The compensation program for non-employee Directors is shown in the following table:
PROPOSAL NO. 2 - ADVISORY RESOLUTION TO APPROVE NAMED EXECUTIVE
OFFICERS COMPENSATION
The Board is asking Shareholders to approve an advisory resolution to approve the compensation of
the Companys Named Executive Officers (NEOs) as reported in this Proxy Statement. The Compensation Committee has structured our NEOs compensation program as described below under Compensation Discussion and
Analysis.
The Board recommends that Shareholders read the Compensation Discussion and Analysis (CD&A)
included in this Proxy Statement, which describes in more detail how our Executive Compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other
related compensation tables and narrative included within the CD&A, which provide detailed information on the compensation of our NEOs. The Compensation Committee and the Board of Directors believe that the policies and procedures articulated in
the CD&A are effective in achieving our goals.
In accordance with Section 14(a) of the Exchange Act, and as a matter of good
corporate governance, the Board is asking Shareholders to approve the following advisory resolution at the 2014 Annual Meeting:
RESOLVED, that the Shareholders of Horace Mann Educators Corporation (the Company) approve, on an advisory basis, the
compensation of the Companys Named Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Companys
2014 Annual Meeting of Shareholders.
This advisory resolution, commonly referred to as a Say on Pay resolution, is non-binding
on the Board of Directors. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our NEOs compensation program.
The Board has adopted a policy providing for an annual advisory vote to approve NEOs compensation. Unless the Board modifies its policy on
the frequency of holding such advisory votes, the next advisory vote will occur at the Companys 2015 Annual Meeting of Shareholders.
The Board recommends that Shareholders vote FOR the approval of the advisory resolution to approve Named Executive Officers
compensation.
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10
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2014 Proxy Statement Proposals and Company Information
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Compensation Discussion and Analysis
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In this section, we describe the material components of our executive
compensation program for our Named Executive Officers, or NEOs, whose compensation is displayed in the 2013 Summary Compensation Table and the other compensation tables contained in this Proxy Statement. We also provide an overview of
our executive compensation philosophy and we explain how and why the Compensation Committee (the Committee) arrives at specific compensation policies and decisions.
Our 2013 NEOs are our
Chief Executive Officer (CEO), Former Chief Executive Officer, Chief Financial Officer (CFO) and the three other most highly compensated Executive Officers employed at the end of 2013:
Marita Zuraitis,
President and Chief Executive Officer;
Peter H. Heckman, Former President and Chief Executive
Officer;
Dwayne D. Hallman, Executive Vice President and Chief Financial
Officer;
Stephen P. Cardinal, Executive Vice President, Property and Casualty;
Thomas C. Wilkinson, Former Executive Vice President, Property and Casualty; and
Matthew P. Sharpe, Executive Vice President, Annuity and Life.
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Executive Summary
This summary highlights information from this Compensation Discussion and Analysis section and may not contain all the information that is
necessary to gain a full understanding of our policies and decisions. Please read the entire Compensation Discussion and Analysis section and compensation tables for a more complete understanding of our compensation program.
Our Business
We are a personal insurance
and financial services business with approximately $8.8 billion of assets as of December 31, 2013.
Founded by Educators for Educators
®
, we offer our products and services primarily
to K-12 teachers, administrators, and other employees of public schools and their families. We underwrite personal lines of auto, property and life insurance, and retirement annuities in the United States of America.
2013 Business Highlights
The Company
delivered solid underlying financial results across all three segments of its multiline insurance platform in 2013. Full year operating income was $2.32 per diluted share a Company record. Book value per share* increased 9% in 2013 driven by
the solid operating results and positive contributions from investment portfolio performance. In addition, broad-based increases in new business sales and solid policy retentions were achieved during the past year. Total Shareholder Return was
approximately 63% in 2013 and outperformed key insurance indices for the second year in a row.
*
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Excluding the fair value adjustment for investments
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Significant progress was also made on numerous strategic priorities, including the following:
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Increased new sales levels year-over-year in all lines of business
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New auto sales premium increased 5%
New property sales premium increased 7%
Horace Mann agency annuity sales increased 7%
Horace Mann life product sales increased 33%
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Improved auto retention ratio
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Improved profitability in the auto and property books of business
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Increased annuity assets under management by 13%
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Please see Managements Discussion and Analysis of Financial Condition and Results of Operations in
HMECs 2013 Annual Report on Form 10-K for a more detailed description of these financial results.
