<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
JOHN ALDEN FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<S> <C>
[JOHN ALDEN LOGO] JOHN ALDEN FINANCIAL CORPORATION
7300 CORPORATE CENTER DRIVE
MIAMI, FLORIDA 33126-1223
(305) 715-3767
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1997
------------------------
</TABLE>
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the stockholders of John
Alden Financial Corporation, a Delaware corporation (the "Company"), will be
held, pursuant to the Company's By-Laws, at the Grand Ballroom, Marriott
Hotel -- Airport, Miami, Florida on Tuesday, May 20, 1997 at 10:00 a.m. for the
following purposes, each of which is discussed in the accompanying Proxy
Statement:
1. To elect a Board of 11 Directors to serve for the ensuing year.
2. To approve the 1997 Long-Term Incentive Plan.
3. To approve the appointment of Price Waterhouse LLP as the Company's
independent accountants for fiscal year 1997.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Nominees for directors are set forth in the enclosed Proxy Statement.
Pursuant to the By-Laws, the Board of Directors of the Company has fixed
the close of business on March 24, 1997 as the record date for the determination
of stockholders entitled to notice of and to vote at the Annual Meeting. The
list of stockholders entitled to vote at the Annual Meeting will be available
for inspection by any stockholder for any purpose related to the Annual Meeting
at the offices of John Alden Financial Corporation, 7300 Corporate Center Drive,
Miami, Florida 33126-1223, for the ten days prior to May 20, 1997.
By Order of the Board of Directors
/S/ MICHAEL P. ANDERSEN
MICHAEL P. ANDERSEN
General Counsel and Secretary
Miami, Florida
April 3, 1997
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE FILL IN, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH DOES
NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
<TABLE>
<S> <C>
[JOHN ALDEN LOGO] JOHN ALDEN FINANCIAL CORPORATION
7300 CORPORATE CENTER DRIVE
MIAMI, FLORIDA 33126-1223
(305) 715-3767
------------------------
PROXY STATEMENT
------------------------
</TABLE>
SOLICITATION AND REVOCABILITY OF PROXY
The enclosed proxy is solicited by and on behalf of the Board of Directors
of John Alden Financial Corporation, a Delaware corporation (the "Company"), for
use at the Annual Meeting of Stockholders to be held on May 20, 1997 (the
"Annual Meeting"). The Company will bear the entire cost of preparing,
assembling, printing and mailing this Proxy Statement, the accompanying proxy
and any additional material which may be furnished to stockholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries and
custodians to forward to beneficial owners of stock held in their names. The
Company has engaged Georgeson & Co., Inc. ("Georgeson") to solicit proxies from
and distribute materials to brokers, banks, custodians and other nominee holders
for the Annual Meeting. The Company will pay Georgeson approximately $6,500 for
these services. In addition to solicitation by Georgeson, officers, directors
and employees of the Company may solicit proxies personally, by mail, by
telephone and by facsimile, without additional compensation for such
solicitation activities.
Unless contrary instructions are indicated on the proxy, all valid proxies
received pursuant to this solicitation (and not revoked before they are voted)
will be voted FOR the election of the nominees for director named below, FOR the
approval of the 1997 Long-Term Incentive Plan ("1997 Plan"), and FOR the
approval of the appointment of Price Waterhouse LLP as independent accountants
for the fiscal year ended December 31, 1997. If a stockholder specifies a
different choice on the proxy, such stockholder's shares of Common Stock, par
value $.01 ("Common Stock"), will be voted in accordance with such
specifications.
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise. A proxy may be revoked
by filing with the Secretary of the Company an instrument revoking it, by
presenting an executed proxy bearing a later date at the Annual Meeting, or by
attending the Annual Meeting and voting in person.
The Company's principal executive offices are located at 7300 Corporate
Center Drive, Miami, Florida 33126-1223. This Proxy Statement and the
accompanying proxy are first being sent to stockholders on or about April 3,
1997.
VOTING SECURITIES
The Company's only class of voting securities is its Common Stock. Only
stockholders of record at the close of business on March 24, 1997 will be
entitled to vote at the Annual Meeting. On March 24, 1997, the Company had
25,335,538 shares of Common Stock issued and outstanding. Each share of Common
Stock entitles the holder thereof on the record date to one vote. The presence,
in person or by proxy, of stockholders holding a majority of the issued and
outstanding shares of Common Stock entitled to vote at the Annual
<PAGE> 4
Meeting is necessary to constitute a quorum. Abstentions and broker non-votes
are each included for purposes of determining the presence or absence of a
sufficient number of shares to constitute a quorum for the transaction of
business. With respect to the approval of any particular proposal, abstentions
are considered present at the meeting, but since they are not affirmative votes
for the proposal, they will have the same effect as votes against the proposal.
Broker non-votes, on the other hand, are not considered present at the meeting
for the particular proposal for which the broker withheld authority to vote.
ITEM 1 -- ELECTION OF DIRECTORS
At the Annual Meeting, a Board of 11 Directors will be elected, each to
serve until the next Annual Meeting of Stockholders and until his successor is
duly elected and qualified, or until his earlier death, resignation or removal.
The 11 nominees receiving a plurality of the votes cast by the holders of Common
Stock represented at the Annual Meeting, in person or by proxy, will be elected
as Directors of the Company. It is intended that shares represented by proxies
solicited by the Board of Directors will, unless authority to vote for some or
all of the nominees is withheld, be voted in favor of electing as Directors the
nominees listed below. The Company has no reason to believe any of the nominees
will be disqualified or unable or unwilling to serve if elected. However, if any
nominee becomes disqualified, unable or unwilling to serve for any reason, the
shares may be voted for another person nominated by the present Board. All the
nominees are currently Directors of the Company. The term of each current
Director will expire with the election of Directors at the Annual Meeting.
RECOMMENDATION
The Board of Directors recommends that stockholders vote FOR each of the
nominees listed below.
NOMINEES FOR ELECTION AS DIRECTORS
GLENDON E. JOHNSON, 73, has served as Chairman of the Board and Chief
Executive Officer of the Company since 1987 and of John Alden Life Insurance
Company ("JALIC") since 1984. Mr. Johnson served as President of the Company
from 1987 to March 1993 and since May 1995 and of JALIC from 1984 to March 1993.
From 1978 to 1984 he was a partner at Routier & Johnson, P.C., a Washington,
D.C. law firm, and from 1970 to 1977 he was Chairman of the Board, President and
Chief Executive Officer of American National Insurance Company, a life insurance
company headquartered in Galveston, Texas. Mr. Johnson is also a director of
each of the 13 investment companies comprising the United Group of Mutual Funds,
as well as the following investment companies: United Funds, Inc., TMK/United
Funds, Inc., and Waddell & Reed Funds, Inc., all of which are based in Overland
Park, Kansas. Mr. Johnson has been a Director of the Company since 1987.
MARVIN H. ASSOFSKY, 51, has served as Senior Vice President and Chief
Investment Officer and a Director of the Company since 1987. He has been Senior
Vice President and Chief Investment Officer of JALIC since 1981.
NORMAN E. CROCKER, 46, has been a Director of the Company since June 1995.
He is President of Crocker & Company, Ltd., an actuarial consulting firm
established in January 1995. From July 1985 to January 1995, Mr. Crocker served
as Vice President and Group Actuary of JALIC. From time to time since January
1995, the Company has retained the services of Crocker & Company, Ltd. on a
consulting basis and may continue to do so in the future.
2
<PAGE> 5
DAVID P. GARDNER, 64, has been a Director of the Company since June 1993.
He served as President of the University of California System from 1983 until
1992. He is President of the William and Flora Hewlett Foundation, a position he
has held since January 1993. Mr. Gardner is also a director of First Security
Corporation and Fluor Corporation.
EDWIN J. GARN, 64, has been a Director of the Company since June 1993. He
is Vice Chairman and a director of Huntsman Corporation, a position he has held
since January 1993. He is a retired United States Senator from the State of
Utah, a position he held from 1974 until 1992. Mr. Garn is a director of
Franklin Quest Co., Dean Witter InterCapital Inc., United Space Alliance and
Nuskin Asia Pacific.
CARL F. GEUTHER, 51, has been a Director of the Company since 1987. He is
Vice Chairman and Chief Financial Officer of Great Western Financial
Corporation, a position he has held since 1986.
LINDA JENCKES, 49, has been a Director of the Company since June 1995. She
is President of Linda Jenckes and Associates, a legislative, media and public
affairs consulting firm in Washington, D.C. established in February 1995. From
1992 to 1994, Ms. Jenckes served as Senior Vice President of the Health
Insurance Association of America, where she was Vice President of Federal
Affairs from 1982 to 1992 and a Federal Relations Representative from 1978 to
1981.
LYNN G. MERRITT, 66, has been a Director of the Company since June 1995. He
served as President and Chief Executive Officer of Life Office Management
Association from 1970 until his retirement in May 1995.
JAMES L. MOOREFIELD, 74, has been a Director of the Company since 1988. He
served as President and Chief Executive Officer of the Health Insurance
Association of America from 1980 until his retirement in 1987.
SCOTT L. STANTON, 41, has been a Director of the Company since May 1994. He
has served as Senior Vice President -- Finance and Corporate Services and Chief
Financial Officer of the Company since March 1994. From 1993 to 1994, he was
Senior Vice President -- Investor Relations and Taxation. He served as Vice
President of Taxation for the Company from 1987 to 1993 and of JALIC from 1984
to 1993.
LONNIE R. WRIGHT, 54, has been a Director of the Company since June 1995.
He has served as Executive Vice President and Chief Operating Officer of the
Company since January 1997. He was Senior Vice President of the Asset
Accumulation Division of the Company from 1987 to 1997. He was Senior Vice
President of the Asset Accumulation Division of JALIC from 1984 to January 1997.
GENERAL INFORMATION
RELATING TO THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS
The business and affairs of the Company are managed under the direction of
the Board of Directors. To assist it in carrying out its duties, the Board of
Directors has delegated certain authority to five committees. The Board of
Directors held four special and three regular meetings in 1996. Each member of
the Board of Directors attended at least 75%, with the exception of David P.
Gardner who attended 67%, of the meetings of the Board of Directors and all
committees of the Board of which he or she was a member during 1996.
3
<PAGE> 6
COMMITTEES OF THE BOARD
The Executive Committee may exercise all power and authority of the Board
in the management and business of the Company, subject to the limitations
imposed by the By-Laws and applicable laws. The Executive Committee has the
authority to review and approve proposed corporate action when the Board is not
in session and may advise the Board of any recommendations of the Executive
Committee regarding any proposed corporate action presented to the Board. The
members of the Executive Committee are Marvin H. Assofsky, Edwin J. Garn, Carl
F. Geuther, Glendon E. Johnson and Lonnie R. Wright. The Executive Committee was
established in 1987, does not meet on a regular schedule, generally convening
only when action is necessary between meetings of the Board, and held one
meeting in 1996.
The Audit Committee recommends to the Board the independent accountants to
be engaged by the Company, reviews the scope of their engagement, including the
remuneration to be paid, and reviews the independence of the accountants on a
continuing basis. The Audit Committee, with the assistance of the independent
accountants, the Principal Accounting Officer, the Controller, the General
Counsel and other appropriate Company personnel, reviews: (1) the Company's
general policies and procedures with respect to audits and accounting and
financial controls; (2) the general accounting and reporting principles and
practices applied in preparing the Company's financial statements and conducting
financial audits; (3) the interim and year-end financial statements and any
certification, report or opinion the independent accountants propose to render
in connection with such statements; (4) the extent to which the Company has
implemented changes suggested by the internal audit staff, the independent
accountants or the Audit Committee; and (5) the adequacy of the Company's
accounting practices and internal control structure. The Audit Committee may
direct the General Counsel, the independent accountants and the internal audit
staff to inquire into and report to it on any matter having to do with the
Company's Standards of Business Conduct and Ethics. The members of the Audit
Committee are Norman E. Crocker, David P. Gardner, Edwin J. Garn, Carl F.
Geuther, Linda Jenckes, Lynn G. Merritt and James L. Moorefield, each of whom is
a nonemployee Director. The Audit Committee held three regular meetings and two
telephonic meetings in 1996.
The Compensation Committee approves, subject to review by the Board, the
compensation for the Chairman of the Board and Chief Executive Officer and the
other executive officers and administers the Company's current Long-Term
Incentive Plan and, subject to stockholder approval of the 1997 Plan, will
continue this role under the 1997 Plan (including the grant of options
thereunder), the North Star Marketing Organization Long-Term Incentive Plan and
the Company's Employee Stock Purchase Plan. The Compensation Committee makes
recommendations to the Board with respect to proposals for the application of
new benefits, incentive plans or programs to officers who are also Directors and
the application of amendments to existing plans or programs which would
significantly increase such officers' compensation. The members of the
Compensation Committee are David P. Gardner, Edwin J. Garn, Carl F. Geuther,
Linda Jenckes, Lynn G. Merritt and James L. Moorefield, each of whom is a
nonemployee Director. The Compensation Committee held three regular meetings in
1996.
