<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] 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 Section 240.14a-11(c) or Section 240.14a-12
Unitrin, Inc.
- --------------------------------------------------------------------------------
(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(4) Date Filed:
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Notes:
<PAGE>
One East Wacker Drive
Chicago, Illinois 60601
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1999
The Annual Meeting of Shareholders of Unitrin, Inc. will be held on
Wednesday, May 5, 1999, at 10:00 a.m. at The University of Chicago Gleacher
Center, 450 North Cityfront Plaza Drive, Chicago, Illinois 60611.
The meeting is called for the following purposes:
1. To elect a Board of Directors.
2. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 15, 1999 as
the record date for determining those shareholders who will be entitled to
notice of, and to vote at, the meeting. A list of such shareholders will be
open to examination by any shareholder at the meeting and for a period of ten
days prior to the date of the meeting during ordinary business hours at the
Unitrin, Inc. corporate offices, One East Wacker Drive, Chicago, Illinois
60601.
By Order of the Board of Directors
Scott Renwick
Secretary
March 29,1999
WHETHER OR NOT YOU ARE ABLE TO BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO
SIGN AND RETURN THE ENCLOSED PROXY TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED. IF YOU ARE A SHAREHOLDER OF RECORD, YOU MAY ALSO PROVIDE A PROXY
BY TELEPHONE OR THE INTERNET, AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. IF
YOU PLAN TO ATTEND THE MEETING, PLEASE CHECK THE BOX PROVIDED ON THE
ACCOMPANYING PROXY.
<PAGE>
[LOGO OF UNITRIN, INC.]
Corporate Offices: One East Wacker Drive, Chicago, Illinois 60601
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of the
enclosed proxy by and on behalf of the issuer, Unitrin, Inc. ("Company"), for
use at the Annual Meeting of Shareholders of the Company to be held on
Wednesday, May 5, 1999, at 10:00 a.m. at The University of Chicago Gleacher
Center, 450 North Cityfront Plaza Drive, Chicago, Illinois, 60611, and at any
adjournment thereof.
Shares represented by proxies received before the meeting will be voted at
the meeting. Any shareholder giving a proxy has the power to revoke it at any
time before it is voted by filing with the Secretary of the Company either an
instrument revoking the proxy or a proxy bearing a later date. Proxies also
may be revoked by any shareholder present at the meeting who expresses a
desire to vote in person. Proxies specifying a choice as to the election of
directors will be voted accordingly. If no specification is made, the shares
represented by the proxy will be voted for election of the nominees specified
on page 5. By returning a proxy (either by mail or by electronic means as
described below), each shareholder will further authorize the persons named in
such proxy to vote in their discretion as to such other items of business, if
any, that may properly come before the meeting. Abstentions will be treated as
shares that are present for purposes of determining the presence of a quorum.
Abstentions will have the effect of a vote against proposals brought before
the meeting, but will not have an effect on the election of the directors. If
a broker indicates on a proxy that it does not have discretionary authority as
to certain shares to vote on a particular matter (a broker non-vote), those
shares will be considered as present for quorum purposes on all matters.
Broker non-votes will have no effect on any matter to be brought before the
meeting, including the election of directors.
In addition to returning a proxy card by mail, shareholders of record can
also give proxies by calling a toll-free telephone number or by using the
Internet. The telephone and Internet voting procedures are printed on the
proxy cards being provided to shareholders of record. These procedures are
designed to authenticate shareholders' identities, to allow shareholders to
give their voting instructions, and to confirm that shareholders' instructions
have been recorded properly. Shareholders who wish to vote over the Internet
should be aware that there may be costs associated with electronic access,
such as usage charges from Internet access providers and telephone companies,
and that there may be some risk that a shareholder's vote by either telephone
or the Internet might not be properly recorded or counted because of an
unanticipated electronic malfunction.
The principal solicitation of proxies is being made by mail; however,
additional solicitation may be made through direct communication with certain
shareholders or their representatives by directors, officers and employees of
the Company and its subsidiaries, who will receive no additional
<PAGE>
compensation therefor. The Company has retained the services of W.F. Doring &
Co., Inc. ("Doring") to aid in the solicitation of proxies. Doring estimates
that its fees and expenses will not exceed $10,000. The total expense of the
solicitation will be borne by the Company and will include, in addition to the
amounts paid to Doring, amounts paid to reimburse banks, brokerage firms and
others for their expenses in forwarding soliciting material. This proxy
statement and the accompanying form of proxy are being mailed to shareholders
on or about March 29, 1999.
On February 11, 1999, the Company's Board of Directors declared a 2-for-1
stock split of the Common Stock in the form of a dividend of one new share of
Common Stock for each share of Common Stock outstanding on March 5, 1999, the
record date for the dividend. The dividend was scheduled to be paid on or
about March 26, 1999. Information relating to ownership of the Common Stock,
as well as stock options, appearing in the tables and footnotes of this Proxy
Statement has not been adjusted to reflect the effects of the stock split in
order to facilitate the comparability of prior years' data.
VOTING SECURITIES
March 15, 1999 has been fixed as the record date for the determination of
shareholders entitled to notice of, and to vote at, the meeting or any
adjournment thereof. On that date, there were 36,701,433 shares of the
Company's common stock ("Common Stock") issued and outstanding and entitled to
vote. The Company has no other voting securities outstanding. Each shareholder
of record is entitled to one vote per share owned on all matters submitted to
a vote of shareholders.