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2014 Proxy Statement Compensation Discussion and Analysis
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Highlights of Pay Practice and Governance
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Balanced pay mix comprised of Base Salary, Annual Cash Incentives, and Long-term Equity Incentive Awards
Over 65% of the CEOs target compensation and over 55% of all other NEOs target compensation is linked to performance
and service-based
incentives and is at risk
Balanced performance measures designed with a focus on shareholder return and incenting profitable growth while managing risk
Performance incentives tied to multiple overlapping performance periods
Annual Incentive Plan tied to absolute performance measures; Long-term Incentive Plan tied to relative performance measures
Long-term Incentives are entirely equity based
Ø
Service-based stock options with a 4-year vesting period
Ø
Performance-based RSUs vest following a 3-year performance period
Ø
Service-based RSUs with a 5-year vesting period
Stock Ownership Requirements for NEOs (500% of salary for CEO, 350% of salary for other NEOs) and a 12-month post-exercise holding
requirement on stock options
Clawback Policy applicable to both cash and equity awards
Executive Change in Control Plan excludes tax gross-up provisions
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Strong Pay for Performance
We target compensation around the median of the competitive market, with executives earning more or less than median based on the performance of
the Company and value delivered to Shareholders. The overall executive compensation program includes base salary, annual cash incentives, and long-term equity awards. Incentive awards are earned upon the achievement of short-term and long-term
business goals that are reviewed and approved by the Committee at the beginning of each performance period. Performance goals are structured to reward for business growth and profitability, balanced with productivity and risk and capital management.
Long-term Incentive Plan
Our
Long-term Incentive for 2013 is comprised of three vehicles, performance-based RSUs, service-based RSUs and stock options, as described below. The performance-based RSUs provide an effective vehicle for rewarding executives based on a three-year
performance period and have a high value in promoting executive retention. The service-based RSUs and stock options provide strong alignment with Shareholder interests and assist in the retention of key executive talent.
Long-term Incentive Vehicles
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Performance-based RSUs
- Earned over a three-year period, based upon Relative Total Shareholder Return,
Relative Operating Earnings Per Share Growth and Relative Operating Return on Equity. If any shares are earned at the end of the three-year performance period, the executive fully vests in the award
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Service-based RSUs
- Vest 1/3 per year after years 3, 4 and 5
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Stock options
- Granted at fair market value with a 7 year life; options
vest ratably over 4 years
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2013-2015 Performance-based RSU Measures
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Total
Shareholder Return
Relates to the Total Shareholder Return for the three year period measured against a peer group of companies
Operating Return on Equity
Relates to the average annual Operating Income return on
average equity for the three year period measured against a peer group of companies
Operating Earnings per Share Growth
Relates to the total percentage increase or decrease
in Operating Earnings per share for the three year period measured against a peer group of companies
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2014 Proxy Statement Compensation Discussion and Analysis
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Annual Incentive Plan
The Annual Incentive performance measures provide balance between shareholder return (Operating income - 50%) and growth (sales, revenues and
policyholder retention - 50%). Further, these measures were designed to complement the metrics of the Long-term Incentive which focus on long-term shareholder value creation. The performance measures correspond to plan objectives approved by the
Committee. The Annual Incentive is paid solely in cash.
2013 Annual Incentive Performance Measures
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Adjusted Operating Income
- Operating income (GAAP net income after tax,
excluding realized investment gains and losses) adjusted for Property & Casualty (P&C) catastrophe costs different than Plan, Annuity & Life deferred acquisition costs (DAC) unlocking / change in guaranteed
minimum death benefit (GMDB) reserve due to capital gains and losses and market performance different than Plan, and the impact of share repurchases on investment income
Auto Renewal
Ratio
- The percentage of auto policies remaining in force from the previous years policy inforce count
True New Auto Sales Units
- The number of new auto policies sold to first-time auto
customers
Annuity Sales
- The amount of new business from the sales of Horace Mann annuity products, from
Horace Mann and independent agents, as measured by premiums and deposits to be collected over the 12 months following the sale
Life Sales
- The amount of new Horace Mann life insurance products sold during the year, as
measured by premiums and deposits to be collected over the 12 months following the sale
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Committee Oversight
The Committee oversees the compensation program for our NEOs. The compensation program is designed to provide a direct and clear link between
the performance of the Company and executive pay. To assist in the construct of the compensation program design, the assessment of the programs relevance to current market trends and the analysis of the programs effectiveness, the
Committee retained Compensation Advisory Partners LLC (CAP) as independent compensation consultants who report directly to the Committee. CAP attends Committee meetings, including portions of executive sessions, and serves solely at the
pleasure of the Committee.