The Nominating Committee nominates the Board of Directors and plans for the
successor to the Chief Executive Officer. The members of the Nominating
Committee are Norman E. Crocker, David P. Gardner, Edwin J. Garn, Carl F.
Geuther, Linda Jenckes, Glendon E. Johnson, Lynn G. Merritt and James L.
Moorefield. The Nominating Committee held no formal meetings in 1996.
4
<PAGE> 7
COMPENSATION OF DIRECTORS
Directors of the Company who are also employed by the Company or one of its
subsidiaries receive no compensation for serving on the Board but are reimbursed
for expenses actually incurred for each Board meeting they attend. Directors of
the Company who are not employees of the Company each receive an annual fee of
$25,000 for serving as a Director of the Company as well as $1,000 (or $1,500 if
a committee chairperson attending a committee meeting) for each Board and
committee meeting attended in person rather than by telephone. Beginning with
the fourth quarter of 1996, nonemployee directors received the full $1,000 (or
$1,500 if a committee chairperson participating in a committee meeting) for
participating in a telephonic Board or committee meeting lasting thirty minutes
or more, and $500 (or $750 if a committee chairperson) for participating in a
telephonic meeting lasting less than thirty minutes.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, to the knowledge of the Company, the number
of shares of Common Stock and the percentage of the outstanding shares of Common
Stock beneficially owned as of March 24, 1997 by (i) each Director and each
nominee for election as a Director, (ii) each executive officer whose name
appears in the Summary Compensation Table, and (iii) all Directors and executive
officers of the Company as a group. Unless otherwise indicated, each person has
sole investment and voting power (or shares such powers with his or her spouse)
with respect to the shares set forth in the following table. As of March 24,
1997, the Company had 25,335,538 shares of Common Stock issued and outstanding.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
OWNERSHIP(1) OF CLASS(2)
------------ -----------
<S> <C> <C>
Glendon E. Johnson(4)...................................... 857,662(3) 3.3%
Marvin H. Assofsky(4)...................................... 176,446 *
Norman E. Crocker(4)....................................... 4,748 *
David P. Gardner(4)........................................ 7,748 *
Edwin J. Garn(4)........................................... 7,748 *
Carl F. Geuther(4)......................................... 10,781 *
Linda Jenckes(4)........................................... 3,748 *
Lynn G. Merritt(4)......................................... 3,748 *
James L. Moorefield(4)..................................... 8,948 *
Mark Schoder............................................... 33,334 *
Scott L. Stanton(4)........................................ 115,398 *
Lonnie R. Wright(4)........................................ 74,233 *
All Directors and executive officers as a group (13
persons)................................................. 1,361,756(3) 5.2%
</TABLE>
- ---------------
* Represents holdings of less than one percent.
(1) Includes shares subject to options that are currently vested and
exercisable, as follows: Glendon E. Johnson, 772,662; Marvin H. Assofsky,
48,534; Norman E. Crocker, 3,748; David P. Gardner, 7,748; Edwin J. Garn,
7,748; Carl F. Geuther, 8,748; Linda Jenckes, 3,748; Lynn G. Merritt, 3,748;
James L. Moorefield, 8,748; Scott L. Stanton, 45,623; Mark Schoder, 33,334;
and Lonnie Wright, 30,146.
5
<PAGE> 8
(2) Percent of class is calculated by assuming, for purposes of both the number
of shares held by such beneficial owner and the number of shares issued and
outstanding, that all options to purchase Common Stock held by such
beneficial owner (and no others) had been exercised.
(3) Includes 85,000 shares owned by Glendon E. Johnson, Jr., the son of Glendon
E. Johnson. Glendon E. Johnson disclaims beneficial ownership of all such
shares, as to which Glendon E. Johnson, Jr. has sole voting and investment
power.
(4) Director
To the best of the Company's knowledge, the only beneficial owners of more
than 5% of the outstanding shares of Common Stock of the Company as of December
31, 1996 are set forth below. This table is based on information provided in
Schedule 13Gs filed with the Securities and Exchange Commission by each of the
parties listed below.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------- ------------------ --------
<S> <C> <C>
Heartland Advisors, Inc. ........................... 1,973,700(1) 7.8%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Legg Mason, Inc. ................................... 2,046,032(2) 8.08%
111 South Calvert Street
Baltimore, Maryland 21202
Sound Shore Management, Inc. ....................... 2,268,600(3) 9.0%
8 Sound Shore Drive
Greenwich, Connecticut 06836
</TABLE>
- ---------------
(1) Heartland Advisors, Inc. reports in its Schedule 13G that it has sole voting
power with respect to 1,742,000 shares and sole dispositive power with
respect to 1,973,700 shares. Heartland Advisors, Inc. reports that the
shares of Common Stock to which its Schedule 13G relates are held in
investment advisory accounts of Heartland Advisors, Inc. As a result,
various persons have the right to receive or the power to direct the receipt
of dividends from, or the proceeds from the sale of, the securities.
Heartland Advisors, Inc. further reports that no such account is known to
have such an interest relating to more than 5% of the class.
(2) Legg Mason, Inc. reports in its Schedule 13G that it has sole voting power
with respect to 1,438,600 shares and sole dispositive power with respect to
2,046,032 shares. Legg Mason, Inc. reports that such shares are held by Legg
Mason Total Return Trust, Inc. and Legg Mason Special Investment Trust,
Inc., with Legg Mason Fund Adviser, Inc. having power to dispose thereof.
The remainder are held by Barlett Basic Value Fund and by various clients of
Bartlett & Co., which Bartlett & Co. has power to dispose thereof; and by
various clients of Legg Mason Capital Management, Inc. and Legg Mason
Managed Investment Portfolio, which have power to dispose thereof.
(3) Sound Shore Management, Inc. reports in its Schedule 13G that it has sole
voting power with respect to 2,078,600 shares and sole dispositive power
with respect to 2,268,600 shares.
6
<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's Directors and officers and holders of
more than 10% of the Company's Common Stock to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. The
Company believes that during the fiscal year ended December 31, 1996, its
Directors and officers and holders of more than 10% of the Company's Common
Stock complied with all Section 16(a) reporting requirements.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth information concerning
the compensation of the Company's Chief Executive Officer and each of the other
four most highly compensated executive officers of the Company for services in
all capacities to the Company and its subsidiaries.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY COMPENSATION OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) BONUS ($)(1) ($) (#) ($)(2)
------------------ ---- ------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Glendon E. Johnson.................. 1996 693,925 438,661 76,524(3) 93,000 41,641
Chairman of the Board and Chief 1995 667,325 0 74,124(3) 130,000 51,091
Executive Officer 1994 543,859 533,748 74,124(3) 136,522 58,537
Marvin H. Assofsky.................. 1996 319,525 139,286 -- 18,320 16,047
Senior Vice President, Chief 1995 307,325 0 -- 27,000 18,945
Investment Officer and Director 1994 292,993 183,268 -- 30,354 23,499
Mark Schoder........................ 1996 311,067 135,572 61,585(4) 18,320 12,262
Senior Vice President, Business 1995 94,824 100,000 14,583 100,000 0
Development and Communications 1994 n/a n/a n/a n/a 0
Scott L. Stanton.................... 1996 326,965 139,286 -- 18,320 10,932
Senior Vice President, Chief 1995 307,136 0 -- 27,000 12,791
Financial Officer and Director 1994 215,636 149,775 -- 30,123 12,914
Lonnie R. Wright.................... 1996 319,525 212,383 -- 18,320 13,630
Executive Vice President, Chief 1995 208,325 0 -- 27,000 13,142
Operating Officer and Director 1994 199,941 146,817 -- 24,677 17,663
</TABLE>
- ---------------
(1) The amounts shown in this column reflect bonuses earned in the stated year
and paid in the next fiscal year.
(2) The amounts shown in this column consist of the Company's annual
contributions to the John Alden Life Insurance Company Employee Savings
Incentive Plan and annual allocations to the Company's Supplemental Employee
Retirement Plan with respect to contributions supplemental to the Employee
Savings Incentive Plan on behalf of each Named Executive Officer, which
contributions were in the following respective amounts in 1996: Glendon E.
Johnson, $4,500 and $37,141; Marvin H. Assofsky, $4,500 and $11,547; Mark
Schoder, $4,500 and $7,762; Scott L. Stanton, $4,500 and $6,432; and Lonnie
R. Wright, $4,500 and $9,130.
(3) Consists of personal benefits and perquisites (including $55,524 annual
housing allowance).
(4) Consists of personal benefits and perquisites (including $35,416 in the form
of a housing relocation allowance for 1996).
7
<PAGE> 10
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides supplemental information relating to the
Company's grants during 1996 of options to purchase Common Stock to the Named
Executive Officers, including the relative size, exercise price and expiration
date of each grant. Also included is information relating to the potential
realizable value of each grant, assuming that the market price of the Common
Stock appreciates in value from the date of grant to the expiration date of the
options at each of a 5% and a 10% annualized rate.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($)(2) 10% ($)(3)
- --------------------------- ------------ ---------------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Glendon E. Johnson......... 93,000 23.7% $ 20.50 9/11/06 1,198,988 3,038,470
Marvin H. Assofsky......... 18,320 4.7% $ 20.50 9/11/06 236,188 598,546
Mark Schoder............... 18,320 4.7% $ 20.50 9/11/06 236,188 598,546
Scott L. Stanton........... 18,320 4.7% $ 20.50 9/11/06 236,188 598,546
Lonnie R. Wright........... 18,320 4.7% $ 20.50 9/11/06 236,188 598,546
</TABLE>
- ---------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, in the price of the Common Stock. No gain to the optionees is possible
without an increase in the price of the Common Stock, which will benefit all
shareholders proportionately.
(2) In order to realize the potential values set forth in the 5% column, the per
share market price of the Common Stock would be $33.39, or 162.9% above the
base exercise price, with regard to an expiration date of September 11,
2006.
(3) In order to realize the potential values set forth in the 10% column, the
per share market price of the Common Stock would be $53.17, or 259.4% above
the base exercise price, with regard to an expiration date of September 11,
2006.
8
<PAGE> 11
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table shows the number and value at fiscal year-end of
exercisable and unexercisable stock options granted under the Company's
Long-Term Incentive Plan for each of the Named Executive Officers. While the
value realizable from exercisable options is dependent upon the extent to which
the Company's performance is reflected in the market price of the Company's
Common Stock at any particular point in time, the decision as to whether such
value will be realized in any particular year is primarily determined by each
individual Named Executive Officer's determination of when to exercise his
options and not by the Company or the Compensation Committee.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON OPTIONS/SARS AT OPTIONS/SARS AT
EXERCISE VALUE FISCAL YEAR-END FISCAL YEAR-END ($)(1)
NAME (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------ ------------ ------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Glendon E. Johnson............ -- -- 772,662/209,332 $2,178,652/$0
Marvin H. Assofsky............ -- -- 48,354/ 42,320 $52,500/$0
Mark Schoder.................. -- -- 33,334/ 84,986 $0/$0
Scott L. Stanton.............. -- -- 45,623/ 42,320 $43,750/$0
Lonnie R. Wright.............. -- -- 30,146/ 41,320 $5,142/$0
</TABLE>
- ---------------
(1) Based on the difference between the closing price of the Common Stock on
December 31, 1996 ($18.50) and the exercise price of the options.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
The following table shows performance share awards made to the Named
Executive Officers in 1996 for potential payment in 1999 under the Company's
Long-Term Incentive Plan, and estimated future payouts under such plan at
threshold, target and maximum levels.
<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER
SHARES, UNITS PERIOD UNTIL
OR OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME RIGHTS PAYOUT # OF SHARES # OF SHARES # OF SHARES
- ----------------------------------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Glendon E. Johnson................. 20,000 3 Years 1,250 20,000 37,500
Marvin H. Assofsky................. 2,520 3 Years 158 2,520 4,725
Mark Schoder....................... 2,520 3 Years 158 2,520 4,725
Scott L. Stanton................... 2,520 3 Years 158 2,520 4,725
Lonnie R. Wright................... 2,520 3 Years 158 2,520 4,725
</TABLE>
The performance share awards are grants of the Company's Common Stock that
are contingent upon the achievement by the Company of certain return on equity
goals during the performance period of 1996 to 1998. The percentage of shares of
any participant's award which will vest at the end of the performance period
ranges from 0% to 150% of that participant's amount based on whether and to what
extent the three-year average return on equity target was achieved. Such
adjusted amount is further adjusted by multiplying it by a percentage ranging
from 0% to 125% based on the level at which the three-year return on equity
compares to that of the Peer Group (as defined herein) companies.
Notwithstanding the foregoing, in the event of a change
9
<PAGE> 12
in control of the Company, the participant shall immediately receive 100% of the
shares awarded. No dividends are paid on shares underlying performance share
awards prior to vesting.
PENSION PLAN TABLE
The following table sets forth estimated annual benefits payable under the
Company's Pension Plan and Supplemental Pension Plan (each as defined below) at
the Social Security retirement age, based on credited years of service and final
average earnings, assuming an approximate current age of 42.
