<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KEMPER CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
KEMPER CORPORATION
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:1
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(4) Proposed maximum aggregate value of transaction:
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/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
--------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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-------------------------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
[LOGO]
KEMPER CORPORATION
Long Grove, Illinois 60049--Telephone (708) 320-4700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS--MAY 17, 1995
March 30, 1995
To Our Stockholders:
The 1995 Annual Meeting of Stockholders of Kemper Corporation (the "Company")
will be held at 10:30 a.m. on Wednesday, May 17, 1995, in the Stockholders
Meeting Room on the 57th floor of The First National Bank of Chicago, One First
National Plaza (intersection of Clark and Madison), Chicago, Illinois. The
meeting is called for the purpose of considering and acting upon:
1. The election of directors.
2. The ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors for 1995.
3. The transaction of such other business as may properly come before the
meeting or any adjournment(s) or postponement(s) thereof.
The close of business on March 24, 1995 was fixed by your Board of Directors as
the record date for the determination of stockholders entitled to notice of the
annual meeting and having the right to vote at the meeting.
The Board of Directors appreciates the interest of the stockholders in the
Company's affairs and encourages those entitled to vote at this annual meeting
to take the time to do so. Please complete, date and sign the enclosed proxy
card and return it promptly. A self-addressed return envelope, requiring no
postage if mailed in the United States, is enclosed for your use. You may revoke
your proxy at any time before the authority granted by it is exercised. If you
attend the annual meeting, you may vote in person although you have previously
returned an executed proxy.
By Order of the Board of Directors
Kathleen A. Gallichio
Corporate Secretary
<PAGE> 3
-- IMPORTANT --
If your shares are held in "street name," only your bank or broker can vote your
shares. Please contact the person responsible for your account and instruct him
or her to vote the proxy card as soon as possible.
If you have any questions or need further assistance in voting your shares,
please call Kemper Corporation's proxy solicitor,
GEORGESON & COMPANY INC.
(toll free) at 1-800-223-2064.
<PAGE> 4
KEMPER CORPORATION
Long Grove, Illinois 60049--Telephone (708) 320-4700 [LOGO]
PROXY STATEMENT AND FORM OF PROXY DATED MARCH 30, 1995,
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 17, 1995
GENERAL INFORMATION
This proxy statement is being used in connection with the solicitation of
proxies on behalf of the Board of Directors for use at the 1995 Annual Meeting
of Stockholders of Kemper Corporation (the "Company") on May 17, 1995. Only the
holders of the Company's common shares are entitled to vote at the annual
meeting, and such stockholders are being asked to vote upon: (i) the election of
directors and (ii) the ratification of the appointment of KPMG Peat Marwick LLP
as independent auditors for the Company for 1995. This proxy statement and the
accompanying proxy card are first being mailed to stockholders on or about April
3, 1995.
Proxy cards properly executed and received prior to the time of the annual
meeting will be voted as directed. If no direction is made, the proxy will be
voted "FOR" any proposal for which no direction is indicated. Although a
stockholder may have submitted a proxy, such stockholder may vote in person at
the annual meeting if he or she desires. A stockholder voting by means of the
enclosed proxy card has the power to revoke it at any time before it is
exercised by delivering a written notice of revocation or a duly executed proxy
bearing a later date to the corporate secretary of the Company at the address of
the Company set forth above or by attending the annual meeting and voting in
person. Attendance at the annual meeting will not in and of itself constitute
revocation of a proxy.
As of the close of business on March 24, 1995, the record date for the
determination of stockholders entitled to vote at the annual meeting, there were
34,506,708 shares of Kemper Corporation $5.00 par value common stock issued and
outstanding. Each share of common stock issued and outstanding on the record
date entitles the holder to one vote on each matter to be acted upon at the
annual meeting. The presence in person or by proxy of a majority of the
outstanding shares of common stock will constitute a quorum for the transaction
of business at the annual meeting.
1
<PAGE> 5
As of March 24, 1995, the following were the only persons known to management
who may be deemed to beneficially own more than 5 percent of the Company's
outstanding voting securities:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF PERCENT
TITLE OF NAME AND ADDRESS BENEFICIAL OF
CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS(a)
------------- ------------------------------------ -------------- -----
<S> <C> <C> <C>
Common Stock Franklin Resources, Inc. 3,004,044(b) 8.7%
($5 par 777 Mariners Island Blvd.
value) P.O. Box 7777
San Mateo, California 94403-7777
Common Stock Southeastern Asset Management, Inc. 2,242,720(c) 6.5%
($5 par 860 Ridgelake Boulevard
value) Memphis, Tennessee 38120
</TABLE>
---------------
(a) Based on the number of shares of Kemper Corporation common stock outstanding
on March 24, 1995 and an assumption that share totals beneficially owned
have remained equal to those last reported to the Company.
(b) Franklin Resources, Inc. has reported that, at December 31, 1994, it or its
investment advisory subsidiaries had sole voting power as to 2,821,444
shares, shared voting power as to 182,600 shares, sole dispositive power as
to no shares and shared dispositive power as to 3,004,044 shares.
(c) Southeastern Asset Management, Inc. has reported that, at December 31, 1994
and as an investment advisor to various discretionary and non-discretionary
accounts of its clients, it had sole voting power as to 1,696,720 shares,
shared voting power as to 500,000 shares, no voting power as to 46,000
shares, sole dispositive power as to 1,742,720 shares and shared dispositive
power as to 500,000 shares.
2
<PAGE> 6
ELECTION OF DIRECTORS
The Company's Second Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), provides that the Board of Directors shall be
divided as nearly as possible among three equal classes which are designated as
Class I, II or III, with each class serving for a three-year term of office. Any
person elected to fill a vacancy or a newly-created directorship holds office
for the remainder of the full term of the class to which such person is elected.
On March 16, 1995, the Board of Directors nominated J. Reed Coleman, Raymond F.
Farley, Richard D. Nordman and Stephen B. Timbers, the current Class I
directors, to stand for re-election at the annual meeting and, if elected, to
hold office until the 1998 Annual Meeting of Stockholders of the Company.
Also on March 16, 1995, the Company's Board of Directors, on the recommendation
of its Nominating Committee, reduced the number of members of the Board of
Directors to 11 in accordance with the Certificate of Incorporation. The Board
of Directors agreed that reducing the size of the board was advisable, in lieu
of filling a vacancy created by the February 1995 resignation of Charles M.
Kierscht, previously a Class III director, due to the ongoing uncertainties with
respect to the Company's future ownership in the context of the process to
maximize stockholder value and thus the potentially abbreviated term of office
any replacement director may be required to serve. Pending resolution of the
Company's ownership situation, the Board of Directors does not presently
contemplate any near-term changes in board size or composition.
The persons named on the enclosed proxy card (Peter B. Hamilton, George D.
Kennedy and David B. Mathis) have agreed to represent stockholders submitting
properly executed proxy cards and to vote for the election of the four nominees
listed herein, unless otherwise directed by the authority granted or withheld on
the proxy cards. Although the Board of Directors has no reason to believe that
any of the nominees will be unable to serve as directors, if any one or more of
the nominees shall not be available for election, the persons named on the proxy
card have agreed to vote for the election of such other nominees as may be
proposed by the Board of Directors. The names of the four nominees for election
at this annual meeting, the names of the directors whose terms continue after
the meeting and the principal occupations of all such persons during the past
five years are as follows:
<TABLE>
<CAPTION>
NOMINEES TO BE ELECTED FOR TERMS EXPIRING AT THE 1998 ANNUAL MEETING (CLASS I):
<S> <C>
J. Reed Coleman Age 61
Chairman of the Board of Madison-Kipp Corporation, Madison, WI Director since 1968
(manufacturer of precision components serving the automotive
and durable goods industries). Director of the Kemper National
Insurance Companies, Lunar Corp., Madison-Kipp Corporation,
NIBCO, Inc., Regal-Beloit Corporation and Xeruca Corporation.
Raymond F. Farley Age 70
Corporate Director. Prior to January 1990, President and Chief Director since 1983
Executive Officer of S.C. Johnson & Son, Inc., Racine, WI
(manufacturer of household and commercial cleaners, wax,
insecticides and personal care products). Director of Hartmarx
Corporation, Johnson International, Inc., Johnson Worldwide
Associates and Snap-On Incorporated.
Richard D. Nordman Age 48
President and Chief Operating Officer of Lawter International, Director since 1989
Inc., Northbrook, IL (manufacturer of products for the graphic
arts, adhesives and coatings industries). Director of Lawter
International, Inc.
