SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 3, 1995
KEMPER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-10242 36-6169781
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or
organization)
One Kemper Drive 60049
Long Grove, Illinois
(Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (708) 320-4700
ITEM 5. OTHER EVENTS
A. PLANNED DIVESTITURE OF SECURITIES BROKERAGE SEGMENT
On April 3, 1995, Kemper Corporation (the "Company") announced a plan
to divest its securities brokerage operations. A copy of the
Company's press release dated April 3, 1995 is attached hereto as
Exhibit 20.1 and is incorporated herein by reference.
B. AGREEMENT IN PRINCIPLE
On April 11, 1995, the Company, Zurich Insurance Company ("Zurich")
and Insurance Partners, L.P. and Insurance Partners Offshore
(Bermuda), L.P. (collectively, "Insurance Partners" and together with
Zurich, the "Investor Group") announced that they have reached an
agreement in principle pursuant to which the Company would be acquired
in a merger transaction valued at more than $2.0 billion. A copy of
the Company's and the Investor Group's joint press release dated
April 11, 1995 is attached hereto as Exhibit 20.2 and is incorporated
herein by reference. A copy of the agreement in principle is attached
hereto as Exhibit 10.1 and is incorporated herein by reference.
Also on April 11, 1995, following the announcement of the agreement in
principle, Standard & Poor's Corporation ("S&P") announced that it
revised its BBB senior debt and BB+ preferred stock ratings of the
Company, which S&P had placed under "CreditWatch with 'negative'
implications" in 1994, to BB+ and BB-, respectively, and placed these
ratings on "CreditWatch with 'developing' implications"; Moody's
Investors Service announced that it changed the direction of its
review of its Baa2 senior debt and Baa3 preferred stock ratings of the
Company and Baa1 insurance financial strength ratings of the Company's
life insurance subsidiaries to under review "with direction uncertain"
from "for possible downgrade"; Duff & Phelps Credit Rating Co. advised
the Company that it did not revise its A- senior debt rating of the
Company, AA- claims paying ability rating of Federal Kemper Life
Assurance Company and A+ claims paying ability rating of Kemper
Investors Life Insurance Company from "Rating Watch - Uncertain"; and
A. M. Best Company announced that its A- ratings of the Company's life
insurance subsidiaries remain "under review until a definitive
agreement is signed."
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit No. Page
- ----------- ----
10.1 Agreement in principle dated April 10, 1995 4
among Kemper Corporation, Zurich Insurance
Company, Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P.
20.1 Press release of Kemper Corporation dated 29
April 3, 1995.
20.2 Joint press release of Kemper Corporation, 33
Zurich Insurance Company and Insurance Partners.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
KEMPER CORPORATION
Date: April 11, 1995 By: /s/ JOHN H. FITZPATRICK
-----------------------
John H. Fitzpatrick
Executive Vice President and
Chief Financial Officer
EXHIBIT NO. 10.1
ZURICH INSURANCE COMPANY
INSURANCE PARTNERS, L.P.
INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P.
One Chase Manhattan Plaza
New York, New York 10005
April 10, 1995
Kemper Corporation
1 Kemper Drive
Long Grove, Illinois 60049
Attention: David B. Mathis
Chairman of the Board and
Chief Executive Officer
Ladies and Gentlemen:
Zurich Insurance Company ("Zurich") and Insurance Partners,
L.P. and Insurance Partners Offshore (Bermuda), L.P. (collectively,
"Insurance Partners" and together with Zurich, the "Investor Group")
are pleased to make the following proposal to acquire Kemper
Corporation (the "Company") through a merger transaction and to
acquire in a separate transaction the asset management business of the
Company. To induce the Investor Group to work toward definitive
agreements with respect thereto, the Company and the Investor Group
agree as follows:
1. Description of Proposed Transactions. The proposed
transactions (the "Proposed Transactions") primarily involve the
merger of a corporation owned by the Investor Group with and into the
Company (the "Merger"). In the Merger, the Company's common
stockholders will receive $51 per common share consisting of $47.50 in
cash, 1/10 of 1 share ($2.00 subject to upward adjustment as described
below) of Cumulative Exchangeable Preferred Stock (the significant
terms of which are outlined in Annex A hereto), and an estimated $1.50
in value of common stock from the spin-off of Kemper Securities, Inc.
("KSI") described below.
In addition, a group led by Zurich (or an affiliate of
Zurich) will enter into an agreement to purchase the asset management
business (the "Asset Management Business") of the Company in a
transaction that will close immediately prior to (or, at the Investor
Group's option, after) the Merger (the significant terms of which are
outlined in Annex B hereto). It is agreed that the definitive
agreements shall provide that Zurich will, with the assistance of the
Company, use commercially reasonable efforts (including reasonable
undertakings) to obtain the approval of the requisite new investment
advisory contracts by the boards of trustees/directors of the
registered investment companies for which the Company or any of its
subsidiaries acts as investment advisor or sub-advisor (the "Company
Funds").
