Amendment to Employment Agreement

Form of Severance Agreement

Form of Change in Control





EX-10.12

LOUIS G. LOWER II EMPLOYMENT AGREEMENT



 
                                                                   Exhibit 10.12

                                 Execution Copy

                              EMPLOYMENT AGREEMENT
                              --------------------


     As of December 31, 1999, Horace Mann Educators Corporation, a Delaware
corporation ("Employer"), and Louis G. Lower II, an individual residing at 76
Woodley Road, Winnetka, IL 60093 ("Employee"), agree as follows:

     1. Term. Employer hereby employs Employee, and Employee hereby accepts
employment, on the terms and conditions hereinafter set forth. The term of this
Agreement (the "Term") shall commence on February 1, 2000 and shall terminate on
December 31, 2000; provided, however; that unless Employer gives notice to
Employee of its intention to have this agreement expire ("Employer Notice of
Non-Renewal") prior to September 1 of any year during the Term, or Employee
gives notice to Employer of his intention to have this agreement expire
("Employee Notice of Non-Renewal") prior to September 1 of any year during the
Term, then, on such September 1, the Term shall be extended to the December 31
of the year succeeding the year in which such September 1 occurs. Said Term may
be sooner terminated as hereinafter provided, and if the Term is so terminated,
all references herein to the "Term" of this Agreement shall mean the original
Term as so shortened, except where the context otherwise requires.

     2. Duties. Employee agrees to serve Employer as its President and Chief
Executive Officer and, subject to election by the shareholders of Employer, as a
member of its Board of Directors. Employee also agrees to serve as a director
and/or executive officer of corporations which are subsidiaries of Employer as
requested by the Board of Directors of Employer. During the term of this
Agreement, Employee will devote his full working time and exclusive attention
to, and use his best efforts to advance, the business and welfare of Employer.
During the term of this Agreement, Employee will not engage in any other
employment activities for any direct or indirect remuneration without the prior
written consent of Employer and will not engage in any activities which
interfere with the performance of his duties hereunder.

     3. Confidential Information.

          (a) Employee hereby agrees that, during the Term and thereafter, he
proprietary or confidential information or knowledge, including without
limitation, trade secrets, processes, records of research, proposals, reports,
methods, techniques, computer software or programming or budgets or other

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financial information, regarding Employer, its business, properties or affairs
obtained by him at any time prior to or subsequent to the execution of this
Agreement, except to the extent required by his performance of assigned duties
for Employer or as required by law or legal process.

          (b) Upon termination of employment Employee will deliver to Employer
all tangible displays and repositories of processes, records of research,
proposals, reports, memoranda, computer software and programming, budgets and
other financial information, and other materials or records or writings of any
other type (including any copies thereof) made, used or obtained by Employee in
connection with his employment by Employer.

          (c) Employee agrees that the remedy at law for any breach by him of
any of the covenants and agreements set forth in this Section 3 will be
inadequate and that, in the event of any such breach, Employer may, in addition
to the other remedies which may be available to it at law, obtain injunctive
relief prohibiting him (together with all those persons associated with him)
from the breach of such covenants and agreements.

     4. Base Salary and Benefits.

          4.1 Base Salary. During the Term, Employer shall pay Employee a salary
at the rate of Five Hundred Thousand Four Dollars ($500,004) per annum, payable
in accordance with the standard policies of the Company in existence from time
to time, subject to any payroll deductions as may be necessary or customary in
respect of Employer's salaried employees.

          4.2 Vacation. Employee shall be entitled to such amount of paid
vacation during each year during the Term as shall be afforded to the other
senior executives of the Company.

          4.3 Non-Pension Benefits. During the Term, Employer shall furnish
Employee with the same fringe benefit programs other than stock option and
supplemental pension plans as are made available generally to Employer's senior
employees, including participating in such group life, disability, health and
other similar benefit or insurance programs as are now or hereafter made
available generally to such employees and participating in Employer's 401(k)
plan, subject to the terms of such programs.

          4.4 Pension Benefits. Employer shall provide for Employee's
participation in Employer's pension plan and an additional non-qualified pension
plan at no cost to Employee so that the following retirement benefits will be
payable to Employee during his lifetime by Employer, in aggregate, pursuant to
such plans:

                                       2

 
Last Date of Employment                            Annual Benefit
-----------------------                            --------------
On or prior to December 31, 2000                            $0
January 1, 2001 to December 31, 2001                   $45,000
January 1, 2002 to December 31, 2002                   $90,000
January 1, 2003 to December 31, 2003                  $135,000
January 1, 2004 or later                              $180,000.

     5. Expenses.

          (a) Employer will pay or reimburse Employee for such reasonable
travel, entertainment and other expenses as he may incur at the request of
Employer during the term of this Agreement in connection with the performance of
his duties hereunder. Employee shall furnish Employer with such evidence that
such expenses were incurred as Employer reasonably requires or requests.

          (b) Employer will pay or reimburse Employee for reasonable costs
associated with his purchase of a second home in the Springfield, IL area (the
"Second Home"), including without limitation fees and commissions of real estate
brokers and agents and points incurred in financing the Second Home, but not
including the actual cost of the Second Home and its contents and costs of
financing the purchase of the Second Home, other than points. Employer will also
pay or reimburse Employee for reasonable temporary living expenses in the
Springfield, IL area until such time as he occupies the Second Home.

          (c) If, prior to January 17, 2003, the Term ends as a result of a
Termination Without Cause (as defined herein), an Employer Notice of Non-Renewal
or a Change of Control Termination (as defined herein) and Employee sells the
Second Home within six (6) months of such end of the Term (the "Resale"),
Employer will pay to Employee in cash an amount equal to Employee's purchase
price of the Second Home, less the gross sales price of the Second Home in the
Resale, if such amount is greater than zero (0); provided that Employee shall
make reasonable good faith efforts to obtain the best sales price in the Resale
available within such six (6) month period.

     6. Incentive Compensation. In addition to the base salary to which Employee
is entitled pursuant to Section 4.1 hereof, Employer will pay to Employee
additional compensation in accordance with the following terms and conditions:

          6.1 Stock Grant. On the first day of employment hereunder, Employer
shall cause to be issued to Employee a certificate for 10,000 shares of common
stock of Employer. Such certificate shall be in the name of Employee and shall
represent

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full ownership of such shares. Such shares shall have been registered under the
Securities Act of 1933 and will be freely tradable in the public markets,
subject to applicable legal restrictions. Employee represents to Employer that
he is acquiring such securities for investment purposes and not with an intent
to distribute such securities.


          6.2 Stock Options. Employer shall enter into stock option agreements
with Employee, (a) in the form attached hereto as Exhibit A, concurrent with the
complete execution of this Agreement, and (b) in the form attached hereto as
Exhibit B, on the first day of Employee's employment hereunder (together, the
"Stock Option Agreements").

          6.3 STIP. Employee shall participate in Employer's Short-Term
Incentive Plan (the "STIP") and successor plans thereto.

          6.4 LTIP. Employee shall participate in Employer's Long-Term Incentive
Plan (the "LTIP") and successor plans thereto

          6.5 One-Time Bonus. Simultaneous with the payment by Employer of
bonuses payable under the STIP with regard to performance in calendar year 2000
("2000 STIP Bonuses") and payable under the LTIP with regard to performance in
and prior to calendar year 2000 ("2000 LTIP Bonuses"), Employer shall pay to
Employee a one-time bonus equal to the sum of (a) the greater of Employee's 2000
STIP Bonus or Four Hundred Thousand Dollars ($400,000), less Employee's 2000
STIP Bonus and (b) the greater of Employee's 2000 LTIP Bonus or Three Hundred
Thousand Dollars ($300,000), less Employee's 2000 LTIP Bonus.

     7. Disability of Employee. If Employee becomes disabled by reason of
illness or other incapacity so that Employee is unable to perform his duties
hereunder for ninety (90) out of one hundred twenty (120) consecutive days, as
determined by a doctor selected by Employer's Board of Directors and reasonably
acceptable to Employee, Employer shall thereupon have the right to terminate
this Agreement. Upon such a termination, Employer's obligations hereunder shall
be limited to payment to Employee of salary due to Employee to such date of
termination and subsequent payment to Employee of a pro-rata share of any
incentive compensation bonuses pursuant to Section 6.3, 6.4 and 6.5, based on
the portion of the performance year in question during which Employee was
employed, with such pro-rata portions payable when such bonuses are regularly
paid to the Employer's employees.


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     8.  Death of Employee. If Employee dies during the term of this Agreement,
Employee's employment under this Agreement shall automatically terminate. Upon
such a termination, Employer's obligations hereunder shall be limited to payment
to Employee's estate of salary due to Employee through the date which is one
year after such termination and subsequent payment to Employee's estate of a
pro-rata share of any incentive compensation bonuses pursuant to Section 6.3,
6.4 and 6.5, based on the portion of the performance year in question during
which Employee was employed, with such pro-rata portions payable when such
bonuses are regularly paid to the Employer's employees.
 
     9.  Termination for Cause. Employee's employment under this Agreement may
be terminated by Employer for "good cause" (a "Termination for Cause"). The term
"good cause" is defined as any one or more of the following occurrences:

     (a) Employee's breach of any of the covenants contained in Section 3 of
this Agreement;

     (b) Employee's conviction by, or entry of a plea of guilty or nolo
contendere in, a court of competent and final jurisdiction for any felony crime;

     (c) Employee's commission of an act of fraud, whether prior to or
subsequent to the date hereof, upon Employer; or

     (d) Employee's continuing failure or refusal to perform his duties as
required by this Agreement to the reasonable satisfaction of Employer's Board of
Directors, provided, however, that termination of Employee's employment pursuant
to this subparagraph (d) shall not constitute valid termination "for cause"
unless Employee shall have first received written notice from the Board of
Directors of Employer stating with specificity the nature of such failure or
refusal and stating the required cure action and affording Employee at least
forty-five (45) days to correct the act or omission complained of.