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
Stephen B. Timbers Age 50
President and Chief Operating Officer of Kemper Corporation Director since 1992
since September 1992; Chief Investment Officer of Kemper
Corporation from May 1991 until May 1993. Chairman of the
Board, President and Chief Executive Officer of Kemper
Financial Companies, Inc. ("KFC") since March 1995. Chairman
and Chief Executive Officer of Kemper Financial Services, Inc.
("KFS") since February 1995; prior thereto, Senior Executive
Vice President and Chief Investment Officer of KFS until
November 1993. President and trustee of the registered
investment companies managed by KFS. Director of KFC, several
other Company subsidiaries, Gillett Holdings, Inc. and LTV
Corporation.
<CAPTION>
DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT THE 1996 ANNUAL MEETING (CLASS III):
<S> <C>
John H. Fitzpatrick Age 38
Executive Vice President and Chief Financial Officer of Kemper Director since 1990
Corporation since May 1993; prior thereto, Senior Vice
President and Chief Financial Officer from May 1990; prior
thereto, Vice President. Executive Vice President and Chief
Financial Officer of KFC since January 1994. Director of KFC
and several other Company subsidiaries.
Peter B. Hamilton Age 48
Vice President and Chief Financial Officer of Cummins Engine Director since 1992
Company, Inc., Columbus, IN (manufacturer of diesel engines and
related products). Director of various corporations that are
wholly-owned by Cummins Engine Company, Inc.
Daniel R. Toll Age 67
Corporate and civic director. Director of Brown Group, Inc., Director since 1986
A.P. Green Industries, Inc., Mallinckrodt Group Inc., the
Kemper National Insurance Companies, Lincoln National
Convertible Securities Fund, Inc., Lincoln National Income
Fund, Inc. and NICOR, Inc.
<CAPTION>
DIRECTORS CONTINUING IN OFFICE WITH TERMS EXPIRING AT THE 1997 ANNUAL MEETING (CLASS II):
<S> <C>
John T. Chain Jr. Age 60
Executive Vice President, Burlington Northern Railroad Co., Director since 1991
Fort Worth, TX (transportation) since January 1991; prior
thereto, Commander in Chief, Strategic Air Command, and
Director, Joint Strategic Target Planning Staff. Director of
Northrop Corporation, RJR Nabisco Holdings and various
subsidiaries of Burlington Northern Railroad Co.
George D. Kennedy Age 68
Corporate Director. Prior to November 1994, Chairman of Director since 1982
Mallinckrodt Group Inc. (formerly, IMCERA Group, Inc.),
Mundelein, IL (mining, manufacturing). Director of American
National Can Company, Brunswick Corporation, Illinois Tool
Works, Inc., the Kemper National Insurance Companies, Scotsman
Industries, Inc. and Stone Container Corp.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
David B. Mathis Age 56
Chairman of the Board and Chief Executive Officer of Kemper Director since 1989
Corporation since February 1992; prior thereto, President and
Chief Operating Officer from May 1990 to September 1992; prior
thereto, Executive Vice President. Director of IMC Global Inc.,
KFC and several other Company subsidiaries, and trustee of the
registered investment companies managed by KFS.
Kenneth A. Randall Age 67
Corporate Director. Director of Dominion Resources, Inc., Director since 1981
Dominion Energy, Inc., Enron/Dominion Cogen Corporation and
Prime Retail, Inc., and trustee of the principal Oppenheimer
mutual funds.
</TABLE>
Messrs. Chain, Coleman, Farley, Hamilton, Kennedy, Mathis, Nordman, Randall and
Toll are presently directors of Fidelity Life Association, a Company-affiliated
mutual life insurance company ("FLA").
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table shows the shares of Kemper Corporation common stock
beneficially owned as of February 1, 1995 by the directors, nominees and other
persons within the group of five most highly-compensated executive officers of
the Company during 1994, and by all directors, nominees and the executive
officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES OF $5 PAR VALUE COMMON PERCENT
NAME OF BENEFICIAL OWNER STOCK BENEFICIALLY OWNED OF CLASS
----------------------------- ------------------------------ --------
<S> <C> <C>
John T. Chain Jr. 8,000(1) *
J. Reed Coleman 1,518,098(1)(3)(4)(5) 4.4%
Raymond F. Farley 8,750(1) *
John H. Fitzpatrick 145,845(2)(5) *
Peter B. Hamilton 7,000(1) *
George D. Kennedy 1,500,098(1)(4) 4.3%
David B. Mathis 300,156(2) *
Richard D. Nordman 9,000(1) *
Kenneth A. Randall 9,701(1) *
Stephen B. Timbers 99,000(2) *
Daniel R. Toll 1,501,098(1)(4) 4.4%
James R. Boris 51,409(2)(5) *
Robert T. Jackson(6) 51,762(2)(5) *
Charles M. Kierscht(6) 84,160(2)(7) *
Directors, nominees and executive
officers as a group (19
persons, including the above) 2,596,505(2)(4) 7.5%
</TABLE>
-------------------------
* Less than 1% of the shares outstanding on March 24, 1995.
(1) Includes 8,000 shares which each of Messrs. Coleman, Farley, Kennedy,
Nordman, Randall and Toll, 7,000 shares which General Chain, and 6,000
shares which Mr. Hamilton, can acquire under stock options granted pursuant
to the Kemper Corporation Non-Management Director Stock Option Plan.
All of such options became exercisable in full when the approval in June
1994 of a merger agreement among the Company, Conseco, Inc., an Indiana
corporation ("Conseco"), and a wholly owned subsidiary of Conseco, pursuant
to which the Company would have been acquired by Conseco (the "Conseco
Merger Agreement"), activated certain "change of control" accelera-
5
<PAGE> 9
tion provisions under such plan. The directors as a group can thus
presently acquire 61,000 shares under these stock options. The Conseco
Merger Agreement was terminated, with the mutual consent of the parties, in
November 1994.
(2) Includes the following number of shares which the following persons or
group have the right to acquire pursuant to stock options granted under the
Kemper Corporation 1982 Incentive Stock Option Plan, 1985 Amended Stock
Option Plan or 1990 Stock Option Plan: Mr. Fitzpatrick, 132,540 shares; Mr.
Mathis, 256,765 shares; Mr. Timbers, 91,000 shares; Mr. Boris, 43,218
shares; Mr. Jackson, 43,757 shares; Mr. Kierscht, 63,680 shares; and all
directors and executive officers as a group, 886,285 shares. All of such
options became exercisable in full in connection with the approval of the
Conseco Merger Agreement in June 1994.
(3) Excludes 6,592 shares held in several trusts created by Lumbermens Mutual
Casualty Company ("Lumbermens"), principal company of the Kemper National
Insurance Companies, for the prospective retirement benefit of certain
Lumbermens officers. As a member of the distribution committee of these
trusts, Mr. Coleman presently shares voting and investment power over, but
disclaims beneficial ownership of, such shares.
(4) Includes 1,492,098 shares held by Lumbermens, the James S. Kemper
Foundation, American Manufacturers Mutual Insurance Company ("AMM"),
another of the Kemper National Insurance Companies, and several trusts
established for the benefit of Lumbermens' officers which certain of the
Company's directors, to the extent they are also members of Lumbermens' or
AMM's boards of directors, or trustees of the foundation, could be deemed
to control either through voting or dispositive power. Such directors
disclaim beneficial ownership of such shares.
(5) Includes shares owned by or for the benefit of the spouse, minor children
or other relatives of the director, nominee or executive officer.
(6) In February 1995, Mr. Kierscht resigned from the Company's Board of
Directors, as well as his positions as a Company executive officer and his
various subsidiary capacities, and Mr. Jackson resigned as a Company
executive officer as well as his various subsidiary positions.
(7) At the date of his resignation, Mr. Kierscht beneficially held stock and
other forms of equity interests in KFC, a publicly-reporting subsidiary of
the Company, all of which are now subject to mandatory redemption in
accordance with their respective terms due to his employment termination.
Given the present estimate of the year-end 1995 KFC formula price upon
which any mandatory redemption payments to Mr. Kierscht would be based, it
is unlikely he will be entitled to receive any appreciation amounts
pertaining to his KFC interests.
Also see COMPENSATION OF EXECUTIVE OFFICERS later in this proxy statement.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a five-member Executive Committee presently consisting of
Messrs. Mathis (chairman), Chain, Farley, Kennedy and Timbers. The function of
the committee is to exercise the authority of the Board of Directors in the
management of the business and the affairs of the Company as necessary and
appropriate during the interim between meetings of the full board.