<TABLE>
<CAPTION>
ATTAINED BENEFIT SERVICE YEARS
----------------------------------------------------------
FINAL AVERAGE EARNINGS 15 20 25 30 35
- ---------------------------------------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
125,000................................ $ 35,558 $ 47,410 $ 59,263 $ 64,865 $ 70,468
150,000................................ 43,995 58,660 73,325 80,490 87,655
200,000................................ 60,870 81,160 101,450 111,740 122,030
250,000................................ 77,745 103,660 129,575 142,990 156,405
500,000................................ 162,120 216,160 270,200 299,240 328,280
740,000................................ 246,495 328,660 410,825 455,490 500,155
1,000,000............................... 330,870 441,160 551,450 611,740 672,030
1,200,000............................... 398,370 531,160 663,950 736,740 809,530
1,700,000............................... 567,120 756,160 945,200 1,049,240 1,153,280
2,200,000............................... 735,870 981,160 1,226,450 1,361,740 1,497,030
</TABLE>
The Company maintains a defined benefit pension plan (the "Pension Plan")
which is intended to be a qualified plan under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Pension Plan provides an
annual benefit at normal retirement age which equals the sum of: (a) 1.5% of
final average earnings times years of service up to 25 years; (b) 0.5% of final
average earnings times years of service between 25 and 35 years; and (c) 0.75%
of final average earnings in excess of the participant's average Social Security
wage base for the 35 years preceding retirement, times years of service not in
excess of 35 years; but the amount determined under this formula shall at least
be equal to the benefit determined under the Pension Plan's benefit formula in
effect prior to 1989. Final average earnings include salary, bonuses and
deferred compensation, subject to an annual limitation under the Code for
includable compensation, which is $150,000 for 1996.
The Company also provides a supplemental benefit (the "Supplemental Pension
Plan") to the Company's Pension Plan to the Company's Chief Executive Officer,
Glendon E. Johnson, and certain officers of the Company with the title of Senior
Vice President ("Senior Executives") equal to the actuarial present value at the
time of payment of the excess of (a) a benefit determined under the benefit
formula for the Pension Plan, applied without regard to maximum compensation and
benefit limitations under the Code applicable to the Pension Plan, over (b) the
applicable accrued benefit actually earned under the Pension Plan formula.
The credited years of service for the Named Executive Officers under the
Pension Plan and the Supplemental Pension Plan as of December 31, 1996, are as
follows: Glendon E. Johnson, 11 years; Marvin H. Assofsky, 21 years; Scott L.
Stanton, 11 years; Lonnie R. Wright, 25 years; and Mark Schoder, .33 years. The
covered compensation received in 1996 by the Named Executive Officers covered
for purposes of the Pension Plan and the Supplemental Pension Plan was as
follows: Glendon E. Johnson, $697,600; Marvin H. Assofsky, $317,200; Scott L.
Stanton, $317,200; Lonnie R. Wright, $317,200 and Mark Schoder, $408,742.
10
<PAGE> 13
In addition, the Company maintains a supplemental executive retirement plan
for the purpose of supplementing the retirement income of Glendon E. Johnson.
The plan provides an annual retirement benefit equal to $10,000 per annum
multiplied by the number of years of service prior to December 1, 1989, plus
$15,000 per annum times the number of years of service after December 1, 1989 in
the form of a life annuity or, if Mr. Johnson is married, a 100% joint and
survivor annuity. Benefits are paid upon the termination of Mr. Johnson's
employment agreement with the Company. As of December 31, 1996, the projected
annual benefit amount under this plan is $155,000. Benefits under this plan are
not included in the Pension Plan Table.
The Supplemental Pension Plan also provides supplemental benefits to
Glendon E. Johnson and other Senior Executives who are selected by the
Compensation Committee in the form of an annual supplemental benefit to the
Company's Employee Saving Incentive Plan (the Company's 401(k) plan, referred to
herein as the "ESIP") equal to: (a) the excess of (i) 50% of the first 6% of
each executive's contributions to the ESIP, plus, if declared by the Board of
Directors, an additional percentage not to exceed 25% of the first 6% of such
contributions to the ESIP, each determined without regard to maximum
compensation and benefit limitations under the Code applicable to the ESIP, over
(ii) the amount of matching contributions by the Company actually contributed to
the ESIP for such executive's account, plus (b) an accumulation credit of 8%, or
such other rate as declared from time to time by the Compensation Committee,
applied to such executive's benefit accrual at the end of the prior calendar
year (if applicable).
EMPLOYMENT AND DEFERRED COMPENSATION AGREEMENTS
Glendon E. Johnson has extended his employment agreement with the Company
for one year. It is scheduled to expire on December 31, 1997. The agreement
provides for, among other things, an initial annual base salary of $401,250,
which is reviewed at least annually, but may not be decreased. Mr. Johnson may
also receive annual cash bonuses based upon the comparison of the actual
performance of the Company to projected performance levels. In the event of Mr.
Johnson's death or disability prior to termination of the agreement, or in the
event the agreement is terminated without cause by the Company or with cause by
Mr. Johnson, Mr. Johnson will receive a payment equal to two times his annual
cash compensation. Upon a change in control (as defined in the Company's
Long-Term Incentive Plan) or sale of all of the assets of the Company, Mr.
Johnson will have the option to terminate the agreement and receive a cash
payment equal to three times his annual cash compensation, plus a tax gross-up
amount sufficient to cover any excise or similar taxes pursuant to Section 280G
of the Code. In addition, in order to preserve the deductibility of certain
amounts by the Company, under Section 162(m) of the Code, the $1 million
executive compensation deduction limit, Mr. Johnson has entered into a deferred
compensation agreement with the Company pursuant to which amounts payable to Mr.
Johnson under the Company's incentive compensation plans will be deferred for
payment in future years, subject to acceleration of payment in certain events,
including a change in control (as defined in the Company's 1997 Plan).
SEVERANCE PAY
All the Company's employees are eligible for termination pay should their
employment be terminated by the Company. Certain officers of the Company,
including the Named Executive Officers, are eligible for six to 12 months of
severance pay plus two weeks for each year of service.
11
<PAGE> 14
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors consists of
six outside directors who are neither employees nor officers of the Company. The
Compensation Committee reviews the Company's executive compensation program and
policies each year and determines the compensation of the Company's executive
officers. All decisions of the Compensation Committee relating to the
compensation of the Company's executive officers are subject to review by the
full Board of Directors, other than decisions regarding stock-based grants or
awards under the Company's Long-Term Incentive Plan or the proposed 1997 Plan
and other stock-related plans, which decisions are made solely by the members of
the Compensation Committee. The members of the Compensation Committee are all
non-employee directors under Rule 16b-3 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and outside directors under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code").
EXECUTIVE COMPENSATION POLICY
The Company's compensation programs are designed by the Compensation
Committee to achieve four fundamental objectives: (1) to provide competitive
salary levels and compensation incentives that attract and retain qualified
executives; (2) to motivate executives to achieve specific strategic short-term
and long-term objectives of the Company; (3) to recognize individual
performances and achievements as well as the performance of the Company relative
to its peers; and (4) to link the interests of senior management with the
long-term interests of the Company's stockholders through compensation
opportunities in the form of stock ownership. At present, these objectives are
met through a program comprised of salary, annual cash bonus, which is directly
tied to the Company's operating performance, stock price or similar criteria,
and long-term incentive opportunities in the form of stock options and
performance stock.
In view of the Company's strategic decision to sell or exit certain of its
lines of business in order to focus on its healthcare business, a new peer group
of companies (the "Peer Group") was recently developed to be used both for the
required total shareholder return performance graph shown in this proxy
statement and for compensation comparisons. The Company's objective is to be
generally competitive with the Peer Group, but no specific objectives have been
established for the Company's stance versus this group. Broader industry surveys
are also used for competitive comparisons.
BASE SALARIES
Salaries for executive officers are determined periodically by evaluating
the performance of the individuals reviewed and their contributions to overall
Company performance, their responsibilities, experience and potential, their
period of service at current salary, internal comparability considerations, as
appropriate, and compensation practices of the Peer Group companies. Financial
results of the Company as well as appropriate non-financial measures are also
considered. Executive salaries were increased approximately 4% in 1996, in line
with general industry practice.
ANNUAL BONUSES
The Company's Short-Term Incentive Plan, which is its annual bonus program,
is designed to provide year-end incentive bonuses to selected key employees who
contributed materially to the success of the Company during the most recently
completed fiscal year, thus enabling them to participate in that success as well
as providing future incentives. In determining amounts to be awarded under the
Short-Term Incentive
12
<PAGE> 15
Plan, the Compensation Committee takes into account a number of factors,
including various measures or components of the financial performance of the
Company and its divisions, as well as individual performance and achievement.
For 1996, the bonus target level for participants in the Short-Term Incentive
Plan, expressed as a percentage of base salary, remained at 65% for the chief
executive officer, 45% for executive officers and 40% for most other senior
executives of the Company, and the maximum bonus opportunity was set at 200% of
target.
Goals for the 1996 bonus were either Company operating earnings per share
or division operating earnings before interest, taxes and amortization of
purchase costs ("EBIT"), depending on the executive's position. All but one of
the executive officers reported in this proxy statement received bonuses based
upon the Company's operating earnings per share with division operating EBIT as
the goal for one officer. The Company's operating earnings per share level
achieved in 1996 resulted in bonuses at 97% of target.
LONG-TERM INCENTIVES
Under the Company's Long-Term Incentive Plan and the proposed 1997 Plan,
the Compensation Committee may grant to certain employees of the Company and its
subsidiaries a variety of long-term incentives, including non-qualified stock
options, incentive stock options, stock appreciation rights, grants of stock or
performance awards.
Based on recommendations made by the Company's independent compensation
consultant during 1996, the Company approved grants of stock options that have
an exercise price of not less than the fair market value of the underlying stock
on the date of grant. The 1996 stock option grants were somewhat reduced from
1995 levels in view of the fact that the number of options granted for 1995 was
larger than for prior years due to the then lower share price, as well as to
reflect the number of shares remaining in the authorized pool. The options
become exercisable with respect to one-third of such options on September 11 of
each of 1997, 1998 and 1999 and all of the options will expire on September 11,
2006.
The Committee also approved performance share awards during 1996. The
performance share awards are grants of the Company's Common Stock that are
contingent upon the achievement by the Company of certain return on equity goals
during the performance period of 1996 to 1998. The percentage of shares of any
participant's award which will vest at the end of the performance period ranges
from 0% to 150% of that participant's amount based on whether and to what extent
the three-year average return on equity target was achieved. The resulting
amount is further adjusted by multiplying it by a percentage ranging from 0% to
125% based on the level at which the three-year return on equity compares to
that of the Peer Group companies. Performance share grants in 1996 were awarded
at approximately the same percentage of salary as in 1995.
The Committee also approved performance share awards on March 5, 1997, that
are contingent upon total shareholder return on the Company's Common Stock
measured against the Standard & Poor's 500 Index, during the performance period
of 1997 to 1999. The percentage of shares of any participant's award that will
vest at the end of the performance period ranges from 0% to 200%.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Effective January 1, 1996, Mr. Johnson's base salary increased by 4% to
$693,925, consistent with the increase granted to other Senior Executives of the
Company. As referenced above, Mr. Johnson's 1996 target bonus was 65% of salary,
and his maximum bonus amount was 200% of his established target.
13
<PAGE> 16
During 1996, the Compensation Committee authorized a grant to Mr. Johnson
of options to acquire 93,000 shares of the Company's Common Stock and a grant of
20,000 performance shares, each pursuant to the Company's Long-Term Incentive
Plan. The performance shares granted to Mr. Johnson will vest only upon the
achievement by the Company of certain performance objectives, including the
Company's return on equity relative to both the target level and the comparable
return on equity of the Peer Group companies.
EXECUTIVE COMPENSATION DEDUCTIBILITY
Section 162(m) of the Code, which was enacted in August 1993, limits the
tax deduction that the Company can take with respect to the compensation paid or
granted to its chief executive officer and next four highest compensated
executive officers of the Company, unless the compensation is "performance
based." To the extent determinable and as one of the factors in its
consideration of compensation matters, the Compensation Committee considers the
anticipated tax effect which the Section 162(m) limitations would have on the
Company. It is the Compensation Committee's policy to obtain the maximum
deduction available under Section 162(m). The Compensation Committee anticipates
that compensation paid or granted to executive officers during 1996 will qualify
for deductibility. The 1997 Plan presented to shareholders in this proxy
statement will ensure that certain future payments under that plan continue to
be deductible.
CONCLUSION
The Committee believes that the programs described above provide
compensation that is competitive with the levels paid by other Peer Group
companies and is structured to provide incentives that are consistent with the
Company's short-term and long-term business mission.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS:
CARL F. GEUTHER, CHAIRMAN EDWIN J. GARN
JAMES L. MOOREFIELD DAVID P. GARDNER
LINDA JENCKES LYNN G. MERRITT
14
<PAGE> 17
PERFORMANCE GRAPH
In view of the Company's recent strategic decision to sell or exit certain
of its noncore businesses and to focus on its healthcare business, the
Compensation Committee of the Board of Directors has revised the old Peer Group
of companies formerly used for comparison purposes, and has approved a new Peer
Group of companies that are more comparable to the business to be done by the
Company in the future. In this transitional year, both old and new Peer Groups
are presented in the following graph. The following graph shows the Company's
cumulative total return to stockholders compared to the Standard & Poor's 500
Index and the Company's old and new Peer Groups over the period from September
30, 1992 through December 31, 1996, based upon an initial investment of $100.