     Upon a Termination for Cause, Employer's obligations hereunder shall
be limited to payment to Employee of salary due to Employee through the date of
termination and subsequent payment to Employee of a pro-rata share of any
incentive compensation bonuses pursuant to Section 6.3, 6.4 and 6.5, based on
the portion of the performance year in question during which Employee was
employed, with such pro-rata portions payable when such bonuses are regularly
paid to the Employer's employees.

                                       5

 
     10. Other Terminations.

     (a) Employer may, at any time during the Term, upon sixty (60) days prior
written notice to Employee, terminate this Agreement without cause (a
"Termination Without Cause").

     (b) Employee may, at any time during the Term, upon sixty (60) days prior
written notice to Employer, terminate this Agreement without cause (a
"Resignation").

     (c) A Resignation shall, for purposes of this Agreement, be treated as a
Termination for Cause on the date which is sixty (60) days after the notice of
Resignation.

     (d) An Employer Notice of Non-Renewal shall, for purposes of this
Agreement, be treated as a Termination Without Cause on December 31 of the year
in which such notice is given.

     (e) An Employee Notice of Non-Renewal shall, for purposes of this
Agreement, be treated as a Termination for Cause on December 31 of the year in
which such notice is given

     (f) Upon a Termination Without Cause, Employer's obligations hereunder
shall be limited to (i) payment to Employee of salary due to Employee through
the date which is two (2) years after the date of termination, (ii) continuation
of benefits pursuant to Section 4.3 through the date which is two years after
the date of termination and (iii) payment to Employee, on or before the date
which is thirty (30) days after the date of termination, of a lump-sum cash
amount equal to two (2) times the aggregate target incentive compensation
bonuses pursuant to Section 6.3, 6.4 and 6.5 for the Employee with regard to the
performance year in which the date of termination occurred.

     (g) If, during the Term, (i) there is a significant adverse change or
diminution in Employee's duties, working conditions or status as an employee,
(ii) Employer breaches its obligations hereunder or (iii) Employee is required
to perform his duties hereunder in a location other than Springfield, Illinois
which is more than one hundred fifty (150) miles away from Winnetka, Illinois
(any of such events, a "Material Change"), Employee may elect, by written notice
to Employer, to treat such Material Change as a Termination Without Cause on the
date of such notice. Thereupon, the Employee's rights shall be as described in
subsection (f) above and in subsection 5(c) above.

     11. Change of Control. If, during the Term, any individual, entity or group
of persons acting in concert own voting securities of Employer which, in the
aggregate, have more than 50% 

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of the voting power of outstanding voting securities of Employer entitled to
vote for the election of directors of Employer, such shall constitute a "Change
of Control." If, within three (3) years of a Change of Control, (a) there is a
Termination Without Cause, (b) there is a Material Change or (c) there is an
Employer Notice of Non-Renewal, then this Agreement shall terminate (a "Change
of Control Termination") and Employer shall immediately pay to Employee a
lump-sum cash amount equal to the sum of (x) three (3) times the greater of (i)
Employee's highest annual cash compensation from Employer in any calendar year,
as reported on Form W-2 for such year, or (ii) One Million Two Hundred Thousand
Dollars ($1,200,000) and (y) the actuarially determined present value of the
benefits payable to Employee pursuant to Section 4.4 for his expected remaining
life, calculated on the basis of Employee having been employed by Employer until
the date which is three (3) years after the Change of Control Termination. In
addition, Employer shall continue his benefits pursuant to Section 4.3 for three
(3) years after the Change of Control Termination. In addition, in the event it
shall be determined that any payment or distribution by Employer to or for the
benefit of Employee pursuant to the terms of this Agreement, including without
limitation an Excise Tax Payment (as defined below) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended, or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest and penalties,
collectively the "Excise Tax"), then Employee shall be entitled to receive from
Employer an additional payment (the "Excise Tax Payment") in an amount equal to
the Excise Tax imposed upon the Payments.

     12. Miscellaneous.

          12.1 Modification and Waiver of Breach. No waiver or modification of
this Agreement shall be binding unless it is in writing signed by the parties
hereto. No waiver of a breach hereof shall be deemed to constitute a waiver of a
future breach, whether of a similar or dissimilar nature.

          12.2 Assignment. The rights of Employer under this Agreement may,
without the consent of Employee, be assigned by Employer, in its sole and
unfettered discretion, to any person, firm, corporation, or other business
entity which at any time, whether by purchase, merger, or otherwise, directly or
indirectly, acquires all or substantially all of the assets or business of
Employer; provided that such assignment shall not alter or limit Employee's
rights hereunder, including without limitation all rights pursuant to Sections
10(g) and 11 which arise as a result of such assignment.

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          12.3 Notices. All notices and other communications required or
permitted under this Agreement shall be in writing, served personally on, sent
by telecopy or overnight courier to, or mailed by certified or registered United
States mail to, the party to be charged with receipt thereof. Notices and other
communications served by mail shall be deemed given hereunder seventy-two (72)
hours after deposit of such notice or communication in the United States Post
Office as certified or registered mail with postage prepaid and duly addressed
to whom such notice or communication is to be given, in the case of (a)
Employer, Horace Mann Educators Corporation, 1 Horace Mann Plaza, Springfield,
IL 62715 Attention: General Counsel, with a copy to Gibson, Dunn & Crutcher LLP,
200 Park Avenue, New York, NY 10166-0193, Attention: Conor D. Reilly, or (b)
Employee, to the home address indicated above, with a copy to Dowd, Bloch &
Bennett, Suite 3100, 8 Michigan Avenue, Chicago, IL 60603-3320, Attention: Barry
M. Bennett. Either party may change said party's address for purposes of this
Section by giving to the party intended to be bound thereby, in the manner
provided herein, a written notice of such change.

          12.4 Counterparts. This instrument may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.

          12.5 Construction of Agreement. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of Illinois applicable
to agreements executed and to be performed in Illinois.

          12.6 Complete Agreement. This Agreement, together with the Stock
Option Agreements, contains the entire agreement between the parties hereto with
respect to the transactions contemplated by this Agreement and supersedes all
previous oral and written and all contemporaneous oral negotiations,
commitments, writings and understandings.

          12.7 Non-Transferability of Interest. None of the rights of Employee
to receive any form of compensation payable pursuant to this Agreement shall be
assignable or transferable except through a testamentary disposition or by the
laws of descent and distribution upon the death of Employee. Any attempted
assignment, transfer, conveyance or other disposition (other than as aforesaid)
of any interest in the rights of Employee to receive any form of compensation to
be made by Employer pursuant to this Agreement shall be void.

                                       8

 
          12.8 Arbitration. In the event that there shall be a dispute between
the parties hereto arising out of or relating to this Agreement, or the breach
thereof, the parties agree that such dispute shall be resolved by final and
binding arbitration in Chicago, Illinois administered by the American
Arbitration Association (the "AAA") in accordance with the AAA's commercial
arbitration rules for individual employment disputes then in effect. Any award
issued as a result of such arbitration shall be final and binding between the
parties thereto and shall be enforceable by any court having jurisdiction over
the party against whom enforcement is sought. The arbitrator(s) shall allocate
the cost of the legal fees and related costs of the prevailing party in such
arbitration to the other party if and only if a determination is made that such
other party's position asserted in the arbitration was unreasonable.

          12.9 Survival of Certain Obligations. Except as may otherwise be
specifically provided for herein, the obligations of the parties pursuant to
Sections 3 and 11 shall survive the termination of this Agreement.

          12.10 Captions. The captions appearing in this Agreement are inserted
only as a matter of convenience and as a reference and in no way define, limit
or describe the scope or intent of this Agreement or any of the provisions
hereof.

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     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written. 

EMPLOYEE:                               EMPLOYER: 

                                        HORACE MANN EDUCATORS CORPORATION


/s/ Louis G. Lower II                   By: /s/ Paul J. Kardos    
----------------------                      ----------------------
                                            Name: Paul J. Kardos
                                            Title:  Chairman, President & CEO 


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                                 Execution Copy

                                    Exhibit A
                                    ---------



                             STOCK OPTION AGREEMENT
                                 PURSUANT TO THE
                        HORACE MANN EDUCATORS CORPORATION
                            1991 STOCK INCENTIVE PLAN

     THIS STOCK OPTION AGREEMENT (this "Agreement") is made as of December 31,
1999 (the "Effective Date"), between Horace Mann Educators Corporation, a
Delaware corporation (the "Company"), and Louis G. Lower II (the "Optionee").

                                 R E C I T A L S


     A. The Optionee is expected to serve the Company as its President and Chief
Executive Officer pursuant to an Employment Agreement dated as of December 31,
1999 (the "Employment Agreement");

     B. The Employment Agreement calls for the Company to enter into this
Agreement on the date of complete execution of the Employment Agreement.

     C. This Agreement relates to the granting of stock options to the Optionee
under the Company's 1991 Stock Incentive Plan (the "Plan"), a copy of which is
attached hereto as Exhibit A.

     D. In accordance with the Plan, the Committee (as defined in the Plan) has,
as of the Effective Date, granted to the Optionee an option to purchase shares
of Common Stock, $0.001 par value, of the Company (the "Common Stock"), subject
to the terms and conditions of the Plan and this Agreement.

                                   AGREEMENTS

     1. Definitions. Capitalized terms not defined herein shall have the
meanings ascribed thereto in the Employment Agreement. Other capitalized terms
used herein shall have the following meanings:

     "Act" is defined in Section 8.

     "Agreement" means this Stock Option Agreement.

     "Change of Control" is defined in the Plan.

     "Committee" is defined in the Plan.

     "Common Stock" is defined in recital D.

     "Company" is defined in the preamble.

     "Effective Date" is defined in the preamble.


                                       1

 
     "Employment Agreement" is defined in recital A.

     "Exercise Price" is defined in Section 2.

     "Option" is defined in Section 2.

     "Optionee" is defined in the preamble.

     "Option Shares" is defined in Section 2.

     "Plan" is defined in recital C.

     "Termination Date" means the date on which the Optionee ceases to be
employed by the Company for any reason.