The Company has an Audit Committee composed of three non-management directors.
(A non-management director is one other than a present or past officer of the
Company or of any affiliate thereof.) Members currently serving on the committee
are Messrs. Coleman (chairman), Hamilton and Nordman. This committee oversees
the selection and retention of an independent auditor and has responsibility for
the content and oversight of the Company's audit program, including review of
the effectiveness of corporate accounting and financial practices and the
adequacy of internal controls.
6
<PAGE> 10
The Investment Committee of the Company currently consists of three
non-management directors: Messrs. Randall (chairman), Farley and Toll. The
function of the committee is to exercise the authority of the Board of Directors
principally in connection with the supervision of investment policies and
performance of the Company's life insurance subsidiaries' portfolios, including
the related activities of KFS, investment adviser to the portfolios. Investments
made under the committee's general guidelines are approved by the respective
investment committees and boards of directors of the Company's life insurance
subsidiaries.
The Corporate Public Policy Committee of the Company presently consists of three
non-management directors: Messrs. Chain (chairman), Kennedy and Randall. The
committee is responsible for review of corporate policies with respect to
corporate responsibility, legislative and regulatory matters and industry and
consumer relations. Commencing in 1994, the Corporate Public Policy Committee
maintains a regular subcommittee on Intercompany Conflicts, Accountability and
Relationships. The subcommittee will scrutinize, evaluate, avoid where possible
and resolve conflicts of interest among the Company or its subsidiaries and
those companies within the organization whose ownership constituencies and
interests are distinct from those of the Company and its stockholders; explore
the equities and ethical considerations applicable to intercompany dealings; and
review procedures and activities of management dealing with individual and
intercompany conflicts of interest. Mr. Kennedy is the representative of the
Company at subcommittee meetings, Mr. Randall represents FLA, and Mr. Timbers
will be the invited representative of KFC.
The Committee on Compensation and Organization is currently comprised of three
non-management directors: Messrs. Kennedy (chairman), Chain and Farley. The
committee is responsible for reviewing with management (1) the overall
objectives, structure, cost and administration of the Company's compensation and
benefit programs, (2) executive management's performance and (3) officer
succession plans.
The Nominating Committee of the Company is composed of all non-management
directors not standing for re-election within one year and not serving on the
Executive Committee, except for the chairman who is appointed by the Board of
Directors. Members currently serving on the committee are Messrs. Toll
(chairman), Hamilton and Randall. The committee has the responsibility of
recommending nominees to the full board to fill directorships which expire at
the annual meeting of stockholders, board vacancies and newly-created
directorships. Any stockholder who wishes to have the committee consider a
candidate should submit in writing the name of the candidate along with any
biographical or other relevant information regarding the qualifications of such
individual and the written consent of the proposed candidate to serve if
nominated and elected. Such recommendations should be addressed to the Chairman
of the Nominating Committee, in care of the corporate secretary of the Company,
at the address appearing on the first page of this proxy statement.
During 1994, 22 Board meetings, 7 Executive Committee meetings, 6 Audit
Committee meetings, 2 Investment Committee meetings, 2 Corporate Public Policy
Committee meetings (including a meeting of the subcommittee on Intercompany
Conflicts, Accountability and Relationships), 12 Committee on Compensation and
Organization meetings and 3 Nominating Committee meetings were held.
7
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- ------------------------
NAME OTHER RESTRICTED STOCK
AND ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL COMPEN- AWARDS OPTIONS COMPEN-
POSITION YEAR SALARY($) BONUS($) SATION($)(2) ($)(3) (#) SATION($)(4)
----------------------- ------ --------- -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David B. Mathis, 1994 $ 594,167 $875,000 $ 1,704,375 $ 533,600(5) 28,300 $ 1,125,017
Chairman of the Board 1993 531,308 960,000 193,357 560,625(5) 45,000 111,811
and Chief Executive 1992 473,846 360,000 167,658 131,250 15,000 24,219
Officer
Stephen B. Timbers, 1994 483,333 700,000 493,885 452,400(5) 31,000 544,215(6)
President and Chief 1993 448,269 816,000 25,508 560,625(5) 40,000 143,455
Operating Officer 1992 412,500 500,000 7,706 110,250 10,000 106,789
Charles M. Kierscht, 1994 462,500 450,000 482,444 232,000(5) 17,413 213,157
Executive Vice 1993 440,000 412,000 17,980 149,500(5) 20,867 188,398
President(1) 1992 400,000 650,000 10,629 110,250 10,000 115,648
James R. Boris, 1994 440,000 300,000 367,418 220,400(5) 11,000 369,671(6)
Executive Vice 1993 400,000 800,000 25,974 119,600(5) 15,218 608,114
President 1992 400,000 -- 22,345 84,000 9,000 3,286
Robert T. Jackson, 1994 342,500 360,000 367,285 156,600(5) 8,700 153,319(6)
Executive Vice 1993 322,500 270,000 12,457 104,650(5) 15,457 130,755
President(1) 1992 310,000 434,000 10,548 70,875 8,100 83,769
</TABLE>
---------------
(1) Resigned in February 1995.
(2) The amounts disclosed in this column include:
(a) Compensation income reported in 1994 of $1,657,125, in 1993 of $145,625
and in 1992 of $132,750 for Mr. Mathis based on the market value on the
vesting date of restricted stock awarded in 1990 through 1992, and in
1988 and 1987, respectively, under the Kemper Corporation Senior
Executive Long-Term Incentive Plan and the Kemper Corporation 1989
Senior Executive Long-Term Incentive Plan. See footnote (3) below for
further detail respecting the vested restricted stock.
Compensation income reported in 1994 of $460,313 for both Messrs.
Timbers and Kierscht and $349,838 for both Messrs. Boris and Jackson
based on the market value on the vesting date of restricted stock
awarded in 1991 and 1992 under the Kemper Corporation 1989 Senior
Executive Long-Term Incentive Plan. See footnote (3) below for further
detail respecting the vested restricted stock.
(b) Compensation amounts paid to each of the named executive officers as
non-preferential dividend equivalents on shares of restricted stock
awarded at various times.
(c) The taxable benefits from personal use of an employer-provided
automobile and certain estate planning services the Company facilitates
for its executives, both adjusted for the related tax expense.
(3) The values shown are based on the closing price for the Company's common
stock on the date any restricted stock was awarded applied to the number of
award shares. A five-year restriction period on transfers or other
dispositions applied to all awards of restricted stock when made. All shares
reflected in the table which were awarded in 1992 vested in full when the
approval of the Conseco Merger Agreement in June 1994 activated certain
"change of control" acceleration provisions under the Kemper Corporation
1989 Senior Executive Long-Term Incentive Plan. See footnote (5) below for
further information respecting the subsequent cancellation of the shares of
restricted stock awarded in 1993 and 1994.
In June 1994, Mr. Mathis vested in an aggregate 27,000 shares, Messrs.
Timbers and Kierscht both vested in an aggregate 7,500 shares, and Messrs.
Boris and Jackson both vested in an aggregate 5,700 shares.
8
<PAGE> 12
Until the shares of restricted stock granted in 1992 or earlier vested,
dividend equivalents, calculated based on the amount of the per share
dividend declared and paid on the Company's common stock, were paid as
additional compensation income to the named individuals when dividends were
paid to the Company's stockholders. Participants were also entitled to
settle their tax obligations on the vesting of restricted shares by
utilizing a portion of the award shares.
Due to the June 1994 vesting of all outstanding shares of restricted stock
granted in 1992 or earlier and the cancellation of shares awarded in 1993
and 1994, no shares of restricted stock were held by any of the named
executive officers at December 31, 1994.
(4) The amounts disclosed in this column include:
(a) The amounts of employer contributions and forfeitures allocated to the
accounts of the named persons under profit sharing plans maintained by
the Company, in the case of Messrs. Mathis, Timbers and Boris, or by
KFS in the case of Mr. Kierscht and Jackson, or under supplemental
plans maintained by both employers to provide benefits in excess of
applicable ERISA limitations.
Effective with the 1994 plan year, the Company and KFS adopted uniform
profit sharing provisions providing for a 50 percent match of the first
5 percent of participants' elective 401(k) contributions; a
discretionary year-end profit contribution of up to 7 1/2 percent of
eligible annual compensation based on the Company's level of attainment
of profit objectives; and a basic contribution of 5 percent of annual
compensation (to a separate money purchase pension plan account) for
eligible employees who continue employment through the end of each
calendar year. Under both the Company and the KFS profit sharing plans,
annual compensation which is attributable to restricted stock vesting
or stock option exercise is not taken into account for employer
contributions.