2
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OWNERSHIP OF COMMON STOCK
The following table shows the beneficial ownership of Common Stock as of
March 15, 1999 (unless otherwise indicated) by: (i) each director, including
directors who are also executive officers; (ii) each other executive officer
named in the Summary Compensation Table on page 10; (iii) all directors and
executive officers as a group; and (iv) each other person known by the Company
to be the beneficial owner of more than five percent of the Common Stock.
Unless otherwise indicated, to the Company's knowledge, the beneficial owner
has both sole voting and sole dispositive powers with respect to the shares
listed opposite his name.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name Beneficial Ownership Class (1)
---- -------------------- ----------
<S> <C> <C>
Directors
James E. Annable 15,000 (2) *
Reuben L. Hedlund 9,000 (2) *
Jerrold V. Jerome 289,740 (2) *
William E. Johnston, Jr. 4,000 (2) *
George A. Roberts 368,620 (3) 1.0
Fayez S. Sarofim 3,126,883 (4) 8.3
Henry E. Singleton 7,242,260 (5) 19.3
Richard C. Vie--Chairman,
President & CEO 409,100 (2),(3) 1.1
Named Executive Officers
James W. Burkett 92,886 (2) *
Eric J. Draut 45,200 (2) *
Donald G. Southwell 80,100 (2) *
Directors and All Executive Officers
as a Group (14 persons) 11,773,974 (2) 31.4
Other 5% Owners
George Kozmetsky
2815 San Gabriel Street
Austin, TX 78705 2,080,460 (6) 5.6
</TABLE>
- --------
(1) Based on the number of shares outstanding on the record date, March 15,
1999, plus shares deemed outstanding pursuant to rules of the Securities
and Exchange Commission ("SEC"). An asterisk in this column indicates
ownership of less than 1% of the outstanding Common Stock. Each
outstanding share of Common Stock includes an attached right under the
Company's shareholder rights plan adopted August 3, 1994. Among other
provisions of the rights plan, if any person or group beneficially owns
15% or more of the Common Stock without approval of the Board of
Directors, then each shareholder (other than the non-approved acquiror or
its affiliates or transferees) would be entitled to buy Common Stock
having twice the market value of the exercise price of the rights, which
has been adjusted to $62.50 pursuant to the plan's provisions in order to
reflect the Company's 2-for-1 stock split.
3
<PAGE>
(2) Shares shown for the named executive officers and Messrs. Annable,
Hedlund, Jerome and Johnston include shares which they have the right to
acquire presently or within 60 days of the date of this Proxy Statement
through exercise of stock options. The number of such acquirable shares
for each of such persons is as follows: Annable (8,000); Hedlund (8,000);
Johnston (4,000); Jerome (139,086); Vie (310,300); Burkett (80,252); Draut
(35,710) and Southwell (73,809).
(3) Shares shown for Dr. Roberts include 11,215 shares owned by his wife with
respect to which he disclaims beneficial ownership. Shares shown for Mr.
Vie include 7,917 shares held by a trust, the trustee of which is his
wife. Mr. Vie disclaims beneficial ownership of such shares.
(4) Based upon information as of December 31, 1998 contained in an amendment
to a Schedule 13G filed by Mr. Sarofim with the SEC, Mr. Sarofim may be
deemed to be the beneficial owner of 3,126,883 shares of Common Stock. Of
such shares, Mr. Sarofim reported sole voting and dispositive powers as to
1,012,335 shares, shared voting power as to 1,887,772 shares and shared
dispositive power as to 2,114,548 shares. Substantially all of the shares
which are not subject to sole voting and dispositive powers are held in
accounts managed by Fayez Sarofim & Co. (of which Mr. Sarofim is the
majority shareholder) or by its wholly-owned subsidiaries, Sarofim Trust
Co. and Sarofim International Management Company, or are owned directly by
such companies for their own accounts. Fayez Sarofim & Co. maintains
policies which preclude Mr. Sarofim from exercising voting and dispositive
powers with respect to Common Stock held in accounts managed by Fayez
Sarofim & Co. and its subsidiaries. Shares shown include 1,000 shares
owned by members of Mr. Sarofim's family with respect to which he
disclaims beneficial ownership. Mr. Sarofim's mailing address is Two
Houston Center, Suite 2907, Houston, Texas 77010.
(5) Dr. Singleton's mailing address is 335 North Maple Drive, Beverly Hills,
California 90210.
(6) Based upon information as of December 31, 1998 contained in an amendment
to a Schedule 13G filed by Dr. Kozmetsky with the SEC, he may be deemed to
be the beneficial owner of 2,080,460 shares of Common Stock. Of such
shares, Dr. Kozmetsky reported sole voting and dispositive powers as to
2,050,000 shares. Dr. Kozmetsky disclaims beneficial ownership of 30,460
shares owned by his wife which are included as part of his holdings in
this table.
ELECTION OF DIRECTORS
Eight directors are to be elected at the meeting to serve for a term of one
year or until the election of their successors. If any of the persons named
below refuses or is unable to serve as a director (which is not anticipated),
the persons named in the accompanying proxy reserve full discretion to vote
for any or all other persons as may be nominated. The vote of the holders of a
majority of the Common Stock having voting power present, in person or by
proxy, is required for the election of any nominee as a director.
Business Experience of Nominees
Following is a summary of the business experience during the last five years
of each person nominated to be a director of the Company. References hereafter
in this Proxy Statement to "Argonaut" are to Argonaut Group, Inc.