     2. Grant of Option. The Company hereby grants to the Optionee the right and
option (the "Option") to purchase up to 250,000 shares of Common Stock (the
"Option Shares"), at a per share purchase price equal to the mean between the
highest and lowest reported sales prices of a share of Common Stock on the New
York Stock Exchange Composite Tape on the Effective Date (as such amount may be
adjusted, the "Exercise Price"), on the terms and conditions set forth herein.

     3. Exercisability. The Optionee's right to exercise the Option shall vest
as follows if the Optionee is employed by the Company on the relevant dates of
vesting:

 Number of Option Shares                 Date of Vesting
 -----------------------                 ---------------
          50,000                         January 1, 2001
          50,000                         January 1, 2002
          50,000                         January 1, 2003
          50,000                         January 1, 2004
          50,000                         January 1, 2005.

     Notwithstanding the foregoing, in the event of a Termination Without Cause,
an Employer Notice of Non-Renewal or a Material Change, the Optionee shall, for
purposes of this Section 3, be treated as having been employed by the Company
until the date which is one (1) year after the Termination Date. Further,
notwithstanding the foregoing, in the event of a Change of Control which occurs
after the Optionee's employment with the Company has begun, all unvested Option
Shares shall thereupon immediately vest.

     4. Expiration. The vested portion of the Option shall expire upon the
earlier of (1) the tenth (10th) anniversary of the Effective Date, or (2) (i) in
the event of a Termination for Cause, a Resignation which is not a Retirement
(as defined in the Plan) or an Employee Notice of Non-Renewal, the day which is
ninety (90) days after the Termination Date unless, on the seventy-fifth (75th)
day after the Termination Date, the Optionee is, in the reasonable judgment of
outside counsel to the Company, in possession of non-public material information
regarding the Company, in which case the expiry date shall be the day which is
thirty (30) days after notice is given to the Optionee by the Company that, in
the reasonable judgment of outside counsel to the Company, the Optionee is no
longer in possession of such information or (ii) if the Optionee ceases to be an
officer or employee of the Company due to death, a Retirement (as defined in the
Plan), a Termination Without Cause, an Employer Notice of Non-Renewal or a
Material Change or pursuant to Section 7 of the Employment Agreement, the
two-year anniversary of the Termination Date. All provisions of this Section 4
shall apply regardless of whether or not a Change of Control has occurred.

     5. Nontransferability. The Option shall not be transferable by the Optionee


                                       2

 
other than by will or by the laws of descent and distribution and
the Option shall be exercisable, during Optionee's lifetime, only by Optionee or
by his guardian or legal representative, it being understood that the term
"Optionee" herein shall include the guardian and legal representative of
Optionee and any person to whom an option is transferred by will or by the laws
of descent and distribution. Notwithstanding the foregoing, the Option may be
transferred to the spouse or lineal descendant of Optionee or to the trustee of
a trust for the primary benefit of a spouse or lineal descendent of Optionee.
Such assignee shall be subject to all of the terms and provisions of the Plan.

     6. Adjustments. If the shares of the Common Stock are changed into or
exchanged for a different number or kind of shares or securities, as the result
of any one or more reorganizations, recapitalizations, mergers, acquisitions,
stock splits, reverse stock splits, stock dividends or similar events, or in the
event of a rights offering to purchase Common Stock at a price substantially
below its fair market value, an appropriate adjustment shall be made in the
number and kind of shares or other securities subject to the Option, and the
price for each share or other unit of any securities subject to this Agreement,
in accordance with the Plan. No fractional interests shall be issued on account
of any such adjustment unless the Committee specifically determines to the
contrary; provided, however, that in lieu of fractional interests, the Optionee,
upon the exercise of the Option in whole or part, shall receive cash in an
amount equal to the amount by which the fair market value of such fractional
interests exceeds the Exercise Price attributable to such fractional interests.

     7. Exercise of the Option. Prior to the expiration thereof, the Optionee
may exercise the vested portion of the Option from time to time in whole or in
part, provided that unless the Committee in its sole discretion shall determine
otherwise, each such exercise, other than an exercise for all remaining shares
pursuant to this Agreement, shall be for no fewer than one hundred (100) shares.
Upon electing to exercise the Option, the Optionee shall deliver to the
Secretary of the Company a written and signed notice of such election setting
forth the number of Option Shares the Optionee has elected to purchase and shall
at the time of delivery of such notice tender cash or a cashier's or certified
bank check to the order of the Company for the full Exercise Price of such
Option Shares and any amount required pursuant to Section 13 hereof.

     8. Compliance with Legal Requirements. No Option Shares shall be issued or
transferred pursuant to this Agreement unless and until all legal requirements
applicable to such issuance or transfer have, in the reasonable opinion of
counsel to the Company, been satisfied. Such requirements may include, but are
not limited to, registering or qualifying such Shares under any state or federal
law, satisfying any applicable law relating to the transfer of unregistered
securities or demonstrating the availability of an exemption from applicable
laws, placing a legend on the Shares to the effect that they were issued in
reliance upon an exemption from registration under the Securities Act of 1933,
as amended (the "Act"), and may not be transferred other than in reliance upon
Rule 144 or Rule 701 promulgated under the Act, if available, or upon another
exemption from the Act, or obtaining the consent or approval of any governmental
regulatory body.

     9. No Interest in Shares Subject to Option. Neither the Optionee
(individually or as a member of a group) nor any beneficiary or other person
claiming under or through the Optionee shall have any right, title, interest, or
privilege in or to any shares of stock allocated or reserved for the purpose of
the Plan or subject to this Agreement except as to such Option Shares, if any,
as shall have been issued to such person upon exercise of this Option or any
part of it.

     10. Plan Controls. The Option hereby granted is subject to, and the Company
and the Optionee agree to be bound by, all of the terms and conditions of the
Plan as the same may be amended from time to time in accordance with the terms
thereof, but no such amendment shall be effective as to the Option without the
Optionee's consent insofar as it may adversely affect the Optionee's rights
under this Agreement.


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     11. Not an Employment Contract. Nothing in the Plan, in this Agreement or
any other instrument executed pursuant thereto shall confer upon the Optionee
any right to employment by the Company or any Subsidiary or shall affect the
rights of the parties to the Employment Agreement with regard to the terms
thereof.

     12. Governing Law. All terms of and rights under this Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Delaware, without giving effect to principles of conflicts of law.

     13. Taxes. The Committee may, in its discretion, make such provisions and
take such steps as it may deem necessary or appropriate for the withholding of
all federal, state, local and other taxes required by law to be withheld with
respect to the issuance or exercise of the Option including, but not limited to,
deducting the amount of any such withholding taxes from any other amount then or
thereafter payable to the Optionee, requiring the Optionee to pay to the Company
the amount required to be withheld or to execute such documents as the Committee
deems necessary or desirable to enable it to satisfy its withholding
obligations, or any other means provided in the Plan.

     14. Notices. All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be given in accordance
with the procedures set forth in Section 12.3 of the Employment Agreement.

     15. Amendments and Waivers. This Agreement may be amended, and any
provision hereof may be waived, only by a writing signed by both parties hereto.

     16. Entire Agreement. This Agreement, together with the Plan, sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof and supersedes all prior oral and written and all contemporaneous
oral discussions, agreements and understandings of any kind or nature.

     17. Separability. In the event that any provision of this Agreement is
declared to be illegal, invalid or otherwise unenforceable by a court of
competent jurisdiction, such provision shall be reformed, if possible, to the
extent necessary to render it legal, valid and enforceable, or otherwise
deleted, and the remainder of this Agreement shall not be affected except to the
extent necessary to reform or delete such illegal, invalid or unenforceable
provision.

     18. Headings. The headings preceding the text of the sections hereof are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement, nor shall they affect its meaning, construction or effect.

     19. Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed an original, but which together shall constitute one
and the same instrument.

     20. Further Assurances. Each party shall cooperate and take such action as
may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement.

     21. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective permitted successors and
assigns.


                                       4

 
     22. Arbitration. In the event that there shall be a dispute between the
parties hereto arising out of or relating to this Agreement or the breach
thereof, the parties agree that such dispute shall be resolved in accordance
with Section 12.8 of the Employment Agreement.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.

                                       HORACE MANN EDUCATORS CORPORATION

                                       By: /s/ Paul J. Kardos
                                           -------------------------------------
                                           Name: Paul J. Kardos
                                           Title: Chairman

                                        OPTIONEE

                                        /s/ Louis G. Lower II
                                        ----------------------------------------
                                        Louis G. Lower II

80101362_10.Doc


 
                                    Exhibit B
                                    ---------



                             STOCK OPTION AGREEMENT
                                 PURSUANT TO THE
                        HORACE MANN EDUCATORS CORPORATION
                            1991 STOCK INCENTIVE PLAN

     THIS STOCK OPTION AGREEMENT (this "Agreement") is made as of February 1,
2000 (the "Effective Date"), between Horace Mann Educators Corporation, a
Delaware corporation (the "Company"), and Louis G. Lower II (the "Optionee"). 

                                R E C I T A L S
                                - - - - - - - -

     A. The Optionee presently serves the Company as its President and Chief
Executive Officer pursuant to an Employment Agreement dated as of December 31,
1999 (the "Employment Agreement");

     B. The Employment Agreement calls for the Company to enter into this
Agreement on the first day of the Optionee's employment with the Company.

     C. This Agreement relates to the granting of stock options to the Optionee
under the Company's 1991 Stock Incentive Plan (the "Plan"), a copy of which is
attached hereto as Exhibit A.

     D. In accordance with the Plan, the Committee (as defined in the Plan) has,
as of the Effective Date, granted to the Optionee an option to purchase shares
of Common Stock, $0.001 par value, of the Company (the "Common Stock"), subject
to the terms and conditions of the Plan and this Agreement. Such option is
intended to qualify to the maximum extent permitted by law as an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended.

                                   AGREEMENTS
                                   ----------

     1. Definitions. Capitalized terms not defined herein shall have the
meanings ascribed thereto in the Employment Agreement. Other capitalized terms
used herein shall have the following meanings:

     "Act" is defined in Section 8.

     "Agreement" means this Stock Option Agreement.

     "Change of Control" is defined in the Plan.

     "Committee" is defined in the Plan.