We have been informed by the Company that prior to or
simultaneously with the Merger, it will consummate a sale of
approximately 55% of the common stock of a new holding company of KSI
to an ESOP for an expected price of approximately $71.5 million, issue
1% of such common stock to the management of KSI and spin off the
remaining approximately 44% of such common stock for an aggregate
value of approximately $62.5 million (based on the price expected to
be paid by the ESOP for its interest) or approximately $1.50 per
common share (collectively, the "Spin-off"). Prior to the execution
of definitive agreements relating to the Proposed Transactions, the
Company will notify the Investor Group of the terms and conditions of
the Spin-off, which must be reasonably satisfactory to the Investor
Group.
In addition, we anticipate that prior to December 31, 1995,
a significant majority of the real estate assets of the Company's
portfolio companies and life companies (other than the excepted real
estate assets specified on Schedule I hereto (the "Excepted Real
Estate Assets")) will be sold in one or more bulk sale transactions.
We would expect that the buyers would include (i) Brazos Partners,
L.P., (ii) The Praedium Recovery Fund, L.P., an affiliate of our
financial advisor CS First Boston, and/or (iii) other third parties.
In order to maximize the value of the real estate in the sale process,
the life companies will provide financing to the buyers of the real
estate assets on the terms set forth in Schedule I to this letter
agreement. The sale of the real estate assets will not be a condition
of closing, although the Company will be expected to use its best
efforts to arrange for sales that will close on or before December 31,
1995.
The aggregate liquidation preference of the Cumulative
Exchangeable Preferred Stock may be adjusted upward three years after
the closing of the Merger to the extent described on Schedule I to
this letter agreement. Your financial advisor, Goldman, Sachs & Co.,
will participate with our financial advisor, O'Connor and Company, in
the sales process (to be initiated promptly after the signing of the
definitive merger agreement) to seek maximization of proceeds. The
definitive documentation will provide for specific procedures
governing the participation of the parties and their advisors in such
sales process during the period following the signing of the
definitive merger agreement through the closing of the Merger and the
period commencing at the closing of the Merger through the third
anniversary of such closing. Neither Goldman, Sachs & Co. nor
O'Connor and Company shall be a purchaser, or shall represent any
purchaser, of any such real estate assets. For purposes of
determining the aggregate liquidation preference, an appraisal
mechanism will be agreed upon in the definitive documentation to value
any real estate assets that have not been sold within three years
after the closing of the Merger. At the Investor Group's option, the
adjustment may be paid in cash in lieu of increasing the aggregate
liquidation preference of the Cumulative Exchangeable Preferred Stock.
The Investor Group acknowledges that the Company intends to implement
appropriate bonus programs for those employees who will be involved in
the real estate sales process, which bonus programs must be reasonably
satisfactory to the Investor Group.
In the Merger, all shares of the Company's Series A and
Series E preferred stock may be converted into common stock and
receive the merger consideration described above. In the Merger, all
Company stock options will be exercised or terminated and the
Company's 6-7/8% Notes due 2003, 8.8% Notes due 1998, Medium-Term
Notes and Series A, C, D and E preferred stock will remain outstanding
following the Merger. The significant terms and conditions of the
Merger are set forth in Annex B hereto. The consummation of the
Merger will not be subject to any financing conditions. Zurich and
Insurance Partners will sign the definitive merger agreement and
Zurich will guarantee Insurance Partners' obligation to consummate the
merger.
2. Process. To date, we have done substantial due
diligence in a number of areas and our due diligence with respect to
the life insurance and asset management businesses is substantially
complete. We expect to complete our due diligence of these businesses
by April 24, 1995 and we will advise you promptly within such two week
period of our view of any materially adverse matters relating to such
businesses that we have discovered. We believe that with the
continued cooperation of the Company and its advisors, we can complete
our due diligence with respect to the real estate and related assets
and finalize definitive documentation with respect to the Proposed
Transactions by May 8, 1995. After it completes its due diligence,
the Investor Group must be satisfied that the bulk sale net value of
the real estate assets of the Company (other than the Excepted Real
Estate Assets) is at least the threshold amount described in Schedule
I hereto.
3. Publicity. The parties shall make a public
announcement with respect to the transactions contemplated by this
letter agreement in a form approved by all the parties hereto. Except
as required by law, regulation or stock exchange requirements, in no
event will any party make any public announcement or issue any press
release with respect to the transactions contemplated by this letter
agreement without consulting with the other parties as to the content
of such public announcement or press release.