4
<PAGE>
James E. Annable, 55, has been a director of the Company since November
1993. He has been Senior Vice President and Chief Economist of Bank One
Corporation and its predecessors for more than the last five years.
Reuben L. Hedlund, 62, has been a director of the Company since November
1993. He has been a partner of the Chicago law firm of Hedlund Hanley & John
for more than the last five years.
Jerrold V. Jerome, 69, is a retired executive of the Company and has been a
director of the Company since February 1990. He was Chairman of the Board of
Directors from February 1994 through December 1998 and is currently a director
of Argonaut.
William E. Johnston, Jr., 58, has been a director of the Company since
October 1997. Mr. Johnston has been President and Chief Operating Officer of
Morton International, Inc., a manufacturer and marketer of specialty chemicals
and salt, since October 1995. Prior thereto, he was Executive Vice President
for Administration of Morton. Mr. Johnston is currently a director of Morton
International.
George A. Roberts, 80, is a retired executive and has been a director of the
Company since February 1990. He is also a director of Argonaut.
Fayez S. Sarofim, 70, has been a director of the Company since March 1990.
He has been Chairman of the Board and President of Fayez Sarofim & Co., a
registered investment advisor, for more than five years. He is also a director
of Argonaut and Imperial Holly Corporation.
Henry E. Singleton, 82, is a rancher and investor and has been a director of
the Company since February 1990. He is also a director of Argonaut.
Richard C. Vie, 61, has been a director of the Company since March 1990,
Chairman of the Board of Directors since January 1999 and President and Chief
Executive Officer for more than the last five years.
The Board of Directors recommends a vote "FOR" election of the nominees
listed above as directors.
Committees and Meetings of the Board of Directors
The committees of the Board of Directors are the Executive Committee, Audit
Committee, Compensation Committee and Stock Option Committee. The Company does
not have a nominating committee.
The Executive Committee, which met five times in 1998, consists of Dr.
Singleton and Messrs. Jerome and Vie. The Executive Committee may exercise all
powers and authority of the Board of Directors in the management of the
business of the Company except for certain powers which, under Delaware law,
may be exercised only by the full Board of Directors.
The Audit Committee, which met five times in 1998, consists of Messrs.
Johnston and Hedlund and Dr. Roberts. The Audit Committee reviews the scope of
the audit and non-audit assignments of the Company's independent auditors and
related fees, the accounting principles applied by the
5
<PAGE>
Company in financial reporting, the scope of internal auditing procedures and
the adequacy of internal controls. The Audit Committee meets periodically with
management, the independent auditors and the Company's internal auditors.
The Compensation Committee, which met once in 1998, consists of Dr. Roberts
and Messrs. Annable, Hedlund and Johnston. The Compensation Committee sets the
cash compensation of the Company's executives, including its executive
officers.
The Stock Option Committee, which met four times in 1998, consists of
Messrs. Annable, Hedlund and Johnston. The Stock Option Committee selects
executives and other key employees of the Company and its subsidiaries to
receive stock options pursuant to the Company's 1990 and 1997 Stock Option
Plans and otherwise generally administers such plans.
In 1998, the Company's Board of Directors met seven times and, except for
Dr. Singleton and Mr. Sarofim, each director attended more than 75% of the
meetings of the Board of Directors and committees of the Board on which he
served.
Director Compensation
Directors who are not employees of the Company receive an annual fee of
$30,000 for service on the Board and a fee of $1,500 for each Board Meeting
attended. All directors are reimbursed for travel expenses incurred in
attending Board and committee meetings.
EXECUTIVE OFFICERS
The following summarizes the business experience over the last five years of
the Company's executive officers, other than Mr. Vie whose business experience
is described on page 5. The executive officers serve at the pleasure of the
Board of Directors.
David F. Bengston, 50, has been a Vice President of the Company for more
than the last five years.
James W. Burkett, 69, has been a Vice President of the Company since
February 1994 and has been head of the Unitrin Property and Casualty Insurance
Group for more than the last five years.
Eric J. Draut, 41, has been a Senior Vice President of the Company since
February 1999, Chief Financial Officer since February 1997, Treasurer since
April 1992 and was a Vice President between October 1997 and February 1999 and
Controller from February 1990 to February 1997.
Thomas H. Maloney, 67, has been Vice President of the Company since May
1996, was General Counsel from May 1996 until February 1999, and was Secretary
from February 1990 to May 1996.
Scott Renwick, 47, has been General Counsel of the Company since February
1999, Secretary since May 1996 and was Counsel between January 1991 and
February 1999.
Donald G. Southwell, 47, has been a Senior Vice President of the Company
since February 1999, was a Vice President between May 1998 and February 1999
and has been head of the Unitrin Life
6
<PAGE>
and Health Insurance Group since March 1996. Prior thereto, he served as
President of Prudential Insurance and Financial Services, an affiliate of
Prudential Insurance Company of America.
COMPENSATION OF EXECUTIVE OFFICERS
The following report on the compensation of executive officers for 1998 is
submitted jointly by the Compensation Committee and the Stock Option
Committee. Notwithstanding any general statement to the contrary set forth in
any of the Company's previous or future filings under the Securities Act of
1933 or the Securities Exchange Act of 1934 that might incorporate this Proxy
Statement into such filings, neither this Report nor the performance graph
which follows on page 9 shall be incorporated by reference into any such
filings, nor shall they be deemed to be soliciting material or deemed filed
under such Acts.