     "Common Stock" is defined in recital D.

     "Company" is defined in the preamble.

     "Effective Date" is defined in the preamble.

     "Employment Agreement" is defined in recital A.

 
     "Exercise Price" is defined in Section 2.

     "Option" is defined in Section 2.

     "Optionee" is defined in the preamble.

     "Option Shares" is defined in Section 2. 

     "Plan" is defined in recital C.

     "Termination Date" means the date on which the Optionee ceases to be
employed by the Company for any reason.

     2. Grant of Option. The Company hereby grants to the Optionee the right and
option (the "Option") to purchase up to 500,000 shares of Common Stock (the
"Option Shares"), at a per share purchase price equal to the mean between the
highest and lowest reported sales prices of a share of Common Stock on the New
York Stock Exchange Composite Tape on the Effective Date (as such amount may be
adjusted, the "Exercise Price"), on the terms and conditions set forth herein.

     3. Exercisability. The Optionee's right to exercise the Option shall vest
as follows if the Optionee is employed by the Company on the relevant dates of
vesting:
 
         Number of Option Shares     Date of Vesting
         -----------------------     ---------------

                 100,000              January 1, 2001
                 100,000              January 1, 2002
                 100,000              January 1, 2003
                 100,000              January 1, 2004
                 100,000              January 1, 2005.
                 
     Notwithstanding the foregoing, in the event of a Termination Without Cause,
an Employer Notice of Non-Renewal or a Material Change, the Optionee shall, for
purposes of this Section 3, be treated as having been employed by the Company
until the date which is one (1) year after the Termination Date. Further,
notwithstanding the foregoing, in the event of a Change of Control, all unvested
Option Shares shall thereupon immediately vest.

     4. Expiration. The vested portion of the Option shall expire upon the
earlier of (1) the tenth (10th) anniversary of the Effective Date, or (2) (i) in
the event of a Termination for Cause, a Resignation which is not a Retirement
(as defined in the Plan) or an Employee Notice of Non-Renewal, the day which is
ninety (90) days after the Termination Date unless, on the seventy-fifth (75th)
day after the Termination Date, the Optionee is, in the reasonable judgment of
outside counsel to the Company, in possession of non-public material information
regarding the Company, in which case the expiry date shall be the day which is
thirty (30) days after notice is given to the Optionee by the Company that, in
the reasonable judgment of outside counsel to the Company, the Optionee is no
longer in possession of such information or (ii) if the Optionee ceases to be an
officer or employee of the Company due to death, a Retirement (as defined in the
Plan), a Termination Without Cause, an Employer Notice of Non-Renewal or a
Material Change or pursuant to Section 7 of the Employment Agreement, the
two-year anniversary of the Termination Date.
                           
     All provisions of this Section 4 shall apply regardless of whether or not a
Change of Control has occurred.


                                       2

 
     5. Nontransferability. The Option shall not be transferable by the Optionee
other than by will or by the laws of descent and distribution and the Option
shall be exercisable, during Optionee's lifetime, only by Optionee or by his
guardian or legal representative, it being understood that the term "Optionee"
herein shall include the guardian and legal representative of Optionee and any
person to whom an option is transferred by will or by the laws of descent and
distribution. Notwithstanding the foregoing, the Option may be transferred to
the spouse or lineal descendant of Optionee or to the trustee of a trust for the
primary benefit of a spouse or lineal descendent of Optionee. Such assignee
shall be subject to all of the terms and provisions of the Plan.

     6. Adjustments. If the shares of the Common Stock are changed into or
exchanged for a different number or kind of shares or securities, as the result
of any one or more reorganizations, recapitalizations, mergers, acquisitions,
stock splits, reverse stock splits, stock dividends or similar events, or in the
event of a rights offering to purchase Common Stock at a price substantially
below its fair market value, an appropriate adjustment shall be made in the
number and kind of shares or other securities subject to the Option, and the
price for each share or other unit of any securities subject to this Agreement,
in accordance with the Plan. No fractional interests shall be issued on account
of any such adjustment unless the Committee specifically determines to the
contrary; provided, however, that in lieu of fractional interests, the Optionee,
upon the exercise of the Option in whole or part, shall receive cash in an
amount equal to the amount by which the fair market value of such fractional
interests exceeds the Exercise Price attributable to such fractional interests.

     7. Exercise of the Option. Prior to the expiration thereof, the Optionee
may exercise the vested portion of the Option from time to time in whole or in
part, provided that unless the Committee in its sole discretion shall determine
otherwise, each such exercise, other than an exercise for all remaining shares
pursuant to this Agreement, shall be for no fewer than one hundred (100) shares.
Upon electing to exercise the Option, the Optionee shall deliver to the
Secretary of the Company a written and signed notice of such election setting
forth the number of Option Shares the Optionee has elected to purchase and shall
at the time of delivery of such notice tender cash or a cashier's or certified
bank check to the order of the Company for the full Exercise Price of such
Option Shares and any amount required pursuant to Section 13 hereof.

     8. Compliance with Legal Requirements. No Option Shares shall be issued or
transferred pursuant to this Agreement unless and until all legal requirements
applicable to such issuance or transfer have, in the reasonable opinion of
counsel to the Company, been satisfied. Such requirements may include, but are
not limited to, registering or qualifying such Shares under any state or federal
law, satisfying any applicable law relating to the transfer of unregistered
securities or demonstrating the availability of an exemption from applicable
laws, placing a legend on the Shares to the effect that they were issued in
reliance upon an exemption from registration under the Securities Act of 1933,
as amended (the "Act"), and may not be transferred other than in reliance upon
Rule 144 or Rule 701 promulgated under the Act, if available, or upon another
exemption from the Act, or obtaining the consent or approval of any governmental
regulatory body.

     9. No Interest in Shares Subject to Option. Neither the Optionee
(individually or as a member of a group) nor any beneficiary or other person
claiming under or through the Optionee shall have any right, title, interest, or
privilege in or to any shares of stock allocated or reserved for the purpose of
the Plan or subject to this Agreement except as to such Option Shares, if any,
as shall have been issued to such person upon exercise of this Option or any
part of it.

     10. Plan Controls. The Option hereby granted is subject to, and the Company
and the Optionee agree to be bound by, all of the terms and conditions of the
Plan as the same may be amended from time to time in accordance with the terms
thereof, but no such amendment shall be effective as to the Option without the
Optionee's consent insofar as it may adversely affect the Optionee's rights
under this Agreement.


                                       3

 
     11. Not an Employment Contract. Nothing in the Plan, in this Agreement or
any other instrument executed pursuant thereto shall confer upon the Optionee
any right to employment by the Company or any Subsidiary or shall affect the
rights of the parties to the Employment Agreement with regard to the terms
thereof.

     12. Governing Law. All terms of and rights under this Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Delaware, without giving effect to principles of conflicts of law.

     13. Taxes. The Committee may, in its discretion, make such provisions and
take such steps as it may deem necessary or appropriate for the withholding of
all federal, state, local and other taxes required by law to be withheld with
respect to the issuance or exercise of the Option including, but not limited to,
deducting the amount of any such withholding taxes from any other amount then or
thereafter payable to the Optionee, requiring the Optionee to pay to the Company
the amount required to be withheld or to execute such documents as the Committee
deems necessary or desirable to enable it to satisfy its withholding
obligations, or any other means provided in the Plan.

     14. Notices. All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be given in accordance
with the procedures set forth in Section 12.3 of the Employment Agreement.

     15. Amendments and Waivers. This Agreement may be amended, and any
provision hereof may be waived, only by a writing signed by both parties hereto.

     16. Entire Agreement. This Agreement, together with the Plan, sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof and supersedes all prior oral and written and all contemporaneous
oral discussions, agreements and understandings of any kind or nature.

     17. Separability. In the event that any provision of this Agreement is
declared to be illegal, invalid or otherwise unenforceable by a court of
competent jurisdiction, such provision shall be reformed, if possible, to the
extent necessary to render it legal, valid and enforceable, or otherwise
deleted, and the remainder of this Agreement shall not be affected except to the
extent necessary to reform or delete such illegal, invalid or unenforceable
provision.

     18. Headings. The headings preceding the text of the sections hereof are
inserted solely for convenience of reference, and shall not constitute a part of
this Agreement, nor shall they affect its meaning, construction or effect. 

     19. Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed an original, but which together shall constitute one
and the same instrument.

     20. Further Assurances. Each party shall cooperate and take such action as
may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement.

     21. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective permitted successors and
assigns.

                  22. SAR Contingency. With regard to 200,000 of the Option
Shares (the "Authorized Option Shares"), those shares are within the current
authorized shares under the Plan and are therefore granted under the Plan
without contingency. The Authorized Option Shares shall constitute the Option
Shares which first vest pursuant to Section 3 hereof. With regard to the Option


                                       4

 
Shares over and above the Authorized Option Shares (the "Contingent Option
Shares"), the Option as it relates to such Option Shares is granted hereby
subject to the condition that, at the 2000 Annual Meeting of Shareholders of the
Company, the shareholders approve an amendment to the Plan authorizing
sufficient additional shares of Common Stock under the Plan to permit the
Contingent Option Shares to be granted thereunder or, prior to that Annual
Meeting, sufficient shares of Common Stock otherwise become available under the
Plan to permit the Contingent Option Shares to be granted thereunder. If such
condition is not met, the Contingent Option Shares shall thereupon immediately
be converted to stock appreciation rights granted under the Plan, with the terms
and conditions thereof such as to approximate as closely as possible the
economic value of the Contingent Option Shares to the Optionee. The Company
shall then issue to the Optionee a new stock option agreement relating to the
Authorized Option Shares to replace this Agreement and a stock appreciation
rights agreement relating to the stock appreciation rights so granted.

     23. Arbitration. In the event that there shall be a dispute between the
parties hereto arising out of or relating to this Agreement or the breach
thereof, the parties agree that such dispute shall be resolved in accordance
with Section 12.8 of the Employment Agreement.


                                       5

 
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.