4. No Solicitation. Neither the Company nor any of its
subsidiaries shall, nor shall it or any of its subsidiaries authorize
or permit any of their respective officers, directors or employees, or
any investment banker, financial advisor, attorney, accountant or
other representative retained by the Company or any of its
subsidiaries to, (a) solicit, initiate, encourage (including by way of
furnishing information) or take any other action to facilitate, any
inquiry or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any acquisition or purchase of a
substantial amount of assets of, or any equity interest in, the
Company or any of its subsidiaries or any tender offer (including a
self tender offer) or exchange offer, merger, consolidation, business
combination, sale of substantially all assets, sale of securities,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries or any other
transaction the consummation of which would or could reasonably be
expected to impede, interfere with, prevent or materially delay the
Proposed Transactions or materially dilute the benefits to the
Investor Group of the transactions contemplated hereby (collectively,
"Transaction Proposals") or agree to or endorse any Transaction
Proposal or (b) propose, enter into or participate in any discussions
or negotiations regarding any of the foregoing, or furnish to any
other person any information with respect to its business, properties
or assets or any of the foregoing, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort
or attempt by any other person to do or seek any of the foregoing;
provided, however, that none of the restrictions set forth in clauses
(a) and (b) above shall limit any action by any party relating to
(i) the transactions contemplated by this letter agreement, (ii) the
Spin-off, (iii) the sale of Supervised Service Company, Inc. stock and
related transactions, (iv) the sale of State Street Boston Corporation
shares now owned by a subsidiary of the Company, (v) the sale of the
Company's venture capital portfolio, (vi) sales of real estate and
related assets to third parties in the ordinary course of business
(provided, that prior to entering into any agreement with a third
party relating to the sale of any real estate and related assets, the
Company shall give the Investor Group at least 5 business days written
notice), (vii) the conversion of outstanding securities pursuant to
their terms, or (viii) any sale by the Company of its equity
securities representing less than 30% of the voting power of the
Company in a transaction or series of transactions that does not
contemplate a sale, spin-off or other disposition of all or a portion
of the asset management or life insurance businesses of the Company,
other than the sale of real estate and related assets held by the
Company's life insurance subsidiaries (such equity sale being referred
to as a "Strategic Investment"). Clauses (a) and (b) in the preceding
sentence shall not prohibit the Company from (i) furnishing
information pursuant to an appropriate confidentiality letter
concerning the Company and its businesses, properties or assets to a
third party who has made a Transaction Proposal after the date hereof,
(ii) engaging in discussions or negotiations with such a third party
who has made a Transaction Proposal after the date hereof or
(iii) following receipt of a Transaction Proposal after the date
hereof, taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) under the Securities Exchange Act of
1934, as amended, but in each case referred to in the foregoing
clauses (i) through (iii) only after the Board of Directors of the
Company concludes in good faith following consultation with outside
counsel that such action is necessary for the Board of Directors of
the Company to comply with its fiduciary obligations under applicable
law. If the Board of Directors of the Company receives a Transaction
Proposal or a proposal for a Strategic Investment, then the Company
shall immediately inform the Investor Group of the terms and
conditions of such proposal and the identity of the person making it
and shall keep the Investor Group fully informed of the status and
details of any such proposal and any response to such proposal.
5. Conduct of Business. The Company agrees that it shall
conduct the business of the Company and its subsidiaries in the
ordinary course and that, without the prior written consent of the
Investor Group, the Company and its subsidiaries shall not enter into
any extraordinary transactions. Without the prior written consent of
the Investor Group, neither the Company nor any of its subsidiaries
shall issue any securities (including, without limitation, the
issuance of any stock options, restricted stock or convertible
debentures to employees of the Company or its subsidiaries) other than
(a) the granting of up to 654,750 stock options to employees under
stock option plans currently in effect at an option price equal to the
then market price or (b) in connection with the conversion of
outstanding securities pursuant to their terms or the exercise of
outstanding stock options. Without the prior written consent of the
Investor Group, the Company shall not permit any transfer of real
estate properties between the Company and any of its subsidiaries or
between any subsidiaries of the Company.
6. Expenses. If (a) this letter agreement is terminated
(i) by the Company pursuant to clause (a) of paragraph 7 or (ii) by
the Investor Group pursuant to clause (b) of paragraph 7 or (b) by the
close of business on May 8, 1995, the Investor Group has executed
definitive agreements providing for the per share consideration set
forth in the first paragraph of paragraph 1 of this letter agreement
and containing terms and conditions materially consistent with those
set forth in this letter agreement and Annexes A and B hereto and the
Company has not executed such definitive agreements, then the Company
agrees to pay promptly upon request all Transaction Expenses (as
defined below) of Insurance Partners and Zurich (including, without
limitation, financing expenses and all fees and expenses of each of
their respective advisors (including, without limitation, investment
bankers, lawyers, accountants, real estate advisors and consultants,
actuaries and money management consultants)); provided, however, that
the aggregate amount of Transaction Expenses of Insurance Partners and
Zurich payable by the Company shall not exceed $7.5 million.