In 1994, a total of $233,125 was allocated to Mr. Mathis' profit
sharing account, and $326,045, $145,644, $172,366 and $102,009 were
allocated to the accounts of Messrs. Timbers, Kierscht, Boris and
Jackson, respectively. Mr. Timbers participated in the KFS profit
sharing plan until January 1, 1993, and his continued employment with
the Company vested additional amounts of employer contributions and
forfeitures to his KFS plan account in 1994 (included in his preceding
total). Mr. Boris commenced participation in the Company's profit
sharing plan on January 1, 1994. Mr. Boris previously participated in
the Kemper Securities, Inc. ("KSI") profit sharing plan and
participated in the KFS plan until 1992. Mr. Boris also vested in
additional amounts under the KFS plan in 1994 (included in his
preceding total).
(b) Distributions from the Company's supplemental plan. The Company's
supplemental plan provides for an accelerated lump sum distribution of
vested amounts credited to that plan which are attributable to the
Company's profit sharing plan upon a "change of control". The approval
of the Conseco Merger Agreement in June 1994 constituted such a "change
of control" under this plan. In third quarter 1994, distributions of
$648,847, $150,657 and $145,995 were made to Messrs. Mathis, Timbers
and Boris, respectively. These distribution totals included sums
earlier contributed by the executives over their years of plan
participation, together with employer contributions, as well as
investment returns on both types of contributions. The approval of the
Conseco Merger Agreement triggered creation of an irrevocable "rabbi
trust" for amounts payable under the KFS profit sharing plan but no
distributions were required until consummation of the transaction. As
such, Messrs. Kierscht and Jackson did not receive any plan
distributions in 1994.
(c) Amounts representing a portion of the executives' income tax payments
arising from the June 1994 vesting of shares of restricted stock due to
the approval of the Conseco Merger Agreement. The Committee on
Compensation and Organization of the Board of Directors (the
"Committee") authorized such payments to 16 senior executives of the
Company either precluded under pertinent securities law limitations or
discouraged as a matter of appearance from subsequently selling their
vested shares of restricted stock prior to the closing of the
then-planned Conseco merger transaction. The executives' tax
liabilities were based on the $61.375 fair market value of the
restricted stock on the vesting date. The Company's payments to the
executives were derived from a formula based on certain relative stock
values but approximated one-third of the executives' total income tax
9
<PAGE> 13
liabilities from the imputed income on vesting. Mr. Mathis received
$243,045, Messrs. Timbers and Kierscht both received $67,513, and
Messrs. Boris and Jackson both received $51,310 under this tax
liability payment arrangement.
(d) $600,000 earned by Mr. Boris in 1993 under special contractual
arrangements extended to the senior management team of KSI to ensure
management retention and encourage dedication to maintaining
organizational stability during the pendency of discussions regarding
the possible sale of KSI. The amount paid reflects KSI's achievement of
its maximum earnings goal for 1993 as well as the nonpayment of any
incentive bonus award for 1992.
(5) Pursuant to the Conseco Merger Agreement, the restricted stock awards shown
in the table for 1993 and 1994 were cancelled. To replace these awards, on
June 30, 1994, the Committee, under the Kemper Corporation Bonus Restoration
Plan and in its sole discretion, granted cash awards to the named executive
officers and other affected executives entitling each of them to receive an
amount in cash immediately prior to the effective time of the then-planned
Conseco merger equal to the product of the number of shares of restricted
stock previously granted to such individual under the 1993 Senior Executive
Long-Term Incentive Plan multiplied by the consideration payable in the
merger. As a result of the termination of the Conseco Merger Agreement, no
cash awards were paid pursuant to the Kemper Corporation Bonus Restoration
Plan.
In January 1995, the Board of Directors, upon the advice of the Committee,
approved the adoption of the Kemper Corporation 1995 Executive Incentive
Plan under which active employee holders of the previously cancelled shares
of restricted stock were granted phantom stock units by the Committee equal
to the number of shares cancelled plus an added amount representing 20% of
the aggregate cancelled shares. The 20% supplement was awarded in
recognition of the imposition of new vesting periods on the phantom awards
(to the extent the restricted stock held prior to cancellation would
otherwise have vested in June 1994 had stockholder approval of the affected
restricted stock plan been obtained as earlier anticipated).
The phantom stock units associated with cancelled shares of restricted stock
originally awarded in 1993, as supplemented, will vest on December 31, 1995
and entitle the holders to a cash payment (net of any required tax
withholding) determined by the value of Kemper Corporation's common stock
based on an average trading range to December 31, 1995, and those phantom
stock units associated with the cancelled restricted stock originally
awarded in 1994 will similarly vest and be paid on December 31, 1996,
subject to ongoing employment to the respective vesting dates.
Notwithstanding these vesting provisions, the phantom stock units will
earlier vest and entitle payment on the consummation of a "change of
control" of Kemper Corporation or on the date of closing any divestiture
transaction affecting a subsidiary or business unit employing the holder,
based on a then-applicable Kemper Corporation common stock value and also
subject to ongoing employment to the pertinent early vesting date. Dividend
equivalents are payable to holders of the phantom stock units as
compensation income when and as dividends are paid on the Company's
outstanding common stock and the Executive Incentive Plan provides for
standard anti-dilution adjustments.
Phantom units awarded to the named executive officers subject to vesting
December 31, 1995 and December 31, 1996, respectively, were: Mr. Mathis,
18,000 and 11,040 phantom units, Mr. Timbers, 18,000 and 9,360 phantom units
and Mr. Boris, 3,840 and 4,560 phantom units. The phantom units awarded
Messrs. Kierscht and Jackson were forfeited due to their February 1995
resignations.
(6) Messrs. Timbers, Boris and Jackson each owned various KFC securities
interests which became subject to mandatory redemption or lapsed when their
employment with a KFC subsidiary terminated upon commencement of employment
by the Company. During a period extending to December 31, 2001, Messrs.
Timbers and Boris will, subject to continued employment by the Company or
one of its subsidiaries, be eligible to elect to receive phantom
compensation amounts from the Company based on the future appreciation, if
any, which may pertain to the interests in KFC securities each previously
owned. Mr. Jackson's rights to any such phantom compensation amounts were
fixed due to his February 1995 resignation date. Given the present estimates
of the year-end 1995 KFC formula price upon which any such phantom
compensation would be based, it is unlikely he will be entitled to receive
any such phantom appreciation payment. No phantom compensation amounts were
paid during any of the years reported in the table.
10
<PAGE> 14
OPTION GRANTS IN 1994
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE OF
------------------------------------------------------------------------------ ASSUMED ANNUAL
NUMBER % OF TOTAL RATES OF STOCK PRICE
OF SHARES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(5)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH)(3) DATE(4) 5%($) 10%($)
----------------------------- -------------- ----------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
David B.
Mathis 28,300 2.3% $ 58.00 April 11, 2004 $ 1,032,260 $ 2,615,965
Stephen B.
Timbers 31,000 2.5% $ 58.00 April 11, 2004 1,130,744 2,865,545
Charles M. 4,913 .4% $ 41.00 February 14, 2004 126,679 321,032
Kierscht 12,500 1.0% $58.00 April 11, 2004 455,945 1,155,462
James R.
Boris 11,000 .9% $ 58.00 April 11, 2004 401,232 1,016,806
Robert T.
Jackson 8,700 .7% $ 58.00 April 11, 2004 317,338 804,201
All common
stockholders(6) -- -- $ 58.00 -- 1,255,399,068 3,181,446,215
</TABLE>
---------------
(1) Each of the options reflected in the table, when granted, were subject to
installment vesting provisions whereby only a portion of the underlying
stock would become eligible for exercise on successive anniversaries of the
date of grant. However, such options became exercisable in full in
connection with the approval of the Conseco Merger Agreement in June 1994.
(2) Based on 1,255,437 shares, the total number of shares under options granted
in 1994. This total includes 338,577 shares under options granted on
February 14, 1994 to subsidiary employee holders of KFC debentures and
309,960 shares under options granted on April 11, 1994 to employees of KSI
under special incentive award programs. Of the named executive officers,
only Mr. Kierscht participated in these special incentive awards, as a
holder of KFC debentures.
(3) The option exercise price assigned by the Committee was the last sale price
for Kemper Corporation common stock on the date of the respective grants.