Joint Report Of Compensation Committee and Stock Option Committee
The Company compensates its executive officers with two principal forms of
compensation: cash compensation and stock options. Cash compensation consists
of base salary, performance-based bonuses and may include discretionary
bonuses. Executive officers are eligible to receive stock options under the
Unitrin, Inc. 1990 Stock Option Plan and the Unitrin, Inc. 1997 Stock Option
Plan. Although the type and terms of options granted under these Plans may
vary, the Stock Option Committee's current practice is to grant five-year,
non-qualified options with exercise prices equal to the fair market value of
the Common Stock on the date of grant and which become exercisable in four,
equal annual installments beginning six months after the date of grant.
Base salaries of the Company's executive officers depend on the Compensation
Committee's subjective assessment of the individual officer's work performance
with respect to such officer's normal job responsibilities. In its
compensation deliberations in 1998, the Compensation Committee had available
to it data which summarized the salary compensation of the chief executive
officers and certain other senior officers of a group of insurance and
diversified financial services companies, some of which are competitors of the
Company. While the Compensation Committee noted these data in establishing the
base salary compensation of the Company's Chief Executive Officer for 1998,
such data were not determinative of his compensation and the Compensation
Committee did not target a specific level within the range of such data for
his 1998 compensation. Such data were not referenced in establishing the
compensation of any of the Company's other executive officers, but it was
noted that the salaries of the Company's executive officers were below those
of the data presented. The level of Mr. Jerome's base salary for 1998 reflects
the fact that he was a part-time employee of the Company prior to his
retirement at year-end.
On February 4, 1998, the Compensation Committee adopted a plan under which
the Company's executive officers became eligible to receive cash bonuses based
on attainment of designated corporate performance criteria (the "1998 Bonus
Plan"). The 1998 Bonus Plan was approved by the Company's shareholders at the
Annual Meeting held on May 13, 1998. For 1998, the Company's executive
officers were eligible for cash bonuses of up to 35% of their base salaries
(or 48.3%, in the case of the Chairman and the Chief Executive Officer) based
on formulas adopted by the Compensation Committee at its February 1998
meeting. The formulas for participants with "line"
7
<PAGE>
responsibilities were based on growth in operating earnings of the business
units they oversee. Formulas for participants with "staff" responsibilities
were based on growth in earnings per share from operations. The formulas for
the Chairman and for the Chief Executive Officer took each of the foregoing
factors into account. With the following exception, the bonuses paid for 1998
to the executive officers named in the Summary Compensation Table were derived
by application of the foregoing formulas using actual 1998 financial results.
In addition to such formula bonuses, discretionary bonuses of $50,000 and
$25,000 were awarded to Messrs. Vie and Draut, respectively, based on the
Compensation Committee's subjective evaluation of such officers' work
performance during 1998.
The Stock Option Committee endorses the concept that the interests of the
executive officers are more closely aligned with those of the shareholders
through the award of stock options. The number of stock options granted to
executive officers, including the Chief Executive Officer, is determined by
the Stock Option Committee's subjective evaluation of the particular officer's
ability to influence the long-term growth and profitability of the Company,
given his particular job responsibilities. In light of the Chief Executive
Officer's overall, day-to-day responsibility for the Company's operations and
financial results, he would ordinarily be deemed to have the greatest ability
to influence the long-term growth and profitability of the Company and would
therefore generally receive a greater number of options than the other
executive officers. In determining the number of stock options to grant a
particular officer, the Stock Option Committee also takes into account the
number of options already held by such officer. The Stock Option Committee has
no predetermined goal for a particular level of stock ownership by its
executive officers.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to a public company for compensation in excess of $1
million paid to its chief executive officer and any of its four other most
highly compensated executive officers. Certain performance-based compensation
is specifically exempt from the deduction limit. All stock options that have
been granted to the Company's executive officers through the end of 1998
either are not subject to Section 162(m) (because they were granted prior to
the effective date of such section) or qualify as performance-based
compensation under Section 162(m), as interpreted by final regulations
promulgated by the Internal Revenue Service thereunder, and therefore are not
subject to the deduction limit under such section. The 1998 Bonus Plan is
designed to qualify as a performance-based compensation program under Section
162(m) in order to preserve the Company's federal income tax deduction for
bonuses paid thereunder.
Compensation Stock Option
Committee of the Board of Committee of the Board
Directors of Unitrin, Inc. Directors of Unitrin, Inc.
James E. Annable James E. Annable
Reuben L. Hedlund Reuben L. Hedlund
William E. Johnston, Jr. William E. Johnston, Jr.
George A. Roberts
8
<PAGE>
Comparison of Cumulative Total Return
Among Unitrin, Inc., Equity Market Index, Full Line Insurance Index, and S&P
MidCap 400 Index
Graph assumes $100 invested on December 31, 1993 in the Company's Common
Stock, Dow Jones Equity Market Index, Dow Jones Full Line Insurance Group, and
Standard & Poor's MidCap 400 Index ("S&P MidCap 400") in each case with
dividends reinvested. The Company has selected the S&P MidCap 400 as a broad-
based equity market index in lieu of the Dow Jones Equity Market Index because
the market capitalizations of the stocks in the S&P MidCap 400 more closely
approximate the market capitalization of the Company. In the Company's view,
the S&P MidCap 400 provides a more meaningful comparison to the Company than
does the Dow Jones Equity Market Index, which is more heavily weighted with
large capitalization stocks.