                                       HORACE MANN EDUCATORS CORPORATION

                                       By:/s/ Paul J. Kardos                    
                                       -----------------------------------------
                                       Name: Paul J. Kardos
                                       Title:  Chairman

                                       OPTIONEE

                                       /s/ Louis G. Lower II
                                       -----------------------------------------
                                       Louis G. Lower II





EX-10.14.A 13 dex1014a.htm AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN HMEC AND LOUIS G. LOWER II

Exhibit 10.14(a)

AMENDMENT TO EMPLOYMENT AGREEMENT

On this 22 nd day of December, 2008, Horace Mann Educators Corporation, a Delaware Corporation (“Employer”), and Louis G. Lower II (“Employee”), hereby agree as follows:

WHEREAS, the parties previously entered into an Employment Agreement dated December 31, 1999 (“Agreement”), which Agreement continues in effect; and

WHEREAS, in connection with the enactment of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”), and guidance issued thereunder, the parties wish to revise the Agreement as necessary to comply with Code Section 409A and related guidance;

NOW, THEREFORE, the parties hereby agree to the following amendments to the Agreement, the same to be effective as of January 1, 2008:

1. Section 4.4 of the Agreement is hereby deleted and replaced with the following new Section 4.4:

4.4 Pension Benefits.

(a) Employer shall provide for Employee’s participation in Employer’s pension plan and an additional non-qualified pension plan at no cost to Employee so that the following retirement benefits will be payable to Employee during his lifetime by Employer, in aggregate, pursuant to such plans:

 

Last Date of Employment

  

Annual Benefit

On or prior to December 31, 2000

  

$

0

January 1, 2001 to December 31, 2001

  

$

45,000

January 1, 2002 to December 31, 2002

  

$

90,000

January 1, 2003 to December 31, 2003

  

$

135,000

January 1, 2004 or later

  

$

180,000

(b) To the extent an actuarial equivalent is not provided in Employer’s pension plan or additional non-qualified pension plan, except as otherwise provided in Section 4.4(c) or (d) below, the annual benefit provided above (“accrued benefit”) shall be paid hereunder in monthly installments commencing on the first day of the first month following Employee’s separation from service (within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”)); provided, however, that if Employee is married at the time such payments commence, the accrued benefit shall be paid in the form of a joint and 50% survivor annuity, with monthly payments to Employee commencing on the first day of the first month following Employee’s separation from service and continuing until the first day of the month immediately preceding the Employee’s death, and with monthly payments equal to fifty percent (50%) of Employee’s monthly payment continuing thereafter to the Employee’s surviving spouse at separation, if any, until the first day of the month immediately preceding such spouse’s death. Notwithstanding the preceding, if Employee is a “specified employee” (within the meaning of Code Section 409A) upon his separation from service, then any payments to which Employee would have been entitled to receive under this Section 4.4(b) during the first six (6) months following his separation from service shall be


accumulated and paid on the first day of the seventh month following such separation, along with the normal payment for such seventh month.

(c) If, during the Term, any one person, or more than one person acting as a group, acquires ownership of stock of Employer that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Employer and, within two (2) years of such event Employee incurs a separation from service (within the meaning of Code Section 409A) on account of a Termination Without Cause (as defined in Section 10), a Material Change (as defined below) or an Employer Notice of Non-Renewal (as defined in Section 1), then this Agreement shall terminate and the Employer shall pay to the Employee within sixty (60) days of such separation the actuarially determined present value of the benefits payable to the Employee in Section 4.4(b) above for his expected remaining life, calculated on the basis of the Employee having been employed by the Employer until the date which is three (3) years after such separation.

For purposes of this Section 4.4, a “Material Change” means that, during the Term, (1) there is a significant adverse change or diminution in the Employee’s duties, working conditions or status as an employee, (2) the Employer breaches its obligations hereunder, or (3) the Employee is required to perform his duties hereunder in a location other than Springfield, Illinois which is more than one hundred fifty (150) miles away from Winnetka, Illinois and the Employee elects, by written notice to the Employer, to treat such change as a Termination Without Cause on the date of such notice.”

(d) If, at any time after payment under Section 4.4(b) has commenced, any one person, or more than one person acting as a group, acquires ownership of stock of Employer that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Employer, then Employer shall pay to the Employee within sixty (60) days of such acquisition the actuarially determined present value of the benefits payable to the Employee in Section 4.4(b) above for his expected remaining life.

2. The last sentence of Section 5(a) of the Agreement is hereby deleted and replaced with the following new sentence:

The Employee shall furnish the Employer with such evidence that such expenses were incurred as the Employer reasonably requires or requests in accordance with its policies and procedures from time to time and such expenses shall be reimbursed within sixty (60) days of such substantiation, but in no event shall reimbursement under this Section 5(a) be made later than the last day of the calendar year following the calendar year in which the expense is incurred.”

3. Section 7 of the Agreement is hereby amended by the addition of the following new sentence at the end thereof:

Notwithstanding anything in this Section 7 to the contrary, salary amounts shall be paid to the Employee within sixty (60) days of termination and the pro rata share of incentive compensation bonuses under Sections 6.3 and 6.4 shall be paid to the Employee no later than two

 

-2-


and one-half (2 1/2) months after the end of the performance year in which such termination occurs.”

4. Section 8 of the Agreement is hereby amended by the addition of the following new sentence at the end thereof:

Notwithstanding anything in this Section 8 to the contrary, salary amounts shall be paid to the Employee’s estate in a lump sum within sixty (60) days of the Employee’s death and the pro rata share of incentive compensation bonuses under Sections 6.3 and 6.4 shall be paid to the Employee’s estate no later than two and one-half (2 1/2) months after the end of the performance year in which such death occurs.”

5. Section 9(d) of the Agreement is hereby amended by the addition of the following new sentence at the end of the second paragraph thereof:

Notwithstanding anything in this Section 9(d) to the contrary, salary amounts shall be paid to the Employee within sixty (60) days of termination and the pro rata share of incentive compensation bonuses under Sections 6.3 and 6.4 shall be paid to the Employee no later than two and one-half (2 1/2) months after the end of the performance year in which such termination occurs.”

6. Sections 10(d) and 10(e) are hereby amended by the addition of the following language at the end thereof:

unless the parties agree to an earlier termination date.”

7. Section 10(f) of the Agreement is hereby deleted and replaced with the following new Section 10(f):

(f) Upon a separation from service (within the meaning of Code Section 409A) due to a Termination Without Cause (as defined above), the Employer’s obligations hereunder shall be limited to:

(1) payment to the Employee of a lump sum cash severance amount equal to two times the aggregate target incentive compensation bonuses pursuant to Section 6.3, 6.4 and 6.5 for the Employee with regard to the performance year prior to the performance year in which the Employee’s separation from service occurs, such payment to be made within thirty (30) days of separation;

(2) payment to the Employee of a lump sum cash amount equal to two (2) years of the Employee’s salary at the rate in effect as of such separation from service, such payment to be made within thirty (30) days of separation;

(3) continuation of benefits pursuant to Section 4.3 through the date which is eighteen (18) months after the Employee’s separation from service; and

(4) a pro-rata share of any incentive compensation bonuses pursuant to Section 6.3, 6.4 and 6.5, for the performance year in which the Employee’s separation

 

-3-


from service occurs, such pro-rata portions payable when such bonuses are regularly paid to the Employer’s employees.

8. Section 10(g) of the Agreement is hereby deleted and replaced with the following new Section 10(g):

(g) If, during the Term, the Employee terminates his employment on account of one of the following “Good Reason” conditions (“Termination for Good Reason”), the Employee shall be entitled to the rights described in Section 10(f) above. “Good Reason” conditions mean one or more of the following conditions:

(1) a significant adverse change in the Employee’s duties, working conditions or status as an employee;

(2) the Employer breaches its obligations under this Agreement; or

(3) the Employee is required to perform his duties hereunder in a location other than Springfield, Illinois which is more than one hundred fifty (150) miles away from Winnetka, Illinois.

In order for the terms of this Section 10(g) to be operative, the Employee must provide written notice to the Employer within thirty (30) days after the initial existence of one of the above conditions, the Employer must be provided at least thirty (30) days to remedy the condition, and the Employee must terminate his employment within ninety (90) days of the expiration of such thirty (30)-day remedy period.”

9. Section 11 of the Agreement is hereby deleted and replaced with the following new Section 11:

11. Change of Control. If, during the Term, any individual, entity or group or persons acting in concert own voting securities of Employer which, in the aggregate, have more than 50% of the voting power of outstanding voting securities of Employer entitled to vote for the election of directors of Employer, such shall constitute a “Change of Control” for purposes of this Section 11. If, within three (3) years following a Change of Control, the Employee incurs a separation from service (within the meaning of Code Section 409A) that is a Termination Without Cause (as defined in Section 10), a Termination for Good Reason (as defined in Section 10(g)), or an Employer Notice of Non-Renewal (as defined in Section 1), then this Agreement shall terminate and the Employer shall pay to the Employee:

(a) a lump sum cash payment equal to three (3) times the greater of (1) the Employee’s highest annual cash compensation from the Employer in any calendar year since Employee’s first date of employment with Employer, as reported on Form W-2 for such year, or (2) one million two hundred thousand dollars ($1,200,000), such payment to be made within sixty (60) days of such separation from service;

(b) continuation of benefits pursuant to Section 4.3 through the date which is eighteen (18) months after the Employee’s separation from service; and

 

-4-


(c) in the event it shall be determined that any payment or distribution by the Employer to or for the benefit of the Employee pursuant to the terms of this Agreement, including without limitation an Excise Tax Payment (as defined below), (“Payment”) would be subject to the excise tax imposed by Code Section 4999 or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively the “Excise Tax”), an additional lump sum payment (“Excise Tax Payment”) in an amount equal to the Excise Tax imposed upon the Payments, such payment to be made no later than the last day of the calendar year following the calendar year in which the Employee remits such Excise Taxes.”

10. Section 12.5 is hereby amended by the addition of the following new sentence at the end thereof:

The Agreement is intended to comply with, or otherwise be exempt from, Code Section 409A and shall be interpreted and construed in a manner that does not result in the imposition of additional taxes or penalties under Code Section 409A.”