(4) The options disclosed in the preceding table contain a "reload" feature
which entitles an optionee who, within the first eight years after the date
the option was granted, pays all or any portion of the exercise price of an
option with shares of Company common stock to receive a new non-qualified
stock option to purchase a number of shares equal to the number of shares of
common stock tendered in payment. The new option will have an exercise price
equal to the fair market value of the common stock on the date of such
exercise by payment in shares, and is only exercisable as long as the
optionee continues to hold the shares issued on exercise of the initial
option. The new option would vest in installments identical to those first
applying to the option exercised. In no event, however, can any new option
granted under the "reload" feature be exercised beyond the ten-year term of
the initial option exercised.
(5) The assumed annual rates of stock price appreciation are prescribed in the
proxy rules and should not be construed to forecast any future appreciation
in the market price for the Company's common stock.
(6) The potential realizable value for all Company stockholders is based on
34,417,484 shares of Kemper Corporation common stock outstanding at December
31, 1994 and the ten-year term of the stock options granted during 1994.
11
<PAGE> 15
AGGREGATED OPTION EXERCISES IN 1994
AND OPTION VALUES AT YEAR-END 1994
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT
AT FY-END(#) FY-END($)(2)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
David B. Mathis 6,000(3) $288,000 256,765/0(4) $1,501,902/$0(4)
Stephen B. Timbers -- -- 91,000/0 $132,500/$0
Charles M. Kierscht 6,000(3) $149,250 63,680/0(4) $232,859/$0(4)
James R. Boris -- -- 43,218/0 $117,625/$0
Robert T. Jackson -- -- 43,757/0(4) $138,290/$0(4)
</TABLE>
---------------
(1) Based on the last sale price of Kemper Corporation common stock on the
exercise date over the exercise price.
(2) Based on the last sale price of $37.875 at December 31, 1994 over the
exercise price, if less.
(3) Messrs. Mathis and Kierscht exercised options which would have expired, if
unexercised, in August 1994 at the end of the ten-year term of the options.
(4) Where needed, the figures are adjusted to reflect the 3-for-1 stock split in
June 1986.
TERMINATION PROTECTION AGREEMENTS
The Company and 13 senior executives (the "Executives"), including the five
named executive officers, have entered into agreements (the "Agreements") dated
March 18, 1994 intended to encourage the Executives to remain with the Company
during periods of uncertainty with respect to the Company's ownership and to
enhance their abilities to act in the best interests of the Company and its
stockholders with respect to any offer for the Company, without being influenced
by any uncertainties surrounding their respective situations with the Company.
If effective on the date of a "Change of Control" of the Company, the Agreements
remain in effect for three years or such longer period as is necessary to give
effect to their terms. "Change of Control" is defined under the Agreements in
the same manner as under the Company's existing stock option and restricted
stock plans, and the approval of the Conseco Merger Agreement in June 1994
constituted a Change of Control under the Agreements.
Under the Agreements, an Executive would receive severance benefits if the
Company were to terminate his or her employment with the Company without Cause
(defined below) or if the Executive were to resign for Good Reason (defined
below) either within three years after a Change of Control or prior to a Change
of Control at the request of the acquiror. Such severance benefits would be: (i)
a payment equal to three times the sum of the Executive's base salary, target
bonus and target equity awards (i.e., the value of the Executive's target awards
of options and restricted stock under the Company's long-term equity award
programs); (ii) a payment equal to three times the Executive's target profit
sharing contribution from the Company, reduced for each month of service after
the Change of Control; (iii) payment of a pro-rata portion of the Executive's
target bonus for the year of termination; (iv) continued welfare benefits for
three years (or, if shorter, until the Executive becomes covered under a new
employer's plan); (v) payment of any accrued but unpaid bonuses (for prior
years) and any deferred compensation; (vi) three years additional age and
service credit towards eligibility for post-retirement welfare benefits (offset
by additional age and participation actually credited after the Change of
Control); (vii) acceleration of vesting under the Company's supplemental
retirement plans, payment of the Executive's accrued benefit under these plans
and, to the extent the Executive is entitled to a benefit under the defined
benefit portion of any of these plans, three years additional age and service
credit towards eligibility for all purposes, including benefit accrual and
eligibility for early retirement (offset by additional age and service actually
credited after the Change of Control); and (viii) reimbursement for outplacement
counseling
12
<PAGE> 16
services. Any severance benefits payable are grossed up to the extent an
Executive would be subject to an excise tax under Section 4999 of the Internal
Revenue Code due to the receipt thereof. The Agreements preserve any applicable
Change of Control provisions under other agreements or arrangements, such as the
Company's equity-based compensation programs. They also preserve the Executive's
indemnification rights, require the Company to maintain certain directors' and
officers' liability insurance coverage and impose certain confidentiality
obligations on the Executive.
Cause is defined generally as (i) willful malfeasance which has a material
adverse effect on the Company; or (ii) conviction of a felony. As to any
Executive, Good Reason is defined to be any of the following actions, without
the Executive's express prior written approval, other than due to the
Executive's permanent disability or death: (i) any diminution in the Executive's
titles, duties, responsibilities, status or reporting relationship from the
positions, duties, responsibilities, status or reporting relationship existing
immediately prior to the Change of Control; (ii) removal of the Executive from,
or any failure to re-elect the Executive to, any of the positions the Executive
holds immediately prior to the Change of Control; (iii) failure to pay the
Executive's base salary when due; (iv) any reduction of the Executive's base
salary, target bonus or target equity award; (v) a material reduction in the
Executive's employee or fringe benefits; (vi) a change of the Executive's
principal place of employment to a location more than 20 miles from the
Executive's principal place of employment immediately prior to the Change of
Control; or (vii) any material breach of any provision of the Agreement.
Three of the Executives, including Messrs. Kierscht and Jackson, demanded
payment under their respective Agreements in connection with their resignations
from the Company in February 1995, which resignations the Executives claimed
were for Good Reason. The Company rejected the Executives' demands and has
commenced an arbitration proceeding seeking damages and other relief from the
Executives, including a declaration that no amounts are payable by the Company
under these Executives' Agreements.
RETIREMENT PLAN
Two of the named executive officers, Mr. Mathis and Mr. Timbers, have
participated in the Kemper Corporation Retirement Plan (the "Retirement Plan"),
a qualified defined benefit plan, and the Company's supplemental retirement plan
(the "SRP"), a nonqualified plan providing benefits in excess of ERISA
limitations. The Company terminated the Retirement Plan and the SRP effective
December 14, 1994, and all benefit accruals ceased as of November 30, 1994. As
of the termination date and assuming 100% joint and survivor annuity elections,
Mr. Mathis qualified for an annual benefit estimated at $294,770 to commence
April 1, 2000, and Mr. Timbers qualified for an annual benefit estimated at
$47,757 to commence August 1, 2006.
The annual benefit payable to Mr. Mathis was calculated based on a "final pay"
formula taking into account years of service and average annual salary plus
bonus for the 60 months preceding November 30, 1994. The Retirement Plan and the
SRP provided, as an alternative to the final pay formula, a "career average"
formula if the latter would have provided a greater benefit. The annual benefit
payable to Mr. Timbers was calculated under the alternative career average
benefit formula. This formula was based on compensation earned during each year
of participation in the Retirement Plan and the SRP. For 1993, the first year of
Mr. Timbers' participation, this formula credited 1.85 percent of Mr. Timbers'
first $10,000 of eligible compensation plus 2.4 percent of additional eligible
compensation. For 1994, this formula credited 3.45 percent of Mr. Timbers' first
$10,000 of eligible compensation, plus 4 percent of additional eligible
compensation, for the first nine months of the year. The percentages credited to
all participants were increased in 1994, but applied only to a nine-month base,
to facilitate the termination of the Retirement Plan while effectively crediting
covered employment to the March 31, 1995 employment termination date anticipated
to apply for most Company employees in the context of the then-pending Conseco
merger. The benefits payable to Messrs. Mathis and Timbers begin at age 62 and
are not subject to offset or reduction for social security or other items.
13
<PAGE> 17
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the following report and
the performance graph on page 17 shall not be incorporated by reference into any
such filings.