In addition, the Committee believes its oversight of executive compensation is strongly enhanced by the
on-going education of each Committee member on emerging legislation, regulatory guidelines and industry best practices. This is done through review of topical publications, participation in webcasts, attendance at seminars and conferences on
executive compensation and formal updates by CAP and other external experts during Committee meetings. Committee members provide management and CAP with topics for presentation and discussion prior to each meeting. During the Committee meetings,
Committee members, management and CAP discuss executive compensation, benefits and related issues and their relevancy to the Company, its Shareholders and its executive compensation program. The Committee has an executive session, without management
present, during each of its meetings.
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Ownership & Holding Requirements
The Companys Long-term Incentive Plan has been 100% equity-based since 2009. The equity is comprised of a combination of stock options,
performance-based RSUs and service-based RSUs. Paying these incentives solely in equity-based instruments and requiring executives to meet specific stock ownership requirements further serves to align our executives and Shareholders
interests. As part of its 2013 overall review of the executive compensation program, the Committee determined the existing multiples of base salary stock ownership requirements for the Executive Officers were appropriate and would be continued in
2014. The CEO is required to accumulate and maintain beneficial stock ownership with a book value of at least 500% of base salary and all other NEOs to accumulate and maintain beneficial stock ownership with a book value of at least 350% of base
salary. Currently, our NEOs are required to satisfy stock ownership
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Stock Ownership
Requirements
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CEO
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500% (1)
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All other NEOs
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350% (1)
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(1) Percentage of
base salary
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levels within five years of attaining their position.
Beginning with the March 9, 2011 stock option grants, the NEOs are required to hold shares equivalent to any proceeds from a long-term incentive stock option exercise, net of exercise price and related taxes and the costs of the exercise, for a
minimum of twelve months after the date of exercise.
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2014 Proxy Statement Compensation Discussion and Analysis
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13
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Annual Performance & Pay Review
To further reinforce the tie between Company results and compensation, each executive officers performance is reviewed by the Committee
every 12 months, coinciding with the review of corporate performance results. Each executive officer is reviewed not only on prior year business results but also on the individuals demonstration of leadership skills and progress on specific
strategic initiatives and other key priorities. The Committee also considers any adjustments to base salary, annual incentive opportunity and long-term incentive opportunity at this review.
The Committee recognizes the need to have market-competitive compensation opportunities to attract, retain, and reward high performing
executive talent. CAP reviews our executive compensation and compensation practices relative to the competitive market. Overall, our total target compensation is comparable to the market median, with above-target performance allowing for the
possibility of total compensation greater than market median and below-target performance resulting in total compensation below market median.
Risk
Assessment
Our programs are structured to discourage excessive risk-taking through a balanced use of compensation vehicles and metrics
with an overall goal of delivering sustained long-term shareholder value while aligning our executives interests with those of our Shareholders. To this end, management and CAP conduct, and the Committee reviews, an annual risk analysis of the
compensation plans and incentive metrics. Our programs require that a substantial portion of each executive officers compensation be contingent on delivering performance results that benefit our Shareholders. In addition, a significant portion
of our NEOs compensation is delivered in equity over a multi-year timeframe and each executive is expected to satisfy meaningful stock ownership requirements as well as comply with holding requirements. Furthermore, incentive compensation is
subject to clawbacks. Similarly, we have stock ownership requirements for our non-employee Directors which are described under Board of Directors and Committees - Director Compensation. The Compensation Committee has determined that no
unreasonable risk exists that a compensation policy or incentive plan would have a material adverse impact on the Company.
Succession Planning Process
To further mitigate enterprise risk and ensure the Company does not suffer sustained gaps in leadership, the Committee approves,
oversees and monitors the Companys succession planning process. This process identifies candidates that have the skill sets, background, training, and industry knowledge to assume critical positions on an emergency basis and also for the
long-term executive succession plan. The Companys succession plan is reviewed by the full Board annually.