Except as specifically provided herein, the Agreement shall continue in full force and effect.

IN WITNESS WHEREOF, the Employer and the Employee have caused this Amendment to Employment Agreement to be executed in their respective names all on the day and year first above written.

 

EMPLOYER:

HORACE MANN EDUCATORS CORPORATION

/s/ Joseph J. Melone

Joseph Melone

Chairman of the Board

EMPLOYEE:

/s/ Louis G. Lower II

Louis G. Lower, II

 

-5-



EX-10.12 9 dex1012.htm FORM OF SEVERANCE AGREEMENT BETWEEN HMEC AND CERTAIN OFFICERS

Exhibit 10.12

Form of

SEVERANCE AGREEMENT

This SEVERANCE AGREEMENT (this “Agreement”), dated as of                     , 20    , is made and entered into by and between Horace Mann Educators Corporation (“HMEC”), a Delaware Corporation (the “Parent Company”), Horace Mann Service Corporation (“HMSC”), an Illinois corporation (the “Employer Company”), (HMEC and HMSC collectively referred to as the “Company”), and                      (the “Executive”).

WHEREAS, the Company considers the maintenance of a sound and vital senior management to be essential to protecting and enhancing the interests of the Parent Company and its subsidiaries, including the Employer Company, hereinafter collectively referred to as the “Group”;

WHEREAS, the Company recognizes that, as is the case with many publicly owned corporations, the possibility of a change in control of the Group may arise and that such possibility, and the uncertainty and questions which it may raise among senior management, may result in the departure or distraction of senior management personnel to the detriment of the Group; and

WHEREAS, accordingly the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s senior management to their assigned duties and long-range responsibilities without distraction in circumstances arising from the possibility of a change in control of the Group; and

WHEREAS, the Company believes it important and in the best interests of the Group, should the Group face the possibility of a change in control, that the senior management of the Company be able to assess and advise the Board of Directors of the Company whether such a proposed change in control would be in the best interests of the Group and to take such other action regarding such a proposal as the Board of Directors might determine to be appropriate, without senior management being influenced by the uncertainties of their own employment situations; and

WHEREAS, in order to induce the Executive to remain in the employ of the Company in the event of any actual or threatened change in control of the Group, the Company has determined to set forth the severance benefits which the Company will provide to the Executive under the circumstances set forth below;

NOW THEREFORE, in consideration of the foregoing recitals, and the mutual covenants and agreements contained in this Agreement and for other good and valuable consideration, the parties hereto agree as follows:

 

-1-


1. Definitions. Terms not otherwise defined in this Agreement shall have the meanings set forth in this Section 1.

(a) Base Year. The “Base Year” shall be the twelve (12) month period immediately preceding a Change in Control.

(b) Cash Compensation. “Cash Compensation” shall mean the sum of (i) the Executive’s annual base salary and (ii) the cash bonus paid to the Executive under the Horace Mann Incentive Compensation Program (or similar program that may replace the Incentive Compensation Program) for whichever of the five (5) fiscal years immediately preceding the year in which the Date of Termination occurs that will result in the highest amount of Cash Compensation.

(c) Cause. For purposes of this Agreement, “Cause” shall mean serious, willful misconduct by the Executive such as, for example, the commission by the Executive of a felony arising from specific conduct of the Executive which reasonably relates to his qualification or ability (personal or professional) to perform his duties to the Company or its Subsidiaries or a perpetration by the Executive of a common law fraud against the Company or its Subsidiaries. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Company’s Board of Directors at a meeting of the Board called and held for the purpose of considering his termination for Cause (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board). The resolution of the Board shall contain a finding that in the good faith opinion of the Board the Executive was guilty of the conduct set forth above and specifying the particulars thereof in detail. Notwithstanding the foregoing, the Executive shall have the right to contest his termination for Cause.

(d) Change in Control. A “Change in Control” shall be deemed to have occurred if (i) there shall be consummated (1) any consolidation or merger of HMEC in which HMEC is not the continuing or surviving corporation, or pursuant to which shares of HMEC’s Common Stock would be converted into cash, securities or other property, other than a merger of HMEC in which no HMEC shareholder’s ownership percentage in the surviving corporation immediately after the merger is less than such shareholder’s ownership percentage in HMEC immediately prior to such merger by ten percent (10%) or more, or (2) 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 HMEC; (ii) the shareholders of HMEC approve any plan or proposal for the liquidation or dissolution of HMEC which is a part of a sale of assets, merger, or reorganization of HMEC or other similar transaction; (iii) any “Person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is or becomes, directly or indirectly, the “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of securities of HMEC that represent 51% or more of the combined voting power of HMEC’s then outstanding securities; or (iv) a majority of the members of the Company’s Board of Directors are persons who are then serving on the Board of

 

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Directors without having been elected by the Board of Directors or having been nominated by the Company for election of its shareholders.

(e) Constructive Termination. “Constructive Termination” shall mean the following events:

(1) any material diminution in the Executive’s duties or responsibilities to the Group;

(2) any required relocation of the Executive from his present work site to another site more than fifty (50) miles from the present work site;

(3) a diminution in the Executive’s annual base salary of more than ten percent (10%) below the Executive’s salary for the Base Year; or

(4) a diminution in the Executive’s annual cash bonus under the Horace Mann Incentive Compensation Program (or similar program that may replace the Incentive Compensation Program) of more than fifty percent (50%) below that paid to the Executive for the Base Year, except in the event that such diminution is comparable to the diminution in the cash bonus paid to other employees of the same business segment as the Executive due to the performance of that business segment.

Notwithstanding the preceding, a Constructive Termination shall not be deemed to have occurred until and unless the Executive provides written notice to the Company within ninety (90) days after the initial existence of one of the above conditions and the Company is provided thirty (30) days to remedy the condition and fails to do so.

(f) Date of Termination. “Date of Termination” shall mean the effective date of the Notice of Termination which results (on such effective date) in the Executive’s separation from service (as that term is defined in Section 409A of the Internal Revenue Code of 1986, as amended, and guidance issued thereunder).

2. Termination Following Change in Control.

(a) Termination of Employment. If a Change in Control shall have occurred while the Executive is still an employee of the Company, the Executive shall be entitled to the compensation provided in Section 3 if, within 3 years after the Change in Control, the Executive’s employment is terminated by (i) the Company without Cause or (ii) the Executive due to Constructive Termination.

(b) Notice of Termination. Any purported termination of the Executive’s employment by the Company or the Executive shall be communicated by a Notice of Termination to the other party in accordance with Section 10 hereof. The Notice of Termination shall set forth in reasonable detail the reasons for termination and, if termination is for Cause, the facts and circumstances claimed to provide a basis for

 

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termination of the Executive’s employment and, in the case of a Constructive Termination, the information specified in Section 1(e).

3. Severance Compensation upon Termination of Employment. If the Executive becomes entitled to compensation pursuant to Section 2(a), then the Company shall:

(i) pay to the Executive as severance pay in a lump sum, in cash, on the fifth day following the Date of Termination, an amount equal to          times the Executive’s Cash Compensation;

(ii) arrange to provide to the Executive for          years (or such shorter period as the Executive may elect) disability, life, accident and health insurance substantially similar to those insurance benefits, if any, which the Executive was receiving immediately prior to the Notice of Termination (including coverage for dependents at the same per person cost as the Executive was then paying); and

(iii) fully vest the Executive in the Executive’s benefit under any nonqualified supplemental pension plan sponsored by the Company.

4. Indemnification for Excise Tax.

(a) Indemnification. In addition to the amounts specified in Section 3, the Company agrees that it will pay or cause to be paid to the Executive, at the time specified in paragraph (b) below, an amount in cash (the “Additional Amount”) as determined by the following formula:

Additional Amount = Excise Taxes + Attributable Taxes

Excise Taxes” shall mean all federal and state excise taxes, if any, payable under Section 4999 of the Internal Revenue Code (the “Code”) and any state counterparts, with respect to the benefits received by the Executive pursuant to Section 3 of this Agreement. “Attributable Taxes” shall mean all taxes, including any federal and state income taxes and any federal and state excise taxes under Section 4999 of the Code and its state counterparts, that become payable by the Executive as a result of the receipt of the Additional Amount.

(b) Preparation of Tax Return; Notice to the Company. The Company, at its expense, agrees to supply the Executive with advice from a tax practitioner as to whether the Executive must reflect an excise tax under Section 4999 of the Code and any state counterparts on the filing of any income tax return of the Executive relating to the period or periods in which the Executive received payments or benefits under this Agreement. If such tax practitioner advises that such excise tax must be reflected on such tax return, the Executive agrees to so reflect and, unless such tax was previously withheld from payments to the Executive, pay such tax and the Company will reimburse the Executive in accordance with Section 4(a) above as soon as practicable after receipt of proof of payment (or, in the case of tax that was previously withheld, proof that such return was filed as required) from the Executive. If such tax practitioner advises that such excise tax

 

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need not be reflected on such tax return, the Executive agrees to prepare and file his tax return in accordance with such advice. The Executive shall notify the Company in writing no less than thirty (30) days prior to the time the Executive is required to file each tax return, and shall promptly provide to the tax practitioner selected by the Company such information as it may request in connection with establishing the existence of an obligation to withhold tax pursuant to Section 16 hereof or an obligation pursuant to this Section 4. If the Executive provides such notice and information and prepares the relevant tax return as provided in this paragraph (b), the Company shall indemnify the Executive in accordance with Section 4(a) of this Agreement for any subsequent assessment of Excise Taxes or Attributable Taxes by the IRS or any state taxing authority, and any interest, penalties, and additions to tax directly relating to such Excise Taxes. If the Executive fails to comply fully with the requirements of this paragraph (b), then the Company’s obligations will not include indemnification or any interest, penalties or additions to tax. In the event the Executive’s liability for Excise Taxes is determined upon audit by the IRS or the relevant state taxing authority, the Company shall pay to the Executive the amount determined in accordance with paragraph (a) and this paragraph (b) at such time as the Company determines that it no longer desires to contest the Executive’s liability pursuant to paragraph (c); provided, however, that in all events the Company will indemnify the Executive for interest, penalties and additions to tax, directly relating to Excise Taxes, which accrue after such time the Company receives notice of a proposed assessment of Excise Taxes resulting from an audit of the Executive’s tax return. In no event will reimbursement under this Section 4(b) occur later than the end of the Executive’s taxable year following the taxable year in which he or she remits the related taxes.