REPORT ON EXECUTIVE COMPENSATION OF THE COMMITTEE
ON COMPENSATION AND ORGANIZATION
COMPENSATION PHILOSOPHY
The Company's executive compensation program has traditionally been founded on
certain guiding principles designed to align compensation with the Company's
business strategy, performance and realization of stockholder value. At various
points throughout this proxy statement or as relevant later in this report, the
influence of the Company's process to maximize stockholder value in 1994 upon
various components comprising the executive compensation program are noted. The
Committee has endeavored to retain compensation elements based on these guiding
principles while balancing a need to respond to the particular employee morale
and retention issues the Company has faced during this protracted process in
light of the uncertainties naturally engendered by such a process. Overall, the
executive compensation program is designed to:
- Attract and retain key executives critical to the long-term success of the
Company;
- Reinforce a common direction among the Company's distinct business units;
- Reward executives for long-term strategic management by delivering appropriate
ownership interests in the Company;
- Support a performance-oriented environment that differentiates rewards based
on contributions to business results;
- Integrate the compensation program with the Company's strategic planning and
performance measurement process; and
- Provide competitive total compensation opportunities consistent with those of
other leading diversified financial organizations.
Consistent with this policy, the Company has developed an overall compensation
strategy and corresponding compensation plans that tie a significant portion of
executive compensation to success in meeting specified performance goals as well
as in building stockholder value. As an executive's level of responsibility
increases, a greater portion of potential total compensation is based on
performance incentives and long-term equity awards and less on salary and
employee benefits, often causing greater variability in the individual's
compensation level from year to year.
In evaluating competitor practices, the Company's various operating subsidiaries
are compared with their specific industry peers while compensation elements for
executive officers of the Company are measured against those of diversified
financial companies. Each year, the Company has participated in several
compensation studies to determine the competitiveness of its executive
compensation program. The peer group used at the Company level consists of
approximately twenty selected diversified financial companies providing a
cross-section of the diversified financial services industry. The group
evaluated provides a relevant competitive frame of reference for the major
segments of the Company's business portfolio, including asset management,
securities brokerage and life insurance. Specific peer group companies have also
been selected on the basis of comparable asset size, business portfolio and
corporate strategy, and represent the Company's most direct competitors for
executive talent. Some of the companies comprising the Dow Jones Financial
Services (Diversified) Peer Group are included within the industry peer group
analyzed for compensation purposes. While peer group financial performance has
not been directly analyzed, the influence of results on industry compensation
practices generally can be expected to produce an indirect effect over time.
14
<PAGE> 18
COMPENSATION VEHICLES
Traditionally, the key elements of the Company's executive compensation program
have been base salary, annual incentive bonus and long-term equity awards.
Base Salaries
Base salary levels for the Company's executive officers and subsidiary officers
have been normally positioned somewhat below those for comparable positions in
competitor companies. In determining base salary levels and annual salary
adjustments for executive officers, the Committee considers market compensation
comparisons as well as the individual's performance and relative contribution to
the organization. In the case of a head of a functional or operating unit, that
unit's operating results have also generally been considered.
Annual Incentive Bonus Awards
The Company's executives have been eligible for an annual cash bonus. Goals have
been established at the beginning of each year for the Company, and for each
functional and operating unit, to provide the basis for achieving bonus awards.
These include threshold, target and maximum performance goals which have been
clearly linked with resultant bonus opportunities at each level.
Bonus award opportunities throughout the Company have been generally positioned
above standard industry practices and have been contingent upon business
results. As such, a greater portion of the executive's compensation is placed at
risk and tied more directly to operating performance. Bonus awards for
executives in a functional or operating unit have reflected results of the
particular unit whereas consolidated results have been the primary basis for
bonuses for the Company's officers and staff.
Long-Term Equity Awards
The Company's past practices respecting equity awards have been designed to
foster significant ownership interests in the Company common stock for key
executives, thereby promoting greater identity between the Company's management
and its stockholders. Two types of awards have been granted to executive
officers of the Company and its major functional and operating units as well as
to other key employees:
Stock Options--a right to purchase shares of common stock over a ten-year period
at the fair market value per share as of the date the option is granted; and
Restricted Stock Awards--shares of common stock which, when granted, provided
that the recipient could not sell or otherwise dispose of the shares awarded
until a requisite employment period had lapsed. As noted earlier in this proxy
statement, the recent unavailability of restricted stock for awards led to the
Company's implementation in early 1995 of a phantom interest program to replace
earlier-cancelled shares of restricted stock. The Committee also anticipates
potentially making larger stock option grants in 1995 in those cases where
restricted stock awards otherwise would have been contemplated.
The Company's practices in granting options and restricted stock have been
designed to provide opportunities fully competitive with those offered by other
diversified financial companies. In establishing grant levels, the executive's
responsibilities, past contributions to the Company and attainment of corporate
and personal objectives, together with the practices of the same peer companies
utilized for all aspects of the compensation program (verified by external
surveys), have been evaluated closely. The Committee has considered the
particular executive's accomplishments, as measured against preset three-year
goals focused on creating longer term stockholder value, in determining the
number of shares awarded. The measurement goals have been established for the
Company as well as for each executive officer and generally include important
strategic initiatives as measurement factors. Prior equity grants can and have
influenced the Committee's determination of grant levels for a given period,
particularly when evaluated against attainment of long-term performance
objectives over the multi-year cycle of the overall compensation program.
15
<PAGE> 19
Tax Deductibility
Generally, under normal circumstances, the Committee seeks to preserve all
available tax deductions respecting each element of the Company's executive
compensation program. Early in 1994, the Committee had proposed various measures
designed to preserve the deductibility of the Company's annual incentive bonus
awards and the compensation income realized on the vesting of its more recent
awards of restricted stock pursuant to Section 162(m) of the Internal Revenue
Code. Section 162(m), commencing from January 1, 1994, inhibits the ability of
public companies to deduct compensation expense in excess of $1.0 million paid
in any taxable year to a chief executive officer or any other person included
within the five named executive officers identified by a company as among its
highest paid executive officers for such year unless such compensation is
sufficiently performance-based so as to continue to qualify for deduction.
Due to the advisability of eliminating various compensation-related
uncertainties during the pendency of the then-planned Conseco merger, however,
the Committee endorsed the vesting of various outstanding long-term equity
awards as well as the provision of certain other payments. These measures, by
fixing the right to receive these particular compensation elements, can preclude
such forms of compensation from being considered performance-based within the
meaning of Section 162(m). The Committee believes that, in the Company's present
circumstances, any desire to attempt to preserve tax deductibility is far
outweighed by the employee relations and business transition objectives
supported by these measures. Section 162(m) will disallow the Company's
deduction of a portion of the bonuses paid Messrs. Mathis and Timbers for their
services in 1994. Most of the remaining elements of their compensation, however,
such as those reported due to restricted stock vesting and dividends or as a
result of the qualified plan distributions, are items grandfathered under
Section 162(m) and continue to be deductible to the same extent as prior to
Section 162(m)'s adoption.
COMPENSATION OF THE CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
The Committee authorized an increase to Mr. Mathis' base salary effective
February 1994 (from $530,000 to $600,000 per annum) to better position his
salary level within the standard salary ranges employed by comparable
organizations for their most senior executives having responsibilities similar
to those of Mr. Mathis. During prior periods, Mr. Mathis' base salary had been
at the lower end of such competitor ranges, reflecting his then fairly recent
promotion to the position of chief executive officer of the Company.
Mr. Mathis' bonus for 1994 declined when compared to his 1993 bonus payment
primarily because, while surpassing its blended targeted performance measures on
an overall basis during 1994, the Company did not attain the same relative level
of above-target achievement it had posted for 1993. The Company's 1994 operating
earnings slightly lagged the targeted operating earnings goal (with the
Committee endorsing the exclusion of previously unanticipated expenses related
to the proxy contest and now-terminated merger from these calculations), but the
Company exceeded its targeted level of administrative expense reduction.
Respecting the Company's objectives to increase the market price of the
Company's common stock, both on an absolute basis as well as relative to the
Standard & Poor's 500 Index, the stock's performance when compared to the S&P in
1994 qualified for the maximum performance-based compensation credit associated
with this goal, while the absolute growth level, as calculated to year-end 1994,
was somewhat below target. The Company's common stock had traded at
substantially higher market prices during much of 1994, however, due to the
influence of the proxy contest and then-pending Conseco Merger Agreement. The
Committee did authorize a fairly modest supplement to Mr. Mathis' 1994 bonus
amount as otherwise calculated under a strict application of the Company's
performance measurement guidelines to recognize the exceptional challenges posed
together with the particular efforts required during 1994 within the context of
the process to maximize stockholder value.