"Transaction Expenses" shall mean, with respect to any party, the
expenses of such party (whether or not incurred prior to the date
hereof) arising out of, relating to or incidental to the discussion,
evaluation, negotiation and documentation of this letter agreement and
the transactions contemplated hereby, including, without limitation,
the financing of such transactions. For purposes of this paragraph,
(i) Insurance Partners shall mean Insurance Partners, L.P., Insurance
Partners Offshore (Bermuda), L.P. and their respective affiliated or
related entities and (ii) Zurich shall mean Zurich and its affiliated
or related entities.
7. Termination. If the Company has not yet accepted this
letter agreement, the offer of the Investor Group contained in this
letter agreement shall expire at 7:00 p.m., New York City time, on
April 11, 1995, unless extended by the Investor Group in writing. If
accepted by the Company, this letter agreement shall terminate at the
earliest to occur of (a) at any time by written notice from any party
hereto to the other parties terminating this letter agreement for any
reason whatsoever, (b) at any time by written notice from the Investor
Group to the Company after the Company announces, or enters into any
letter of intent or definitive agreement relating to, any Strategic
Investment or Transaction Proposal and (c) the close of business on
May 8, 1995, or such other later date as the parties may agree, if the
definitive agreements relating to the Proposed Transactions have not
been executed. Upon any such termination, any obligations under this
letter agreement will terminate and no party shall have any liability
whatsoever to any other party; provided, however, that notwithstanding
any such termination, paragraphs 3, 6, 7, 8, 9, 10, 11, 12 and 13
shall remain in full force and effect, and no party shall be relieved
of liability for any breach of any such paragraph.
8. Governing Law. This letter agreement shall be governed
by and construed in accordance with the laws of the State of New York
without regard to conflicts of law principles thereof.
9. Amendment. This letter agreement shall not be amended
except by a written instrument executed by all of the parties hereto.
10. Entire Understanding. This letter agreement (including
the schedules and annexes hereto), the confidentiality agreement dated
December 23, 1994 between Insurance Partners Advisors, L.P. and the
Company (the "Confidentiality Agreement") and that certain letter
agreement dated March 13, 1995 between Insurance Partners Advisors,
L.P. and Zurich referring to and incorporating the terms of the
Confidentiality Agreement, set forth the entire understanding of the
parties with respect to the matters addressed herein.
11. Remedies. Each of the parties acknowledges and agrees
that no failure or delay in exercising any right, power or privilege
hereunder will operate as a waiver thereof, nor will any single or
partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
The parties to this letter, when signed by the Company, further
acknowledge and agree that money damages would not be a sufficient
remedy for any breach hereof, and that the respective non-breaching
parties will be entitled to specific performance as a remedy for any
such breach. Such remedy will not be deemed to be the exclusive
remedy for a breach hereof but will be in addition to all other
remedies available at law or equity to the respective non-breaching
parties.
12. Other. It is understood that this letter agreement and
the Annexes hereto merely set forth a statement of intentions with
respect to the Proposed Transactions, do not contain all matters upon
which agreement must be reached in order for the Proposed Transactions
to be consummated, do not constitute an obligation binding on any
person to complete the Proposed Transactions or enter into definitive
agreements or create rights in favor of any person and no claim shall
be made by any party hereto that any withdrawal from the Proposed
Transactions was not made in good faith and there shall be no
liability to any person on the basis of such claim. A binding
agreement with respect to the Proposed Transactions will result only
from the execution of definitive agreements with respect thereto and
will be entirely subject to the terms and conditions contained
therein. Notwithstanding the foregoing and notwithstanding anything
to the contrary in the Confidentiality Agreement between the Company
and Insurance Partners Advisors, L.P., the provisions of paragraphs 3,
4, 5, 6, 7, 8, 9, 10, 11, 12 and 13 are acknowledged and agreed to be
fully binding on the parties hereto.
13. Counterparts. This letter agreement may be executed in
one or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same
instrument.
Please confirm that the foregoing accurately sets forth our
agreement by executing this letter agreement and returning
it to Insurance Partners Advisors, L.P., One Chase Manhattan Plaza,
New York, New York 10005.
Very truly yours,
ZURICH INSURANCE COMPANY
By:
----------------------------
Name:
Title:
INSURANCE PARTNERS, L.P.
By: Insurance GenPar L.P., its general
partner
By: Insurance GenPar MGP, L.P., its general
partner
By: Insurance GenPar MGP, Inc., its general
partner
By:
---------------------------------
Name:
Title:
INSURANCE PARTNERS OFFSHORE (BERMUDA), L.P.
By: Insurance GenPar (Bermuda) L.P.,
its general partner
By: Insurance GenPar (Bermuda) MGP, L.P.,
its general partner
By: Insurance GenPar (Bermuda) MGP, Ltd.,
its general partner
By:
---------------------------------
Name:
Title:
Accepted and agreed to on this 10th day of
April, 1995 by:
KEMPER CORPORATION
By:
---------------------------------
Name:
Title:
Annex A
CUMULATIVE EXCHANGEABLE PREFERRED STOCK
SUMMARY OF TERMS
Issuer: Kemper Corporation (which, after the
proposed transactions, will own
through its subsidiaries, only the
life insurance business) (the "Issuer").