<TABLE>
<CAPTION>
Unitrin Dow Jones Equity Full line Insurance S&P 400 Midcap
<S> <C> <C> <C> <C>
12/31/93 100 100 100 100
12/31/94 102 101 93 96
12/31/95 119 139 145 126
12/31/96 145 171 178 150
12/31/97 175 229 247 199
12/31/98 201 293 275 237
</TABLE>
[Stock Performance Graph Appears Here]
9
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
-------------------- ------------
Name and Salary All Other
Principal Position Year ($) Bonus ($)(1) Options (#)(2) Compensation ($)(3)
------------------ ---- ------- ------------ -------------- -------------------
<S> <C> <C> <C> <C> <C>
Jerrold V. Jerome(4).... 1998 211,979 47,029 106,528 300
Chairman of the Board 1997 275,000 101,819 103,707 300
(retired 12/31/98) 1996 268,750 85,000 37,742 300
Richard C. Vie.......... 1998 693,750 205,299 277,616 300
Chairman,
President and Chief 1997 668,750 213,555 495,526 300
Executive Officer 1996 612,500 150,000 78,662 300
Donald G. Southwell(5).. 1998 425,000 110,615 37,916 300
Senior Vice President
James W. Burkett........ 1998 368,750 94,545 81,419 300
Vice President 1997 338,750 119,680 99,667 300
1996 300,000 75,000 26,898 300
Eric J. Draut........... 1998 168,750 41,306 39,305 300
Senior Vice President, 1997 145,000 64,389 56,123 300
Chief
Financial Officer and 1996 126,750 30,000 4,667 300
Treasurer
</TABLE>
- --------
(1) Cash bonuses are listed for the year earned, but are paid in the following
year. All bonuses earned for 1996 were discretionary bonuses. Messrs.
Jerome, Vie and Draut received discretionary bonuses of $25,000 each for
1997, and Messrs. Vie and Draut received discretionary bonuses of $50,000
and $25,000, respectively, for 1998. Such discretionary bonuses are
included in the bonus totals in this table. All other bonus amounts
reflected for 1997 and 1998 were formula-based bonuses under the 1997 and
1998 Bonus Plans for Senior Executives (see "Joint Report of Compensation
Committee and Stock Option Committee" on page 7.)
(2) All options listed were granted pursuant to the Unitrin, Inc. 1990 and
1997 Stock Option Plans and include automatic grants of restorative
options. (See footnote (1) to the option grant table on page 12.)
(3) The amounts shown in this column represent Company matching contributions
to the named officers' accounts under the Company's 401K Savings Plan.
(4) Mr. Jerome retired as an officer and employee of the Company at the end of
1998. The level of Mr. Jerome's annual compensation for the years shown
reflects his status as a part-time employee during such years.
(5) Mr. Southwell was elected a Vice President in May 1998. Data shown for Mr.
Southwell is for the entire year.
10
<PAGE>
Stock Option Grants in 1998 Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
- ----------------------------------------------------------------------- ----------------
Percent
Number of of total
securities options
underlying granted
options to Grant Date
granted employees Exercise price Expiration Present Value
Name (#) (1) in 1998 ($/sh) (2) date ($)(3)
---- ---------- --------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Jerrold V. Jerome....... 15,000* 1.22% 72.50 05/13/03 135,549
12,151 0.99% 68.88 02/01/05 63,225
60,631 4.94% 68.88 04/30/00 315,481
4,384 0.36% 68.88 05/14/02 22,811
14,362 1.17% 68.88 01/28/02 74,730
Richard C. Vie.......... 3,621 0.30% 64.25 01/28/02 18,717
9,428 0.77% 64.25 05/04/04 48,732
19,602 1.60% 65.13 05/04/04 102,701
31,482 2.57% 65.13 02/03/03 164,944
3,590 0.29% 65.13 01/28/02 18,809
33,358 2.72% 65.25 02/01/05 175,109
2,803 0.23% 70.56 01/28/02 15,975
1,516 0.12% 70.56 05/04/04 8,640
14,797 1.21% 70.56 02/03/03 84,331
70,000* 5.71% 72.50 05/13/03 632,562
15,670 1.28% 64.13 02/01/05 79,840
18,182 1.48% 69.25 05/14/02 95,121
13,176 1.07% 69.25 05/04/04 68,932
14,436 1.18% 69.25 04/30/00 75,523
3,723 0.30% 73.13 02/01/05 20,794
3,966 0.32% 73.13 02/03/03 22,152
18,266 1.49% 71.75 05/14/02 100,105
Donald G. Southwell..... 21,330 1.74% 65.13 05/01/06 111,754
10,000* 0.82% 72.50 05/13/03 90,366
6,586 0.54% 71.13 05/01/06 35,779
James W. Burkett........ 8,990 0.73% 65.25 02/01/05 47,192
8,272 0.67% 65.25 05/04/04 43,423
12,971 1.06% 65.25 05/06/03 68,090
19,190 1.56% 65.25 12/19/01 100,736
20,000* 1.63% 72.50 05/13/03 180,732
3,937 0.32% 71.13 02/01/05 21,388
8,059 0.66% 71.13 05/14/02 43,781
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
- ----------------------------------------------------------------------- ----------------
Percent
Number of of total
securities options
underlying granted
options to Grant Date
granted employees Exercise price Expiration Present Value
Name (#) (1) in 1998 ($/sh) (2) date ($)(3)
---- ---------- --------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Eric J. Draut........... 2,649 0.22% 67.69 05/04/04 14,425
2,755 0.22% 67.69 04/30/00 15,002
731 0.06% 67.69 01/28/02 3,981
1,622 0.13% 67.69 05/06/03 8,833
2,228 0.18% 67.69 02/01/05 12,133
20,000* 1.63% 72.50 05/13/03 180,732
1,064 0.09% 61.94 02/01/05 5,236
2,228 0.18% 66.38 05/14/02 11,172
2,921 0.24% 66.38 01/28/02 14,647
2,148 0.18% 71.75 05/14/02 11,772
959 0.08% 71.75 05/06/03 5,256
</TABLE>
- --------
(1) All options granted to the named executive officers were granted under the
Unitrin, Inc. 1990 and 1997 Stock Option Plans and include restorative
options. Restorative options are granted when an option holder exercises a
stock option and makes payment of the exercise price and/or the resulting
tax obligations using shares of previously-owned Common Stock. In such a
case, the option holder is granted a restorative option for the total
number of shares used to make such payment. A restorative option becomes
exercisable in full six months after the date of grant and expires on the
same date as the original option. All option grants reflected in the table
above are restorative options except for those marked with an asterisk.