Total stockholder return assumes dividend reinvestment. The stock price
performance shown on the following graph is not necessarily indicative of future
price performance. The companies currently included in the old and new Peer
Groups are identified below:
<TABLE>
<CAPTION>
OLD PEER GROUP NEW PEER GROUP
- --------------------------------------------- ---------------------------------------------
<S> <C>
AFLAC Inc. American Heritage Life Investment Corp.
American General Corp. Capitol American Financial Corporation
American National Insurance Company Central Reserve Life Corporation
AON Corp. Foundation Health Corporation
Bankers Life Holding Corp. Health Systems International, Inc.
Central Reserve Life Corp. Mid Atlantic Medical Services, Inc.
First Colony Corp. Physician Corporation of America
Foundation Health Corp. Pioneer Financial Services, Inc.
Healthcare Compare Corp. Provident Companies, Inc.
Humana Inc. RightCHOICE Managed Care, Inc.
Jefferson-Pilot Corp. The Paul Revere Corporation
Old Republican International Corp. United Wisconsin Services, Inc.
Oxford Health Plans, Inc. UICI
PacifiCare Health Systems, Inc. Washington National Corporation
Protective Life Corp. Wellpoint Health Networks Inc.
Provident Companies, Inc.
Providian Corp.
ReliaStar Financial Corp.
Torchmark Corp.
United HeathCare Corp.
Unitrin Inc.
UNUM Corp.
US Heathcare Inc.
US Life Corp.
Washington National Corp.
</TABLE>
15
<PAGE> 18
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG JOHN ALDEN, S&P 500, OLD PEER GROUP AND NEW PEER GROUP
(ASSUMING AN INVESTMENT OF $100 ON SEPTEMBER 30, 1992)
<TABLE>
<CAPTION>
JOHN ALDEN
MEASUREMENT PERIOD FINANCIAL
(FISCAL YEAR COVERED) GROUP S&P 500 OLD PEER GROUP NEW PEER GROUP
<S> <C> <C> <C> <C>
9/30/92 100 100 100 100
12/31/92 175.4 105.0 115.8 104.0
12/31/93 243.1 115.5 119.6 107.5
12/31/94 196.5 117.1 123.5 101.0
12/31/95 145.9 161.0 172.2 121.3
12/31/96 132.4 197.8 191.2 126.8
</TABLE>
Note: Total return includes reinvestment of dividends.
CERTAIN TRANSACTIONS
AGREEMENTS WITH MANAGEMENT STOCKHOLDERS
Company's Obligation and Right to Repurchase Common Stock
The Company, certain stockholders of the Company (including senior
management of the Company and certain other persons referred to herein as
"Management Stockholders"), and their spouses, are parties to an Amended and
Restated Management Stockholders Agreement dated February 17, 1993 (the
"Management Stockholders Agreement").
The Management Stockholders Agreement grants the Company an option to
purchase, and each of the Management Stockholders an option to sell to the
Company, through October 30, 1997, the Common Stock owned by each such
Management Stockholder at its then fair market value in the event of his or her
death, disability, involuntary termination of employment other than for cause or
retirement at or beyond the early retirement date under the Company's Pension
Plan as it existed at October 30, 1987 (the later of age 55 or 10 years of plan
service). Such "put" and "call" rights also apply to the stock owned by Glendon
E. Johnson,
16
<PAGE> 19
Jr., in the event of the retirement of Glendon E. Johnson on or after October
30, 1992 or, in the case of such "put" rights, upon the death, disability or
involuntary termination of employment other than for cause of Glendon E.
Johnson. The Company's obligations and rights to purchase Common Stock for cash
from Management Stockholders under the Management Stockholders Agreement are
subject to restrictions under the Company's Amended and Restated Credit
Agreement dated as of July 27, 1994, as amended, with The Chase Manhattan Bank
(National Association) and certain other commercial lending institutions named
therein (the "Credit Agreement"), as amended. If the provisions of the Credit
Agreement restrict the exercise of a Management Stockholder's "put" rights for
cash, the purchase price will be paid in cash to the extent not in violation of
the Credit Agreement and the balance will be paid by the issuance of a
promissory note (a "Purchase Note"). The Purchase Note will: (i) be subordinated
to all indebtedness under the Credit Agreement and (ii) bear simple interest,
payable quarterly, from the date of issuance at the prime rate (unless a payment
default has occurred and is continuing, in which event interest accrues until
the default is no longer existing). The Company has agreed to fund its
contingent liabilities with respect to the "put" rights in the event of the
death of those Management Stockholders who have or will have exercisable "put"
rights upon retirement (including Glendon E. Johnson, Jr. with regard to the
retirement of Glendon E. Johnson) prior to October 30, 1997 by purchasing life
insurance policies on the lives of such Management Stockholders, from an
unaffiliated life insurance company in the case of contingent liabilities that
exceed $500,000 and from JALIC for the others. To date, the Company has
purchased life insurance on all of the Management Stockholders for which it is
obligated to do so.
Reoffer of Shares of Common Stock
The Management Stockholders Agreement also provides for the reoffer of
shares of Common Stock or the granting of options to purchase Common Stock that
the Company repurchases from the Management Stockholders pursuant to the "put"
and "call" provisions of the Management Stockholders Agreement. The Management
Stockholders Agreement provides that shares of repurchased stock will be held by
the Company solely for sale, directly or through the grant of options, to such
full-time employees of the Company or its subsidiaries as may be designated by
the committee of the Board of Directors that administers the Company's Long-Term
Incentive Plan (which is currently administered by the Compensation Committee).
The purchase price or option exercise price, as the case may be, must be equal
to the price paid by the Company for the repurchased stock. On the first
anniversary date of each repurchase of stock by the Company pursuant to the
Management Stockholders Agreement (or, if earlier, upon a merger or
consolidation resulting in a change of control, or a sale of substantially all
of the assets of the Company), the Company must offer such stock to the
Management Stockholders, on a pro rata basis and at the price the Company paid
for the repurchased stock, except for shares of such stock that have already
been made subject to a contract of sale or outstanding option entered into or
granted to an employee of the Company or its subsidiaries.
It is anticipated that stock or options to purchase stock which become
available through repurchase by the Company from Management Stockholders
pursuant to the Management Stockholders Agreement will be offered primarily to
individuals chosen from among approximately 100 of the top members of the
Company's management and sales staff. Certain of the Company's Named Executive
Officers will also be eligible for such stock sales or option grants and may be
granted, on an individual basis, in excess of 5% of the options to be granted or
stock to be sold pursuant to the Management Stockholders Agreement. As of April
3, 1997, 233,756 shares of stock, which constitute all of the remaining treasury
shares repurchased by the Company pursuant to the Management Stockholders
Agreement, were reserved for issuance upon the exercise of options previously
granted to employees of the Company and Management Stockholders pursuant to the
Management Stockholders Agreement, at a weighted average exercise price of
$22.20 per share. The last reported sales
17
<PAGE> 20
price of the Common Stock on April 2, 1997, as reported on the New York Stock
Exchange, was $17 1/8 per share.
As of April 3, 1997, 163,323 shares were subject to "put" and "call" rights
pursuant to the Management Stockholders Agreement. Therefore, the maximum number
of additional shares of stock that could be reserved for the grant of options or
sale of stock to employees of the Company pursuant to the Management
Stockholders Agreement could not exceed such number of shares. As a practical
matter, the actual number of all such shares that will be subject to options to
employees will most likely be only a small portion of such number of shares. The
Company's "put" and "call" obligations under the Management Stockholders
Agreement will terminate on October 30, 1997, after which no additional shares
will be available for sale or option to employees.
Option agreements for options granted to date pursuant to the Management
Stockholders Agreement have provided for a maximum option life of 10 years. Such
option agreements have also provided that the options may be exercised only by
the employee while in active employment with the Company, except in the case of
the employee's death, retirement or disability, and for a period of up to three
years after termination of employment. In addition, the option agreements have
provided that the options may not be transferred by the employee other than by
will or the laws of descent and distribution. Although such provisions are not
required by the Management Stockholders Agreement, the Company anticipates that
such provisions will be included in future option agreements granted pursuant to
the Management Stockholders Agreement.
The Management Stockholders Agreement can be amended, without a vote of
stockholders of the Company, to increase the cost thereof to the Company or to
alter the allocation of benefits to the Named Executive Officers and employees,
although the Company currently has no intention to approve any such amendment.
Under certain circumstances, recipients of stock or options to purchase
stock under the Management Stockholders Agreement will realize taxable
compensation income under the Code at the time of issuance or grant. In that
event, the Company would be entitled to a deduction in a corresponding amount at
the same time. If the recipient of an option realizes taxable income upon grant,
there will be no taxable event upon exercise of the option. In general,
recipients of options under the Management Stockholders Agreement will not be
subject to tax at the time an option is granted. Upon exercise of an option that
did not generate taxable income upon grant, the recipient generally must include
in ordinary income at the time of exercise an amount equal to the excess, if
any, of the fair market value of the Common Stock at the time of exercise over
the exercise price, and will have a tax basis in such shares equal to the cash
paid upon exercise plus the amount taxable as ordinary income to the
participant. At such time, the Company would be entitled to a deduction in a
corresponding amount. The holding period for stock received upon exercise of an
option will begin on the date the stock is acquired pursuant to exercise. In
addition, special rules apply under Section 83 of the Code, which may delay the
recognition of income upon exercise by an option holder who would be subject to
liability under Section 16(b) of the Exchange Act. If these special rules apply,
such an option holder could make an election under Section 83(b) of the Code to
recognize income upon exercise of the option.
EMPLOYEE MORTGAGE PROGRAM
Under a program available to all of the Company's full-time employees
generally with at least one year of continuous service, certain employees have
obtained mortgage loans from the Company on favorable terms (the "Employee
Mortgage Program"). The Employee Mortgage Program provides mortgage financing
for the purchase or refinancing of an employee's primary residence at a fixed
interest rate equivalent to the then
18
<PAGE> 21
prevailing market rates in the greater Miami metropolitan area. The Company
charges each employee out-of-pocket origination expenses, but no origination
fees or points. All mortgage payments under the Employee Mortgage Program are
deducted directly from the employee's paycheck. As of December 31, 1996, the
total remaining principal payments under the Employee Mortgage Program for
current employees was approximately $34.3 million.
During July of 1996, the Company ceased making loans under the Employee
Mortgage Program. All loans pursuant to the Employee Mortgage Program were
assumed by an unaffiliated third party as of March 31, 1997 and as of that date,
mortgage payments were no longer deducted directly from the employee's paycheck.
The following table sets forth certain information with respect to loans
outstanding to the Company's Named Executive Officers:
<TABLE>
<CAPTION>
ORIGINAL AMOUNT OUTSTANDING ANNUAL INTEREST RATE
MORTGAGOR LOAN AMOUNT AS OF DEC. 31, 1996 AS OF DEC. 31, 1996
--------- ----------- ------------------ --------------------
<S> <C> <C> <C>
Glendon E. Johnson.................... $ 765,000 $757,915 7.90%
Lonnie R. Wright...................... $ 380,000 $374,028 8.75%
</TABLE>
OTHER
Glendon E. Johnson, Jr., the son of Glendon E. Johnson, was a partner in
the law firm of Kelley Drye & Warren during 1996. The Company paid fees of
$2,992,468 to Kelley Drye & Warren in 1996.
Norman E. Crocker, a director of the Company, is the President of Crocker &
Company, Ltd., an actuarial consulting firm. The Company paid consulting fees of
$516,482 to Crocker & Co., Ltd. in 1996.
The Company has granted certain registration rights to the Management
Stockholders and General Electric Capital Corporation. The Company has agreed to
grant those Management Stockholders who have or will have exercisable "put"
rights upon retirement (including Glendon E. Johnson, Jr. with respect to the
retirement of Glendon E. Johnson) prior to October 30, 1997, priority with
respect to the inclusion of their shares of Common Stock requested to be
included in any registered secondary sale of Common Stock.
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings incidental to the
conduct of its business. While it is not possible to determine the ultimate
disposition of each of these proceedings, the Company believes that the ultimate
disposition of such proceedings, individually and in the aggregate (including
the lawsuit discussed below), will not have a material adverse effect on the
Company's financial position, results of operations or cash flows.