Issuance: Issuer common stockholders will receive in
the merger described in the letter to which
this Annex is attached.
Issue: Cumulative Exchangeable Preferred Stock (the
"Preferred Stock").
Amount: $83,396,000 ($2.00 per share of outstanding
common stock of Kemper premerger).
Number of Shares: 4,169,800
Liquidation $20.00 per share, subject to adjustment as
Preference: provided below (the "Liquidation
Preference").
Adjustment of The Liquidation Preference of the Preferred
Liquidation Stock may be adjusted upward three years
Preference: after the closing of the Merger as described
on Schedule I to the aforesaid letter
agreement. The net aggregate value received
from all sales of real estate assets (except
the excepted Real Estate Assets) after
January 1, 1995 shall be included in
determining the Liquidation Preference. For
purposes of determining the Liquidation
Preference, an appraisal mechanism will be
agreed upon in the definitive documentation
to value any real estate assets that have not
been sold within three years after the
closing of the Merger. At the Issuer's
option, the adjustment may be paid in cash in
lieu of increasing the Liquidation
Preference.
Maturity: Perpetual
Dividends: At a rate per annum of 11.25% of the
Liquidation Preference, which shall (i) for
7 years after the closing date (the "Closing
Date"), (a) accumulate and compound
semi-annually or (b) be paid in cash
semi-annually at the option of the Issuer,
and (ii) thereafter be payable in cash
semi-annually.
Optional Will be redeemable, at the option of the
Redemption: Issuer, in whole or in part, at any time
after 3 years from the date of issuance (but
in no event earlier than the Adjustment
Date), at the redemption price indicated in
the table below plus accrued and unpaid
dividends to the redemption date.
Percentage of
Liquidation
Preference
Year 3 108.0%
Year 4 106.0%
Year 5 104.0%
Year 6 102.0%
Year 7 and after 100.0%
Ranking: The dividends and liquidation preferences of
the Preferred Stock will rank junior to all
indebtedness and to the Issuer's Series A, C,
D and E preferred stock and newly issued
preferred stock (other than any series
expressly ranked pari passu or junior to the
Preferred Stock). The series of preferred
stock issued to the Investor Group in
connection with the Merger will rank
junior to the Preferred Stock and the terms
of such series will provide that such series
cannot be redeemed prior to the redemption of
the Preferred Stock.
Except as otherwise provided under Delaware
law and under "Failure to Pay Dividends"
below, the Preferred Stock will not be
entitled to any vote.
Exchangeable: At the Issuer's option, at any time after the
Adjustment Date, the Preferred Stock and
accumulated and unpaid dividends are
exchangeable, in whole or in part, into an
aggregate principal amount of junior
subordinated debt equal to the Liquidation
Preference and accumulated and unpaid
dividends of the Preferred Stock so
exchanged. The junior subordinated debt will
have a maturity date that is 15 years after
the Closing Date. The junior subordinated
debt will rank junior to all indebtedness of
the Issuer (including indebtedness issued on
or after the aforesaid merger transaction)
other than indebtedness whose terms provide
that it is not senior to the junior
subordinated debt. Interest on the junior
subordinated debt will be equal to the
dividend rate on the Preferred Stock, payable
semi-annually in additional junior
subordinated debentures or cash, at the
Issuer's option, for 7 years after closing
and thereafter payable in cash. The
junior subordinated debt shall be redeemable
upon the same terms as the Preferred Stock.
The terms of the junior subordinated debt
will not contain a provision for cross-
default to other indebtedness.
Acceleration: The junior subordinated debt into which the
Preferred Stock is exchanged will be
accelerated if and only if any other debt
with a principal amount greater than $50
million is accelerated, subject to
subordination provisions.
Failure to Pay If the Issuer fails to pay 3 consecutive
Dividends: dividends, the holders of Preferred Stock
will be able to elect 2 directors.
Transferability: The Preferred Stock will be issued to the
Issuer's stockholders under an effective
registration statement.
Covenants: The indenture for the junior subordinated
debt shall include incurrence of indebtedness
and restricted payment covenants. There will
be a merger, consolidation, sale of assets
and bulk reinsurance covenant in the
Certificate of Designation for the Preferred
Stock and indenture for the junior
subordinated debt.
Put Right: In the event of a Designated Event (to be
defined), the Company shall offer to
repurchase all of the Preferred Stock and
junior subordinated debt at a purchase price
equal to 101% of the Liquidation Preference
or aggregate principal amounts, plus
accumulated and unpaid dividends and
interest. A Designated Event shall include
any transfer of shares of common stock of the
Issuer by Zurich during the period ending on
the fifth anniversary of the closing of the
Merger if such transfer results in Zurich and
its affiliates owning less than 49% of the
outstanding common stock of the Issuer.
