeemable securities consisted primarily of KFC preferred stock, all
of which was redeemed December 1, 1993. The redemption price paid by KFC
totaled approximately $3.1 million, which was the carrying value of the
securities on the company's balance sheet.
Common stock
During 1993, the company received $29.0 million by issuing common stock
through the Kemper Corporation Dividend Reinvestment and Stock Purchase
Plan and employee stock option plans.
(See note captioned Stock option plans on page 64.)
During 1993 and 1992, the quarterly dividend rate was $.23 per common
share. The aggregate common stock dividend payment has been reduced by
approximately 35 percent due to the August 1993 acquisition of 17.4 million
shares of the company's common stock in the exchange transaction with
Lumbermens. (See note captioned Discontinued operations on page 54.)
While the board of directors intends to continue quarterly cash dividends,
future declarations and amounts will depend upon, among other factors, the
earnings of Kemper Corporation, its financial condition, its capital
requirements and general business conditions.
Preferred stock
During 1993 and 1992, Kemper Corporation privately placed preferred stock
in the amounts of $260.0 million and $100.0 million, respectively. (See
note captioned Preferred stock on page 50.) At December 31, 1993, the
company's outstanding preferred stock totaled $360.6 million.
Emerging issues
On November 30, 1992, the Financial Accounting Standards Board
(FASB) issued SFAS 112, Employers' Accounting for Postemployment Benefits.
SFAS 112 establishes standards for accounting for benefits provided to
former or inactive employees and their dependents and beneficiaries before
retirement. It is effective for fiscal years beginning after December 15,
1993.
Benefits covered by the statement include salary continuation, severance
pay, supplemental unemployment benefits and disability-related benefits.
The impact of implementation is not expected to be material to the
company.
On June 1, 1993, the FASB issued SFAS 115, Accounting for Certain
Investments in Debt and Equity Securities. SFAS 115 addresses the
accounting and reporting for investments in equity securities that have
readily determinable fair values and for all investments in debt
securities. At acquisition, those investments are to be classified in one
of three categories: held-to-maturity securities; trading securities; or
available-for-sale securities. Each of the three classifications carries
different accounting treatments.
The effective date for implementation is for fiscal years beginning after
December 15, 1993. The company already follows the classification guidance
provided in SFAS 115 as it classifies its debt and equity securities as
available-for-sale, reported at fair value, with after-tax unrealized gains
<PAGE> 25
and losses reported as a net amount in a separate component of
stockholders' equity. Recent accounting literature has indicated that
deferred acquisition costs and other appropriate accounts would also need
to be adjusted related to the above recognition of unrealized gains or
losses, with such adjustment also being reported as a separate component of
stockholders' equity. Full implementation is expected in first-quarter
1994 and, as of January 1, 1994, is not expected to be material to
stockholders' equity.
Appendix for Graphic and Image Material
Section - Management Discussion and Analysis
Subsection - Investments - Real Estate Concentrations
1. Subsection contains a map of the United States of America depicting the
geographic composition of real estate portfolio as of December 31, 1993.
Real estate concentrations are the highest in the following states:
California 27.6%, Illinois 21.8 %, Texas 8.4%, Ohio 4.0%, Florida 3.5 %,
Alaska 3.3%, Washington 3.1%, Colorado 2.4% and Oregon 2.2%. The real
estate concentrations in the remaining states approximate 2.0% or less.
The map does provide a note which indicates that real estate in Spain
accounts for approximately 10.5% of the real estate portfolio.
2. Subsection contains a pie chart depicting the distribution of real
estate at December 31, 1993 as follows: Office 23.5%, Retail 14.8%, Land
20.0%, Residential 2.3%, Other 12.0%, Apartment 5.4%, Hotel 8.2% and
Industrial 13.8%.
<PAGE> 26
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
<TABLE>
<S> <C>
Eleven-year consolidated summary Page 40
- ---------------------------------------------------------------------
Consolidated balance sheet Page 42
- ---------------------------------------------------------------------
Consolidated statement of operations Page 43
- ---------------------------------------------------------------------
Consolidated statement of stockholders' equity Page 44
- ---------------------------------------------------------------------
Consolidated statement of cash flows Page 45
- ---------------------------------------------------------------------
Notes to consolidated financial statements Page 46
- ---------------------------------------------------------------------
Report of independent public accountants Page 68
- ---------------------------------------------------------------------
</TABLE>
39
<PAGE> 27
ELEVEN-YEAR CONSOLIDATED SUMMARY
Kemper Corporation and subsidiaries (in thousands, except per share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
REVENUE BY CATEGORY
- --------------------------------------------------------------------------------------------------------------------------
Asset management $ 515,702 $ 525,058 $ 492,390
- --------------------------------------------------------------------------------------------------------------------------
Life insurance 726,518 688,448 803,378
- --------------------------------------------------------------------------------------------------------------------------
Securities brokerage 673,732 677,464 663,721
- --------------------------------------------------------------------------------------------------------------------------
Real estate (338,077) (309,274) (57,479)
- --------------------------------------------------------------------------------------------------------------------------
Other operations and corporate 31,937 12,946 12,753
- --------------------------------------------------------------------------------------------------------------------------
Eliminations (60,638) (90,918) (98,920)
- --------------------------------------------------------------------------------------------------------------------------
Total $ 1,549,174 $ 1,503,724 $ 1,815,843
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) BY CATEGORY, EXCLUDING REALIZED
INVESTMENT GAIN (LOSS)
- --------------------------------------------------------------------------------------------------------------------------
Asset management $ 99,087 $ 88,288 $ 85,000
- --------------------------------------------------------------------------------------------------------------------------
Life insurance 90,171 44,943 92,748
- --------------------------------------------------------------------------------------------------------------------------
Securities brokerage (3,640) (38,433) 6,233
- --------------------------------------------------------------------------------------------------------------------------
Real estate (59,330) (34,193) (19,357)
- --------------------------------------------------------------------------------------------------------------------------
Other operations and corporate (30,014) (29,962) (17,552)
- --------------------------------------------------------------------------------------------------------------------------
Total continuing operations $ 96,274 $ 30,643 $ 147,072
- --------------------------------------------------------------------------------------------------------------------------
Primary per share* $ 1.81 $ .63 $ 3.06
- --------------------------------------------------------------------------------------------------------------------------
Fully diluted per share* $ 1.88 $ .63 $ 3.06
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) BY CATEGORY
- --------------------------------------------------------------------------------------------------------------------------
Asset management $ 99,087 $ 88,288 $ 85,000
- --------------------------------------------------------------------------------------------------------------------------
Life insurance 79,777 (25,451) 45,795
- --------------------------------------------------------------------------------------------------------------------------
Securities brokerage (3,640) (38,433) 6,233
- --------------------------------------------------------------------------------------------------------------------------
Real estate (257,753) (209,117) (40,789)
- --------------------------------------------------------------------------------------------------------------------------
Other operations and corporate (18,755) (29,962) (20,176)
- --------------------------------------------------------------------------------------------------------------------------
Total continuing operations (101,284) (214,675) 76,063
- --------------------------------------------------------------------------------------------------------------------------
Discontinued operations 336,771 11,275 128,476
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 235,487 $ (203,400) $ 204,539
- ---------------------------------------------------------------------------------------------------------------------------
Average common and equivalent shares outstanding 42,830 48,840 48,094
- --------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE*
- --------------------------------------------------------------------------------------------------------------------------
Primary
- --------------------------------------------------------------------------------------------------------------------------
Continuing operations $ (2.80) $ (4.39) $ 1.58
- --------------------------------------------------------------------------------------------------------------------------
Discontinued operations 7.86 .23 2.67
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 5.06 $ (4.16) $ 4.25
- --------------------------------------------------------------------------------------------------------------------------
Fully diluted
Continuing operations $ (2.36) $ (4.39) $ 1.58
- --------------------------------------------------------------------------------------------------------------------------
Discontinued operations 7.23 .23 2.67
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.87 $ (4.16) $ 4.25
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL SUMMARY
- --------------------------------------------------------------------------------------------------------------------------
Total assets $ 14,038,125 $ 13,176,275 $ 13,104,581
- --------------------------------------------------------------------------------------------------------------------------
Total long-term obligations and redeemable securities 439,798 265,467 320,018
- --------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 1,618,987 1,766,114 1,838,526
- --------------------------------------------------------------------------------------------------------------------------
Book value per common share 38.24 33.77 37.92
- --------------------------------------------------------------------------------------------------------------------------
Cash dividends declared and paid per common share .92 .92 .92
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ON EQUITY 14.1% (11.6)% 11.8%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Net income per share for 1987 through 1993 reflects the effect of employee
interests in Kemper Financial Companies, Inc.
40
<PAGE> 28
<TABLE>
<CAPTION>
ELEVEN-YEAR CONSOLIDATED SUMMARY (continued)
Kemper Corporation and subsidiaries (in thousands, except per share data)
- ----------------------------------------------------------------------------------------
1990 1989
- ----------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE BY CATEGORY
Asset management $ 476,693 $ 457,381
- ----------------------------------------------------------------------------------------
Life insurance 824,641 767,330
- ----------------------------------------------------------------------------------------
Securities brokerage 620,708 637,177
- ----------------------------------------------------------------------------------------
Real estate (21,446) (7,382)
- ----------------------------------------------------------------------------------------
Other operations and corporate 27,288 33,017
- ----------------------------------------------------------------------------------------
Eliminations (98,621) (96,948)
- ----------------------------------------------------------------------------------------
Total $ 1,829,263 $ 1,790,575
- ----------------------------------------------------------------------------------------
NET INCOME (LOSS) BY CATEGORY, EXCLUDING REALIZED
INVESTMENT GAIN (LOSS)
Asset management $ 58,072 $ 59,205
- ----------------------------------------------------------------------------------------
Life insurance 93,382 87,763
- ----------------------------------------------------------------------------------------
Securities brokerage (181,657) (4,586)
- ----------------------------------------------------------------------------------------
Real estate (16,324) (5,858)
- ----------------------------------------------------------------------------------------
Other operations and corporate (9,439) (8,574)
- ----------------------------------------------------------------------------------------
Total continuing operations $ (55,966) $ 127,950
- ----------------------------------------------------------------------------------------
Primary per share* $ (1.16) $ 2.47
- ----------------------------------------------------------------------------------------
Fully diluted per share* $ (1.16) $ 2.47
- ----------------------------------------------------------------------------------------
NET INCOME (LOSS) BY CATEGORY
- ----------------------------------------------------------------------------------------
Asset management $ 58,072 $ 59,205
- ----------------------------------------------------------------------------------------
Life insurance 74,581 84,980
- ----------------------------------------------------------------------------------------
Securities brokerage (181,657) (4,586)
- ----------------------------------------------------------------------------------------
Real estate (16,324) (5,858)
- ----------------------------------------------------------------------------------------
Other operations and corporate (4,530) (9,686)
- ----------------------------------------------------------------------------------------
Total continuing operations (69,858) 124,055
- ----------------------------------------------------------------------------------------
Discontinued operations 81,735 183,386
- ----------------------------------------------------------------------------------------
Net income (loss) $ 11,877 $ 307,441
- ----------------------------------------------------------------------------------------
Average common and equivalent shares outstanding 48,431 51,281
- ----------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE*
- ----------------------------------------------------------------------------------------
Primary
- ----------------------------------------------------------------------------------------
Continuing operations $ (1.44) $ 2.39
- ----------------------------------------------------------------------------------------
Discontinued operations 1.69 3.57
- ----------------------------------------------------------------------------------------
Net income (loss) $ .25 $ 5.96
- ----------------------------------------------------------------------------------------
Fully diluted
- ----------------------------------------------------------------------------------------
Continuing operations $ (1.44) $ 2.39
- ----------------------------------------------------------------------------------------
Discontinued operations 1.69 3.57
- ---------------------------------------------------------------------------------------
Net income (loss) $ .25 $ 5.96
- ----------------------------------------------------------------------------------------
FINANCIAL SUMMARY
- ----------------------------------------------------------------------------------------
Total assets $12,163,954 $11,295,727
- ----------------------------------------------------------------------------------------
Total long-term obligations and redeemable securities 245,238 225,347
- ----------------------------------------------------------------------------------------
Stockholders' equity 1,625,909 1,724,318
- ----------------------------------------------------------------------------------------
Book value per common share 34.20 35.25
- ----------------------------------------------------------------------------------------
Cash dividends declared and paid per common share .92 .81
- ----------------------------------------------------------------------------------------
TOTAL RETURN ON EQUITY .7% 18.4%
- ----------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 29
CONSOLIDATED BALANCE SHEET
Kemper Corporation and subsidiaries (in thousands, except share data)
<TABLE>
<CAPTION>
December 31
1993 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
Investments:
- --------------------------------------------------------------------------------------------------------------------------------
Fixed maturities available for sale, at market (cost 1993, $5,147,592; 1992, $4,440,239) $ 5,333,175 $ 4,523,490
- --------------------------------------------------------------------------------------------------------------------------------
Equity securities, at market (cost 1993, $53,366; 1992, $79,251) 98,968 106,398
- --------------------------------------------------------------------------------------------------------------------------------
Short-term investments 713,401 295,021
- --------------------------------------------------------------------------------------------------------------------------------
Joint venture mortgage loans 1,053,403 1,263,589
- --------------------------------------------------------------------------------------------------------------------------------
Third-party mortgage loans 153,880 345,025
- --------------------------------------------------------------------------------------------------------------------------------
Other real estate-related investments 272,188 342,696
- --------------------------------------------------------------------------------------------------------------------------------
Other loans and investments 446,717 399,866
- --------------------------------------------------------------------------------------------------------------------------------
Total investments 8,071,732 7,276,085
- --------------------------------------------------------------------------------------------------------------------------------
Cash (restricted: 1993, $470; 1992, $645) 253,105 246,040
- --------------------------------------------------------------------------------------------------------------------------------
Securities purchased under resale agreements 204,467 423,643
- --------------------------------------------------------------------------------------------------------------------------------
Securities held by brokerage firm subsidiaries, at market 285,695 244,966
- --------------------------------------------------------------------------------------------------------------------------------
Accounts receivable from brokerage firms and customers 776,971 867,607
- --------------------------------------------------------------------------------------------------------------------------------
Other accounts and notes receivable 617,458 811,486
- --------------------------------------------------------------------------------------------------------------------------------
Reinsurance recoverable 835,975 --
- --------------------------------------------------------------------------------------------------------------------------------
Deferred insurance acquisition costs 622,592 578,482
- --------------------------------------------------------------------------------------------------------------------------------
Deferred investment product sales costs 186,931 163,879
- --------------------------------------------------------------------------------------------------------------------------------
Other assets 299,543 265,244
- --------------------------------------------------------------------------------------------------------------------------------
Net assets of discontinued operations -- 784,365
- --------------------------------------------------------------------------------------------------------------------------------
Assets of separate accounts 1,883,656 1,514,478
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $14,038,125 $13,176,275
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------------------------------------
Life policy benefits $ 7,380,787 $ 7,337,018
- --------------------------------------------------------------------------------------------------------------------------------
Ceded life policy benefits 835,975 --
- --------------------------------------------------------------------------------------------------------------------------------
Securities sold under repurchase agreements 181,879 373,565