During the period of April 1995 through May 1995, the Company and certain
of its officers and directors were named as defendants in a series of putative
class actions alleging violations of the federal securities laws. The actions,
Christopher W. Aronson, et al. v. John Alden Financial Corporation, et al.; In
Re: John Alden Financial Corporation Securities Litigation, all of which were
filed in the United States District Court for the Southern District of Florida
(the "Court"), have been consolidated. In October 1995, the plaintiffs filed a
Consolidated Amended Complaint purportedly on behalf of a class of persons who
purchased the Company's Common Stock during the period of October 27, 1994
through May 3, 1995 seeking unspecified damages, fees, costs and interest. The
first of the original complaints was filed after the Company revised its
previously
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announced earnings for the fourth quarter of 1994 to reflect an unanticipated
increase in claims received in 1995 for medical services rendered in 1994. The
remainder of the original complaints were filed after the Company increased
reserves during the first quarter of 1995 to reflect a further increase in such
claims. On September 30, 1996, the Court denied the defendants' motion to
dismiss the Consolidated Amended Complaint and the Court certified a class of
those persons who purchased the Company's Common Stock during the period between
October 27, 1994 through May 3, 1995. Discovery in this lawsuit is ongoing. The
Company and individual defendants deny any wrongdoing, believe they have
meritorious defenses against the claims asserted, and intend to vigorously
defend the lawsuit.
ITEM 2 -- APPROVAL OF THE COMPANY'S 1997 LONG-TERM INCENTIVE PLAN
The Board of Directors has adopted, subject to stockholder approval, the
1997 Plan to provide certain employees of the Company and its subsidiaries a
variety of long-term incentives, including non-qualified stock options,
incentive stock options, stock appreciation rights, grants of stock or
performance awards. The 1997 Plan will replace the Company's current Long-Term
Incentive Plan, which expires on October 31, 1997. 31,745 shares remain
available for grant under the Company's current Long-Term Incentive Plan, and
these shares may be awarded at any time until October 31, 1997. The Board
believes that the Company's stock plans have benefited the stockholders by
allowing the Company to attract and retain key employees who have the ability to
enhance the value of the Company and by aligning the interests of key employees
with those of the stockholders through increased stock ownership. The Board
therefore recommends the approval of the 1997 Plan.
The 1997 Plan is, in many respects, similar to the Company's Long-Term
Incentive Plan. However, the 1997 Plan will allow stock options, stock
appreciation rights and performance awards (but not other awards) granted under
the 1997 Plan in the future to the Company's executive officers to qualify as
"performance-based" compensation under Section 162(m) of the Code. This will
allow the Company to preserve the tax-deductibility of such grants without
regard to the limitations of Section 162(m) of the Code.
The maximum number of shares that may be awarded in respect of all awards
granted during the term of the 1997 Plan is 500,000 shares of Common Stock. The
maximum number of shares which shall be available for grants of stock and
performance awards shall be equal to one-third of the total shares available for
awards under the 1997 Plan. Pursuant to a resolution of the Board of Directors
of the Company, the source of the 500,000 shares of Common Stock must be
treasury shares, i.e., shares acquired by the Company and placed in its
treasury, including shares acquired on the open market. Pursuant to such
resolution, authorized but unissued shares or newly issued shares may not be
used as a source for these 500,000 shares. The Company anticipates that the
500,000 treasury shares to be made available under the 1997 Plan will be used
primarily for 1997 grants, and that the additional shares that will be needed
for the remaining years under the 1997 Plan will be presented to the Company's
stockholders for approval in 1998.
In the event that (i) any stock option or stock appreciation right under
the 1997 Plan or under the Company's Long Term Incentive Plan is settled for
cash or expires or is terminated unexercised as to any shares of stock covered
thereby or (ii) any Restricted Stock or Stock Performance Award under the 1997
Plan or the Long Term Incentive Plan is cancelled or forfeited for any reason
without the delivery of shares of stock, such shares shall thereafter again be
available for award pursuant to the 1997 Plan. In the event that any option
granted under the 1997 Plan or the Long Term Incentive Plan is exercised through
the delivery of shares of stock, the number of shares of stock available for
awards under the 1997 Plan shall be increased by the number of shares so
surrendered.
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<PAGE> 23
The 1997 Plan will terminate on October 31, 2002.
The following summary of the 1997 Plan is qualified in its entirety by
reference to the complete text of the 1997 Plan, attached as Exhibit A to this
Proxy Statement.
Administration. The 1997 Plan will be administered by a committee of the
Board of Directors of the Company (the "Committee") composed of not fewer than
two directors. To the extent deemed necessary or advisable by the Board, the
Committee will consist of "nonemployee directors" within the meaning of Rule
16b-3 under the Exchange Act and "outside directors" under Section 162(m) of the
Code. Currently, the Compensation Committee administers the Long-Term Incentive
Plan. The Committee will interpret the 1997 Plan, will establish administrative
regulations to further the purpose of the 1997 Plan, will authorize awards to
eligible participants, and will take any other action necessary for the proper
operation of the Long-Term Incentive Plan. The 1997 Plan awards may be made, in
the sole discretion of the Committee, to employees of the Company, or employees
of subsidiaries or affiliates of the Company, serving in managerial,
administrative or professional positions.
The Committee will have the authority to grant the following types of
awards under the 1997 Plan: (1) stock options; (2) stock appreciation rights;
(3) grants of stock or restricted stock; and (4) performance awards. The
Committee will have the authority to authorize awards under the Plan, including
the authority to set the option price, the number of options to be awarded out
of the total number of shares available for award and (in the case of awards
which are not intended to satisfy the requirements of Section 162(m)) the
authority to delegate to the Chief Executive Officer of the Company the right to
allocate awards among eligible employees who are not officers or directors of
the Company.
Stock Options. Incentive stock options intended to qualify for special tax
treatment in accordance with Section 422 of the Code ("ISOs") and non-qualified
stock options not intended to qualify for special tax treatment under the Code
may be granted for such number of shares of Common Stock as the Committee
determines but in no event may the total shares subject to ISOs exceed an
aggregate of 500,000 shares. A stock option will be exercisable at such times,
over such term and subject to such terms and conditions as the Committee
determines. The exercise price for any option will be determined by the
Committee and shall not be less than the closing price of the Common Stock of
the Company on the date the award is granted, as reported in the New York Stock
Exchange-Composite Transactions (110% of such amount, if the participant to whom
such ISO is granted owns, at the time of the grant, 10% or more of the combined
voting power of the Company or a subsidiary ("10% Owner")). In the event the
stock is not traded on the New York Stock Exchange, the relevant price shall be
the last trading price on such date on whichever exchange the stock is traded.
An ISO may not be exercisable more than ten years after the date it was granted
(five years, if the participant is a 10% Owner).
Options may be exercised with respect to all or part of the shares subject
to the option. Payment of any option's exercise price may be made on or within
ten business days after the date of exercise, in cash or by delivery of whole
shares of Common Stock already owned by the participant prior to exercising the
option.
Options will become exercisable as determined by the Committee (but in no
event earlier than one year after the date of grant), or, if earlier, upon (i)
the participant's death, disability or retirement or (ii) or a change in control
of the Company (as defined in the 1997 Plan). Options will not be transferable
other than by will, by the laws of descent and distribution or, in accordance
with the terms of the 1997 Plan, to "Family Members" of the transferor of the
options (which is defined under the 1997 Plan to include the transferor's
spouse, children or grandchildren) or to certain trusts or partnerships for the
benefit of the Family Members and such options may be exercised during the
participant's lifetime only by the participant or such Family Members.
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<PAGE> 24
The Committee may, in its discretion, grant to the holders of stock options
the right to receive, with respect to each share covered by an option, payments
equal to the regular cash dividends paid to holders of the Company's Common
Stock during the period that the option is outstanding. The Committee may
provide either at the time of grant or subsequently that a stock option include
the right to acquire a restoration option.
The number of shares of stock underlying stock options that may be granted
under the 1997 Plan to any one employee during any one calendar year shall not
exceed 150,000 shares, subject to adjustment as set forth in the 1997 Plan. To
the extent required for exemption under Section 162(m) of the Code, any stock
options that are cancelled or repriced shall not again be available for grant
under this maximum share limit.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted to employees who have received a stock option award under the 1997 Plan.
The SARs may relate to such number of shares as the Committee may determine, but
may not exceed the number of shares that such employee may acquire upon exercise
of the related stock option. Unexercised SARs may be revoked by the Committee at
any time without compensation to such employee. Upon the exercise of an SAR, the
employee shall receive an amount equal to the excess of the Market Price (as
defined in the 1997 Plan) of the Common Stock over the option price of the
related stock option, as determined by the Committee. Payment of such SAR may be
made in cash, Common Stock, restricted stock or such combination thereof as the
Committee shall determine.
The number of shares relating to stock appreciation rights that may be
granted under the 1997 Plan to any one employee during any one calendar year
shall not exceed 150,000 shares, subject to adjustment as set forth in the 1997
Plan. To the extent required for exemption under Section 162(m) of the Code, any
stock appreciation rights that are cancelled or repriced shall not again be
available for grant under this maximum share limit.
Grants of Stock. The Committee may grant, either alone or in tandem with
other awards under the 1997 Plan, shares of Common Stock or restricted stock to
such eligible employees as the Committee, or the Chief Executive Officer of the
Company, if the Committee in its discretion delegates the right to allocate
awards to the Chief Executive Officer, authorizes and on such terms as the
Committee establishes.
Performance Awards. The Committee may grant performance awards under which
payment would be made in shares of Common Stock, restricted stock or other
securities of the Company, cash, or in any combination thereof, if the financial
performance of the Company meets certain financial goals during an award period.
The financial goals are established by the Committee and may relate only to
earnings per share (operating earnings per common share on a fully diluted
basis), return on equity (net income divided by the average stockholders'
equity), stock price, total shareholder return, market share, covered lives
(number of individuals insured), expense savings and operating earnings (either
before or after interest, taxes and amortization of purchase costs). The
performance goals for an award period may relate to one or a combination of the
foregoing factors, on an aggregate or per share basis, and may be set on an
aggregate basis for the entire Company, on a divisional or business unit basis,
or any combination thereof. The financial goals may be established on an
absolute basis or on a relative basis by comparison to market indices or other
companies, including other insurance companies. The Committee also establishes
the award period, the maximum payment value of an award, and the minimum
financial performance required before a payment is made. Awards may be
denominated either in shares of Common Stock, restricted stock or other
securities of the Company ("Stock Performance Awards") or in dollar amounts
("Dollar Performance Awards"). No individual may receive a Performance award (i)
in respect of a Stock Performance Award in excess of 100,000 shares of stock in
any calendar year or (ii) in respect of a Dollar Performance Award in excess of
$500,000 in any calendar year. In order to receive payment, a grantee must
remain employed by the Company
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<PAGE> 25
to the end of the award period, except that the Committee may provide special
rules in the case of terminations as a result of death, disability or
retirement.
As and to the extent permitted by Section 162(m) of the Code, in the event
of (i) a change in corporate capitalization, a corporate transaction or a
complete or partial corporate liquidation, or (ii) any extraordinary gain or
loss or other event that is treated for accounting purposes as an extraordinary
item under GAAP or (iii) any material change in accounting policies or practices
affecting the Performance Goals, then the Committee shall make adjustments to
the Performance Goals and the levels of the Performance Awards, based solely on
objective criteria, so as to neutralize the effect of the event on all affected
Performance Awards.
Change in Control. The 1997 Plan provides for accelerated vesting,
exercisability and delivery and payment of awards in the event of a change in
control of the Company (as defined in the 1997 Plan).
New Plan Benefits. Performance share awards granted to the Company's Named
Executive Officers (as hereinafter defined) under the Long-Term Incentive Plan
during 1996 are summarized in the table entitled "Long-Term Incentive Plan
Awards in Last Fiscal Year" located on page 9. The Committee granted 43,640
performance awards to all executive officers as a group. The Committee granted
17,750 performance share awards to all other employees as a group (97 persons).
Stock options to purchase Common Stock granted to the Named Executive
Officers under the Long-Term Incentive Plan during 1996 are summarized in the
table entitled "Option/SAR Grants in the Last Fiscal Year" located on page 8.
The Committee granted options to buy 263,140 shares of Common Stock to all
executive officers as a group at a weighted average exercise price of $20.50 per
share. The Committee granted options to buy 128,670 shares of Common Stock to
all other employees as a group (106 persons) at a weighted average exercise
price of $20.50 per share.
Any future grants under the 1997 Plan are not determinable at this time.
The closing price of the common stock on the New York Stock Exchange on
April 2, 1997 was $17 1/8 per share.
Federal Income Tax Consequences of Stock Options. The grant of a stock
option will generally not result in taxable income at the time of grant for the
optionee or the Company. The grantee will have no taxable income upon exercising
an ISO (except that the alternative minimum tax may apply), and the Company will
receive no deduction when an ISO is exercised. Upon exercising a nonqualified
stock option, the grantee will recognize ordinary income in the amount by which
the fair market value exceeds the option price; the Company will be entitled to
a deduction for the same amount. The treatment to a grantee of a disposition of
shares acquired through the exercise of an option is dependent upon the length
of time the shares have been held and on whether such shares were acquired by
exercising an ISO or a nonqualified stock option. Generally, there will be no
tax consequence to the Company in connection with the disposition of shares
acquired under an option except that the Company may be entitled to a deduction
in the case of a disposition of shares acquired upon exercise of an ISO before
the applicable ISO holding periods have been satisfied.
RECOMMENDATION
The Board of Directors recommends that Stockholders vote FOR approval of
the Company's 1997 Plan, as set forth in Exhibit A.