Annex B
KEMPER MERGER
SUMMARY OF TERMS
Company: Kemper Corporation (the "Company").
Buyer: An entity to be formed by Zurich Insurance
Company or an affiliate thereof ("Zurich"),
Insurance Partners, L.P. and Insurance
Partners Offshore (Bermuda), L.P.
(collectively, the "Buyer").
Form of The Buyer will merge with and into the
Transaction: Company, with the Company being the surviving
corporation (the "Merger").
Merger Each share of Company common stock
Consideration: outstanding (other than dissenters' shares)
will be converted into $47.50 in cash, 1/10
of 1 share ($2.00, subject to adjustment) of
Cumulative Exchangeable Preferred Stock
(described in Annex A) and $1.50 of
common stock from the spin-off of the
Company's securities business (the
"Spin-off").
Definitive The transaction is subject to negotiation,
Agreements: execution and delivery of definitive
agreements setting forth the terms of the
Merger. Prior to the execution of definitive
agreements, the Company's stockholder rights
plan will be amended so that the execution
and delivery of the definitive agreements by
the Buyers and its affiliates and the
consummation of the Merger will be exempted
from the provisions of the stockholder rights
plan.
Representations, Customary for transactions of this nature
Warranties (including no-shop, expense reimbursement and
and Covenants: break-up fee provisions, which will be
different from the terms set forth in letter
agreement to which this Annex B is attached)
involving the sale of a publicly owned
corporation. There will be no survival of
any representations, warranties or covenants
by the Company. The surviving corporation
shall provide the directors and officers of
the Company with customary indemnification
and ongoing directors and officers insurance
protection for six years following the
closing of the transaction.
Asset Simultaneously with the negotiation of
Management definitive agreements setting forth the terms
Transaction: of the Merger, the Company and a group led by
Zurich (or an affiliate thereof) (the
"Purchaser") will negotiate the terms of the
sale of the Company's asset management
businesses to the Purchaser (the "Asset
Management Transaction"). The Buyer will
also participate in such negotiations. Such
agreement will include representations,
warranties and covenants consistent with the
representations, warranties and covenants
relating to the asset management businesses
set forth in the Merger Agreement.
The execution and delivery of the definitive
agreements relating to the Asset Management
Transaction are anticipated to occur
simultaneously with the execution and
delivery of the definitive agreements
relating to the Merger.
Closing The closing conditions to the Merger and the
Conditions: Asset Management Transaction will be
substantially identical. A closing condition
to the Merger shall be the consummation of
the Asset Management Transaction (except if
the failure to consummate is due to a breach
by the Purchaser or if the Buyer elects to
have the Asset Management Transaction
consummated after the Merger). A closing
condition to the Asset Management Transaction
shall be the satisfaction or waiver of the
closing conditions of the Merger. The
consummation of the Merger will occur
immediately after (or, at Buyer's election,
prior to) the consummation of the Asset
Management Transaction.
Conditions to closings of both the Merger and
the Asset Management Transaction will
include, without limitation: (i) consummation
of the Spin-off; (ii) requisite Company
stockholder approval of the transactions
(with no appraisal rights asserted other than
by the holders of no more than 5% of the
Common Stock); (iii) the absence of new
material litigation relating to the Company
and its subsidiaries or relating to the asset
management business; (iv) no material adverse
changes with respect to litigation
outstanding on date of agreement shall have
occurred; (v) prior or simultaneous
redemption of Kemper Financial Companies'
("KFC") convertible debentures and
repurchase of KFC minority shareholders'
shares and options at satisfactory prices;
(vi) requisite regulatory approvals;
(vii) Hart-Scott-Rodino compliance;
(viii) approval of the transaction by
the respective board of trustees/directors of
the Company Funds and the holders of a
majority of the outstanding voting securities
of Company Funds which, as of April 30, 1995,
represent at least 90% of all of the net
assets of all of the Company Funds (including
the approval of disinterested
trustees/directors) and the approval of the
advisory clients of the asset management
business representing at least 80% of all of
the net assets of unaffiliated entities held
under management as of April 30, 1995;
(ix) Lumbermens Mutual Casualty Company shall
have consented to the continued use of the
"Kemper" name in the asset management
business following the consummation of the
Asset Management Transaction on terms
satisfactory to the Purchaser and, to the
extent required, shall have waived any
existing non-compete provisions that may
relate to the Buyer, the Purchaser and their
affiliates; (x) an effective registration
statement relating to the issuance of the
shares of Cumulative Exchangeable Preferred
Stock in the Merger and no stop order (or
proceedings with respect thereto) shall have
been issued or be pending; (xi) (a) no
default (other than a covenant default),
(b) no covenant default (with respect to
which a valid notice of default has been
given) and (c) no event of default (each as
defined in the indentures governing) under
the Company's public indebtedness and medium
term notes existing at the closing;
(xii) exercise or termination of all Company
stock options; (xiii) the absence of a
material adverse change in the business,
operations, or financial condition of the
Company and its subsidiaries as a
whole or of any material subsidiary from and
after December 31, 1994 (provided that the
occurrence of one or more of the matters
listed in Schedule II hereto shall not be
deemed to constitute such a material adverse
change); (xiv) no material breach by the
Company of representations and covenants in
the merger agreement or the definitive
agreements relating to the Asset Management
Transaction; and (xv) other customary closing
conditions.