- --------------------------------------------------------------------------------------------------------------------------------
Securities sold, not yet purchased, at market 77,023 50,421
- --------------------------------------------------------------------------------------------------------------------------------
Accounts payable to brokerage firms and customers 354,998 620,336
- --------------------------------------------------------------------------------------------------------------------------------
Other accounts payable and liabilities 915,954 856,241
- --------------------------------------------------------------------------------------------------------------------------------
Notes payable 349,237 396,264
- --------------------------------------------------------------------------------------------------------------------------------
Long-term debt 393,978 182,972
- --------------------------------------------------------------------------------------------------------------------------------
Convertible debentures of subsidiary 45,651 78,866
- --------------------------------------------------------------------------------------------------------------------------------
Liabilities of separate accounts 1,883,656 1,514,478
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 12,419,138 11,410,161
- --------------------------------------------------------------------------------------------------------------------------------
Commitments and contingent liabilities
- --------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
Preferred stock-no par value, authorized 20,000,000 shares;
outstanding 1993, 6,690,637; 1992, 2,025,044 shares 360,600 100,626
- --------------------------------------------------------------------------------------------------------------------------------
Common stock-$5.00 par value, authorized 200,000,000 shares;
issued 1993, 64,620,863; 1992, 63,653,600 shares 323,104 318,268
- --------------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 313,531 295,863
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized loss on foreign currency translations (56,878) (16,949)
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized gain on investments 155,004 114,399
- --------------------------------------------------------------------------------------------------------------------------------
Retained earnings 1,549,580 1,370,629
- --------------------------------------------------------------------------------------------------------------------------------
Treasury shares, at cost (1993, 31,717,505; 1992, 14,334,708 shares) (1,025,954) (416,722)
- --------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,618,987 1,766,114
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $14,038,125 $13,176,275
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
42
<PAGE> 30
CONSOLIDATED STATEMENT OF OPERATIONS
Kemper Corporation and subsidiaries (in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31
REVENUE 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset management income $ 498,153 $ 480,546 $ 437,789
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 426,807 522,293 653,848
- ------------------------------------------------------------------------------------------------------------------------
Insurance premium income 157,667 135,922 123,929
- ------------------------------------------------------------------------------------------------------------------------
Securities brokerage income 639,991 638,653 632,126
- ------------------------------------------------------------------------------------------------------------------------
Realized investment loss (255,702) (359,761) (107,621)
- ------------------------------------------------------------------------------------------------------------------------
Other income 82,258 86,071 75,772
- ------------------------------------------------------------------------------------------------------------------------
Total 1,549,174 1,503,724 1,815,843
- ------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
- ------------------------------------------------------------------------------------------------------------------------
Asset management expenses 295,785 284,076 240,421
- ------------------------------------------------------------------------------------------------------------------------
Amortized investment product sales costs 48,011 39,986 54,458
- ------------------------------------------------------------------------------------------------------------------------
Insurance claim costs and policyholder benefits 514,304 598,128 639,396
- ------------------------------------------------------------------------------------------------------------------------
Amortized policy acquisition costs 60,367 66,786 47,825
- ------------------------------------------------------------------------------------------------------------------------
Insurance operating expenses 23,133 47,138 47,525
- ------------------------------------------------------------------------------------------------------------------------
Securities brokerage expenses 617,455 630,874 571,982
- ------------------------------------------------------------------------------------------------------------------------
Interest expense 73,201 79,150 80,649
- ------------------------------------------------------------------------------------------------------------------------
Other expenses 26,065 32,457 21,194
- ------------------------------------------------------------------------------------------------------------------------
Total 1,658,321 1,778,595 1,703,450
- ------------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations
before income tax (benefit) (109,147) (274,871) 112,393
- ------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) (19,749) (74,690) 36,330
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations (89,398) (200,181) 76,063
- ------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations, net of tax 25,498 23,794 128,476
- ------------------------------------------------------------------------------------------------------------------------
Gain on sale of discontinued operations to related party, net of tax 204,668 -- --
- ------------------------------------------------------------------------------------------------------------------------
Gain on other sales of discontinued operations, net of tax 92,174 -- --
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of changes in
accounting principles 232,942 (176,387) 204,539
- ------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principles, net of tax 2,545 (27,013) --
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 235,487 $ (203,400) $ 204,539
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stockholders $ 216,828 $ (203,400) $ 204,539
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE
- ------------------------------------------------------------------------------------------------------------------------
Primary
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ (2.52) $ (4.10) $ 1.58
- ------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations 7.52 0.49 2.67
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of changes in
accounting principles 5.00 (3.61) 4.25
- ------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principles, net of tax 0.06 (0.55) --
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ 5.06 $ (4.16) $ 4.25
- ------------------------------------------------------------------------------------------------------------------------
Fully diluted
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ (2.11) $ (4.10) $ 1.58
- ------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations 6.92 0.49 2.67
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of changes in
accounting principles 4.81 (3.61) 4.25
- ------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principles, net of tax 0.06 (0.55) --
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ 4.87 $ (4.16) $ 4.25
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
43
<PAGE> 31
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Kemper Corporation and subsidiaries (in thousands, except share data)
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCK, beginning of year $ 100,626 $ 782 $ 1,137
- -------------------------------------------------------------------------------------------------------------------
Stated value of shares converted to common stock (26) (156) (355)
- -------------------------------------------------------------------------------------------------------------------
Issuance of preferred stock 260,000 100,000 --
- -------------------------------------------------------------------------------------------------------------------
End of year 360,600 100,626 782
- -------------------------------------------------------------------------------------------------------------------
COMMON STOCK, beginning of year 318,268 314,485 310,277
- -------------------------------------------------------------------------------------------------------------------
Par value of shares issued under stock plans:
1993, 967,263; 1992, 756,697; 1991, 841,594 shares 4,836 3,783 4,208
- -------------------------------------------------------------------------------------------------------------------
End of year 323,104 318,268 314,485
- -------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL, beginning of year 295,863 281,989 259,693
- -------------------------------------------------------------------------------------------------------------------
Excess of proceeds over par value
of shares issued under stock plans 24,159 14,397 21,779
- -------------------------------------------------------------------------------------------------------------------
Gain (loss) on reissued treasury shares 1,111 (499) (53)
- -------------------------------------------------------------------------------------------------------------------
Other (7,602) (24) 570
- -------------------------------------------------------------------------------------------------------------------
End of year 313,531 295,863 281,989
- -------------------------------------------------------------------------------------------------------------------
FOREIGN CURRENCY TRANLATIONS, beginning of year (16,949) (1,366) 1,788
- -------------------------------------------------------------------------------------------------------------------
Unrealized loss from foreign currency translations
during year, net of income tax (39,929) (15,583) (3,154)
- -------------------------------------------------------------------------------------------------------------------
End of year (56,878) (16,949) (1,366)
- -------------------------------------------------------------------------------------------------------------------
UNREALIZED GAIN ON INVESTMENTS, beginning of year 114,399 42,907 18,138
- -------------------------------------------------------------------------------------------------------------------
Unrealized gain on revaluation of investments
during year, net of income tax 40,605 71,492 24,769
- -------------------------------------------------------------------------------------------------------------------
End of year 155,004 114,399 42,907
- -------------------------------------------------------------------------------------------------------------------
RATAINED EARNINGS, beginning of year 1,370,629 1,618,903 1,457,820
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) 235,487 (203,400) 204,539
- -------------------------------------------------------------------------------------------------------------------
Dividends to stockholders:
- -------------------------------------------------------------------------------------------------------------------
Preferred (18,708) (55) (73)
- -------------------------------------------------------------------------------------------------------------------
Common (37,750) (44,896) (44,180)
- -------------------------------------------------------------------------------------------------------------------
(Increase) decrease in redemption value of redeemable securities (78) 77 797
- -------------------------------------------------------------------------------------------------------------------
End of year 1,549,580 1,370,629 1,618,903
- -------------------------------------------------------------------------------------------------------------------
TREASURY SHARES, beginning of year (416,722) (419,174) (422,944)
- -------------------------------------------------------------------------------------------------------------------
Shares acquired (612,992) (914) (184)
- -------------------------------------------------------------------------------------------------------------------
Shares reissued, at average cost 3,760 3,366 3,954
- -------------------------------------------------------------------------------------------------------------------
End of year (1,025,954) (416,722) (419,174)
- -------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 1,618,987 $ 1,766,114 $ 1,838,526
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
44
<PAGE> 32
CONSOLIDATED STATEMENT OF CASH FLOWS
Kemper Corporation and subsidiaries (in thousands)
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31
1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 235,487 $ (203,400) $ 204,539
- ------------------------------------------------------------------------------------------------------------------------
Reconcilement of net income (loss) to net cash provided:
- ------------------------------------------------------------------------------------------------------------------------
Realized investment loss 255,702 359,761 107,621
- ------------------------------------------------------------------------------------------------------------------------
Gains from sales of discontinued operations (296,842) -- --
- ------------------------------------------------------------------------------------------------------------------------
Life policy benefits 342,710 515,935 480,217
- ------------------------------------------------------------------------------------------------------------------------
Accounts payable to brokerage firms and customers (265,338) 110,283 (99,962)
- ------------------------------------------------------------------------------------------------------------------------
Deferred federal income tax (52,735) (69,110) (33,501)
- ------------------------------------------------------------------------------------------------------------------------
Brokerage firm portfolios 13,363 (2,484) 122,127
- ------------------------------------------------------------------------------------------------------------------------
Accounts receivable from brokerage firms and customers 90,636 (155,159) 65,765
- ------------------------------------------------------------------------------------------------------------------------
Deferred insurance acquisition costs (44,110) (57,533) (76,165)
- ------------------------------------------------------------------------------------------------------------------------
Deferred investment product sales costs (23,052) (39,792) 19,027
- ------------------------------------------------------------------------------------------------------------------------
Amortization on investments (6,394) (30,529) (20,398)
- ------------------------------------------------------------------------------------------------------------------------
Other accounts and notes receivable 107,980 (3,333) (187,481)
- ------------------------------------------------------------------------------------------------------------------------
Other accounts payable and liabilities (80,933) (22,338) 36,920
- ------------------------------------------------------------------------------------------------------------------------
Equity in loss of affiliates 76,636 95,877 8,279
- ------------------------------------------------------------------------------------------------------------------------
Other (33,654) (12,732) 74,832
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 319,456 485,446 701,820
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------------
Cash from investments sold or matured:
- ------------------------------------------------------------------------------------------------------------------------
Fixed maturities held to maturity 332,666 324,375 339,821
- ------------------------------------------------------------------------------------------------------------------------
Fixed maturities sold prior to maturity 2,363,161 4,382,099 3,800,251
- ------------------------------------------------------------------------------------------------------------------------
Equity securities 126,794 24,002 28,845
- ------------------------------------------------------------------------------------------------------------------------
Mortgage loans, other loans and investments 595,347 499,205 800,611
- ------------------------------------------------------------------------------------------------------------------------
Cost of investments purchased:
- ------------------------------------------------------------------------------------------------------------------------
Fixed maturities (3,348,709) (5,462,844) (3,089,716)
- -----------------------------------------------------------------------------------------------------------------------
Equity securities (21,048) (22,116) (39,639)
- -----------------------------------------------------------------------------------------------------------------------
Mortgage loans, other loans and investments (542,628) (516,661) (1,210,096)
- -----------------------------------------------------------------------------------------------------------------------
Short-term investments, net (399,737) 863,609 (918,454)
- -----------------------------------------------------------------------------------------------------------------------
Net receivable for securities transactions 70,960 36,229 (63,667)
- -----------------------------------------------------------------------------------------------------------------------
Sale of discontinued operations 380,269 -- --
- -----------------------------------------------------------------------------------------------------------------------
Other (1,514) (95,450) 66,043
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in) investing activities (444,439) 32,448 (286,001)
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- -----------------------------------------------------------------------------------------------------------------------
Policyholder account balances:
- -----------------------------------------------------------------------------------------------------------------------
Deposits 412,391 645,338 874,284
- -----------------------------------------------------------------------------------------------------------------------
Withdrawals (711,332) (691,863) (827,235)
- -----------------------------------------------------------------------------------------------------------------------
Issuance of long-term debt 217,300 289 136,589
- -----------------------------------------------------------------------------------------------------------------------
Reduction of long-term debt (2,037) (832) (2,905)
- -----------------------------------------------------------------------------------------------------------------------
Issuance of preferred stock 251,920 100,000 --
- -----------------------------------------------------------------------------------------------------------------------
Treasury shares acquired (2,786) (914) (184)
- -----------------------------------------------------------------------------------------------------------------------
Dividends paid to stockholders (56,458) (44,951) (44,253)
- -----------------------------------------------------------------------------------------------------------------------
Notes payable, net (51,284) 121,466 (77,624)
- -----------------------------------------------------------------------------------------------------------------------
Reinsured life reserves -- (515,684) (416,297)
- -----------------------------------------------------------------------------------------------------------------------
Other 74,334 (84,223) 5,996
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in) financing activities 132,048 (471,374) (351,629)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in cash 7,065 46,520 64,190
- -----------------------------------------------------------------------------------------------------------------------
Cash, beginning of period 246,040 199,520 135,330
- -----------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 253,105 $ 246,040 $ 199,520
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
45
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kemper Corporation and subsidiaries
----------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles. The statements include the
accounts of Kemper Corporation and its subsidiaries (the company) on a
consolidated basis. Unconsolidated companies between 20 percent and 50
percent owned are generally accounted for on the equity method of
accounting. The company's share of earnings on such investments is recorded
in revenue. All significant intercompany balances and transactions have been
eliminated. Certain reclassifications have been made in the financial
statements for the years 1992 and 1991 to conform to 1993 reporting.