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ITEM 3 -- APPROVAL OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Company's Audit
Committee, has appointed Price Waterhouse LLP as the Company's independent
accountants to audit the consolidated financial statements of the Company for
the 1997 fiscal year. Price Waterhouse LLP served as the Company's independent
accountants for the fiscal year ended December 31, 1996.
The Board of Directors recommends that the stockholders vote FOR approval
of the appointment of Price Waterhouse LLP as the Company's independent
accountants for the succeeding year. The affirmative vote of a majority of the
shares present and voting at the Annual Meeting, in person or by proxy, is
required for approval of the appointment of independent accountants. If the
appointment is not approved, the Board will select other independent
accountants. Representatives of Price Waterhouse LLP will be present at the
Annual Meeting to respond to appropriate questions from the stockholders and
will be given the opportunity to make a statement should they desire to do so.
MATTERS NOT DETERMINED AT THE TIME OF SOLICITATION
The Board is not aware of any other matters to come before the Annual
Meeting. If any other matter should come before the Annual Meeting, then the
persons named in the enclosed form of proxy will have discretionary authority to
vote all proxies with respect thereto in accordance with their judgment.
STOCKHOLDERS PROPOSALS FOR 1998 ANNUAL MEETING
From time to time the stockholders of the Company may submit proposals
which they believe should be voted upon by the stockholders. The Securities and
Exchange Commission has adopted regulations which govern the inclusion of such
proposals in the Company's annual proxy materials. All such proposals must be
received by the Secretary of the Company no later than December 4, 1997, in
order to be considered for inclusion in the Company's 1998 proxy materials.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as filed with the Securities and Exchange Commission, will be
provided without charge to stockholders upon written request to the Company's
Investor Relations Officer at: John Alden Financial Corporation, P.O. Box
020270, Miami, Florida 33102-0270.
By Order of the Board of Directors
LOGO
MICHAEL P. ANDERSON
General Counsel and Secretary
Dated: April 3, 1997
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EXHIBIT A
JOHN ALDEN FINANCIAL CORPORATION
1997 LONG-TERM INCENTIVE PLAN
(EFFECTIVE MAY 20, 1997)
A-1
<PAGE> 28
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1: Purpose.................................................................. A-3
Section 2: Administration........................................................... A-3
Section 3: Participation............................................................ A-3
Section 4: Awards................................................................... A-3
Section 5: Stock Options............................................................ A-4
Section 6: Stock Appreciation Rights................................................ A-7
Section 7: Exercise Payments........................................................ A-7
Section 8: Grants of Stock.......................................................... A-8
Section 9: Performance Awards....................................................... A-8
Section 10: General Provisions....................................................... A-9
Section 11: Definitions.............................................................. A-10
Section 12: Amendment, Suspension, or Termination.................................... A-12
Section 13: Effective Date and Duration of the Plan.................................. A-12
</TABLE>
A-2
<PAGE> 29
JOHN ALDEN FINANCIAL CORPORATION
1997 LONG-TERM INCENTIVE PLAN
SECTION 1: PURPOSE. The purpose of the John Alden Financial Corporation 1997
Long-Term Incentive Plan (hereinafter referred to as the "Plan") is to: (a)
provide incentives and rewards to those employees who are in a position to
contribute to the long-term growth and profitability of the Corporation; (b)
assist the Corporation and its subsidiaries and affiliates in attracting,
retaining, and motivating employees with experience and ability; and (c) make
the Corporation's compensation program competitive with those of other major
employers.
SECTION 2: ADMINISTRATION. The Plan shall be administered by an administrative
committee of the Board of Directors composed of not fewer than two directors
(hereinafter referred to as the "Committee"). Solely to the extent deemed
necessary or advisable by the Board, each Committee member shall meet the
definition of (i) a "nonemployee director" for purposes of satisfying the
requirements of Rule 16b-3 of the Exchange Act and/or (ii) an "outside director"
for purposes of satisfying the requirements of Section 162(m) of the Code. The
Committee shall interpret the Plan, establish administrative regulations to
further the purpose of the Plan, authorize awards to Employees and take any
other action necessary for the proper operation of the Plan. All decisions and
acts of the Committee shall be final and binding upon all participants. Subject
to the express provisions hereof, the Committee shall set the option price, the
number of options to be awarded and the number of shares to be awarded out of
the total number of shares available for award. The Committee shall determine
the Employees to whom awards shall be made. Except to the extent an award is
intended to satisfy the requirements of Section 162(m) of the Code, the
Committee may, in its sole discretion, delegate to the Chief Executive Officer
of the Corporation the right to allocate awards among Employees who are not
officers or directors of the Corporation within the meaning of the Exchange Act,
such delegation to be subject to such terms and conditions as the Committee in
its discretion shall determine.
SECTION 3: PARTICIPATION. This Plan is for John Alden Financial Corporation and
its subsidiaries and affiliates. Any Employee of John Alden Financial
Corporation or a subsidiary or affiliate serving in a managerial,
administrative, or professional position who is recommended to, and authorized
by, the Committee shall be eligible to participate in the Plan.
SECTION 4: AWARDS. Awards under this Plan may be stock option awards, stock
appreciation rights, grants of stock, or performance awards. Except as otherwise
defined herein, "stock" shall mean the Common Stock, $.01 par value, of the
Corporation.
a. MAXIMUM AMOUNT AVAILABLE. A maximum of 500,000 shares of stock
(including Restricted Stock if any) shall be available for options or grants
during the term of the Plan, subject to adjustment pursuant to (b) below. Such
shares shall be from authorized but unissued shares of the Corporation, except
to the extent that the applicable resolutions of the Board of Directors of the
Corporation (as approved by the stockholders of the Corporation) require that
such shares come from shares reacquired by the Corporation, including, without
limitation, shares purchased in the open market. The maximum number of shares
which shall be available for grants of stock (pursuant to Section 8) and
Performance Awards (pursuant to Section 9) shall be equal to one-third of the
total shares available for awards under the Plan, as amended from time to time
and as adjusted in accordance with Section 4(b) hereof. In the event that (i)
any stock option or stock appreciation right under the Plan or under the
Company's Long Term Incentive Plan (the "Prior Plan") is settled for cash or
expires or is terminated unexercised as to any shares of stock covered thereby
or (ii) any Restricted Stock or Stock Performance Award under the Plan or the
Prior Plan is cancelled or forfeited for any reason without the delivery of
shares of stock, such shares shall thereafter again be available for award
pursuant to the Plan. In the event that any option granted under the Plan or the
Prior Plan is exercised through the delivery of
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<PAGE> 30
shares of stock, the number of shares of stock available for awards under the
Plan shall be increased by the number of shares so surrendered.
b. ADJUSTMENT IN THE EVENT OF RECAPITALIZATION. In the event of any change
in the outstanding shares of stock of the Corporation by reason of any stock
split, stock dividend, recapitalization, merger, consolidation, combination or
exchange of shares or other similar corporate change or in the event of any
special distribution to the stockholders, the Committee shall make such
equitable adjustments including, but not limited to, adjustments in the number
of shares and prices per share applicable to options then outstanding and in the
number of shares which are available thereafter for Stock Option Awards or other
awards, both under the Plan as a whole and with respect to individuals, as the
Committee determines are necessary and appropriate. Any such adjustment shall be
conclusive and binding for all purposes of the Plan.
SECTION 5: STOCK OPTIONS.
5.1: The Corporation may award options to purchase common stock or
Restricted Stock of the Corporation (hereinafter referred to as "Stock Option
Awards"), but in no event may the total shares subject to Incentive Stock
Options exceed an aggregate of 500,000 shares, to such eligible Employees as the
Committee, or the Chief Executive Officer of the Corporation, if the Committee
in its discretion delegates the right to allocate awards pursuant to Section 2,
authorizes and under such terms as the Committee establishes. The Committee
shall determine with respect to each Stock Option Award whether an Employee is
to receive an Incentive Stock Option or a Non-Qualified Stock Option.
5.2: The Committee shall set the option price of each share of stock
subject to a Stock Option Award. Notwithstanding the preceding sentence, the
option price of each share of stock subject to such Stock Option Award shall not
be less than the closing price of the common stock of the Corporation on the
date the award is granted as reported in the New York Stock Exchange-Composite
Transactions. For purposes of the preceding sentence, in the case of any option
which is not intended to be an Incentive Stock Option, the date the award is
granted may be deemed to be the date the Employee was hired or promoted;
provided that the actual grant of such option occurs within 90 days following
such applicable event. In the event stock of the Corporation is not traded on
the New York Stock Exchange, the relevant price shall be the last trading price
on such date on whichever Exchange such stock is trading. If the Employee to
whom an Incentive Stock Option shall be granted owns, at the time of the grant,
more than ten percent (10%) of the total combined voting power of the
Corporation or a subsidiary of the Corporation, the option price of each share
of stock subject to such Stock Option Award shall be one hundred ten percent
(110%) of the closing price or last trading price described immediately above in
this section.
5.3: (a) Except as set forth in subsection (b) below, a stock option by
its terms shall not be transferable by the Employee other than by will or the
laws of descent and distribution, and, during the Employee's lifetime, shall be
exercisable only by the Employee. A stock option by its terms also shall be of
no more than 10 years' duration, except that an Incentive Stock Option granted
to an Employee who, at the time of the grant, owns stock representing more than
ten percent (10%) of the total combined voting power of the Corporation or a
subsidiary of the Corporation shall by its terms be of no more than five (5)
years' duration. Except as provided in Section 7 below, a stock option by its
terms shall be exercisable only after the earliest of: (i) such period of time
as the Committee shall determine, but in no event less than one year following
the date of grant of such award; (ii) the Employee's death or disability (within
the meaning of Section 22(e)(3) of the Code); or (iii) the Employee's
Retirement.
(b) Notwithstanding the provisions of subsection (a), the terms of a
Non-Qualified Stock Option may permit the Employee to transfer the Stock Option
to (i) his or her spouse, children or grandchildren (referred
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<PAGE> 31
to herein as the Employee's "Family Members"), (ii) a trust or trusts for the
exclusive benefit of such Family Members, or (iii) a partnership in which such
Family Members are the only partners. Any transfer pursuant to this subsection
(b) shall be subject to the following: (A) there may be no consideration for any
such transfer, (B) the stock option agreement pursuant to which such Stock
Options are granted must be approved by the Committee, and must expressly
provide for transferability in a manner consistent with this subsection (b), and
(C) subsequent transfers of transferred Stock Options shall be prohibited except
those in accordance with subsection (a) of this Section 5.3. Following transfer,
any such Stock Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of Sections 5.4 and 10.7(b) hereof, the term "Employee" shall be deemed
to refer to the transferee. The events of death, disability, Retirement, Change
in Control of the Corporation and Termination of Employment in the Plan shall
continue to be applied with respect to the original Employee, following which
the Stock Options shall be exercisable by the transferee only to the extent and
for the periods specified in Sections 5.3(a) and (c) hereof.
(c) A Non-Qualified Stock Option is only exercisable by an Employee (or, if
subsection (b) applies, the transferee) while the Employee is in active
employment with the Corporation or a subsidiary or affiliate of the Corporation,
except (i) in the case of an Employee's death, disability (within the meaning of
Section 22(e)(3) of the Code), or Retirement; (ii) during a three-year period
commencing on the date of an Employee's Termination of Employment by the
Corporation or a subsidiary or affiliate of the Corporation other than for
cause; (iii) during a three-year period commencing on the date of Termination of
Employment by the Employee or the Corporation, or a subsidiary or affiliate of
the Corporation, of employment after a Change in Control of the Corporation,
unless such Termination of Employment is by the Corporation or a subsidiary or
affiliate of the Corporation for cause; or (iv) if the Committee decides that it
is in the best interest of the Corporation to permit exceptions. A Non-Qualified
Stock Option may not be exercised pursuant to this paragraph after the
expiration date of the option.
(d) An Incentive Stock Option is only exercisable by an Employee while the
Employee is in active employment with the Corporation or a subsidiary of the
Corporation, except (i) in the case of the Employee's death; (ii) during a
three-month period commencing on the date of the Employee's Termination of
Employment by the Corporation or a subsidiary of the Corporation other than for
cause; (iii) during a three-month period commencing on the date of Termination
of Employment by the Employee or the Corporation or subsidiary of the
Corporation, after a Change in Control of the Corporation, unless Termination of
Employment is by the Corporation or a subsidiary of the Corporation for cause;
(iv) during a three-month period commencing on the date of the Employee's
Retirement; or (v) during the one-year period commencing on the Employee's
Termination of Employment on account of disability within the meaning of Section
22(e) of the Code. An Incentive Stock Option may not be exercised pursuant to
this paragraph after the expiration date of the option.
5.4: An option may be exercised with respect to part or all of the shares
subject to the option by giving written notice to the Corporation of the
exercise of the option. The option price for the shares for which an option is
exercised shall be paid on or within ten business days after the date of
exercise. The terms of the stock option may provide that the option price may be
paid (i) in cash, (ii) in whole shares of common stock of the Corporation owned
by the Employee prior to exercising the option, or (iii) in a combination of
cash and delivery of shares. The value of any share of common stock delivered or
withheld in payment of the option price shall be its Market Price on the date
the option is exercised.