EXHIBIT NO. 20.1
FOR IMMEDIATE RELEASE
April 3, 1995
FOR MORE INFORMATION:
Ira Nathanson
708/320-4463 or
Bob Schuerings (Kemper Corporation)
708/320-4808
Janice Kalmar (Kemper Securities)
312/574-6151
KEMPER TO DIVEST BROKERAGE BUSINESS
IN ESOP AND STOCKHOLDER DIVIDEND TRANSACTION
LONG GROVE, IL (April 3) -- Kemper Corporation (NYSE: KEM) today
announced it has approved a plan to divest the company's securities
brokerage segment in a transaction that would sell majority ownership
of the nation's 10th largest securities brokerage firm to its
employees.
In the proposed transaction, a Kemper Securities employee stock
ownership plan (ESOP) would purchase for cash an approximate 55
percent interest in the brokerage unit. Approximately 44 percent of
the unit would be spun-off to Kemper Corporation stockholders as stock
in a new publicly held/publicly traded company. The final 1 percent
interest would be issued to Kemper Securities management in the form
of nonvoting common stock.
- -more-
The ESOP is expected to pay Kemper approximately $72 million for
the 55 percent interest. The value derived by Kemper Corporation
stockholders who will receive 44 percent of the brokerage firm in a
property dividend would be determined when the stock of the new firm
begins to trade publicly later this year.
Kemper Corporation anticipates the impact of the transaction on
1995 earnings to be a loss on discontinued operations of approximately
$70 million, net of certain tax benefits. It expects stockholders'
equity to decline by approximately $127 million, attributable in part
to the direct dividend to stockholders.
As part of the transaction, Kemper would convert to equity all
intercompany debt owed by the securities brokerage segment, purchase
certain illiquid securities at fair value and retain four litigation
matters, none of which is expected to have a material effect on Kemper
Corporation.
"This innovative transaction clearly serves the best interests of
Kemper Corporation stockholders. We believe it represents the most
efficient and economically attractive way to realize value now from
the brokerage segment while at the same time providing stockholders
with an opportunity to participate directly in the future growth of a
financially restructured and strengthened securities firm," said David
B. Mathis, chairman and chief executive officer of Kemper Corporation.
- -more-
"Kemper has been actively considering alternatives with regard to
its operating units for several months. This planned sale of the
brokerage unit is an outgrowth of this ongoing process. Our goal is
to conclude this process as rapidly as possible," he said.
The operating companies to be included in the transaction are
Kemper Securities, Inc., Kemper Clearing Corp. and Beta Systems Inc.
Kemper Securities' management will remain in place. James R.
Boris will continue as chairman and chief executive officer and
Stephen G. McConahey as president and chief operating officer.
"This transaction provides a unique opportunity for all of our
employees to share in the firm's ownership and wealth building
potential," Boris said. "It also allows the management team to
implement its vision of building the nation's premier superregional
securities brokerage firm, emphasizing our regional roots and
commitment to service excellence."
Boris said the new entity will have an improved capital position,
be debt-free, excluding bank financing for the ESOP loan and working
capital, and will have significantly higher earnings potential. He
expects the new company will continue its solid relationships with the
Kemper Corporation asset management and life insurance units and
continue to provide an important ongoing channel of distribution for
Kemper products.
- -more-
The transaction is subject to regulatory approval. The ESOP
financing is to be provided by a syndicate of banks. The company
expects the transaction to close in approximately 90 days, at which
time Kemper Securities would change its name. The property dividend
record and payment dates for Kemper Corporation stockholders also will
be announced at a future date.
Kemper Corporation is a holding company with principal
subsidiaries in asset management, life insurance and securities
brokerage.
Based in Chicago, Kemper Securities is the nation's 10th largest
securities brokerage firm with nearly 1,300 investment consultants in
27 states.
EXHIBIT NO. 20.2
FOR IMMEDIATE RELEASE
April 11, 1995
FOR MORE INFORMATION:
Ira Nathanson 708/320-4463 Kemper
Bob Schuerings 708/320-4808 Kemper
Elizabeth Ventura 212/898-5050 Zurich Insurance Group
Owen Blicksilver 212/546-2240 Insurance Partners
ZURICH INSURANCE GROUP AND INSURANCE PARTNERS ENTER INTO AN AGREEMENT
IN PRINCIPLE TO ACQUIRE KEMPER CORPORATION
ZURICH, SWITZERLAND, NEW YORK, NY, SCHAUMBURG, IL AND LONG GROVE,
IL (April 11) -- Kemper Corporation (NYSE: KEM) and an Investor Group
comprised of Zurich Insurance Group and Insurance Partners today
announced that they have reached an agreement in principle pursuant to
which Kemper Corporation would be acquired in a merger transaction
valued at more than $2.0 billion.