Fair value disclosures
Fair value disclosures are required under Statement of Financial
Accounting Standards (SFAS) No. 107. Such fair value estimates are made at
a specific point in time, based on relevant market information and
information about the financial instrument. These estimates do not reflect
any premium or discount that could result from offering for sale at one
time the company's entire holdings of a particular financial instrument. A
significant portion of the company's financial instruments are carried at
fair value. (See note captioned Invested assets and related income
beginning on page 51.) Fair value estimates for financial instruments not
carried at fair value are generally determined using discounted cash flow
models and assumptions that are based on judgments regarding current
economic conditions and risk characteristics and involve uncertainties and
matters of significant judgment. Although fair value estimates are
calculated using assumptions that management believes are appropriate,
changes in assumptions could significantly affect the estimates and such
estimates should be used with care.
Fair value estimates are determined for existing on- and off-balance-sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and certain liabilities
that are not considered financial instruments. Accordingly, the aggregate
fair value estimates presented do not represent the underlying value of the
company. For example, the company's subsidiaries are not considered
financial instruments, and their value has not been incorporated into the
fair value estimates. In addition, tax ramifications related to the
realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in any of the
estimates.
Fair value disclosures have been included for investments, separate
account business, life policy benefits, long-term debt and notes
payable, convertible debentures of subsidiary and certain off-balance-sheet
financial instruments.
Asset management
Revenue for the asset management segment consists principally of
investment management fees and distribution fees from mutual funds,
commission revenue from the sale of mutual fund shares and transfer agent
fees for shareholder recordkeeping. Revenue from investment management,
transfer agent fees and distribution fees is recognized when earned.
Commission revenue is recognized on the trade date.
Commissions and certain operating expenses related to the sales of certain
mutual funds have been deferred. These costs are being amortized in
relation to projected revenue to be earned on these mutual funds. Revenue
assumptions are periodically reviewed and updated.
Life insurance
Revenue for annuities and interest-sensitive life products consists of
investment income and policy charges such as mortality, expense and
surrender charges. Expenses consist of benefits and interest credited to
contracts, policy maintenance costs and amortization of deferred policy
acquisition costs.
Premiums for life policies, except for annuities and interest-sensitive
life products, are reported as earned when due. Profits for such policies
are recognized over the duration of the insurance policy by matching
benefits and expenses to premium income. This matching involves a provision
for future policy benefits and the deferral and subsequent amortization of
policy acquisition costs.
The costs of acquiring new life insurance business, principally
commission expense, certain expenses of the policy issuance and
underwriting departments and certain variable agency expenses, have been
deferred. Except for annuities and interest-sensitive life products, these
deferred acquisition costs are being amortized over the premium paying
period of the related policies. Such costs are amortized in proportion to
the ratio of the annual premium revenue to the anticipated total premium
revenue. Such anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities for future policy
benefits. For annuities, separate account business and certain
interest-sensitive life products, these deferred acquisition costs are
being amortized over the contract life in relation to the present value of
estimated gross profits.
The assets and liabilities of the separate accounts represent
segregated funds administered and invested by the life insurance companies
for purposes of funding variable annuity and variable life insurance
contracts and
46
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
----------------------------------------------------------------------------
the pension plans of Lumbermens Mutual Casualty Company (Lumbermens),
Kemper Corporation and certain of their subsidiaries. The company receives
administrative and investment advisory fees for managing such funds. The
assets and liabilities of the separate accounts are carried at market
value.
Liabilities for future life policy benefits, except annuities and
interest-sensitive life products, have been computed principally by a net
level premium method. Anticipated rates of mortality are based principally
on the 1975-1980 Select and Ultimate Table for 1988-1993 plans, the
1965-1970 Select and Ultimate Table for 1979-1987 plans and the 1955-1960
Select and Ultimate Table for other plans, all of which are modified by
company experience, including withdrawals. Estimated future investment
yields by issue year are as follows: 1993, generally 8 percent graded to 6
percent over 5 years; 1989-1992, generally 10 percent graded to 6 percent
over 7 years; 1986-1988, generally 9 percent graded to 6 percent in 16
years; 1977-1985, 7 percent graded to 5 percent in 20 years; 1976 and
prior, 4.5 percent to 5.0 percent.
Liabilities for life policy benefits related to annuities and
interest-sensitive life contracts reflect net premiums received plus
interest credited during the contract accumulation period and the present
value of future payments for contracts that have annuitized. Current
interest rates credited during the contract accumulation period range from
4 percent to 8.75 percent. Future minimum guaranteed interest rates vary
from 4 percent to 8.75 percent for periods ranging from a portion of 1994
up to a portion of 1999 and are generally 3 percent to 4.5 percent
thereafter. For contracts that have annuitized, interest rates that are
used in determining the present value of future payments range principally
from 3 percent to 11.25 percent.
The fair value of the life policy benefits regarding investment contracts
(primarily deferred annuities) and universal life contracts is estimated by
discounting gross benefit payments, net of contractual premiums, using the
average crediting rate currently being offered in the marketplace for
similar contracts with maturities consistent with those remaining for the
contracts being valued. The company had projected its future average
crediting rate in 1993 and 1992, to be 5.0 percent and 5.25 percent,
respectively, while the assumed average market crediting rate was 5.25
percent in 1993 and 6.0 percent in 1992. The fair value of the investment
and universal life contracts, excluding ceded life policy benefits and the
related reinsurance recoverable, as of December 31, 1993 and 1992, has been
estimated at $7.01 billion and $6.74 billion, respectively, compared with
book value of $7.08 billion and $7.16 billion at December 31, 1993 and
1992, respectively. Using an average market crediting rate of 4.75 percent
would increase the estimated fair value to $7.26 billion at December 31,
1993.
Securities brokerage
Securities transactions and related commission revenue and expense are
recorded on a trade-date basis. Underwriting and investment banking
revenues are recognized as earned, which is generally the settlement date
of the underlying securities issue.
Repurchase and resale agreements are carried at the amounts at which the
securities will be subsequently reacquired or resold as specified in the
respective agreements. These securities are considered to be valued at
fair value due to the highly liquid nature and the short maturity of these
instruments.
Securities held by securities brokerage firms are carried at market value,
which represents fair value. Realized and unrealized gains or losses on
revaluation of these securities are included in net income. Investment
income on these securities is included in "Securities brokerage income."
Accounts receivable from and payable to brokerage firms and customers
include amounts due on cash and margin transactions. Securities owned by
customers are held as collateral for receivables. Such collateral is not
reflected in the financial statements.
Invested assets and related income
Investments in fixed maturities (bonds and redeemable preferred stocks)
are carried at market value at December 31, 1993 and 1992, as they are
currently considered available for sale.
Short-term investments are carried at cost, which approximates market
value.
Equity securities of nonrelated companies are generally carried at
market value using the closing prices as of the balance sheet date derived
from either a major securities exchange or the National Association of
Securities Dealers Automated Quotations system.
Market value for fixed maturities, equity securities and short-term
investments represents fair value.
Mortgage loans are carried at their unpaid balance net of unamortized
discount and any applicable reserve. Other real estate-related investments
net of any applicable reserves and write-downs include certain bonds issued
by
47
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
---------------------------------------------------------------------------
real estate finance or development companies; notes receivable from joint
ventures; investments in real estate ventures carried at cost, adjusted for
the equity in the operating income or loss of such ventures, and real
estate owned carried primarily at fair value. The fair value of mortgage
loans and other real estate-related investments is estimated on a
project-by-project basis. Generally, the projected cash flows of the
collateral are discounted using a discount rate of 10 percent to 12
percent. At December 31, 1993 and 1992, the fair value of the company's
mortgage loans, other real estate-related investments and the related
accrued interest income, net of real estate reserves and write-downs,
approximated the carrying values of $1.6 billion and $2.1 billion,
respectively. The estimate of fair value should be used with care given the
inherent difficulty of estimating fair value of real estate due to the lack
of a liquid quotable market.
The company evaluates its real estate-related assets (including accrued
interest) by estimating the probabilities of loss utilizing various project
ions that include several factors relating to the borrower, property, term
of the loan, tenant composition, rental rates, other supply and demand
factors and overall economic conditions. Real estate reserves are
established when declines in collateral values, estimated in light of
current economic conditions and calculated in conformity with SFAS 114
(see next paragraph), indicate a likelihood of loss. Generally, the
reserve is based upon the excess of the loan amount over the estimated
future cash flows from the loan discounted at the loan's contractual rate
of interest. Changes in the company's real estate reserves and write-downs
are included in revenue as realized investment gain or loss. (See Real
estate-related investments beginning on page 31.)
The company adopted SFAS No. 114, Accounting by Creditors for Impairment
of a Loan, in the fourth quarter of 1993. SFAS 114 defines "impaired
loans" as loans in which it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. Impaired loans amounted to $547.7 million at December 31,
1993, and are included within the nonaccrual loans of $1,127.8 million.
The additional amount of nonaccrual in excess of impaired loans represents
the company's consideration of market risks associated with the real
estate loan portfolio.
Upon adoption of SFAS 114, the company determined that its
previous disclosures relating to impaired loans and recorded real estate
reserves were adequate. As such, restating prior quarters' operating
results for the impact of SFAS 114 was not considered necessary.
Based on the provisions of SFAS 114, the concept of in-substance foreclosed
assets became obsolete. Accordingly, the company reclassified $69.9
million from real estate owned to loans at December 31, 1992.
Other loans and investments principally include policy loans carried at
their unpaid balance. The fair value of policy loans, which
approximates the carrying value of $364.9 million and $340.6 million at
December 31, 1993 and 1992,respectively, is estimated by discounting the
expected future cash flows using an interest rate charged on policy loans
for similar policies currently being issued.
Realized gains or losses on sales of investments, determined on the basis
of identifiable cost on the disposition of the respective investment,
recognition of other-than-temporary declines in value and changes in real
estate-related reserves are included in revenue. Unrealized gains or
losses on revaluation of investments are credited or charged to
stockholders' equity net of deferred income tax.
The company does not accrue interest income on fixed maturities deemed to
be impaired on an other-than-temporary basis, or on mortgage loans, real
estate-related bonds and other real estate loans where the likelihood of
collection of interest is doubtful.
INCOME TAX
Kemper Corporation files a consolidated federal income tax return with its
subsidiaries. Consolidated income tax is allocated among the subsidiaries
participating in the consolidated return based on the tax that would be
incurred if each filed a separate tax return. Subsidiaries that have losses
generally receive tax benefit to the extent such losses can be utilized in
the consolidated tax return.