All options granted in 1998 were non-qualified options for federal income
tax purposes.
A restorative option is intended to enable an option holder to remain in
essentially the same economic position with respect to potential
appreciation of the Common Stock as if he or she had continued to hold the
original option unexercised. As the following table illustrates, the grant
of a restorative option does not result in an increase in the total number
of options and shares held by the option holder.
12
<PAGE>
Net Change in Shares and Options Held by Named Executive Officers
Resulting From Grants of Restorative Options
<TABLE>
<CAPTION>
Net Change
in Total
Total Restorative Shares and
Options Net Shares Options Options
Name Exercised Received (A) Granted (B) (C)
---- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Jerrold V. Jerome.............. 102,641 11,113 91,528 0
Richard C. Vie................. 222,783 15,167 207,616 0
Donald G. Southwell............ 30,141 2,225 27,916 0
James W. Burkett............... 65,198 3,779 61,419 0
Eric J. Draut.................. 20,639 1,334 19,305 0
</TABLE>
--------
(A) Represents shares received in option exercises after subtracting shares
surrendered to pay the exercise prices and/or related tax withholding
obligations.
(B) Represents options granted to replace shares surrendered in connection
with option exercises.
(C) Represents the difference between (i) the total options exercised, and
(ii) the sum of net shares received and the number of restorative
options granted.
(2) Exercise prices were set in all cases at the fair market value of the
Company's Common Stock on the date of grant.
(3) Grant date present values are based on the Black-Scholes option pricing
model, which was applied using the following assumptions: (i) a weighted
average expected volatility of 20%; (ii) a risk free rate of return equal
to the yield on U.S. Treasury obligations with a maturity comparable to
the term of the particular option; (iii) an expected life for restorative
options of one year and 2.5 years for all other options; and (iv) a
dividend yield of 4.39%, representing the average, annualized dividend
yield on the Common Stock for the period from January 1, 1995 through
December 31, 1998. No adjustments were made for the non-transferability of
the options or the risk of their forfeiture. The Company's use of the
Black-Scholes model should not be viewed as a forecast of the future
performance of the Common Stock.
Aggregated Option Exercises in 1998 Fiscal Year, and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Value of unexercised
Number of securities in-the-money options
Shares Acquired underlying unexercised at FY-end ($)
on Value options at FY-end (#) exercisable/unexercisable
Name Exercise (#)(1) Realized ($)(2) exercisable/unexercisable (3)
---- --------------- --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Jerrold V. Jerome....... 102,641 1,367,324 47,558/112,778 250,083/ 443,143
Richard C. Vie.......... 222,783 1,715,038 222,881/182,419 1,267,337/ 998,969
Donald G. Southwell..... 30,141 275,338 67,223/ 44,086 769,403/ 675,366
James W. Burkett........ 65,198 439,208 68,256/ 36,996 416,103/ 187,498
Eric J. Draut........... 20,639 164,249 26,390/ 29,320 103,490/ 128,116
</TABLE>
- --------
(1) Substantially all option exercises by the named executive officers in 1998
were exercises in which the officers surrendered previously acquired
shares of Common Stock as payment for the
13
<PAGE>
exercises. (See footnote (1) to the option grant table on page 12.) The
shares reflected in this column are the gross shares issued in the exercise
transactions, without deduction of the shares surrendered as payment. The
actual net increase in the number of shares held by these officers as a
result of such transactions was as follows: Jerome (11,113); Vie (15,167);
Southwell (2,225); Burkett (3,779); and Draut (1,334).
(2) The "value realized" represents the difference between the exercise price
of the shares acquired and the market price of such shares on the date or
dates of exercise, without regard to any related tax obligations.
(3) The value of unexercised in-the-money options is calculated by subtracting
the applicable exercise price from $71.75 (the closing price of the Common
Stock on December 31, 1998) and multiplying the resulting difference by
the number of shares covered by the options in question.
Pension Plans
The following table shows, for specified levels of average final
compensation and years of credited service, the estimated annual benefits
payable under the Company's tax-qualified retirement plan (the "Retirement
Plan") and a related, non-qualified, supplemental executive retirement plan
(the "supplemental plan"). Average final compensation represents the average
annual covered compensation paid for the highest 60 consecutive months in the
120-month period ending three months prior to retirement. These benefit
estimates assume retirement in 1999 at age 65 or older.