- -more-
In the transaction, Kemper common stockholders would receive
$47.50 per share in cash and 11 and 1/4 percent cumulative
exchangeable preferred stock with a liquidation preference equal to
$2.00 per Kemper share, subject to upward adjustment after three years
depending on certain real estate values. Prior to closing, Kemper
would complete its previously announced ESOP sale and related spin off
of its securities brokerage operations. Including the estimated value
of the spin off, the total value to Kemper stockholders from these
transactions should approximate $51.00 per share.
As part of the transaction, Zurich would purchase Kemper
Financial Services, one of the largest asset managers in the country
with more than $60 billion in assets under management. Following this
purchase, Kemper Corporation, which will include its life insurance
subsidiaries and real estate holdings, would be majority owned by the
Zurich Insurance Group.
A definitive agreement is expected in early May, subject to the
completion of the Investor Group's due diligence. The definitive
agreement would not be subject to any financing contingency. It would
be subject to, among other things, Kemper Corporation board and common
stockholder approvals, Zurich board approval, Kemper mutual fund
boards and shareholder approvals, regulatory approvals and other
customary conditions. Although there can be no assurance that a
definitive agreement will be reached, the transaction is expected to
close early in the fourth quarter of 1995.
- -more-
The Investor Group includes the Zurich Insurance Group, the
multi-billion dollar Swiss insurer, and Insurance Partners, whose
major partners include Centre Reinsurance Holdings Limited (a
subsidiary of Zurich); Keystone, Inc. (formerly the Robert M. Bass
Group); and the Chase Manhattan Corporation.
Kemper Investors Life Insurance Company and Federal Kemper Life
Assurance Company will continue to underwrite term, universal, fixed
and variable annuities and other life insurance related products as
independent entities owned by the Investor Group. Zurich expects to
strategically align its existing U.S. life insurance business with the
Kemper life operations. Kemper's retail and institutional asset
management activities will play an important role in Zurich's global
financial services strategy. Zurich and Insurance Partners will
dispose of the majority of Kemper's real estate holdings.
Rolf Hueppi, president and chief executive officer of Zurich
Insurance, stated, "We are very pleased to be acquiring the very high
quality life insurance and investment management businesses of Kemper,
which fit perfectly into Zurich's long-established strategy in the
insurance and financial services businesses. The strong franchise of
Kemper Corporation is a great addition to the Zurich network in the
U.S." Zurich has been expanding its range of asset accumulation
activities as part of its customer-focused global strategy in the
financial services arena.
Mr. Hueppi continued, "In North America in particular, the
integration of the asset management and life insurance industries is
well under way as individual customers become more and more
- -more-
aware of the importance of prudent financial planning and savings
in general. The Kemper name, stature, and expertise in life and
annuity products, as well as retail mutual funds, complemented by the
financial strength and reputation of our Group, can be expected to
make us a significant player in these important growth areas."
David B. Mathis, chairman and chief executive officer of Kemper
Corporation, stated, "The Kemper board of directors unanimously
concluded that this transaction is in the best interest of our
stockholders. The Zurich Insurance Group is a well-established, well-
respected and highly rated global company with significant financial
resources, which can help us continue to grow and to serve our mutual
fund shareholders, policyholders and other customers. We also believe
it is beneficial for our employees and the communities in which we
operate."
Zurich Insurance Group is an internationally recognized market
leader in life and non-life insurance, financial services and
reinsurance. Headquartered in Zurich, Switzerland, the Group operates
offices in more than 40 countries worldwide and offers customers
global coverage in all lines of insurance. Zurich had worldwide
premium writings of approximately $17 billion in 1993 and over $60
billion in assets at year-end 1993.
Insurance Partners is an investment partnership formed in
February 1994 to sponsor acquisitions and other structured
transactions in the property-casualty and life insurance industries in
the U.S. and abroad. The partnership's committed capital is $540
million. In its first year of operations,
- -more-
Insurance Partners played critical roles in transactions involving
Continental Corporation, Home Holdings, Inc., and a major corporate
syndicate at Lloyd's. Insurance Partners Advisors, L.P. of New York
is the partnership's advisor.
Kemper Corporation, headquartered in Long Grove, IL, is a
financial services holding company with principal operations in asset
management and life insurance. Kemper Corporation has approximately
$98 billion in life insurance in force, has the nation's 11th largest
mutual fund family with $42 billion in mutual fund assets under
management, and also manages $21 billion in assets for Kemper's life
insurance companies and other institutional customers.
- - 37 -