Upon adoption of SFAS No. 109, Accounting for Income Taxes, effective
January 1, 1993, deferred taxes are provided on the temporary differences
between the tax and financial statement basis of assets and liabilities.
Deferred income tax previously was provided on the tax effects of timing
differences between financial statement and taxable income. Foreign
subsidiaries are taxed under applicable foreign statutes.
48
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
FOREIGN EXCHANGE
Generally, the company's currency translations to the respective functional
currency are charged or credited to net income. Translation adjustments for
financial reporting in U.S. dollars are direct charges or credits, net of
deferred income tax, to a separate component of stockholders' equity.
Foreign exchange results included in net income for 1993, 1992 and 1991
were not material.
EARNINGS PER SHARE
Primary earnings per share is based on net income available to
common stockholders divided by the weighted average number of
common shares and common share equivalents outstanding for the period.
Fully diluted earnings per share is based on net income available to common
stockholders (adjusted to add back dividends on convertible preferred
stock), divided by the weighted average number of common shares and common
share equivalents adjusted to reflect the conversion of the convertible
preferred stock (when not anti-dilutive). (See note captioned Computation
of consolidated net income (loss) per share on page 62.)
---------------------------------------------------------------------------
RELATED-PARTY TRANSACTIONS
Significant related-party transactions, other than those described
elsewhere in these financial statements, are below.
Lumbermens Mutual Casualty Company (Lumbermens) owned approximately 38
percent of the common stock of Kemper Corporation at December 31, 1992.
Lumbermens, American Motorists Insurance Company and American Protection
Insurance Company, along with American Manufacturers Mutual Insurance
Company, are collectively referred to as the Kemper National Insurance
Companies. As a result of the exchange transaction with Lumbermens
involving the transfer of Kemper Reinsurance Company and its subsidiaries
as well as National Loss Control Service Corporation, Lumbermens'
ownership of Kemper Corporation was reduced to less than 4 percent in
August 1993, at which time Lumbermens ceased being a related party.
(See note captioned Discontinued operations on page 54.)
The company provides investment services to the Kemper National Insurance
Companies. As compensation for these services, the company earned
revenue, of $9.4 million in 1993, $8.3 million in 1992 and $7.7 million in
1991.
The Kemper National Insurance Companies have received from the company's
continuing operations approximately $3.2 million, $3.2 million and $5.3
million in premiums for various insurance coverages in 1993, 1992 and
1991, respectively.
Kemper Corporation and certain of its continuing operations lease
approximately 105,000 square feet of office space from Lumbermens. The
lease terms, effective late in 1991 for a ten-year period, approximate
market.
At December 30, 1992, the company issued $100 million of preferred
stock to Lumbermens. (See note captioned Preferred stock on page 50.)
Effective January 1, 1993, the company, Lumbermens and certain of their
respective subsidiaries formed a master limited partnership to hold
certain equity real estate investments. (See note captioned Unconsolidated
investees beginning on page 55.) In connection with the formation,
Lumbermens also acquired from the company 50 percent of Kemper Real Estate
Management Company at a consideration
approximating book value.
49
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
PREFERRED STOCK
At December 31, 1993, the company had outstanding 23,998 shares of Series A
Cumulative Preferred Stock, certain rights to purchase up to 500,000 shares
of Series B Junior Participating Preferred Stock, 2,000,000 shares of
Series C Cumulative Preferred Stock, 66,638.5 shares of Series D Index
Exchangeable Preferred Stock and 4,600,000 shares of Series E Cumulative
Convertible Preferred Stock.
Each Series A share was originally issued in 1982; has a stated value of
$25.00; accrues annual dividends of $2.00, payable on a semiannual basis;
is presently convertible into 2.24718 common shares; and, beginning in
May 1997, is redeemable by the company for its stated value plus any
accrued and unpaid dividends.
The company issued Series B preferred stock purchase rights pursuant to a
stockholder rights plan adopted in 1990. One right is attached to each
share of common stock currently outstanding or issued prior to the rights
becoming exercisable. The rights become exercisable and trade separately
from the common stock only upon the occurrence of certain events related to
a change in control of the company, which is generally defined as when a
person accumulates 20 percent or more, or begins a tender or exchange offer
for 30 percent or more, of the company's common stock. Once exercisable,
each right would entitle the holder (other than the acquiring person) to
purchase 1/200th of a share of the company's Series B Junior Participating
Preferred Stock or, in certain circumstances, including a merger or major
asset sale, the company's or the acquiring person's securities or other
property having a value of twice the $220 exercise price per right. If
issued, each full share of such preferred stock is nonredeemable, ranks
junior to all other preferred stock of the company and is approximately
equal in dividend and voting rights to 200 shares of common stock. The
company has reserved 500,000 preferred shares for issuance upon exercise of
the rights. All rights expire July 29, 2000, unless redeemed earlier.
The company issued the Series C Cumulative Preferred Stock on December 30,
1992, to Lumbermens. Lumbermens has certain rights to request the company
to register its Series C shares. Each Series C share has a stated value of
$50.00; accrues annual dividends of $4.375 through January 1, 1996, $4.625
from January 2, 1996, through January 1, 1998, and $5.00 thereafter,
payable on a quarterly basis; and is redeemable by the company upon certain
conditions, for its stated value plus any accrued and unpaid dividends,
from and after December 31, 1995, if held by Lumbermens, and December 31,
1997, if held by any other holder.
On May 28, 1993, the company completed a private placement of 66,638.5
shares of its Series D Index Exchangeable Preferred Stock totaling $30
million. Each Series D share has a stated value of $450.19; accrues
dividends, payable monthly, in an amount per share presently equal to
the sum of (i) the aggregate amount of dividends paid on one unit of
the S&P 500 index the calendar month preceding the applicable monthly
dividend date plus (ii) an amount equal to $0.94; is exchangeable at the
option of Kemper Corporation or the holder, subject to certain limitations,
for shares of the company's common stock based on the closing price on the
exchange date of the S&P 500 index relative to the closing price of the
company's common stock on that date; and is redeemable for cash at the
option of the company beginning December 1, 1995. Net proceeds of
approximately $28.8 million from the placement were used primarily for
purchases of certain real estate-related investments from the company's
regulated life insurance subsidiaries.
On April 28, 1993, the company completed a private placement of 4.6 million
shares of its Series E Cumulative Convertible Preferred Stock totaling $230
million. Each Series E share has a stated value of $50.00; accrues
dividends, payable quarterly, at an annual rate of 5.75 percent; and is
convertible by holders thereof into approximately 4.8 million shares of
Kemper Corporation common stock in the aggregate at a conversion price of
$48.36 per share. Beginning May 31, 1996, the Series E preferred stock
is redeemable at the option of the company upon certain conditions for
such number of shares of Kemper Corporation common stock as are issuable
at a conversion rate of 1.0339 shares of common stock for each share of
Series E preferred stock. The Series E preferred stock ranks on a parity
with the outstanding Series A, Series C and Series D preferred stock with
respect to the payment of dividends and amounts upon liquidation,
dissolution or winding up. Net proceeds of approximately $223.1 million
from the placement were used primarily for a $70.0 million capital
contribution to the company's life insurance operations and for $147.2
million of purchases of certain real estate-related investments from the
company's life insurance subsidiaries.
50
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
INVESTED ASSETS AND RELATED INCOME
Fixed maturities are available for sale, depending upon certain
economic and business conditions. The company is carrying its fixed maturity
investment portfolio at estimated market value, with the aggregate unrealized
appreciation or depreciation being recorded as a separate component of equity
net of any applicable income tax effect. The carrying value (estimated market
value) of fixed maturities compared with amortized cost, adjusted for
other-than-temporary declines in value, at December 31, 1993 and 1992, is as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands) Carrying Amortized Estimated unrealized
--------------------
1993 value cost Gains Losses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. treasury securities and obligations
of U.S. government agencies and authorities $ 14,155 $ 13,924 $ 251 $ (20)
- ------------------------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions,
special revenue and nonguaranteed 195,765 189,618 7,479 (1,332)
- ------------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by foreign governments 14,640 14,306 334 -
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate securities 3,119,142 2,991,574 144,091 (16,523)
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,989,473 1,938,170 60,756 (9,453)
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturities $5,333,175 $ 5,147,592 $ 212,911 $(27,328)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. treasury securities and obligations
of U.S. government agencies and authorities $ 584,281 $ 592,633 $ 433 $ (8,785)
- ------------------------------------------------------------------------------------------------------------------------------------
Obligations of states and political subdivisions,
special revenue and nonguaranteed 152,363 151,635 1,054 (326)
- ------------------------------------------------------------------------------------------------------------------------------------
Debt securities issued by foreign governments 9,457 9,423 80 (46)
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate securities 2,217,797 2,168,436 88,644 (39,283)
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities 1,559,592 1,518,112 41,718 (238)
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed maturities $4,523,490 $ 4,440,239 $ 131,929 $(48,678)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Upon default or indication of potential default by an issuer of fixed
maturity securities, the company-owned issue(s) of such issuer would be
placed on nonaccrual status and, since declines in market value would no
longer be considered by the company to be temporary, would be analyzed for
possible write-down. Any such issue would be written down to its net
realizable value, determined in the manner described in the following
paragraph, during the fiscal quarter in which the impairment was determined
to have become other than temporary, unless such net realizable value
exceeded the company's carrying value for such issue. Thereafter, each
issue on nonaccrual status is regularly reviewed, and additional
write-downs may be taken in light of later developments.
The company's computation of net realizable value involves judgments and
estimates, so such value should be used with care. Such value
determination considers such factors as the existence and value of any
collateral security; the capital structure of the issuer; the level of
actual and expected market interest rates; where the issue ranks in
comparison with other debt of the issuer; the economic and competitive
environment of the issuer and its business; the company's view on the
likelihood of success of any proposed issuer restructuring plan and the
timing, type and amount of any restructured securities that the company
anticipates it will receive.
51
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
---------------------------------------------------------------------------
INVESTED ASSETS AND RELATED INCOME (continued)
The company's $1.5 billion real estate portfolio consists of joint venture
and third-party mortgage loans and other real estate-related investments.
(See Real estate-related investments beginning on page 31.) At December
31, 1993, the company had $731.1 million of mortgage loans and other real
estate-related investments (before reserves and write-downs) that were
non-income producing for the preceding 12 months.
At December 31, 1993, securities of the life insurance subsidiaries,
carried at approximately $7.9 million, were on deposit with governmental
agencies as required by law. Policy loans, which are included in "Other
loans and investments," were $364.9 million and $340.6 million at December
31, 1993 and 1992, respectively.
Proceeds from sales of investments in fixed maturities prior to maturity
during 1993 were $2.4 billion. Gross gains of $119.7 million and $98.7
million and gross losses of $52.6 million and $150.4 million were realized
on sales of fixed maturities in 1993 and 1992, respectively.
Gross unrealized gains and gross unrealized losses on equity securities at
December 31, 1993, were $45.6 million and $33,092, respectively.
The following table sets forth the maturity aging schedule of fixed
maturity investments at December 31, 1993:
----------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------------------------
(in thousands) Carrying Amortized
value cost value
----------------------------------------------------------
<S> <C> <C>
One year or less $ 44,720 $ 42,999
----------------------------------------------------------
Over one year through five 464,047 450,053
----------------------------------------------------------
Over five years through ten 1,906,981 1,822,278
----------------------------------------------------------
Over ten years 927,954 894,092
----------------------------------------------------------
Securities not due at a single
maturity date(1) 1,989,473 1,938,170
----------------------------------------------------------
Total fixed maturities $5,333,175 $5,147,592
----------------------------------------------------------
</TABLE>
(1)Weighted average maturity
of 7.8 years.