16
<PAGE> 20
In granting long-term equity awards in April 1994 to Mr. Mathis and each of the
other named executive officers, the Committee considered the Company's
accomplishments relative to pre-established goals during 1993 as well as
throughout the three-year compensation plan cycle which was completed at
year-end 1993. The Committee also included reconciling adjustments in the April
awards granted where needed to align interim award levels, made earlier in the
cycle, with the ultimate results achieved over the course of the entire
three-year compensation cycle.
COMMITTEE ON COMPENSATION AND ORGANIZATION
The Company's Committee on Compensation and Organization is comprised of the
following non-management directors:
George D. Kennedy (Chairman)
John T. Chain Jr.
Raymond F. Farley
KEMPER CORPORATION VERSUS SELECTED COMPOSITE INDICES
FIVE-YEAR CUMULATIVE TOTAL RETURN(1)
1989-1994
<TABLE>
<CAPTION>
DOW JONES
FINANCIAL
SERVICES
KEMPER (DIVERSI-
MEASUREMENT PERIOD CORPORA- FIED) PEER
(FISCAL YEAR COVERED) TION S&P 500 GROUP (2)
<S> <C> <C> <C>
1989 100 100 100
1990 52 97 81
1991 86 126 116
1992 69 136 135
1993 87 150 156
1994 92 152 154
</TABLE>
---------------
(1) Assumes $100 invested on December 31, 1989 in Kemper Corporation common
stock, S&P 500 and Dow Jones Financial Services (Diversified) Peer Group.
Also assumes reinvestment of dividends on a quarterly basis.
(2) Dow Jones Financial Services (Diversified) Peer Group consisted of:
Alexander & Alexander Services Inc., American Express Company, Beneficial
Corp., Dean Witter, Discover & Co., Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, Household International, Inc., Marsh
and McLennan Companies Inc., The Travelers Corp. and Student Loan Marketing
Association.
17
<PAGE> 21
COMPENSATION OF DIRECTORS
Effective January 14, 1994, the Board of Directors changed the membership and
configuration of its committees and the director compensation program. Such
changes were designed to rebalance and streamline board committee participation
to promote efficiencies; facilitate contemporaneous committee meetings to free
additional time for full board deliberations; de-emphasize meeting fees in favor
of standardized retainers to better equalize director compensation; and increase
total director compensation to better align with emerging standards for
financial services companies. The cash compensation program for non-management
directors was last amended in mid-1990.
As a result of these changes, effective January 1, 1994, all non-management
directors receive an annual retainer of $35,000 for board service and an
additional $15,000 annual retainer for committee service, the latter amount
applying regardless of the number of committees on which a director serves.
These retainers are earned quarterly but paid semi-annually.
The Company continues to provide reimbursement for necessary travel and
accommodation expenses incurred for attendance at each meeting of the Board of
Directors or committee thereof, and now pays the following meeting fees:
<TABLE>
<CAPTION>
MEETINGS COMPENSATION
------------------------------- ------------------------------------------------------------
<S> <C>
Board A fee of $500 for each meeting attended.
Executive Committee A fee of $250 for each meeting attended.
Audit Committee A fee of $500 for each meeting attended.
Corporate Public Policy A fee of $1,000 for each meeting attended.
Committee
Committee on A fee of $250 for each meeting attended.
Compensation and
Organization
Investment Committee A fee of $500 for each meeting attended.
Nominating Committee A fee of $2,000 for each meeting attended.
</TABLE>
Other than the above compensation, non-management directors receive no
additional cash remuneration from the Company. Directors who are salaried
employees of the Company or any of its subsidiaries do not receive any annual
retainer or meeting fees for service as a director or on any board committee.
DIRECTOR STOCK OPTIONS
Until 1994, non-qualified stock options had automatically been granted once each
year under the Kemper Corporation Non-Management Director Stock Option Plan (the
"Director Plan") to the Company's non-management directors. Two types of
non-qualified stock options had been issuable under the Director Plan. An
initial option to purchase up to 5,000 shares of Kemper Corporation common stock
was granted to each of the Company's non-management directors elected or
continuing in office on May 16, 1990 and would be granted to any new
non-management director on the date of the organizational board meeting (the
board meeting immediately following the annual stockholders' meeting) at which
he or she first served as a member of the Company's Board of Directors.
Also, each non-management director annually received a non-qualified stock
option to purchase 1,000 shares of Kemper Corporation common stock on the date
of the organizational board meeting next following the date on which such
director received an initial option and on the date of each succeeding
organizational board meeting during the period of such director's incumbency.
In light of the process to maximize stockholder value, no options were granted
under the Director Plan during 1994, and whether option grants will be resumed
at some future date has yet to be determined.
The option exercise price of each option granted under the Director Plan is
equal to the last sale price of the Company's common stock at the date of the
automatic grant. Shares purchased through the exercise of an option must be paid
for in full either in cash or with an amount of the Company's common stock
having a fair market value equal to the exercise price, or a combination of
both.
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<PAGE> 22
The Director Plan provides that each option granted thereunder has a ten-year
term and is not exercisable during the first year from the date the option was
granted. Thereafter, the director may purchase up to one-fourth of the shares
covered by the option in the second year after grant, up to an additional
one-fourth of the total shares in the third year after grant (one-half of the
total shares cumulatively), up to an additional one-fourth of the total shares
in the fourth year after grant (or cumulatively, for three-fourths) and become
fully exercisable in or after the fifth year following grant. Notwithstanding
these installment purchase provisions applicable to each of the options granted
under the Director Plan, such options become fully exercisable upon the
retirement of the director from the Company's board if such retirement occurs
after one year from the date the particular option was granted.
Any option granted under the Director Plan also becomes fully exercisable upon
the occurrence of one of certain enumerated events resulting in a "change of
control" of the Company, provided such change of control event occurs at least
one year after the date the option was granted to a director. All the
outstanding director options became exercisable in full in connection with the
approval of the Conseco Merger Agreement in June 1994. The Director Plan
contains standard anti-dilution provisions. Subject to certain limitations, the
Board of Directors may amend or terminate the Director Plan at any time
(although amendments may not be adopted more frequently than once every six
months), but such actions cannot adversely affect any outstanding option.
OTHER DIRECTOR BENEFITS
Non-management directors may elect to participate in the Kemper Corporation
Director Deferred Compensation Plan prior to the commencement of any calendar
year in which director compensation is earned. A decision to defer compensation
is irrevocable once the relevant deferment period begins. The deferred
compensation and any earnings credited thereon can be accumulated in an Income
Account (credited at the prime rate of interest), a phantom Stock Unit Account
(credited with an amount based on the market performance and dividend rate of
Kemper Corporation common stock) or a combination of both. All deferred
compensation and any accumulated credited earnings have been payable to the
director either in quarterly payments, a single lump sum or partial lump sum
payments, in each case commencing with the first quarter following cessation of
service as a director or such later date(s) as earlier designated by the
director. The approval of the Conseco Merger Agreement in June 1994 effected a
"change of control" under the Deferred Compensation Plan. As a result, each
participating non-management director will receive immediate payment of any
deferred amounts upon any resulting termination of board membership.
The Kemper Corporation Director Retirement Plan provides that each
non-management director shall, upon the later of retirement or attaining age 72,
receive a retirement benefit payable quarterly for ten years or the number of
plan quarters in which the director served as a director of the Company,
whichever is less. Payments cease after the date of death of the director. The
retirement benefit presently accrues at $3,000 per quarter. The average of the
accrual rates for the last forty quarters of service (or the director's service
period, if less) determines the amount of the quarterly retirement benefit. The
approval of the Conseco Merger Agreement in June 1994 effected a "change of
control" under the Director Retirement Plan. As a result, each non-management
director will receive the actuarial equivalent of his retirement benefit in a
lump sum upon any resulting termination of board membership.
During their periods of incumbency, the non-management directors are each
provided life insurance coverage (without cash value) in the amount of $50,000,
and accidental death and dismemberment insurance coverage while traveling on
Company business (without cash value) in the amount of $250,000, in each case
payable to the beneficiaries designated from time to time by each such director.
Such coverages are reduced to the extent coverage is provided by an employee or
retiree benefit plan sponsored by the Company or any of its subsidiaries.
DIRECTOR EMERITUS
Mr. Stetson, who served as a director of the Company from 1973 to 1977 and again
from 1979 to 1993 (having served as Secretary of the United States Air Force
during the interim), retired from the board
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<PAGE> 23
effective with the May 12, 1993 annual meeting of stockholders and became
director emeritus of the Company. As director emeritus, Mr. Stetson may attend
meetings of the board or any committee on which he previously served prior to
his retirement. He will be paid fees for any meeting attended equal to those
payable to directors and will continue to receive the annual board retainers.