(c) Duty to Cooperate. The Executive agrees to notify the Company promptly in the event of any audit by the IRS or any state taxing authority in which the IRS or the state taxing authority asserts that any Excise Tax should be assessed against the Executive and to cooperate with the Company in contesting (at the Company’s expense) any such proposed assessment. The Executive agrees not to settle or compromise any such assessment without the Company’s consent. The Executive will promptly provide to the Company all information requested by the Company in connection with its contest of a proposed final assessment of Excise Taxes.

5. Mitigation of Damages; Effect of Plan on Other Contractual Rights.

(a) The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as a result of employment by another employer or by retirement benefits received after the Date of Termination, or otherwise.

(b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive’s existing rights, or rights that would accrue solely as a result of the passage of time, under any benefit plan, employment agreement or other contract, plan or arrangement.

 

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6. Term. This Agreement shall terminate three (3) years after the date of a Change in Control. Termination or amendment of this Agreement shall not affect any obligation of the Company under this Agreement which has accrued and is unpaid as of the effective date of such termination or amendment.

7. At-Will Employment. Nothing in this Agreement shall confer upon the Executive any right to continue in the employ of the Company prior to a Change in Control of the Company or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to discharge the Executive at any time prior to the date of a Change in Control of the Company for any reason whatsoever, with or without cause.

8. Successors.

(a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, expressly, absolutely and unconditionally to assume and agree in writing to perform this Agreement in the same mariner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Failure of the Company to obtain such written agreement of any such successor shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if such succession had not occurred, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as defined above and any successor or assign to its business and/or assets which executes and delivers the agreement provided for in this Section 8 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devises and legatees. If the Executive should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee or other designee or, if there be no such designee, to the Executive’s estate.

9. Governing Law; Arbitration; Attorneys’ Fees.

(a) This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Delaware, without giving effect to its conflict or choice of laws provisions.

(b) If any controversies, disputes or claims arise out of, in connection with, or in relation to, the interpretation, performance or breach of this Agreement, all such controversies, disputes or claims shall be settled, at the request of any party hereto, by arbitration conducted in Springfield, Illinois, in accordance with the then existing rules of the American Arbitration Association. The decision rendered by the arbitrators as to all

 

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issues of law and fact shall be final and binding without right of appeal on all parties hereto who receive notice of such arbitration and the opportunity to participate therein. Judgment upon any award rendered in such arbitration may be entered by an state or federal court having jurisdiction over the matter.

(c) Should any party hereto institute any action or proceeding to enforce any provision of this Agreement, the prevailing party shall be entitled to receive from the losing party reasonable attorneys’ fees and costs incurred in such action or proceeding, whether or not such action or proceeding is prosecuted to judgment.

10. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or two days after deposit in the mail by United States registered mail, return receipt requested, postage prepaid, as follows: if to the Company, to Horace Mann Service Corporation, 1 Horace Mann Plaza, Springfield, Illinois 62715, attention: Chief Executive Officer (except if such notice is sent by the Chief Executive Officer, in which ease such notice shall be sent to the attention of the Chairman of the Board of Directors), and if to the Executive at the address specified at the end of this Agreement. Notice may also be given at such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

11. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

12. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

13. Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original but both of which together will constitute one and the same instrument.

14. Gender. In this Agreement (unless the content requires otherwise), use of any masculine term shall include the feminine.

15. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated hereby and supersedes all previous oral and written and all contemporaneous oral negotiations, commitments and understandings.

 

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16. Withholding. The Company shall withhold benefits otherwise due or payable hereunder in order to comply with any federal, state, local or other income or other tax laws requiring withholding with respect to benefits provided to the Executive pursuant to this Agreement.

17. Optional Amendment. Notwithstanding anything contained in this Agreement, upon the written request of the Executive, the terms of this Agreement may be modified by the Company to the extent necessary to avoid the application of Section 409A of the Code and/or to allow the Agreement to qualify for any regulatory or other administrative exception to the application of Section 409A of the Code. Consistent with the parties’ intent, the Agreement shall be interpreted at all times in a manner consistent with Code Section 409A to avoid the imposition of excise taxes thereunder.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

HORACE MANN EDUCATORS CORPORATION

By:

 

 

Name:

 

Joseph J. Melone

Title:

 

Chairman of the Board

By:

 

 

Name:

 

Louis G. Lower II

Title:

 

President & Chief Executive Officer

EXECUTIVE:

By:

 

 

 

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EX-10.13 11 dex1013.htm FORM OF CHANGE IN CONTROL AGREEMENT BETWEEN HMEC AND CERTAIN OFFICERS

Exhibit 10.13

Form Of

CHANGE IN CONTROL AGREEMENT

This CHANGE IN CONTROL AGREEMENT (this “Agreement”) dated as of Date, is entered into by and among Horace Mann Educators Corporation, a Delaware corporation (“HMEC” or the “Parent Company”), Horace Mann Service Corporation, an Illinois corporation (the “Employer Company” and, together with HMEC, the “Company”), and Name (the “Executive”).

WHEREAS, the Company considers the maintenance of a sound and vital senior management to be essential to protecting and enhancing the interests of the Parent Company and its subsidiaries, including the Employer Company, hereinafter collectively referred to as the “Group;”

WHEREAS, the Company recognizes that, as is the case with many publicly owned corporations, the possibility of a change in control of the Group may arise and that such possibility, and the uncertainty and questions that it may raise among senior management, may result in the departure or distraction of senior management personnel to the detriment of the Group;

WHEREAS, accordingly the Company has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s senior management to their assigned duties and long-range responsibilities without distraction in circumstances arising from the possibility of a change in control of the Group;

WHEREAS, the Company believes it important and in the best interests of the Group, should the Group face the possibility of a change in control, that the senior management of the Company be able to assess and advise the Board of Directors of the Company (the “Board”) whether such a proposed change in control would be in the best interests of the Group and to take such other action regarding such a proposal as the Board might determine to be appropriate, without senior management being influenced by the uncertainties of their own employment situations;

WHEREAS, the Executive is an employee of the Company; and

WHEREAS, in order to induce the Executive to remain in the employ of the Company in the event of any actual or threatened change in control of the Group, the Company has determined to set forth the severance benefits that the Company will provide to the Executive under the circumstances set forth below.

NOW THEREFORE, in consideration of the foregoing recitals, and the mutual covenants and agreements contained in this Agreement and for other good and valuable consideration, the parties hereto agree as follows:

1. Definitions. Terms not otherwise defined in this Agreement shall have the meanings set forth in this Section 1.

(a) Base Year. The “Base Year” shall be the twelve (12) month period immediately

 

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preceding a Change in Control.

(b) Cash Compensation. “Cash Compensation” shall mean the sum of (i) the Executive’s annual base salary for the year in which the Date of Termination occurs and (ii) an amount equal to the average of the annual cash bonus paid to the Executive under the Horace Mann Incentive Compensation Program (or such similar program as may replace the Incentive Compensation Program) in the three (3) fiscal years (or such fewer year) as the Executive may have been employed by the Company immediately preceding the year in which the Date of Termination occurs.

(c) Cause. “Cause” shall mean serious, willful misconduct by the Executive such as, for example, the commission by the Executive of a Felony arising from specific conduct of the Executive that reasonably relates to his or her qualification or ability (personal or professional) to perform his or her duties to the Group or a perpetration by the Executive of a common law Fraud against the Group. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting of the Board called and held for the purpose of considering his or her termination for Cause (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board). The resolution of the Board shall contain a finding that in the good faith opinion of the Board the Executive was guilty of conduct constitutes “Cause” as defined above and specifying the particulars thereof in detail. Notwithstanding the foregoing, the Executive shall have the right to contest his or her termination for Cause.

(d) Change in Control. A “Change in Control” shall mean the first to occur of any of the following events:

(i) the consummation of any merger, consolidation or reorganization or sale or other disposition of all or substantially all of the assets of HMEC (a “Business Combination”), in each case, unless, immediately following such Business Combination, all or substantially all of the individuals and entities that were the beneficial owners of outstanding voting securities of HMEC immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the company resulting from such Business Combination (including, without limitation, a company that, as a result of such transaction, owns HMEC or all or substantially all of HMEC’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding voting securities of HMEC;

(ii) the approval by the shareholders of HMEC of any plan or proposal for the complete liquidation or dissolution of HMEC;

(iii) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), excluding for this purpose (x) HMEC or any subsidiary of HMEC, and (y) any employee benefit plan of HMEC or any subsidiary of HMEC, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan that acquires beneficial ownership of voting securities of HMEC, is or becomes, directly or indirectly,

 

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the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), of securities of HMEC that represent more than 50% of the combined voting power of HMEC’s then outstanding securities; provided, however, that no Change in Control shall be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Company; or

(iv) the persons who constitute the Board as of the date hereof (the “Incumbent Directors”) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority thereof; provided, however, that any person becoming a member of the Board subsequent to the date hereof shall be considered an Incumbent Director if such person’s election or nomination for election was approved by a vote of at least 50% of the members of the Board who were Incumbent Directors at the date of such election giving effect to the provisions of this clause; provided, further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director.

(e) Constructive Termination. “Constructive Termination” shall mean any of the following events:

(i) any material diminution in the Executive’s duties or responsibilities to the Group;

(ii) any required relocation of the Executive from his or her present work site to another site more than fifty (50) miles from the present work site;

(iii) a diminution in the Executive’s annual base salary of more than ten percent (10%) below the Executive’s salary for the Base Year; or

(iv) a material diminution in the Executive’s potential annual cash bonus opportunity under the Horace Mann Incentive Compensation Program (or such similar program as may replace the Incentive Compensation Program).

Notwithstanding the preceding, a Constructive Termination shall not be deemed to have occurred until and unless the Executive provides written notice to the Company within ninety (90) days after the initial existence of one of the above conditions and the Company is provided thirty (30) days to remedy the condition and fails to do so.