<TABLE>
<CAPTION>
The sources of net investment income from continuing operations are as
follows:
- -----------------------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest and dividends on fixed maturities $337,051 $308,413 $393,583
- -----------------------------------------------------------------------------------------------------------
Dividends on equity securities 5,193 1,089 6,116
- -----------------------------------------------------------------------------------------------------------
Income from short-term investments 21,164 31,339 28,179
- -----------------------------------------------------------------------------------------------------------
Income from mortgage loans 112,016 181,136 186,486
- -----------------------------------------------------------------------------------------------------------
Income (loss) from other real estate-related investments (76,381) (54,181) 8,021
- -----------------------------------------------------------------------------------------------------------
Income from other loans and investments 38,998 68,262 44,343
- -----------------------------------------------------------------------------------------------------------
Total investment income 438,041 536,058 666,728
- -----------------------------------------------------------------------------------------------------------
Investment expense (11,234) (13,765) (12,880)
- -----------------------------------------------------------------------------------------------------------
Net investment income $426,807 $522,293 $653,848
- -----------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
INVESTED ASSETS AND RELATED INCOME (continued)
Unrealized gains (losses) are computed below as follows: fixed
maturities - for 1993 and 1992, the difference between market and
amortized cost, adjusted for other-than-temporary declines in
value; for 1991, the difference between market value and carrying
value; equity securities and other - the difference between market
value and cost. The realized and change in unrealized investment
gains (losses) by class of investment for the years ended December
31, 1993, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
(in thousands) Realized
- --------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real estate-related losses:
- --------------------------------------------------------------------------------------------------------------------------
Increase in reserve $ (97,414) $(277,277) $(123,919)
- --------------------------------------------------------------------------------------------------------------------------
Write-downs of real estate-related investments (151,904) (4,173) -
- --------------------------------------------------------------------------------------------------------------------------
Equity in write-downs by joint ventures (111,445) (87,928) -
- --------------------------------------------------------------------------------------------------------------------------
Total real estate-related losses (360,763) (369,378) (123,919)
- --------------------------------------------------------------------------------------------------------------------------
Fixed maturities 59,690 11,367 7,771
- --------------------------------------------------------------------------------------------------------------------------
Equity securities 50,333 (428) 12,831
- --------------------------------------------------------------------------------------------------------------------------
Other (4,962) (1,322) (4,304)
- --------------------------------------------------------------------------------------------------------------------------
Realized investment loss before income tax (255,702) (359,761) (107,621)
- --------------------------------------------------------------------------------------------------------------------------
Income tax benefit (58,145) (114,442) (36,612)
- --------------------------------------------------------------------------------------------------------------------------
Net realized investment loss from continuing operations (197,557) (245,319) (71,009)
- --------------------------------------------------------------------------------------------------------------------------
Realized investment gain from discontinued operations,
net of tax 20,726 4,572 73,367
- --------------------------------------------------------------------------------------------------------------------------
Gain on sale of discontinued operations, net of tax 296,842 - -
- --------------------------------------------------------------------------------------------------------------------------
Total $ 120,011 $(240,747) $ 2,358
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(in thousands) Change in unrealized
- --------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $ 105,523 $ 144,954 $ 303,611
- --------------------------------------------------------------------------------------------------------------------------
Equity securities 27,309 21,904 (1,301)
- --------------------------------------------------------------------------------------------------------------------------
Unrealized gain before income tax 132,832 166,858 302,310
- --------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) 44,935 34,794 (845)
- --------------------------------------------------------------------------------------------------------------------------
Net gain from continuing operations 87,897 132,064 303,155
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) from discontinued operations,
net of tax (47,292) (26,626) 72,761
- --------------------------------------------------------------------------------------------------------------------------
Total $ 40,605 $ 105,438 $ 375,916
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
DISCONTINUED OPERATIONS
Discontinued operations primarily include the company's property-casualty
insurance, reinsurance and risk management subsidiaries. These subsidiaries
were divested in 1993.
On August 2, 1993, Kemper Corporation closed a stock exchange transaction with
Lumbermens. Under the tax-free exchange transaction, Kemper Corporation
received approximately 17.4 million shares of Kemper Corporation common stock
previously owned by Lumbermens. In exchange, Lumbermens received Kemper
Reinsurance Company and its subsidiaries as well as National Loss Control
Service Corporation, with a combined book value of $409.2 million. The
tax-free exchange transaction was valued at $610.2 million, resulting in a net
gain of $204.7 million. The gain includes $32.4 million of after-tax realized
investment gains from disposition of investments in connection with the
exchange transaction. The shares received from Lumbermens became treasury
shares, reducing Kemper Corporation's book value by $437.9 million. Book value
per common share increased approximately $5.46, or 15.5 percent, as a result of
this transaction. The transaction reduced Kemper Corporation's common stock
then outstanding to approximately 32.5 million shares from 49.9 million shares.
Lumbermens' ownership of Kemper Corporation common stock is now approximately
1.25 million shares, or less than 4 percent. In connection with the stock
exchange transaction, certain assets (primarily real estate-related) of the
reinsurance subsidiary, with a carrying value of approximately $136.3 million
at December 31, 1992, were guaranteed by Kemper Corporation. By August 2,
1996, the company and Lumbermens will make a final settlement with respect to
such assets based on the above-stated value, taking into account any
dispositions of such assets during the three-year period and the gains or
losses realized thereon. At December 31, 1993, the guarantee has decreased to
$70.1 million ($61.3 million in real estate-related investments) due to
dispositions.
On August 31, 1993, the company sold Economy Fire & Casualty Company (Economy)
to St. Paul Fire and Marine Insurance Company in a transaction valued at $420
million, and received approximately two-thirds in cash and one-third in
assets (primarily real estate-related) distributed from Economy's investment
portfolio. The book value of Economy was $305.1 million at the closing date,
and an after-tax net gain of $82.9 million was recorded. This gain includes
$10.6 million of after-tax realized investment gains from disposition of
investments in connection with the sale.
On December 31, 1993, the company sold Federal Kemper Insurance Company (FKI) to
Anthem P&C Holdings, Inc. The company received $100 million in the
transaction, approximately $95 million in cash and the balance in the form of a
property dividend. The book value of FKI was $83.0 million at the closing date,
and an after-tax net gain of $9.2 million was recorded. This gain includes $5.1
million of after-tax realized investment gains from disposition of investments
in connection with the sale.
The following table sets forth selected financial information regarding the
divested companies for the years ended December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Revenue $755,252 $1,186,806 $1,266,658
- ---------------------------------------------------------------------------------------------------------------------------
Income, net of tax 25,498 23,794 128,476
- ---------------------------------------------------------------------------------------------------------------------------
Gain on sale, net of tax 296,842 - -
- ---------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principles, net of tax 14,430 (12,519) -
- ---------------------------------------------------------------------------------------------------------------------------
Net income 336,770 11,275 128,476
- ---------------------------------------------------------------------------------------------------------------------------
Total investments - 1,713,253 1,774,754
- ---------------------------------------------------------------------------------------------------------------------------
Total assets - 2,385,994 2,362,103
---------------------------------------------------------------------------------------------------------------------------
Losses and adjusting expenses - 1,058,786 896,684
---------------------------------------------------------------------------------------------------------------------------
Total liabilities - 1,601,629 1,591,996
---------------------------------------------------------------------------------------------------------------------------
Net assets - 784,365 770,107
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
UNCONSOLIDATED INVESTEES
Subsidiaries of the company directly hold partnership interests in many
real estate joint ventures and a 50 percent ownership in IFTC Holdings,
Inc. (IFTC). Also, subsidiaries of each of the company and Lumbermens are
partners in a master limited partnership (MLP) formed, effective January 1,
1993, to hold the equity interests each partner's organization previously
separately held in joint ventures with Peter B. Bedford or his affiliates
(Bedford). The company and Lumbermens each own 50 percent of the MLP.
The company's direct and indirect real estate joint venture investments are
accounted for on the equity method, with the company recording its share of
the operating results of the respective partnerships. The company recorded
100 percent of the operating results of certain non-MLP partnerships
beginning in 1993. The company, as an equity owner, has the ability to
fund, and historically has elected to fund, operating requirements of
certain of the joint ventures. Consolidation accounting methods are not
utilized as the company, in most instances, does not own more than 50
percent, and in any event, major decisions of the partnerships must be made
jointly by all partners.
Selected financial information, as of December 31, 1993 and 1992, is
presented below separately for the MLP, ventures with the Prime Group, Inc. or
its affiliates (Prime), other real estate-related partnerships and IFTC. (See
note captioned Concentration of credit risk on page 56.)
<TABLE>
<CAPTION>
REAL ESTATE-RELATED
---------------------------------------------------------------------
Prime-related
-----------------------
MLP Spanish Domestic Other
1993 (Bedford-related) projects partnerships partnerships IFTC
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 102,204 $ 36,607 $ 72,217 $ 170,574 $ 62,917
- -------------------------------------------------------------------------------------------------------------------------
Expenses 230,503 76,449 88,355 195,729 53,383
- -------------------------------------------------------------------------------------------------------------------------
Operating income (loss) (128,299) (39,842) (16,138) (25,155) 9,534
- -------------------------------------------------------------------------------------------------------------------------
Asset write-downs(1) (120,163) (39,274) - - -
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (248,462) $ (79,116) $ (16,138) $ (25,155) $ 9,534
- -------------------------------------------------------------------------------------------------------------------------
Kemper Corporation share of
operating income (loss)(1) $(41,004) $ (26,000) $ (12,448) $ (12,932) $ 4,767
- -------------------------------------------------------------------------------------------------------------------------
Kemper Corporation share of net
income (loss)(1) $ (113,175) $ (65,274) $ (12,448) $ (12,932) $ 4,767
- -------------------------------------------------------------------------------------------------------------------------
Properties at cost, net of depreciation $ 1,183,848 $ 253,321 $ 424,681 $ 456,952 $ -
- -------------------------------------------------------------------------------------------------------------------------
Other investments - - - - 806,437
- -------------------------------------------------------------------------------------------------------------------------
Total assets 1,445,662 292,825 551,041 716,904 837,444
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Mortgages, notes payable and
related accrued interest:
- -------------------------------------------------------------------------------------------------------------------------
Kemper Corporation subsidiaries $ 830,950 $ 337,206 $ 175,602 $ 246,999 $ -
- -------------------------------------------------------------------------------------------------------------------------
Lumbermens 245,890 51,423 17,262 96,352 -
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Life Association 65,691 - - 14,251 -
- -------------------------------------------------------------------------------------------------------------------------
Other third parties 760,093 88,558 285,423 327,967 -
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,945,642 539,728 565,139 772,859 736,975
- -------------------------------------------------------------------------------------------------------------------------
Kemper Corporation net investment(1) $ (221,622) $ 149,849 $ (18,598) $ (4,372) $ 50,235
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excluded from the company's share of net income and related net
investment is interest expense related to loans by the company which are on
nonaccrual and write-downs taken directly by the company.
Included in the immediately preceding and immediately following tables are loans
to partnerships or a corporation in which the company holds an equity
interest. At December 31, 1993, the company had other joint venture-related
loans totaling $265.0 million before reserves, not included in the table above,
to partnerships in which the company has options to acquire equity interests or
has made loans with additional interest features. Also, at December 31, 1993,
the company had joint venture-related loans totaling $146.8 million before
reserves, not included in the table above, to partnerships in which Lumbermens
and Fidelity Life Association, an affiliate have equity interests. (See note
captioned Financial instruments -- off balance-sheet risk on page 61.)
55
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION
(in thousands) Real estate-related
--------------------------------------------------------------------
Prime-related
-----------------------
Bedford-related Spanish Domestic Other
1992 partnerships projects partnerships partnerships IFTC
- ------------------ ---------------- --------- ------------ --------------- -------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Revenue $ 105,895 $ 26,663 $ 43,441 $100,216 $ 81,642
- -------------------------------------------------------------------------------------------------------------------------
Expenses 274,777 52,945 67,573 117,868 71,972
- -------------------------------------------------------------------------------------------------------------------------
Operating income
(loss) (168,882) (26,282) (24,132) (17,652) 9,670
- -------------------------------------------------------------------------------------------------------------------------
Asset write-downs(1) (32,923) (48,637) - - -
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (201,805) $ (74,919) $ (24,132) $(17,652) 9,670
- -------------------------------------------------------------------------------------------------------------------------
Kemper Corporation
share of operating
income (loss)(1) $ (43,876) $ (5,927) $ (12,015) $(10,717) $ 4,835
- -------------------------------------------------------------------------------------------------------------------------
Kemper Corporation
share of net operating
income (loss)(1) $ (76,799) $ (60,927) $ (12,015) $(10,717) $ 4,825
- -------------------------------------------------------------------------------------------------------------------------
Properties at cost,
net of depreciation $1,261,384 $ 332,437 $ 442,032 $443,182 $ -
- -------------------------------------------------------------------------------------------------------------------------
Other investments - - - - 686,955
- -------------------------------------------------------------------------------------------------------------------------
Total assets 1,557,219 381,349 582,738 530,377 725,194
- -------------------------------------------------------------------------------------------------------------------------
Mortgages, notes payable
and related accrued
interest:
- -------------------------------------------------------------------------------------------------------------------------
Kemper Corporation
subsidiaries $1,045,328 $ 186,683 $ 123,385 $157,855 $ -
- -------------------------------------------------------------------------------------------------------------------------
Lumbermens 198,624 46,969 24,045 100,281 -
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Life Association 65,294 - - 40,572 -
- -------------------------------------------------------------------------------------------------------------------------
Other third parties 450,580 247,935 412,056 263,059 -
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,796,610 517,898 614,153 591,438 638,569
- -------------------------------------------------------------------------------------------------------------------------
Kemper Corporation
net investment(1) $ (89,804) $ 97,324 $ 773 $ (3,173) $ 43,324
- -------------------------------------------------------------------------------------------------------------------------
(1)Excluded from the company's share or net income and related net investment is
interest expense related to loans by the company which are on nonaccrual and
write-downs taxed directly by the company.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONCENTRATION OF CREDIT RISK
The company generally strives to maintain a diversified invested asset
portfolio; however, certain concentrations of credit risk exist, including
mortgage-backed securities and real estate. These concentrations are discussed
in Investments beginning on page 29.