Unitrin, Inc. Retirement Plan For Salaried Employees 1999 Estimates
<TABLE>
<CAPTION>
Years of Credited Service
Average Final -------------------------------------------
Annual Compensation 5 10 15 20 30+
- ------------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 150,000.......................... $11,301 $ 22,601 $ 33,902 $ 45,202 $ 67,803
$ 200,000.......................... 15,426 30,851 46,277 61,702 92,553
$ 250,000.......................... 19,551 39,101 58,652 78,202 117,303
$ 300,000.......................... 23,676 47,351 71,027 94,702 142,053
$ 350,000.......................... 27,801 55,601 83,402 111,202 166,803
$ 400,000.......................... 31,926 63,851 95,777 127,702 191,553
$ 450,000.......................... 36,051 72,101 108,152 144,202 216,303
$ 500,000.......................... 40,176 80,351 120,527 160,702 241,053
$ 550,000.......................... 44,301 88,601 132,902 177,202 265,803
$ 600,000.......................... 48,426 96,851 145,277 193,702 290,553
$ 650,000.......................... 52,551 105,101 157,652 210,202 315,303
$ 700,000.......................... 56,676 113,351 170,027 226,702 340,053
$ 750,000.......................... 60,801 121,601 182,402 243,202 364,803
$ 800,000.......................... 64,926 129,851 194,777 259,702 389,553
$ 850,000.......................... 69,051 138,101 207,152 276,202 414,303
$ 900,000.......................... 73,176 146,351 219,527 292,702 439,053
$ 950,000.......................... 77,301 154,601 231,902 309,202 463,803
$1,000,000.......................... 81,426 162,851 244,277 325,702 488,553
$1,050,000.......................... 85,551 171,101 256,652 342,202 513,303
</TABLE>
The foregoing benefits are illustrated as straight-life annuities and are
not subject to reduction for Social Security or other offset amounts.
14
<PAGE>
The years of credited service in the Retirement Plan as of December 31, 1998
for each of the Company's executive officers named in the Summary Compensation
Table is as follows: Jerome (30), Vie (7), Southwell (2); Burkett (7), and
Draut (7). Years of credited service for Mr. Jerome include years of service
under a predecessor plan sponsored by Teledyne, Inc., the Company's former
parent company. Compensation covered by the Retirement Plan is the
participant's base salary and bonuses as defined in the Retirement Plan, but
does not include compensation attributable to the exercise of stock options.
For 1998, the covered compensation for the executive officers named in the
Summary Compensation Table on page 10 is the total of their salary and bonus
amounts, excluding the discretionary bonuses specified in footnote (1) to such
table.
Mr. Vie formerly participated in a defined benefit retirement plan sponsored
by a subsidiary of the Company. His participation in that plan was suspended
on January 1, 1992 and no further contributions will be made on his behalf;
however, he will be entitled to benefits under the plan upon retirement based
on contributions made through the end of 1991. Assuming retirement at age 65,
Mr. Vie would receive annual benefits of $20,971.
Change of Control Arrangements
The Company has entered into individual severance agreements with each of
the Company's executive officers (the "Agreements"). The Agreements provide
various severance benefits to such officers in the event their employment is
involuntarily terminated (other than for cause, disability or death) or
voluntarily terminated, in either case within one year after a change of
control. Such benefits are also payable to such officers in the event their
employment is involuntarily terminated (other than for cause, disability or
death) or voluntarily terminated for certain specified reasons, in either case
in anticipation of a change of control. A change of control is deemed to occur
if, on or before December 31, 1999, any person acquires a majority of the
voting power of the Common Stock, or the individuals who comprised the
Company's Board of Directors on January 19, 1995 (i.e., all of the current
directors except for Mr. Johnston), or any of the individuals they nominate,
cease to comprise a majority of the Board. Each executive officer would be
entitled under the Agreements to: (i) a lump sum severance payment based on a
multiple (specified below) of his annualized salary; (ii) continuation for up
to two years of the life and health insurance benefits that were being
provided by the Company to such officer and his family immediately prior to
termination; and (iii) outplacement services at the Company's expense, up to a
maximum of $12,500. The Agreements contain identical terms and conditions,
except that the severance compensation multiple is 2.99 for Mr. Vie and 2.0
for the other executive officers. The Agreements are not employment contracts.
Severance benefits payable under the Agreements are to be grossed-up to the
extent that a recipient would be subject to an excise tax under Section 4999
of the Internal Revenue Code (including any interest or penalties imposed with
respect to such tax) due to the receipt of such benefits or any other benefits
that constitute "excess parachute payments" for purposes of Section 280G of
the Code. If severance benefits had become payable on December 31, 1998 as a
result of a change of control on that date, no executive officers would have
received such gross-ups except for Mr. Vie, who would have received a gross-up
payment of approximately $866,000.
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee (Messrs. Annable, Hedlund,
Johnston and Dr. Roberts) or the Stock Option Committee (Messrs. Annable,
Hedlund and Johnston) is a current or former officer or employee of the
Company or any of its subsidiaries.
For purposes of the transactions described below, the term "Company" is
deemed to include such of the Company's direct and indirect subsidiaries as
may have been parties to or participants in such transactions.
Argonaut Group, Inc.
Four directors of the Company, Jerrold V. Jerome, George A. Roberts, Fayez
S. Sarofim and Henry E. Singleton, are also directors of Argonaut. As of
February 16, 1999, executive officers and directors of the Company
beneficially owned in the aggregate approximately 27.6% of the outstanding
stock of Argonaut. During 1998, Argonaut provided the Company with investment
trade execution services for which the Company paid $166,000. The Company
charged Argonaut approximately $2.2 million in 1998 for data processing
services based on actual usage of the Company's computers.