(f) Date of Termination. “Date of Termination” shall mean the effective date of the Notice of Termination which results (on such effective date) in the Executive’s separation from service (as that term is defined in Section 409A of the Internal Revenue Code of 1986, as amended, and guidance issued hereunder).

2. Termination Following Change in Control.

(a) Termination of Employment. If a Change in Control shall have occurred while the Executive is still an employee of the Company, the Executive shall be entitled to the compensation provided in Section 3 if, within two (2) years after the Change in Control, the

 

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Executive’s employment is terminated by (i) the Company without Cause or (ii) the Executive due to Constructive Termination.

(b) Notice of Termination. Any purported termination of the Executive’s employment by the Company or the Executive shall be communicated by a Notice of Termination to the other party in accordance with Section 10. The Notice of Termination shall set forth in reasonable detail the reasons for termination and, if termination is for Cause, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment and, in the case of a Constructive Termination, the information specified in Section 1(f).

3. Severance Compensation upon Termination of Employment. If the Executive becomes entitled to compensation pursuant to Section 2(a), then the Company shall:

(a) pay to the Executive as severance pay in a lump sum, in cash, on the fifth day following the Date of Termination, an amount equal to one (2.0) times the Executive’s Cash Compensation;

(b) to the extent permitted under the Company’s group term life insurance policy, pay for a period of 18 months after the Date of Termination (or such shorter period provided in the policy) the costs of converted term life insurance continued by the Executive at the level substantially similar to those insurance benefits, if any, that the Executive was receiving immediately prior to the Date of Termination (including the coverage for the Executive’s dependents);

(c) pay for 18 months after the Date of Termination any premiums for group medical or dental coverage for the Executive and/or the Executive’s eligible dependents, provided the Executive timely elects and maintains such coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and satisfies all other eligibility requirements under COBRA; and

(d) fully vest the Executive in the Executive’s benefit in the Horace Mann Nonqualified Supplemental Money Purchase Pension Plan.

Notwithstanding anything in the Horace Mann Service Corporation Severance Pay Plan to the contrary, amounts payable under Section 3(a) or (b) above shall be reduced by the amount of any lump sum payment, or the aggregate of any installment payment, payable under such Plan.

4. Indemnification for Excise Tax.

(a) Indemnification. In addition to the amounts specified in Section 3, the Company agrees that it will pay or cause to be paid to the Executive, at the time specified in Section 4(b), an amount in cash (the “Additional Amount”) as determined by the following formula:

Additional Amount = Excise Taxes + Attributable Taxes

Excise Taxes” shall mean all federal and state excise taxes, if any, payable under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), and any state counterparts, with respect to the benefits received by the Executive pursuant to Section 3.

 

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Attributable Taxes” shall mean all taxes, including any federal and state income taxes and any federal and state excise taxes under Section 4999 of the Code and its state counterparts, that become payable by the Executive as a result of the receipt of the Additional Amount.

(b) Preparation of Tax Return; Notice to the Company. The Company, at its expense, agrees to supply the Executive with advice from a tax practitioner as to whether the Executive must reflect an excise tax under Section 4999 of the Code and any state counterparts on the filing of any income tax return of the Executive relating to the period or periods in which the Executive received payments or benefits under this Agreement. If such tax practitioner advises that such excise tax must be reflected on such tax return, the Executive agrees to so reflect and, unless such tax was previously withheld from payments to the Executive, pay such tax and the Company will reimburse the Executive in accordance with Section 4(a) above as soon as practicable after receipt of proof of payment (or, in the case of tax that was previously withheld, proof that such return was filed as required) from the Executive. If such tax practitioner advises that such excise tax need not be reflected on such tax return, the Executive agrees to prepare and file his or her tax return in accordance with such advice. The Executive shall notify the Company in writing no less than thirty (30) days prior to the time the Executive is required to file each tax return, and shall promptly provide to the tax practitioner selected by the Company such information as it may request in connection with establishing the existence of an obligation to withhold tax pursuant to Section 16 or an obligation pursuant to this Section 4. If the Executive provides such notice and information and prepares the relevant tax return as provided in this Section 4(b), the Company shall indemnify the Executive in accordance with Section 4(a) for any subsequent assessment of Excise Taxes or Attributable Taxes by the Internal Revenue Service (“IRS”) or any state taxing authority, and any interest, penalties, and additions to tax directly relating to such Excise Taxes. If the Executive fails to comply fully with the requirements of this Section 4(b), then the Company’s obligations will not include indemnification or any interest, penalties or additions to tax. In the event the Executive’s liability for Excise Taxes is determined upon audit by the IRS or the relevant state taxing authority, the Company shall pay to the Executive the amounts determined in accordance with Section 4(a) and this Section 4(b) at such time as the Company determines that it no longer desires to contest the Executive’s liability pursuant to Section 4(c); provided, however, that in all events the Company will indemnify the Executive for interest, penalties and additions to tax, directly relating Excise Taxes, that accrue after such time the Company receives notice of a proposed assessment of Excise Taxes resulting from an audit of the Executive’s tax return. In no event will reimbursement under this Section 4(b) occur later than the end of the Executive’s taxable year following the taxable year in which he or she remits the related taxes.

(c) Duty to Cooperate. The Executive agrees to notify the Company promptly in the event of any audit by the IRS or any state taxing authority in which the IRS or the state taxing authority asserts that any Excise Tax should be assessed against the Executive and to cooperate with the Company in contesting (at the Company’s expense) any such proposed assessment. The Executive agrees not to settle or compromise any such assessment without the Company’s consent. The Executive will promptly provide to the Company all information requested by the Company in connection with its contest of a proposed final assessment of Excise Taxes.

5. Mitigation of Damages; Effect of Plan on Other Contractual Rights.

(a) The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall

 

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the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as a result of employment by another employer or by retirement benefits received after the Date of Termination, or otherwise.

(b) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive’s existing rights, or rights that would accrue solely as a result of the passage of time, under any benefit plan, employment agreement or other contract, plan or arrangement.

6. Term. The term of this Agreement (the “Term”) shall commence on the date hereof and shall terminate upon the third anniversary of the date hereof; provided, however, that unless previously terminated in accordance herewith, the Term shall be extended for additional three year periods unless the Company gives notice to the Executive of its intention to have this Agreement expire no less than 90 days prior to the end of the then current Term. Notwithstanding the foregoing, if a Change in Control shall have occurred at anytime during the Term, then the Term shall continue for two (2) years after the date of occurrence of such Change in Control and shall terminate immediately thereafter. A termination or amendment of this Agreement (other than an amendment pursuant to Section 16) shall not affect any obligation of the Company under this Agreement that has accrued and is unpaid as of the effective date of such termination or amendment.

7. At-Will Employment. Nothing in this Agreement shall confer upon the Executive any right to continue in the employ of the Company prior to or after a Change in Control of the Company or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to discharge the Executive at any time prior to or after a Change in Control of the Company for any reason whatsoever, with or without Cause.

8. Successors.

(a) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, expressly, absolutely and unconditionally to assume and agree in writing to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Failure of the Company to obtain such written agreement of any such successor shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if such succession had not occurred, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as defined above and any successor or assign to its business and/or assets that executes and delivers the agreement provided for in this Section 8 or that otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devises and legatees. If the Executive should die while any amounts are still payable to him or her hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee or other

 

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designee or, if there be no such designee, to the Executive’s estate.

9. Governing Law; Arbitration; Attorneys’ Fees.

(a) This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Delaware, without giving effect to its conflict or choice of laws provisions.

(b) If any controversies, disputes or claims arise out of, in connection with, or in relation to, the interpretation, performance or breach of this Agreement, all such controversies, disputes or claims shall be settled, at the request of any party hereto, by arbitration conducted in Springfield, Illinois, in accordance with the then existing rules of the American Arbitration Association. The decision rendered by the arbitrators as to all issues of law and fact shall be final and binding without right of appeal on all parties hereto who receive notice of such arbitration and the opportunity to participate therein. Judgment upon any award rendered in such arbitration maybe entered by any state or federal court having jurisdiction over the matter.

(c) Should any party hereto institute any action or proceeding to enforce any provision of this Agreement, the prevailing party shall be entitled to receive from the losing party reasonable attorneys’ fees and costs incurred in such action or proceeding, whether or not such action or proceeding is prosecuted to judgment.

10. Notice. Notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or two days after deposit in the mail by United States registered mail, return receipt requested, postage prepaid, as follows:

if to the Company, to Horace Mann Service Corporation, 1 Horace Mann Plaza, Springfield, Illinois 62715, attention: Chief Executive Officer (except if such notice is sent by the Chief Executive Officer, in which case such notice shall be sent to the attention of the Chairman of the Board of Directors), and if to the Executive at the address specified at the end of this Agreement. Notice may also be given at such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

11. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at anytime of any breach by the other party hereto of, or Compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement.

12. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

13. Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the transactions contemplated hereby and supersedes all previous oral and written

 

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and all contemporaneous oral negotiations, commitments and understandings.

14. Withholding. The Company shall withhold benefits otherwise due or payable hereunder in order to comply with any federal, state, local or other income or other tax laws requiring withholding with respect to benefits provided to the Executive pursuant to this Agreement.

15. Optional Amendment. Notwithstanding anything contained in this Agreement, upon the written request of the Executive, the terms of this Agreement may be modified by the Company to the extent necessary to avoid the application of Section 409A of the Code and/or to allow the Agreement to qualify for any regulatory or other administrative exception to the application of Section 409A of the Code. Consistent with the parties’ intent, the Agreement shall be interpreted at all times in a manner consistent with Code Section 409A to avoid the imposition of excise taxes thereunder.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

HORACE MANN EDUCATORS CORPORATION

By:

 

 

Name:

 

Joseph J. Melone

Title:

 

Chairman of the Board

HORACE MANN SERVICE CORPORATION

By:

 

 

Name:

 

Louis G. Lower II

Title:

 

President & Chief Executive Officer

EXECUTIVE:

By:

 

 

 

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