5.5: In order to enable the Corporation to meet any applicable federal,
state or local withholding tax requirements arising as a result of the exercise
of a stock option, an Employee shall pay the Corporation the
A-5
<PAGE> 32
amount of tax to be withheld or, if the terms of the Option so provide, the
Employee may elect to satisfy such obligation (i) by having the Corporation
withhold shares that otherwise would be delivered to the Employee pursuant to
the exercise of the option for which the tax is being withheld, (ii) by
delivering to the Corporation other shares of common stock of the Corporation
owned by the Employee prior to exercising the option, or (iii) by making a
payment to the Corporation consisting of a combination of cash and such shares
of common stock. Such an election shall be subject to the following: (a) the
election shall be made in such manner as may be prescribed by the Committee, and
(b) the election shall be made prior to the date to be used to determine the tax
to be withheld and shall be irrevocable. The value of any share of common stock
to be withheld by the Corporation or delivered to the Corporation pursuant to
this Section 5.5 shall be the Market Price on the date to be used to determine
the amount of tax to be withheld.
5.6: With respect to each share covered by an option, the Committee may,
in its discretion, grant to Employees the right to receive payments of amounts
equal to the regular cash dividends paid to holders of the Company's common
stock during the period that the option is outstanding (such payments are
hereinafter referred to as "Dividend Payments").
5.7: The aggregate fair market value of all shares of stock with respect
to which Incentive Stock Options are exercisable for the first time by an
Employee in any one calendar year, under this Plan or any other stock option
plan maintained by the Corporation (or by any subsidiary of the Corporation),
shall not exceed $100,000. The fair market value of such shares of stock shall
be the mean of the high and low prices of the common stock of the Corporation as
reported in the New York Stock Exchange-Composite Transactions on the date the
related stock option is granted (or on the next preceding day such stock was
traded on a stock exchange included in the New York Stock Exchange-Composite
Transactions if it was not traded on any such exchange on the date the related
stock option is granted). In the event stock of the Corporation is not traded on
the New York Stock Exchange, the relevant price shall be the mean of the high
and low trading prices on such date on whichever Exchange such stock is trading.
5.8: The Committee may, in its sole discretion, provide or arrange for the
provision of financing to Employees to allow such Employees to exercise stock
options and pay taxes due upon such exercise, such financing to be on terms
determined by the Corporation; provided, however, that in the case of an Option
that is intended to satisfy the requirements of an Incentive Stock Option, the
Committee shall exercise such discretion only at the time such Option is
awarded; provided, further, that any such financing shall be with full personal
recourse to the Employee.
5.9: The Committee may provide either at the time of grant or subsequently
that a Stock Option include the right to acquire a restoration option. A Stock
Option which provides for the grant of a restoration option shall entitle the
Employee, upon exercise of the Stock Option (in whole or in part) prior to
Termination of Employment of the Employee and satisfaction of the option price
in Stock, to receive a restoration option. In addition to any other terms and
conditions the Committee deems appropriate, the restoration option shall be
subject to the following terms: the number of shares of Stock shall not exceed
the number of whole shares tendered to satisfy the exercise price of the
original Stock Option and the number of whole shares, if any, withheld by the
Company as payment for withholding taxes in accordance with Section 5.5; the
date of grant of the restoration option will be the date of the exercise of the
original Stock Option; the option price per share shall be the Market Price on
the date of grant of the restoration option; the restoration option shall be
exercisable no earlier than one year after the date of grant of the restoration
option; the term will not extend beyond the term of the original Stock Option,
and the restoration option shall be a Non-Qualified Stock Option and shall
otherwise meet all conditions of the Plan.
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<PAGE> 33
5.10 The number of shares of stock underlying Stock Options that may be
granted under the Plan to any one Employee during any one calendar year shall
not exceed 150,000 shares, subject to adjustment in the same manner as provided
in Section 4(b). To the extent required for exemption under Section 162(m) of
the Code, any Stock Options that are cancelled shall not again be available for
grant under this maximum share limit.
SECTION 6: STOCK APPRECIATION RIGHTS.
6.1: The Committee may, in its sole discretion, grant stock appreciation
rights to Employees who have received a Stock Option Award. The stock
appreciation rights may relate to such number of shares, not exceeding the
number of shares that the Employee may acquire upon exercise of a related stock
option, as the Committee determines in its discretion. Upon exercise of a stock
option by an Employee, the stock appreciation rights relating to the shares
covered by such exercise shall terminate. Upon termination, transfer or
expiration of a stock option, any unexercised stock appreciation rights related
to that option shall also terminate. Upon exercise of stock appreciation rights,
the related option or the appropriate portion thereof shall be surrendered to
the Committee, and such stock appreciation rights and the related option or
portion thereof shall terminate.
6.2: The Committee in its sole discretion may revoke at any time any
unexercised stock appreciation rights granted to an Employee under this Plan,
without compensation to such Employee. Revocation of an Employee's stock
appreciation rights under this section shall not affect any related stock
options granted to the Employee under this Plan.
6.3: Upon an Employee's exercise of some or all of the Employee's stock
appreciation rights, the Employee shall receive an amount equal to the value of
the Stock Appreciation for the number of rights exercised, payable in cash,
common stock, Restricted Stock, or a combination thereof, at the discretion of
the Committee.
6.4: Settlement for exercised stock appreciation rights may be deferred by
the Committee in its discretion to such date and under such terms and conditions
as the Committee may determine.
6.5: A stock appreciation right is only exercisable or transferable when
the stock option to which it is related is also exercisable or transferable,
respectively, and under the same conditions.
6.6: A stock appreciation right may be exercised only when Stock
Appreciation exists.
6.7: The number of shares of stock relating to stock appreciation rights
that may be granted under the Plan to any one Employee during any one calendar
year shall not exceed 150,000 shares, subject to adjustment in the same manner
as provided in Section 4(b). To the extent required for exemption under Section
162(m) of the Code, any stock appreciation rights that are cancelled or repriced
shall not again be available for grant under this maximum share limit.
SECTION 7: CHANGE IN CONTROL.
Notwithstanding any other provisions of the Plan to the contrary, in the
event of a Change in Control of the Corporation, as defined in Section 11.1,
except as otherwise provided at the time of grant:
(i) Any stock options and stock appreciation rights outstanding as of
the date such Change in Control is determined to have occurred, and which
are not then exercisable and vested, shall become fully exercisable and
vested to the full extent of the original grant.
A-7
<PAGE> 34
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock and Stock Performance Awards shall lapse, and such
Restricted Stock and Stock Performance Awards shall become free of all
restrictions and became fully vested and transferable to the full extent of
the original grant (without giving effect to any increase or decrease in
the target number of shares covered by the original grant determined by
applicable performance standards).
(iii) All Dollar Performance Awards shall be considered to be earned
and payable in full, and any deferral or other restrictions shall lapse and
such Dollar Performance Awards shall be settled in cash as promptly as is
practicable to the full extent of the original grant (without giving effect
to any increase or decrease in the target amount of such Dollar Performance
Awards covered by the original grant determined by applicable performance
standards).
SECTION 8: GRANTS OF STOCK.
8.1: The Committee may grant, either alone or in addition to other awards
granted under the Plan, shares of stock or Restricted Stock to such eligible
Employees as the Committee, or the Chief Executive Officer of the Corporation,
if the Committee in its discretion delegates the right to allocate awards
pursuant to Section 2, authorizes and under such terms as the Committee
establishes. The Committee, in its sole discretion, may also make a cash payment
to an Employee granted shares of stock or Restricted Stock under the Plan to
allow such Employee to satisfy tax obligations arising out of receipt of the
stock or Restricted Stock.
SECTION 9: PERFORMANCE AWARDS.
The Committee may grant Performance Awards which shall be denominated at
the time of grant in, or determined by reference to, shares of stock, Restricted
Stock or other securities of the Corporation ("Stock Performance Awards") or in
dollar amounts ("Dollar Performance Awards" and, together with Stock Performance
Awards, "Performance Awards"). Payment under Performance Awards shall be made,
at the discretion of the Committee, in shares of stock, Restricted Stock or
other securities of the Corporation, in cash or any other form of property as
the Committee shall determine, or in any combination thereof, if the financial
performance of the Corporation meets certain financial goals established by the
Committee for the Award Period. The following provisions are applicable to
Performance Awards:
a. AWARD PERIOD. The Committee shall determine and include in the
grant of the Performance Award the period of time for which a Performance
Award is made ("Award Period"). Grants of Performance Awards need not be
uniform with respect to the length of the Award Period. Award Periods for
different grants may overlap. A Performance Award may not be granted for a
given Award Period more than 90 days after such Award Period has commenced.
b. PERFORMANCE GOALS AND PAYMENT. Before a grant of a Performance
Award is made, the Committee shall establish objectives ("Performance
Goals") that must be met during the Award Period as a condition to
payment's being made under the Performance Award. The Performance Goals,
which must be set out in the grant, may relate only to earnings per share,
operating earnings (either before or after interest, taxes and amortization
of purchase costs), return on equity, stock price, total shareholder
return, market share, covered lives and expense savings. The Performance
Goals for an Award Period may relate to one or a combination of the
foregoing factors, on an aggregate or per share basis, and may be set on an
aggregate basis for the entire Corporation, on a divisional or business
unit basis, or any combination thereof. The Performance Goals for an Award
Period may be established on an absolute basis or on a relative basis by
comparison to market indices or other companies, including other insurance
A-8
<PAGE> 35
companies. At the time the Committee sets the Performance Goals for an
Award Period, it may in its discretion provide special rules with respect
to the adjustment of such Performance Goals during the Award Period upon
the occurrence of specific events, subject to such limitations on such
adjustment as the Committee deems advisable in order to satisfy the
requirements of Section 162(m) of the Code. The Committee shall also set
forth in the grant the amounts of the Performance Award to be paid if
particular Performance Goals are met, including the fixing of a maximum
payment (subject to Section 9(f)).
c. COMPUTATION OF PAYMENT. After an Award Period, the financial
performance of the Corporation during the period shall be measured against
the Performance Goals. If the Performance Goals are not met, no payment
shall be made under a Performance Award. If particular Performance Goals
are met, the Committee shall certify that fact in writing and certify the
amount of the Performance Award in accordance with the grant for each
Employee. The Committee shall promptly notify each Employee of the amount
of the Performance Award he or she is to receive.
d. REVISIONS FOR SIGNIFICANT EVENTS. As and to the extent permitted
by Section 162(m) of the Code, in the event of (i) a change in corporate
capitalization, a corporate transaction or a complete or partial corporate
liquidation, or (ii) any extraordinary gain or loss or other event that is
treated for accounting purposes as an extraordinary item under GAAP or
(iii) any material change in accounting policies or practices affecting the
Performance Goals, then the Committee shall make adjustments to the
Performance Goals and the levels of the Performance Awards, based solely on
objective criteria, so as to neutralize the effect of the event on all
affected Performance Awards.
e. REQUIREMENT OF EMPLOYMENT. To be entitled to receive payment under
a Performance Award, a Grantee must remain in the employment of the Company
until the end of the Award Period. Notwithstanding the foregoing, the
Committee may in its discretion provide special rules at the time of the
grant of a Performance Award with respect to payment to a Grantee who has
terminated employment by reason of death, disability (within the meaning of
Section 22(e)(3) of the Code) or Retirement during an Award Period, subject
to such limitations on such payment as the Committee deems advisable for a
Performance Award to satisfy the requirements of Section 162(m) of the
Code.
f. MAXIMUM PAYMENT. No individual may receive a Performance Award (i)
in respect of a Stock Performance Award in excess of 100,000 shares of
stock in any calendar year, subject to adjustment in the same manner as
provided in Section 4(b) or (ii) in respect of a Dollar Performance Award
in excess of $500,000 in any calendar year.
SECTION 10: GENERAL PROVISIONS.
10.1: Subject to the provisions of Section 5.3(b), any assignment or
transfer of any awards without the written consent of the Corporation shall be
null and void.
10.2: Nothing contained herein shall require the Corporation to segregate
any monies from its general funds, or to create any trusts, or to make any
special deposits for any immediate or deferred amounts payable to any Employee
for any year.
10.3: Participation in this Plan shall not affect the Corporation's right
to discharge a participating Employee.
10.4: Restricted Stock may not be sold or transferred by the Employee
until any restrictions that have been established by the Committee have lapsed.
A-9
<PAGE> 36
10.5: Upon an Employee's Termination of Employment during the period any
restrictions are in effect, all Restricted Stock shall be forfeited without
compensation to the Employee unless the Committee decides that it is in the best
interest of the Corporation to permit individual exceptions.
10.6: This Plan shall be interpreted in accordance with, and the
enforcement of this Plan shall be governed by, the laws of the State of
Delaware.
10.7: (a) If the Committee shall at any time determine that any Consent
(as hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Committee.