INDEPENDENT AUDITORS
KPMG LLP has been selected as the Company's independent auditor for the year
1999. It is expected that a representative of KPMG LLP will be present at the
meeting. Such representative may make a statement if he or she desires to do
so and will be available to respond to appropriate questions.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
The management of the Company knows of no other matters that may come before
the meeting. However, if any matters should properly come before the meeting,
it is the intention of the persons named in the enclosed proxy to vote all
proxies in accordance with their best judgment.
SHAREHOLDER PROPOSALS IN CONNECTION WITH THE
2000 ANNUAL MEETING OF SHAREHOLDERS
Pursuant to regulations of the Securities and Exchange Commission,
shareholders who intend to submit proposals for inclusion in the Company's
proxy materials for the 2000 annual meeting must do so no later than December
1, 1999. This requirement is independent of certain other notice requirements
of the Company's Amended and Restated By-Laws described below in this
paragraph. Shareholder nominations of persons for selection to the Board of
Directors are not eligible for inclusion in the Company's proxy materials and
may only be made in accordance with the procedure described hereafter.
Pursuant to the Company's Amended and Restated By-Laws, nominations of persons
for
16
<PAGE>
selection to the Board of Directors and the proposal of business to be
considered by shareholders may in each case be made at the 2000 annual meeting
by any shareholder of record who gives written notice to the Company of such
nominations or proposals not less than 60 days nor more than 90 days prior to
the first anniversary of the 1999 annual meeting. In the event that the date of
the 2000 annual meeting is advanced by more than 30 days or delayed by more
than 60 days from such anniversary date, then such nominations and proposals
must be delivered to the Company no earlier than 90 days prior to the 2000
annual meeting and no later than the close of business on the later of (i) the
60th day prior to the 2000 annual meeting, or (ii) the 10th day following the
day on which public announcement of the date of the 2000 annual meeting is
first made. All such shareholder proposals and notices should be submitted to
Scott Renwick, Secretary, Unitrin, Inc., One East Wacker Drive, Chicago,
Illinois 60601.
FORM 10-K
Shareholders entitled to vote at the Annual Meeting may obtain for no charge
a copy of the Company's Annual Report on Form 10-K, without exhibits, for the
year ended December 31, 1998, upon written request to Scott Renwick, Secretary,
Unitrin, Inc., One East Wacker Drive, Chicago, Illinois 60601.
By Order of the Board of Directors
Scott Renwick
Secretary
March 29, 1999
17
<PAGE>
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
7 7 7 7 7 7 7 7 7 7
One East Wacker Drive PROXY
Chicago, Illinois 60601 Annual Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Richard C. Vie and Eric J. Draut as Proxies, each
with power of substitution, to vote all shares of Unitrin, Inc. common stock of
the undersigned held as of March 15, 1999, at the Annual Meeting of Sharehold-
ers of Unitrin, Inc., to be held at The University of Chicago Gleacher Center,
450 North Cityfront Plaza Drive, Chicago, Illinois 60611, at 10:00 a.m. on
May 5, 1999, and at any adjournment thereof, upon the following matters. This
card also constitutes voting instructions for all shares, if any, credited to
the account of the undersigned in the Unitrin 401K Savings Plan.
(1) ELECTION OF DIRECTORS. Nominees for director are:
1) James E. Annable 5) George A. Roberts
2) Reuben L. Hedlund 6) Fayez S. Sarofim
3) Jerrold V. Jerome 7) Henry E. Singleton
4) William E. Johnston, Jr. 8) Richard C. Vie
(2) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign and date this card on the reverse side and return promptly in the
envelope provided.
SEE REVERSE
SIDE
. FOLD AND DETACH HERE .
<PAGE>
- --------------------------------------------------------------------------------
7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7
7 7 7 7 7 7 7 7 7 7
Please mark your votes as in this example.
0599
----
X
This Proxy, when properly executed, will be voted as directed herein by the
undersigned shareholder. If no direction is made, this proxy will be voted FOR
Proposal (1).
The Board of Directors recommends a vote FOR Proposal (1).
- --------------------------------------------------------------------------------
1. Election of Directors WITHHELD [ ] FOR [ ]
For, except vote withheld from the following nominee(s):
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
- --------------------------------------------------------------------------------
Please check this box if you plan to attend the meeting. [ ]
Please sign exactly as your name(s) appears hereon. All joint tenants should
sign. When signing as attorney, executor, administrator, trustee or guardian,
give full title as such. If a corporation, sign the full corporate name by an
authorized officer. If a partnership, sign in partnership name by authorized
person.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S)DATE
Dear Shareholder:
Unitrin, Inc. encourages you to take advantage of a new and convenient way by
which you can vote your shares. You can vote your shares electronically through
the Internet or by telephone. This eliminates the need to return the proxy
card.
To vote your shares electronically you must use the control number printed in
the box above, just below the perforation. The series of numbers that appears
in the box above must be used to access the system.
To vote over the Internet:
. Log on to the Internet and go to the Web site http://www.vote-by-
net.com
To vote over the telephone:
. On a touch-tone telephone, call 1-800-OK2-VOTE (1-800-652-8683) 24
hours a day, 7 days a week
Your electronic vote authorizes the named Proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
You vote is important. Thank you for voting.