His participation in the Director Deferred Compensation Plan and the Director
Retirement Plan, as well as under the insurance coverages afforded directors,
terminated effective with the 1993 annual meeting. His outstanding stock options
became exercisable in accordance with their post-retirement exercise provisions
and were exercised in April 1994.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Stockholder action at the annual meeting is also requested with respect to the
ratification of board action appointing KPMG Peat Marwick LLP as independent
auditors for the Company for the calendar year ending December 31, 1995.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
stockholders' meeting, will have an opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions raised at the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
KPMG PEAT MARWICK LLP.
OTHER BUSINESS
It is intended that proxies solicited by the Board, unless otherwise specified
therein, will be voted in accordance with the recommendations of the Board of
Directors.
As of March 30, 1995, the Board of Directors does not know of any other business
to be acted upon at the meeting. If any matters other than those referred to
above properly come before the meeting, the persons named in the proxy card
intend to vote on such matters in accordance with their best judgment.
VOTING PROCEDURES
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. Abstentions may be specified on all
proposals except the election of directors and will be counted as present for
purposes of determining the existence of a quorum regarding the item on which
the abstention is noted. Abstentions on the ratification of appointment of
independent auditors will have the effect of a negative vote because such a
proposal requires the affirmative vote of a majority of shares present in person
or by proxy and entitled to vote.
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name have the authority to vote on certain items when they have not
received instructions from beneficial owners. Brokers that do not receive
instructions who are present, in person or by proxy, at the meeting will be
counted as present for quorum purposes and will be entitled to vote on the
election of directors and the ratification of the appointment of independent
auditors. Under applicable Delaware law, a broker non-vote will have no effect
on the outcome of the election of directors or the ratification of appointment
of independent auditors.
COST AND METHOD OF SOLICITATION
In addition to the solicitation of proxies by use of the mails, proxies may also
be solicited by the Company and its directors, officers and employees (who will
receive no compensation therefor in addition to their regular salaries) by
telephone, telegram, facsimile transmission and other electronic communication
methods or personal interview. The Company will reimburse banks and brokers who
hold shares of the Company's common stock in their name or custody, or in the
name of nominees for others, for their out-of-pocket expenses incurred in
forwarding copies of the proxy materials to those persons for whom they hold
such shares.
The Company has retained Georgeson & Company Inc. ("Georgeson") to assist in the
solicitation of proxies. Pursuant to the Company's agreement with Georgeson,
they will provide various proxy
20
<PAGE> 24
advisory and solicitation services for the Company in connection with the 1995
Annual Meeting of Stockholders at a cost of approximately $15,000, plus
reasonable out-of-pocket expenses.
CERTAIN LEGAL PROCEEDINGS
Since March 15, 1994, the Company and certain of its directors, including
directors who are also executive officers, have been named defendants in six
complaints filed in the Court of Chancery in the State of Delaware. The
complaints were brought by stockholders of the Company, individually and
purportedly as class actions on behalf of all other stockholders of the Company.
The complaints allege breaches of fiduciary duty by the Company and its
directors arising primarily from the unsolicited proposal by General Electric
Capital Corporation ("GECC") to acquire the Company initiated in early 1994 and
the defendants' alleged wrongful actions with respect thereto. The complaints
seek injunctive relief prohibiting the Company from, among other things,
utilizing certain defensive measures. The complaints also seek damages and other
relief.
On March 31, 1994, one of the complaints was amended to allege further that,
among other things, the preliminary proxy statement filed by the Company in
connection with the originally-scheduled 1994 annual meeting of stockholders on
May 11, 1994 (which was adjourned, then postponed and ultimately conducted on
December 23, 1994) did not provide full and fair disclosure with respect to the
Agreements or the Board of Directors' unanimous decision to reject the GECC
proposal, and on April 4, 1994, plaintiffs filed a motion for expedited
discovery with respect to the amended allegations. The Court of Chancery granted
limited discovery with respect to the disclosure contained in the Company's
preliminary proxy statement concerning the Board's decision. On May 4, 1994, the
court heard oral argument on the motion for a preliminary injunction. As a
consequence of a letter agreement dated May 8, 1994 between the Company and GECC
pursuant to which the Company and GECC agreed to adjourn the Company's annual
meeting of stockholders to be held on May 11, 1994 to August 22, 1994 and the
Company agreed to commence a process to maximize stockholder value, and
following consultation with the parties, the Court of Chancery determined to
withhold issuance of an opinion with respect to plaintiffs' motion for a
preliminary injunction.
Following Conseco's November 2, 1994 proposed modification of the Conseco Merger
Agreement, plaintiffs moved to file a further amended complaint alleging, among
other things, that "Conseco's revised offer in essence constitutes a repudiation
of its obligations under the merger agreement" and "Thus, the merger agreement
and all its terms, including the bust up fee, are null and void." The complaint
seeks, among other things, equitable relief ordering the individual defendants
"to create an active auction of the Company" and "to take all steps necessary to
compel Conseco to carry out its obligations under the merger agreement." No
further activity has occurred with respect to these actions since that time. The
Company intends to continue to vigorously contest these actions.
STOCKHOLDER LIST
A certified list of stockholders entitled to be present and vote at the 1995
Annual Meeting of Stockholders will be available at the office of the Company's
corporate secretary, One Kemper Drive, Long Grove, Illinois, and at the office
of the Company's transfer agent, Harris Trust and Savings Bank, 311 West Monroe
Street, 11th floor, Chicago, Illinois, for inspection by any stockholder during
normal business hours from May 7, 1995 to one day prior to the date of the
annual meeting and at the annual meeting site on the day of the meeting.
STOCKHOLDER PROPOSALS
It is presently expected that the 1996 Annual Meeting of Stockholders will be
held on May 15, 1996. Stockholder proposals intended to be presented at the next
annual meeting in 1996 should be directed to the corporate secretary of the
Company and must be received by the Company no later than December 4, 1995 for
inclusion in the proxy statement and proxy card relating to that meeting.
Kathleen A. Gallichio
Corporate Secretary
March 30, 1995
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<PAGE> 25
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
MAY 17, 1995
AND
PROXY STATEMENT
KEMPER CORPORATION
ONE KEMPER DRIVE
LONG GROVE, ILLINOIS 60049
[LOGO]
<PAGE> 26
<TABLE>
<S><C>
PROXY PROXY
KEMPER CORPORATION
ONE KEMPER DRIVE, LONG GROVE, ILLINOIS 60049
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
WHICH RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
The undersigned hereby appoints Peter B. Hamilton, George D. Kennedy and David B. Mathis, or any one of them, true and
lawful proxy and attorney in fact for the undersigned, with power in each to appoint a substitute, to vote all shares of Kemper
Corporation which the undersigned is entitled to vote at the 1995 Annual Meeting of Stockholders to be held in the stockholders
meeting room on the 57th floor of The First National Bank of Chicago, One First National Plaza, Chicago, Illinois, on May 17, 1995
at 10:30 a.m., and at any adjournment(s) or postponement(s) thereof, as follows:
NOTE: PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENVELOPE PROVIDED.
(Continued on other side)
KEMPER CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
1. ELECTION OF DIRECTORS For All 3. IN THEIR DISCRETION, THE PROXIES
J. Reed Coleman, Raymond F. Farley, For Withheld Except nominees written below. ARE AUTHORIZED TO VOTE UPON SUCH
Richard D. Nordman and Stephen B. [ ] [ ] [ ] OTHER BUSINESS AS MAY PROPERLY
Timbers COME BEFORE THE MEETING OR ANY
ADJOURNMENT(S) OR POSTPONE-
_____________________________________ MENT(S) THEREOF.
Nominee Exception(s)
2. THE RATIFICATION OF THE APPOINTMENT OF For Against Abstain THIS PROXY WHEN PROPERLY EXECUTED WILL BE
KPMG PEAT MARWICK LLP AS INDEPENDENT [ ] [ ] [ ] VOTED IN THE MANNER DIRECTED HEREIN BY THE
AUDITORS FOR THE YEAR 1995. UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
Dated: ____________________________, 1995
__________________________________________
__________________________________________
Signature of Stockholder(s)
NOTE: PLEASE DATE, SIGN YOUR NAME AS IT APPEARS
HEREON AND RETURN PROMPTLY. WHEN SHARES ARE HELD
BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING
AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME
BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
</TABLE>