The company had $408.9 million (4.9 percent of invested assets and
cash), $322.0 million (3.9 percent of invested assets and cash) and $154.7
million (1.9 percent of invested assets and cash) of mortgage loans and other
real estate investments in California, Illinois and Spain, respectively, at
December 31, 1993. The majority of the Illinois and all of the Spanish loans
and other investments are Prime- related. The majority of the California loans
and other investments were Bedford-related. In January 1994, Bedford's
interests in joint ventures with the company were transferred to the MLP. (See
preceding note captioned Unconsolidated investees.)
The company had $398.6 million (4.7 percent of invested assets and
cash) of below investment-grade securities (including real estate- related
below investment-grade bonds) at December 31, 1993.
The following table shows the amounts of the company's real estate portfolio
at December 31, 1993, which consisted of loans to or investments in joint
ventures with Bedford/MLP and Prime:
<TABLE>
<CAPTION>
(in millions)
- -------------------------------------------------------------------------
Bedford/MLP Prime
<S> <C> <C>
- -------------------------------------------------------------------------
Mortgage loans $ 592.7 $ 404.5
- -------------------------------------------------------------------------
Real estate-related bonds 123.8 72.7
- -------------------------------------------------------------------------
Other real estate loans 201.1 25.6
- -------------------------------------------------------------------------
Real estate owned 28.6 -
- -------------------------------------------------------------------------
Equity investments (60.8) 286.8
- -------------------------------------------------------------------------
Reserves, write-downs
and foreign currency translation (348.3) (282.9)
- -------------------------------------------------------------------------
Total $ 537.1 $ 506.7
- -------------------------------------------------------------------------
</TABLE>
56
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
- --------------------------------------------------------------------------------
INCOME TAX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income tax (benefit) is as follows:
- -----------------------------------------------------------------------------------------------------------
1993
- -----------------------------------------------------------------------------------------------------------
Current Deferred Total
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Federal $ 63,302 $ (76,982) $(13,680)
- -----------------------------------------------------------------------------------------------------------
State (6,718) 649 (6,069)
- -----------------------------------------------------------------------------------------------------------
Total continuing operations 56,584 (76,333) (19,749)
- -----------------------------------------------------------------------------------------------------------
Discontinued operations 43,213 26,862 70,075
- -----------------------------------------------------------------------------------------------------------
SFAS 109 adoption - (2,545) (2,545)
- -----------------------------------------------------------------------------------------------------------
Total $ 99,797 $ (52,016) $ 47,781
- -----------------------------------------------------------------------------------------------------------
1992
- -----------------------------------------------------------------------------------------------------------
Federal $ 18,894 $(100,063) $(81,169)
- -----------------------------------------------------------------------------------------------------------
State 3,624 2,855 6,479
- -----------------------------------------------------------------------------------------------------------
Total continuing operations 22,518 (97,208) (74,690)
- -----------------------------------------------------------------------------------------------------------
Discontinued operations 14,335 (13,897) 438
- -----------------------------------------------------------------------------------------------------------
SFAS 106 adoption - (13,916) (13,916)
- -----------------------------------------------------------------------------------------------------------
Total $ 36,853 $(125,021) $(88,168)
- -----------------------------------------------------------------------------------------------------------
1991
- -----------------------------------------------------------------------------------------------------------
Federal $ 55,265 $ (25,191) $ 30,074
- -----------------------------------------------------------------------------------------------------------
State 5,020 1,236 6,256
- -----------------------------------------------------------------------------------------------------------
Total continuing operations 60,285 (23,955) 36,330
- -----------------------------------------------------------------------------------------------------------
Discontinued operations 67,002 (15,678) 51,324
- -----------------------------------------------------------------------------------------------------------
Total $ 127,287 $ (39,633) $ 87,654
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The actual income tax (benefit) for 1993, 1992 and 1991 differed from the
"expected" tax (benefit) for those years as displayed below. "Expected"
tax (benefit) is computed by applying the U.S. federal corporate tax rate
of 35 percent for 1993, and 34 percent for 1992 and 1991 to earnings (loss)
from continuing operations before income tax (benefit).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Continuing operations (in thousands): 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Computed "expected" tax (benefit) $(38,201) $(93,456) $38,214
- -----------------------------------------------------------------------------------------------------------
Differences between "expected" and actual tax (benefit):
- -----------------------------------------------------------------------------------------------------------
Change in valuation allowance 31,378 - -
- -----------------------------------------------------------------------------------------------------------
State taxes (7,920) 4,878 3,218
- -----------------------------------------------------------------------------------------------------------
Tax-exempt investment income (2,423) (2,524) (2,494)
- -----------------------------------------------------------------------------------------------------------
Tax adjustments (1,600) 11,000 -
- -----------------------------------------------------------------------------------------------------------
Unutilized capital losses - 8,286 -
- -----------------------------------------------------------------------------------------------------------
Other, net (983) (2,874) (2,608)
- -----------------------------------------------------------------------------------------------------------
Total actual tax (benefit) $(19,749) $(74,690) $36,330
- -----------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
INCOME TAX (CONTINUED)
The company adopted SFAS No. 109, Accounting for Income Taxes, as of
January 1, 1993. SFAS 109 establishes new principles for calculating and
reporting the effects of income taxes in financial statements. SFAS 109
replaces the income statement orientation inherent in APB Opinion 11 with a
balance sheet approach. Under the new approach, deferred tax assets and
liabilities are generally determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Under SFAS 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date. SFAS 109 allows recognition of deferred tax assets if future realization
of the tax benefit is more likely than not, with a valuation allowance for the
portion that is not likely to be realized.
The implementation of SFAS 109 resulted in a one-time increase to
earnings of $2.5 million in the first quarter of 1993. The cumulative effect on
continuing operations was an expense of $11.9 million and on discontinued
operations a benefit of $14.4 million. In 1993 the enacted tax rate increased
by 1 percent; the effect of this change on the financial statements was a $3.3
million benefit. Prior years' financial statements have not been restated to
apply the provisions of SFAS 109.
Upon adoption of SFAS 109, a valuation allowance was established to
reduce the deferred federal tax asset related to real estate and other
investments to the amount that, based upon available evidence, is, in
management's judgment, more likely than not to be realized. Any reversals of
the valuation allowance are contingent upon the recognition of future capital
gains in the company's federal income tax return or a change in circumstances
which causes the recognition of the benefits to become more likely than not.
During 1993, the valuation allowance was increased by $31.4 million.
The tax effects of temporary differences that give rise to significant
portions of the company's net deferred federal tax asset from continuing
operations are as follows:
<TABLE>
<CAPTION>
(in thousands)
- --------------------------------------------------------------------------------------------
December 31 January 1
Deferred federal tax assets: 1993 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Real estate-related $268,699 $172,774
- --------------------------------------------------------------------------------------------
Life policy reserves 134,274 132,879
- --------------------------------------------------------------------------------------------
Accrued expenses 50,359 19,928
- --------------------------------------------------------------------------------------------
Accrued employee benefits 26,663 23,109
- --------------------------------------------------------------------------------------------
Other investment-related 22,071 37,588
- --------------------------------------------------------------------------------------------
Tax capitalization of deferred acquisition costs 18,100 11,054
- --------------------------------------------------------------------------------------------
Other 17,436 13,567
- --------------------------------------------------------------------------------------------
Total deferred federal tax assets 537,602 410,899
- --------------------------------------------------------------------------------------------
Valuation allowance (51,503) (20,125)
- --------------------------------------------------------------------------------------------
Total deferred federal tax assets after
- --------------------------------------------------------------------------------------------
valuation allowance 486,099 390,774
- --------------------------------------------------------------------------------------------
Deferred federal tax liabilities:
- --------------------------------------------------------------------------------------------
Deferred insurance acquisition costs 217,907 196,684
- --------------------------------------------------------------------------------------------
Unrealized gains on investments 81,065 34,970
- --------------------------------------------------------------------------------------------
Deferred investment product sales costs 65,426 55,719
- --------------------------------------------------------------------------------------------
Depreciation and amortization 33,754 30,622
- --------------------------------------------------------------------------------------------
Other investment-related 4,673 7,153
- --------------------------------------------------------------------------------------------
Partnerships 4,606 17,820
- --------------------------------------------------------------------------------------------
Other 18,112 15,679
- --------------------------------------------------------------------------------------------
Total deferred federal tax liabilities 425,543 358,647
- --------------------------------------------------------------------------------------------
Net deferred federal tax asset $ 60,556 $ 32,127
- --------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
Income tax (continued)
The net deferred federal tax asset of $60.6 million could increase,
becoming material to stockholders' equity if, for example, the level of the
company's unrealized capital gains were to decline. The valuation allowance of
$51.5 million is subject to future adjustments, based on, among other items,
the company's estimates of future operating earnings and capital gains.
Pursuant to the deferred method under APB Opinion 11, deferred income taxes
were recognized for income and expense items that were reported in different
years for financial reporting purposes and income tax purposes using the tax
rate applicable for the year of the calculation. Under the deferred method,
deferred taxes were not adjusted for subsequent changes in tax rates.
The sources of deferred tax (benefit) on continuing operations and
their tax effect were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(in thousands) 1992 1991
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Conversion to generally accepted accounting principles $ 2,321 $ 15,198
- --------------------------------------------------------------------------------------------------
Deferred investment product sales costs 13,529 (6,469)
- --------------------------------------------------------------------------------------------------
Tax capitalization of policy acquisition costs (4,201) (3,015)
- --------------------------------------------------------------------------------------------------
Life policy benefit reserves tax adjustment 4,005 3,646
- --------------------------------------------------------------------------------------------------
Special charges and arbitration award 5,659 12,348
- --------------------------------------------------------------------------------------------------
Unrealized gain on securities owned
by securities brokerage operations 687 4,666
- --------------------------------------------------------------------------------------------------
Leasing transactions 6,220 10,062
- --------------------------------------------------------------------------------------------------
Losses of Kemper/Bedford Properties, Inc. (18,490) (2,521)
- --------------------------------------------------------------------------------------------------
Unutilized capital losses 8,286 -
- --------------------------------------------------------------------------------------------------
Impairment losses on investments (7,761) (11,772)
- --------------------------------------------------------------------------------------------------
Real estate reserves (108,879) (38,674)
- --------------------------------------------------------------------------------------------------
Tax adjustments 11,000 -
- --------------------------------------------------------------------------------------------------
Other, net (9,584) (7,424)
- --------------------------------------------------------------------------------------------------
Total $ (97,208) $(23,955)
- --------------------------------------------------------------------------------------------------
</TABLE>
The tax returns through the year 1986 have been examined by the Internal
Revenue Service (IRS). Changes proposed are not material to the company's
financial position. The tax returns for the years 1987 through 1990 are
currently under examination by the IRS.
59
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
---------------------------------------------------------------------------
LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt (which consists primarily of the company's $200.0 million of
6.875 percent Notes Due 2003, $110.75 million of 8.80 percent Notes Due
1998 and $65.5 million of its medium-term notes), maturity and annual
weighted average interest rate, are:
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------------------------------------------
Maturity Principal Interest rate
---------------------------------------------------------------------------
<S> <C> <C>
1995 $ 34,711 9.0%
---------------------------------------------------------------------------
1996 5,022 5.8
---------------------------------------------------------------------------
1997 6,839 6.9
---------------------------------------------------------------------------
1998 120,839 8.8
---------------------------------------------------------------------------
2003 200,000 6.9
---------------------------------------------------------------------------
Other 26,567 8.8
---------------------------------------------------------------------------
Total $393,978 7.8%
---------------------------------------------------------------------------
</TABLE>
The company has outstanding short-term loans with banks and other
creditors. Kemper Corporation previously had an $80 million line of credit
with Lumbermens, which at December 31, 1993, was unused. On January 12,
1994, the company and Lumbermens mutually agreed to cancel this line of
credit.
The company maintains $325.0 million of committed lines of credit
with banks, with $162.5 million expiring November 1, 1994, and $162.5
million expiring November 1, 1996. The interest rates generally vary with
short-term bank corporate rates. The lines are unused and fully available.
The fair value of long-term debt is estimated by discounting the scheduled
cash flows using the current rates offered to the company for debt of the
same remaining maturities. The fair value is estimated at $423.6 million.
---------------------------------------------------------------------------
CONVERTIBLE DEBENTURES OF SUBSIDIARY
The company had outstanding $45.7 million and $78.9 million of
convertible debentures issued by Kemper Financial Companies, Inc. (KFC) at
December 31, 1993 and 1992, respectively. Debentures bear interest at a
fluctuating rate per annum, which on average approximates prime. Interest
on the debentures is payable quarterly. The debentures mature in the sixth
through tenth year from the date issued. The future maturity payments
required based upon debentures outstanding as of December 31, 1993, are as
follows: 1994, $6.7 million; 1995, $8.8 million; 1996, $10.9 million;
1997-2000, $19.3 million.
At its option, KFC may call the debentures in connection with a public
offering of its common stock or at any time on or after the fifth
anniversary of the date the debentures were issued. At December 31, 1993,
$24.3 million of the debentures are subject to KFC's right to call.
The fair value of convertible debentures approximates the carrying value.