(b) The term "Consent" as used herein with respect to any Plan Action means
(i) any and all listings, registrations or qualifications in respect thereof
upon any securities exchange or under any federal, state or local law, rule or
regulation, (ii) any and all written agreements and representations by the
Employee with respect to the disposition of shares, or with respect to any other
matter, which the Committee shall deem necessary or desirable to comply with the
terms of any such listing, registration or qualification or to obtain an
exemption from the requirement that any such listing, qualification or
registration be made, and (iii) any and all consents, clearances and approvals
in respect of a Plan Action by any governmental or other regulatory bodies.
10.8: The Employee shall have, with respect to Restricted Stock, all of
the rights of a stockholder of the Corporation, including the right to vote the
shares and the right to receive any dividends, unless the Committee shall
otherwise determine.
SECTION 11: DEFINITIONS.
11.1: A "Change in Control of the Corporation" shall be deemed to occur in
the event that any of the following circumstances have occurred:
(i) if a change in control of the Corporation would be required to be
reported in response to Item 1(a) of the Current Report on Form 8-K, as in
effect on the date hereof, pursuant to Sections 13 or 15(d) of the Exchange
Act whether or not the Corporation is then subject to such reporting
requirement;
(ii) there shall be consummated (x) any consolidation or merger of the
Corporation in which the Corporation is not the continuing or surviving
corporation or pursuant to which shares of the Corporation's common stock
would be converted into cash, securities or other property, other than a
merger of the Corporation in which the holders of the Corporation's common
stock immediately prior to the merger have the same proportion and
ownership of common stock of the surviving corporation immediately after
the merger, or (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially
all, of the assets of the Corporation, provided, that the divestiture of
less than substantially all of the assets of the Corporation in one
transaction or a series of related transactions, whether effected by sale,
lease, exchange, spin-off, sale of the stock or merger of a subsidiary or
otherwise, shall not constitute a Change in Control;
(iii) any "person" or "group" within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act (x) becomes the "beneficial owner" as defined
in Rule 13d-3 under the Exchange Act of more than 20% of the then
outstanding voting securities of the Corporation, otherwise than through a
transaction or
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<PAGE> 37
transactions arranged by, or consummated with the prior approval of, the
Board or (y) acquires by proxy or otherwise the right to vote for the
election of directors, for any merger or consolidation of the Corporation
or for any other matter or question, more than 20% of the then outstanding
voting securities of the Corporation, otherwise than through an arrangement
or arrangements consummated with the prior approval of the Board;
(iv) if during any period of twenty-four consecutive months, Present
Directors and/or New Directors cease for any reason to constitute a
majority of the Board. For purposes of this subsection (iv), "Present
Directors" shall mean individuals who at the beginning of such consecutive
twenty-four month period were members of the Board and "New Directors"
shall mean any director whose election by the Board or whose nomination for
election by the Corporation's stockholders was approved by a vote of at
least two-thirds of the Directors then still in office who were Present
Directors or New Directors; or
(v) any "person" or "group" within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act that is the "beneficial owner" as defined in
Rule 13d-3 under the Exchange Act of 20% or more of the then outstanding
voting securities of the Corporation commences soliciting proxies.
Notwithstanding the foregoing, Present Directors and/or New Directors may,
by two-thirds vote of such Directors, declare that a given transaction shall not
constitute a Change in Control of the Corporation for purposes of this program.
11.2: "Code" means the Internal Revenue Code of 1986, as now or hereafter
amended.
11.3: "Corporation" means John Alden Financial Corporation.
11.4: "Employee" means all employees of the Corporation or of a subsidiary
or affiliate of the Corporation participating in the Plan, including officers of
the Corporation, as well as officers of the Corporation who are also directors
of the Corporation. However, an individual who is a member of the Committee
shall not be an "Employee" for purposes of this Plan while a member of the
Committee.
11.5: "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
11.6: "Incentive Stock Option" means any stock option granted pursuant to
this Plan which is designated as such by the Committee and which complies with
Section 422 of the Code.
11.7: "Market Price" is the mean of the high and low prices of the common
stock of the Corporation as reported in the New York Stock Exchange-Composite
Transactions (or such other Exchange on which such stock is trading) on the date
the option or stock appreciation right is exercised. Notwithstanding the
foregoing provisions, if a stock appreciation right is exercised during the
60-day period commencing on the date of a Change in Control of the Corporation,
the Market Price for purposes of determining the Stock Appreciation shall be the
highest of: (1) the market price of the common stock of the Corporation, as
determined under the preceding sentence; (2) the highest market price of a share
of the common stock of the Corporation during the period commencing on the
ninetieth day preceding the date of exercise of the stock appreciation right and
ending on the date of exercise of the stock appreciation right; (3) the highest
price per share of common stock of the Corporation shown on Schedule 13D or an
amendment thereto filed pursuant to Section 13(d) of the Securities Exchange Act
of 1934 by any person holding 20% of the combined voting power of the
Corporation's then outstanding voting securities; or (4) the highest price paid
or to be paid per share of common stock of the Corporation pursuant to a tender
or exchange offer as determined by the Committee.
11.8: "Non-Qualified Stock Option" means any stock option granted pursuant
to this Plan which is not designated as an Incentive Stock Option.
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<PAGE> 38
11.9: "Retirement" shall mean retirement from employment by the
Corporation, subsidiary or affiliate.
11.10: "Restricted Stock" means stock of the Corporation subject to
restrictions on the transfer of such stock, conditions of forfeitability of such
stock, or any other limitations or restrictions as determined by the Committee.
11.11: "Stock Appreciation" means the excess of the Market Price of the
common stock over the option price of the related option stock, as determined by
the Committee.
11.12: "Termination of Employment" of a Participant means (i) for all
purposes (including without limitation the forfeiture of non-vested shares)
other than the exercise of vested options, the date of actual receipt by the
Corporation or a subsidiary or affiliate of the Corporation of written notice of
termination of employment effected by the Employee (whether by Retirement or
resignation), or the date of actual receipt by the Employee of written notice of
termination of employment effected by the Corporation or a subsidiary or
affiliate of the Corporation; (ii) for purposes of the exercise of vested
options, the date of actual receipt by the Corporation or a subsidiary or
affiliate of the Corporation of written notice of termination of employment
effected by the Employee (other than Retirement), or the date of actual receipt
by the Employee of written notice of termination of employment effected by the
Corporation or a subsidiary or affiliate of the Corporation; or (iii) for all
purposes, such later date as may be determined by the Committee.
SECTION 12: AMENDMENT, SUSPENSION, OR TERMINATION.
12.1: The Board of Directors may at any time suspend, terminate, or amend
the Plan, including but not limited to such amendments as may be necessary or
desirable resulting from changes in the federal income tax laws, securities
laws, rules of any securities exchange and other applicable laws but may not,
without approval by the holders of a majority of all outstanding shares entitled
to vote on the subject at a meeting of stockholders of the Corporation, increase
the total number of shares of stock that may be optioned or granted under this
Plan. In addition, to the extent deemed necessary or advisable by the Board, for
purposes of complying with Section 422 of the Code, Section 162(m) of the Code
or the rules of any securities exchange or for any other reason, the Board may
seek the approval of any amendment by the Company's stockholders.
12.2: It is intended that awards under this Plan comply with the
requirements of Rule 16b-3 under the Exchange Act. Should the requirements of
Rule 16b-3 change, the Board of Directors may amend this Plan as necessary to
comply with the requirements of that rule or its successor provision or
provisions.
SECTION 13: EFFECTIVE DATE AND DURATION OF THE PLAN.
The Plan shall become effective upon approval of the Plan by the
Corporation's stockholders at its 1997 annual meeting of stockholders. No award
shall be granted under this Plan on or after October 31, 2002.
A-12
<PAGE> 39
NOTICE
OF ANNUAL
MEETING OF
STOCKHOLDERS
AND PROXY
STATEMENT
LOGO
MAY 20, 1997
ALL STOCKHOLDERS ARE
REQUESTED TO DATE, SIGN AND
MAIL PROMPTLY THE ENCLOSED
PROXY FOR WHICH AN ENVELOPE
IS PROVIDED.
<PAGE> 40
<TABLE>
<S> <C>
[ X ] Please mark
your votes
as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING ITEMS:
FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS: FOR all nominees WITHHOLD AUTHORITY 2. TO APPROVE THE 1997 LONG [ ] [ ] [ ]
Glendon E. Johnson, Marvin H. listed below as a to vote for all TERM INCENTIVE PLAN.
Assofsky, Scott L. Stanton, group (except as nominees listed
David P. Gardner, Edwin J. indicated to the below as a group
Garn, Carl F. Geuther, James L. contrary below)
Moorefield, Norman E. Crocker, [ ] [ ]
Linda Jenckes, Lynn G. Merritt
and Lonnie R. Wright.
FOR AGAINST ABSTAIN
INSTRUCTIONS: To withhold authority to vote for any individual, write 3. TO APPROVE THE APPOINTMENT [ ] [ ] [ ]
that nominee's name on the space provided below. OF PRICE WATERHOUSE AS THE
COMPANY'S INDEPENDENT
- ------------------------------------------------------------------------ ACCOUNTANTS FOR FISCAL
YEAR 1997.
Dated: , 1997
---------------------------------
---------------------------------------------
Signature of Stockholder
---------------------------------------------
Signature of Stockholder--Joint Tenant
</TABLE>
<PAGE> 41
JOHN ALDEN FINANCIAL CORPORATION
PROXY
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of John Alden Financial Corporation (the
"Company") hereby appoints Glendon E. Johnson, Scott L. Stanton and Michael P.
Andersen, and each of them acting singly, with full power of substitution, as
proxies for the undersigned to attend and act for and on behalf of the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
the Grand Ballroom, Marriott Hotel-Airport, Miami, Florida on Tuesday, May 20,
1997 at 10:00 a.m., and at any adjournment thereof, to the same extent and with
the same power as if the undersigned were present in person thereat and with
authority to vote and act in the said proxyholder's discretion with respect to
amendments or variations to matters referred to in the Notice of the Meeting
and with respect to other matters which may properly come before the Annual
Meeting. The said proxyholder is specifically directed to vote or withhold from
voting the shares registered in the name of the undersigned as indicated below.
Notes:
(1) This form of proxy must be executed by the stockholder or his attorney
authorized in writing or, if the stockholder is a corporation, under the
corporate seal or by an officer or attorney thereof duly authorized. Joint
holders should each sign. Executors, administrators, trustees, etc. should
so indicate when signing. If undated, this proxy is deemed to bear the date
it was mailed to the stockholder.
(2) The shares represented by this proxy will, on a show of hands or any
ballot that may be called for, be voted or withheld from voting in
accordance with the instructions given by the stockholder; in the absence
of any contrary instructions, this proxy will be voted "FOR" the itemized
matters.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENVELOPE PROVIDED.
<PAGE> 42
<TABLE>
<S> <C>
[X] Please mark
your votes
as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING ITEMS:
FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS: FOR all nominees WITHHOLD AUTHORITY 2. TO APPROVE THE 1997 LONG [ ] [ ] [ ]
Glendon E. Johnson, Marvin H. listed below as a to vote for all TERM INCENTIVE PLAN.
Assofsky, Scott L. Stanton, group (except as nominees listed
David P. Gardner, Edwin J. indicated to the below as a group
Garn, Carl F. Geuther, James L. contrary below)
Moorefield, Norman E. Crocker, [ ] [ ]
Linda Jenckes, Lynn G. Merritt
and Lonnie R. Wright.
FOR AGAINST ABSTAIN
INSTRUCTIONS: To withhold authority to vote for any individual, write 3. TO APPROVE THE APPOINTMENT [ ] [ ] [ ]
that nominee's name on the space provided below. OF PRICE WATERHOUSE AS THE
COMPANY'S INDEPENDENT
- ---------------------------------------------------------------------------- ACCOUNTANTS FOR FISCAL
YEAR 1997.
Dated: , 1997
---------------------------------
---------------------------------------------
Signature of Participant
</TABLE>
<PAGE> 43
JOHN ALDEN FINANCIAL CORPORATION
VOTING INSTRUCTIONS TO THE TRUSTEES OF THE JOHN ALDEN
EMPLOYEE SAVINGS INCENTIVE PLAN
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned participant in the Employee Savings Incentive Plan of John
Alden Financial Corporation (the "Company") hereby instructs Glendon E. Johnson
and Scott L. Stanton, as Trustees, to vote as indicated on this instruction
card all the shares of the Company's Common Stock held for me by the Trustees
at the Annual Meeting of Stockholders of the Company to be held at the Grand
Ballroom, Marriott Hotel-Airport, Miami, Florida on Tuesday, May 20, 1997 at
10:00 a.m., and at any adjournment thereof. The Trustees are specifically
instructed to vote or withhold from voting such shares as indicated herein.
Notes:
(1) This voting instruction must be executed by the participant or his attorney
authorized in writing. If undated, this voting instruction is deemed to
bear the date it was mailed to the participant.
(2) The shares represented hereby will be voted as directed by the participant.
If the participant fails to mark or sign and return this voting
instruction, the Trustees will vote such shares in the same proportion as
they vote the shares held for other participants for which the Trustees
receive instructions.
PLEASE MARK, SIGN, DATE AND RETURN THIS VOTING INSTRUCTION
PROMPTLY IN THE ENVELOPE ENCLOSED.