---------------------------------------------------------------------------
STOCKHOLDERS' EQUITY-RETAINED EARNINGS
Retained earnings includes $41.7 million in gross undistributed income of
unconsolidated companies, net of income tax, at December 31, 1993.
Dividend distributions to Kemper Corporation from subsidiaries are
restricted as to the amount that may be paid without prior notice or
approval by regulatory authorities in the asset management, securities
brokerage and life insurance industries. The maximum dividend distribution
that can be made by subsidiaries during 1994 without prior approval is
$150.0 million.
The amount actually paid in cash to Kemper Corporation during 1993 was
$73.8 million.
Net income and stockholder's equity as determined in accordance with
statutory accounting principles for the company's life insurance
subsidiaries are as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
(in thousands) 1993 1992 1991
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $ 5,020 $(155,380) $ 40,836
---------------------------------------------------------------------------
Statutory surplus $ 538,733 $ 444,460 $495,575
---------------------------------------------------------------------------
</TABLE>
The company's life insurance subsidiaries' statutory capital positions are
in excess of levels calling for regulatory action.
60
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
--------------------------------------------------------------------------
COMMITMENTS AND CONTIGENT LIABILITIES
The company has operating leases that have initial or remaining
noncancellable lease terms in excess of one year at December 31, 1993. The
future minimum rental payments required under such leases are as follows:
1994, $50.5 million; 1995, $52.6 million; 1996, $49.2 million; 1997, $36.1
million; 1998, $29.5 million; 1999-2004, $135.3 million. Rental expenses
associated with operating leases were $64.1 million, $60.6 million and
$48.0 million for 1993, 1992 and 1991, respectively. (See note captioned
Related-party transactions on page 49.)
The company is involved in various legal actions for which it establishes
liabilities where appropriate. In the opinion of the company's management,
based upon the advice of legal counsel, the resolution of such litigation
is not expected to have a material adverse effect on the consolidated
financial statements.
See note captioned Financial instruments-off-balance-sheet risk below for
a discussion regarding the company's loan commitments and standby financing
agreements.
--------------------------------------------------------------------------
FINANCIAL INSTRUMENTS-OFF-BALANCE-SHEET RISK
At December 31, 1993, the company had loan commitments and standby
financing agreements totaling $ 636.8 million to support the financing
needs of various real estate investments. To the extent these arrangements
are called upon, amounts loaned would be secured by assets of the joint
ventures, including first mortgage liens on the real estate. The
company's criteria in making these arrangements are the same as for its
mortgage loans and other real estate investments. The company presently
expects to fund approximately $294.8 million of these arrangements.
These commitments are included in the company's analysis of real
estate-related reserves and write-downs. The fair values of loan
commitments and standby financing agreements are estimated in
conjunction with and using the same methodology as the fair value
estimates of mortgage loans and other real estate-related investments.
In the normal course of business, the brokerage operations execute and
finance numerous securities transactions. These activities may expose the
company to off-balance-sheet risk in the event that the customer or
counterparty is unable to fulfill its contractual obligations. The
company manages the risks associated with customer business by requiring
customers to maintain margin collateral in compliance with regulatory
guidelines. Required margin levels are monitored daily, and when necessary,
customers are required to deposit additional collateral or to reduce
positions. Credit limits are also employed to manage clients' activities in
relation to futures transactions.
Securities sold, not yet purchased, represent obligations of the company to
deliver the specified security at the contracted price and thereby create
a liability to repurchase the security in the market at prevailing prices.
Accordingly, these transactions result in off-balance-sheet risk as the
company's ultimate obligation to satisfy the sale of securities sold, not
yet purchased, may exceed the amount in the financial statements reflected
at then current values.
To hedge exposures, the brokerage operations use forward and
futures contracts that contain varying degrees of off-balance-sheet risk
whereby changes in the market values of the underlying securities or other
financial instruments may be in excess of the amounts reflected in the
financial statements.
In addition to the hedging performed by the securities brokerage
operations, the company has also used, to a limited extent, derivative
securities (futures, options and forward contracts) to hedge specific
investments or other actual or potential transactions. Given such limited
use of such derivative securities, and considering that such use is
designed to reduce risk, the company has not had, and does not anticipate
having, any material adverse effects on its financial statements
resulting from its current hedge positions.
In order to reduce interest expense on a joint venture real estate project,
the company has entered into two interest rate swap agreements. The
notional amount outstanding on the swap agreements was $206 million as of
December 31, 1993. The fair value of the interest rate swaps was estimated
by discounting the projected interest rate spread. The fair value at
December 31, 1993, of this future investment income is estimated to be
$12.6 million while the carrying value is $0.
61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidaries
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
COMPUTATION OF CONSOLIDATED NET INCOME (LOSS) PER SHARE
- ---------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data) Year Ended December 31
- ---------------------------------------------------------------------------------------------------------------------------------
PRIMARY 1993 1992 1991
<S> <C> <C> <C>
Net income (loss) from continuing operations $(101,284) $(214,675) $ 76,063
- ---------------------------------------------------------------------------------------------------------------------------------
Add back: Dividends on redeemable securities of subsidiary* - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Interest and amortization expense on convertible
debentures of subsidiary, net of tax* - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Deduct: Employee interests in subsidiary, assuming full conversion* - - -
Dividends on preferred stock 18,659 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Adjusted (119,943) (214,675) 76,063
- ---------------------------------------------------------------------------------------------------------------------------------
Net income from discontinued operations 336,771 11,275 128,476
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stockholders $ 216,828 $(203,400) $ 204,539
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 42,519 48,840 48,009
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average convertible preferred shares expressed as
common share equivalents outstanding 311 ** 85
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average common and equivalent shares outstanding 42,830 48,840 48,094
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share:
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ (2.52) $ (4.10) $ 1.58
- ---------------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations 7.52 0.49 2.67
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of changes in
accounting principles 5.00 (3.61) 4.25
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principles, net of tax 0.06 (0.55) -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ 5.06 $ (4.16) $ 4.25
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
FULLY DILUTED
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stockholders (from above) $ 216,828 $(203,400) $ 204,539
- ---------------------------------------------------------------------------------------------------------------------------------
Add back: Dividends on convertible preferred stock 9,909 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) applicable to common stockholders
on a fully converted basis $ 226,737 $(203,400) $ 204,539
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average common and equivalent shares outstanding
(from above) 42,830 48,840 48,094
- ---------------------------------------------------------------------------------------------------------------------------------
Add back: Weighted average convertible preferred shares
expressed as common shares outstanding 3,756 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Weighted average common and equivalent shares outstanding
on a fully converted basis 46,586 48,840 48,094
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share:
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ (2.11) $ (4.10) $ 1.58
- ---------------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations 6.92 0.49 2.67
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of changes in
accounting principles 4.81 (3.61) 4.25
- ---------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principles, net of tax 0.06 (0.55) -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ 4.87 $ (4.16) $ 4.25
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The effect of these items in 1993, 1992 and 1991 is antidilutive;
accordingly, net income is not adjusted.
** The effect of this item in 1992 is antidilutive; accordingly, it is not
used.
62
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
EMPLOYEE BENEFIT PLANS
Kemper Corporation and its subsidiaries maintain several defined benefit
pension plans. The plans are noncontributory, and benefits are based upon
an employee's career average benefit accrual, with an alternative minimum
benefit formula based upon years of participation and final average pay.
Vesting occurs after five years of service. The company's funding policy
for qualified pension plans is to contribute, at a minimum, the equivalent
of the amount required under the Employee Retirement Income Security Act of
1974 and the Internal Revenue Code.
The expected long-term rate of return on plan assets was 8.5 percent
for both 1993 and 1992. The discount rate and rate of increase in future
compensation levels used in determining the projected benefit obligation
was 7.0 percent for 1993 and 7.5 percent for 1992. The salary scale used
for both 1993 and 1992 was 9.0 percent, 7.5 percent and 6.0 percent
dependent on age group, respectively. Plan assets are held primarily in
various separate accounts. These accounts are invested in stocks and bonds
of entities unrelated to Kemper Corporation.
With the divestitures of Economy and FKI, the retirement plans for each
respective company ceased accruing benefits, and all employees
participating in the plans became fully vested. Upon curtailment of the
plans, the company recognized an immaterial loss, which is included in the
gain from disposal of the businesses. The company will fund any additional
amounts necessary to provide benefits accrued up to the Economy and FKI
divestiture dates. The liability for the pension plans of other divested
operations was transferred with the companies. (See note captioned
Discontinued operations on page 54.)
Expenses of other employee benefit plans, excluding postretirement
benefits, for the three years ended December 31, 1993, are as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- ----------------------------------------------------------------
<S> <C> <C> <C>
Profit-sharing plans $23,817 $20,005 $15,641
- ----------------------------------------------------------------
Health care and life
insurance 22,242 24,421 16,929
- ----------------------------------------------------------------
Total continuing $46,059 $44,426 $32,570
- ----------------------------------------------------------------
- ----------------------------------------------------------------
</TABLE>
Components of pension expense are:
<TABLE>
<CAPTION>
Year Ended December 31
- ----------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs $ 755 $ 707 $ 585
- ----------------------------------------------------------------------------------------
Interest costs on projected benefit
obligations 676 585 484
- ----------------------------------------------------------------------------------------
Actual return on assets (1,445) 300 (2,187)
- ----------------------------------------------------------------------------------------
Net amortization and deferral 799 (913) 1,628
- ----------------------------------------------------------------------------------------
Net pension expense for continuing operations $ 785 $ 679 $ 510
- ----------------------------------------------------------------------------------------
</TABLE>
The funded status of the plans at December 31, 1993 and 1992 was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
(in thousands) 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Continuing operations
- --------------------------------------------------------------------------------------------------
Actuarial present value of vested benefit obligations $ 6,948 $ 5,871
- --------------------------------------------------------------------------------------------------
Actuarial present value of accumulated benefit obligations $ 7,253 $ 6,056
- --------------------------------------------------------------------------------------------------
Plan assets at fair value $ 8,642 $ 7,287
- --------------------------------------------------------------------------------------------------
Actuarial present value of projected benefit obligations 10,543 8,277
- --------------------------------------------------------------------------------------------------
Projected benefit obligations in excess of assets (1,901) (990)
- --------------------------------------------------------------------------------------------------
Unamortized net assets existing at the date of
initial application of SFAS 87 (465) (506)
- --------------------------------------------------------------------------------------------------
Unrecognized net loss from actuarial experience since
initial application of SFAS 87 447 363
- --------------------------------------------------------------------------------------------------
Accrued pension expense for continuing operations $(1,919) $(1,133)
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company sponsors a welfare plan that provides medical and life
insurance benefits to its retired and active employees. The company is self
insured, and the plan is not funded. The medical plan provides for medical
insurance benefits at retirement, with eligibility based upon age and the
participant's number of years of participation attained at retirement. The plan
is contributory for pre-Medicare retirees, and will be contributory for all
retiree coverage for most current employees, with contributions generally
adjusted annually. Postretirement life insurance benefits are noncontributory
and are limited to $10,000 per participant.
The discount rate used in determining the postretirement benefit
obligation was 7 percent and 8 percent for 1993 and 1992, respectively. The
assumed health care trend rate used was based on projected experience for 1993
and 1994, 10 percent in 1995, gradually declining to 6 percent by the year 1999
and remaining at that level thereafter.
The status of the plan as of December 31, 1993 and 1992, was as follows:
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------
Accumulated postretirement
benefit obligation: 1993 1992
- -------------------------------------------------------------------
<S> <C> <C>
Retirees $13,781 $10,406
- -------------------------------------------------------------------
Fully eligible active plan participants 6,488 5,439
- -------------------------------------------------------------------
Other active plan participants 7,918 8,660
- -------------------------------------------------------------------
Unrecognized gain from
actuarial experience (1,353) -
- -------------------------------------------------------------------
Accrued liability $26,834 $24,505
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------
Components of the net periodic
postretirement benefit cost 1993 1992
- -------------------------------------------------------------------
<S> <C> <C>
Service cost-benefits attributed
to service during the period $1,253 $1,602
- -------------------------------------------------------------------
Interest cost on accumulated
postretirement benefit obligations 1,850 1,757
- -------------------------------------------------------------------
Total continuing 3,103 3,359
- -------------------------------------------------------------------
Discontinued operations 1,735 2,751
- -------------------------------------------------------------------
Total $4,838 $6,110
- -------------------------------------------------------------------
</TABLE>
A one percentage point increase in the assumed health care cost trend
rate for each year would increase the accumulated postretirement benefit
obligation as of December 31, 1993 and 1992, by $4.7 million and $4.0 million,
respectively, and the net postretirement health care interest and service costs
for the years ended December 31, 1993 and 1992 by $0.7 million and $0.5 million,
respectively.
STOCK OPTION PLANS
Stock option prices are not less than the fair market value at the date
of grant. Generally, shares underlying the options are subject to exercise in
installments of one-third or one-fourth beginning with the first anniversary of
the grant. The options generally expire after ten years. At December 31, 1993,
3.6 million option shares remained available for future grants. If all shares
exercisable were exercised, the company would receive proceeds of $40.9 million.
<TABLE>
<CAPTION>
Option price Option
per share shares
- --------------------------------------------------------------------
<S> <C> <C>
Outstanding
December 31, 1992 $12.88-43.00 2,238,026
- --------------------------------------------------------------------
Granted $38.38-41.75 1,481,100
- --------------------------------------------------------------------
Cancelled $25.50-43.00 38,550
- --------------------------------------------------------------------
Exercised $12.88-36.25 469,565
- --------------------------------------------------------------------
Outstanding
December 31, 1993 $12.88-43.00 3,211,011
- --------------------------------------------------------------------
Exercisable
December 31, 1993 $12.88-43.00 1,333,244
- --------------------------------------------------------------------
</TABLE>
64
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and Subsidiaries
Reinsurance
In the ordinary course of business, the life insurance subsidiaries
enter into reinsurance agreements for the purpose of limiting their exposure to
loss on any one single insured or to diversify their risk and limit their
overall financial exposure to certain blocks of fixed-rate annuities. For
individual life products, the life insurance subsidiaries generally retain only
the first $300,000 (face amount) on the life of any one individual, with the
excess portions of life insurance risk ceded to reinsurers. For its fixed-rate
annuity reinsurance agreements, the life insurance subsidiaries generally cede
100 percent of the related annuity liabilities. Although these reinsurance
agreements contractually obligate the reinsurers to reimburse the life
insurance subsidiaries, they do not discharge the life insurance subsidiaries
from their primary liability and obligations to policyholders. As such, these
amounts paid or deemed to have been paid are recorded on the company's balance
sheet as reinsurance recoverables and ceded life policy benefits beginning in
1993, due to the adoption of SFAS 113.
The following is a summary of reinsurance activities for the three
years ended December 31:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- --------------------------------------------------------------------
<S> <C> <C> <C>
Direct business $212,055 $198,784 $178,556
- --------------------------------------------------------------------
Reinsurance
assumed 115 98 235
- --------------------------------------------------------------------
Reinsurance
ceded (54,503) (62,960) (54,862)
- --------------------------------------------------------------------
Insurance
premium income $157,667 $135,922 $123,929
- --------------------------------------------------------------------
</TABLE>
The following is a summary of life insurance in force at December 31:
<TABLE>
<CAPTION>
(in billions) 1993 1992 1991
- -------------------------------------------------------
<S> <C> <C> <C>
Direct and assumed $91.3 $84.2 $73.4
- -------------------------------------------------------
Ceded 27.5 25.0 22.4
- -------------------------------------------------------
</TABLE>
In 1992 and 1991, Kemper Investors Life Insurance Company (KILICO)
entered into 100 percent indemnity reinsurance agreements for $515.7 million
and $416.3 million, respectively, of its fixed-rate annuity liabilities with
Fidelity Life Association (FLA). FLA is a mutual insurance company that shares
common management with KILICO and Federal Kemper Life Assurance Company (FKLA)
and certain common board members with the company. The 1992 reinsurance
agreement resulted in the sale to FLA of approximately $500 million of certain
assets, including $151 million of mortgage loans. The 1991 reinsurance
agreement resulted in the transfer of approximately $400 million in cash.
These transactions are net of ceding commissions of approximately $12 million
and $10 million in 1992 and 1991, respectively, retained by KILICO. FLA also is
the primary reinsurer of the mortality coverages issued by FKLA. As of December
31, 1993, the reinsurance recoverable related to the fixed-rate annuity
liabilities and the life products ceded to FLA amounted to approximately $746
million and $48 million, respectively.
Cash flow information
The company defines cash as cash and money market accounts, and certain
highly liquid short-term investments with original maturities of three months
or less held by the brokerage firm subsidiaries.
Not reflected in the statement of cash flows are rollovers of mortgage loans,
other loans and investments totaling $213.4 million, $240.8 million and $126.7
million in 1993, 1992 and 1991, respectively. Also not reflected in the
statement of cash flows for 1993 is the acquisition of 17.4 million treasury
shares valued at $610.2 million. (See note captioned Discontinued operations
on page 54.)
Reflected in the statement of cash flows is the 1992 sale of $515.7 million of
reinsured life reserves for which the company delivered an investment portfolio
that included $151.4 million of mortgage loans, $294.8 million of fixed
maturities and $69.5 million of other investments.
Federal income tax paid for the three years ended December 31, 1993, 1992 and
1991 amounted to $94.5 million, $95.0 million and $91.9 million, respectively.
Interest payments for the same three years totaled $67.8 million, $81.1 million
and $81.2 million, respectively.
65
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Kemper Corporation and subsidiaries
<TABLE>
<CAPTION>
UNAUDITED INTERIM FINANCIAL INFORMATION
- --------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data) Three Months Ended
- --------------------------------------------------------------------------------------------------------------------------
1993 March 31 June 30 September 30 December 31
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 419,207 $385,034 $ 242,379 $ 502,554
- --------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income tax $ 2,179 $(42,477) $(165,124) $ 96,275
- --------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) 7,068 (17,828) (46,300) 37,311
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations (4,889) (24,649) (118,824) 58,964
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations 14,634 (1,926) 281,182 28,450
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before SFAS 109 9,745 (26,575) 162,358 87,414
- --------------------------------------------------------------------------------------------------------------------------
Cumulative effect of SFAS 109 2,545 - - -
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 12,290 $(26,575) $ 162,358 $ 87,414
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share:
- --------------------------------------------------------------------------------------------------------------------------
PRIMARY
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ (0.14) $ (0.59) $ (3.24) $ 1.60
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations 0.30 (0.04) 7.29 0.86
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before SFAS 109 0.16 (0.63) 4.05 2.46
- --------------------------------------------------------------------------------------------------------------------------
Cumulative effect of SFAS 109 0.05 - - -
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ 0.21 $ (0.63) $ 4.05 $ 2.46
- --------------------------------------------------------------------------------------------------------------------------
Average common and equivalent shares outstanding 49,404 49,670 38,557 33,078
- --------------------------------------------------------------------------------------------------------------------------
FULLY DILUTED
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ (0.14) $ (0.59) $ (2.74) $ 1.47
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations 0.30 (0.04) 6.37 0.74
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before SFAS 109 0.16 (0.63) 3.63 2.21
- --------------------------------------------------------------------------------------------------------------------------
Cumulative effect of SFAS 109 0.05 - - -
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ 0.21 $ (0.63) $ 3.63 $ 2.21
- --------------------------------------------------------------------------------------------------------------------------
Average common and equivalent shares outstanding
on a fully diluted basis 49,404 49,670 44,119 38,662
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1992 March 31 June 30 September 30 December 31
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Total revenue $ 467,125 $ 428,787 $ 425,691 $ 182,121
- --------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income tax $ 22,014 $ (7,626) $ 2,292 $(291,551)
- --------------------------------------------------------------------------------------------------------------------------
Income tax (benefit) 12,099 5,862 1,903 (94,554)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 9,915 (13,488) 389 (196,997)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations 19,214 2,748 3,040 (1,208)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before SFAS 106 29,129 (10,740) 3,429 (198,205)
- --------------------------------------------------------------------------------------------------------------------------
Cumulative effect of SFAS 106 (27,013) - - -
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 2,116 $ (10,740) $ 3,429 $(198,205)
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share (primary and fully diluted):
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations $ 0.20 $ (0.27) $ 0.01 $ (4.00)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations 0.40 0.05 0.06 (0.02)
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) before SFAS 106 0.60 (0.22) 0.07 (4.02)
- --------------------------------------------------------------------------------------------------------------------------
Cumulative effect of SFAS 106 (0.56) - - -
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ 0.04 $ (0.22) $ 0.07 $ (4.02)
- --------------------------------------------------------------------------------------------------------------------------
Average common and equivalent shares outstanding 48,508 48,680 48,896 49,271
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Kemper Corporation and subsidiaries
SEGMENT INFORMATION
Continuing operations include the following segments: asset management, life
insurance, securities brokerage and real estate. The company's segmentation was
redefined in 1993, and the 1992 and 1991 presentations have been restated. The
principal products and services of these segments are as follows:
Asset management
Financial products and investment management services.
Life insurance
Variable-rate and fixed-rate annuities and interest-sensitive, term
and other life insurance.
Securities brokerage
Trading, research and investment banking services.
Real estate
Ownership, development and management of real estate-related investments.
Other operations and corporate
The other operations and corporate category primarily includes the holding
company's net expenses.
Summarized financial information for these segments is as follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
- --------------------------------------------------------------------------------
REVENUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset management $ 515,702 $ 525,058 $ 492,390
- --------------------------------------------------------------------------------
Life insurance 726,518 688,448 803,378
- --------------------------------------------------------------------------------
Securities brokerage 673,732 677,464 663,721
- --------------------------------------------------------------------------------
Real estate (338,077) (309,274) (57,479)
- --------------------------------------------------------------------------------
Other operations and corporate 31,937 12,946 12,753
- --------------------------------------------------------------------------------
Eliminations (60,638) (90,918) (98,920)
- --------------------------------------------------------------------------------
Total $ 1,549,174 $ 1,503,724 $ 1,815,843
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
EARNINGS (LOSS) FROM CONTINUING OPERATIONS, BEFORE INCOME TAX AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset management $ 131,491 $ 137,225 $ 129,374
- --------------------------------------------------------------------------------
Life insurance 128,714 (23,605) 68,633
- --------------------------------------------------------------------------------
Securities brokerage (1,476) (27,562) 6,558
- --------------------------------------------------------------------------------
Real estate (346,197) (316,813) (61,625)
- --------------------------------------------------------------------------------
Other operations and corporate (21,679) (44,116) (30,547)
- --------------------------------------------------------------------------------
Total $ (109,147) $ (274,871) $ 112,393
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset management $ 581,215 $ 510,133 $ 439,886
- --------------------------------------------------------------------------------
Life insurance 11,576,647 10,003,714 10,124,315
- --------------------------------------------------------------------------------
Securities brokerage 1,645,058 2,017,562 1,794,134
- --------------------------------------------------------------------------------
Real estate 186,900 (16,529) (24,661)
- --------------------------------------------------------------------------------
Other operations and corporate 423,113 186,805 266,061
- --------------------------------------------------------------------------------
Net assets of discontinued operations - 784,365 770,107
- --------------------------------------------------------------------------------
Eliminations (374,808) (309,775) (265,261)
- --------------------------------------------------------------------------------
Total $14,038,125 $13,176,275 $13,104,581
- --------------------------------------------------------------------------------
</TABLE>
67
<PAGE> 54
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
KPMG PEAT MARWICK
The Board of Directors and Stockholders
of Kemper Corporation:
We have audited the consolidated balance sheet of Kemper Corporation
and subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1993. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Kemper
Corporation and subsidiaries as of December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in the notes to the consolidated financial statements,
effective January 1, 1993 the company changed its method of accounting for
impairment of loans receivable to adopt the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards (SFAS)
No. 114, Accounting by Creditors for Impairment of a Loan, and changed its
method of accounting for income taxes to adopt the provisions of SFAS No. 109,
Accounting for Income Taxes. Also, as discussed in the notes, the company
adopted the provisions of SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions in 1992.
/s/ KPMG PEAT MARWICK
Chicago, Illinois
March 7, 1994
68
<PAGE> 1
SUBSIDIARIES OF KEMPER CORPORATION EXHIBIT NO. 21
AS OF MARCH 30, 1994
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION
- ------------------ -----------------
<S> <C>
Federal Kemper Life Assurance Company....................................................... Illionois
Kemper Financial Companies, Inc. ("KFC")1................................................... Delaware
Kemper Financial Services, Inc............................................................ Delaware
Kemper Asset Management Company........................................................... Delaware
Kemper Sales Company...................................................................... Delaware
Supervised Service Company, Inc........................................................ Delaware
INVEST Financial Corporation Holding Company (95.1% owned)................................ Delaware
INVEST Financial Corporation........................................................... Delaware
Kemper Investment Management Company Limited.............................................. England
Selected Financial Services, Inc.......................................................... Illinois
Kemper Investors Life Insurance Company..................................................... Illinois
Investors Brokerage Services, Inc......................................................... Delaware
Kemper Securities Holdings, Inc............................................................. Delaware
Kemper Securities, Inc.................................................................... Delaware
Kemper Clearing Corp................................................................... Delaware
Beta Systems Inc.......................................................................... Wisconsin
Carnegie Administration Corp.............................................................. New York
Kemper Asset Leasing Corp................................................................. Delaware
Kemper Mortgage Group, Inc................................................................ Delaware
Gateway Mortgage Acceptance Corporation................................................ Delaware
KFC Portfolio Corp.......................................................................... Delaware
Kemper/Cymrot, Inc........................................................................ Delaware
Kemper/Cymrot Management, Inc.......................................................... Georgia
Kemper Real Estate, Inc................................................................... Delaware
KILICO Realty Corporation................................................................. Illinois
Kemper Portfolio Corp....................................................................... Delaware
FKLA Realty Corporation................................................................... Illinois
</TABLE>
1 Certain designated employees of subsidiaries of KFC own securities
constituting, convertible into or exercisable for approximately 4.3% of the
common stock of KFC as of December 31, 1993.