CEO Transition Agreement
The Board created the Succession Planning Committee in 2011. The Succession Planning Committee was charged with overseeing the process of
selecting Mr. Heckmans successor and engaged an executive search firm to assist with the assessment and selection from a pool of both internal and external candidates.
The Company and Mr. Heckman entered into an agreement in late 2012 to assure Mr. Heckmans continued employment through the end
of 2013, if needed to ensure an orderly transition of duties to his successor. As part of his transition agreement, Mr. Heckman gave up his individual change in control agreement and became a participant in the Companys Executive Change
in Control Plan, which among other changes are discussed later in Potential Payments upon Termination or Change in Control, eliminated his right to an excise tax gross-up on change in control and reduced his change in control multiple
from 3x to 2.5x cash compensation. The Company paid Mr. Heckman $20,000 for transitional services.
Recruitment of New CEO
In April 2013, the Board announced the hiring of Marita Zuraitis as President and Chief Executive Officer-Elect, effective May 13, 2013.
Ms. Zuraitis worked with the Board and former President and CEO, Peter H. Heckman, to achieve an orderly transition to the President and CEO position, which occurred on September 17, 2013.
The Board believes that Ms. Zuraitis is uniquely qualified and brings a set of skills and experiences that are ideally suited to address
the Companys current challenges and position the Company for long-term growth. In making an offer to attract Ms. Zuraitis, the Company recognized the need to provide a one-time special equity award for compensation forfeited in leaving
her prior employment. The Board and Compensation Committee view the one-time cost as a prudent investment for the future as well as consistent with market practices for senior executives in the insurance industry.
Since the offer letter with Ms. Zuraitis provides for equity awards with long-term vesting requirements, the grant date fair values of the
equity awards are not necessarily reflective of actual compensation realized in 2013 or even the ultimate value of the awards. The components of Ms. Zuraitis offer letter are addressed in further detail in the compensation tables and
narratives that follow.
Change in Executive Leadership of Property and Casualty Division
On November 1, 2013, Mr. Cardinal assumed leadership of the Property and Casualty business, to assure an orderly transition as
Executive Vice President, Property and Casualty. Mr. Cardinal succeeded Mr. Wilkinson, who retired, effective December 31, 2013. In his new role, Mr. Cardinal is responsible for Property and Casualty strategy and operations,
including the development of a full suite of products that protect the short-term risks of educator customers throughout their lifetime, as well as moving the organization closer to achieving its financial goals.
Employment Agreements
As of
December 1, 2011, the Company discontinued use of any individual employment agreements with any executive (other than Mr. Heckmans transition agreement). The Company intends to minimize their use in the future, while recognizing that
in isolated situations they may be needed for attraction and retention of key executive talent.
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2014 Proxy Statement Compensation Discussion and Analysis
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Change in Control and Elimination of Prospective Gross-ups
To eliminate the need for individual change in control (CIC) agreements for post-2011 new hires, the Committee approved the adoption
of the Horace Mann Service Corporation Executive Change in Control Plan, effective February 15, 2012. This plan does not contain a tax gross-up provision. The Company does have individual CIC agreements with Mr. Hallman and
Mr. Cardinal, which provide severance pay, including a tax gross-up payment. All other NEOs are participants in the Companys Executive Change in Control Plan, which does not provide tax gross-ups. Before any benefits under the
individual agreements are triggered, both a change in control of the Company and an actual or constructive termination of employment must occur. The Committee has determined that, while it cannot change unilaterally any existing CIC agreement with
current executives, it does not plan to include tax gross-up provisions in any future agreements.
Clawbacks
The Committee further believes that our compensation program should reward performance that supports the Companys culture of integrity
through compliance with applicable laws and regulations and our codes of ethics and conduct. As a further step to support that belief, the Committee has determined that all executive officers are subject to the same standards as the CEO and CFO
regarding cash compensation clawbacks as defined under Section 404 of the Sarbanes-Oxley Act of 2002. In addition, under the HMEC 2010 Comprehensive Executive Compensation Plan (CECP), the Company has the right to recover any cash
or equity award if it is determined that an executives own misconduct contributed materially to the executives receipt of an award. New guidance under the Dodd-Frank Act related to clawbacks is anticipated and the Company will modify the
current clawback provisions, if necessary, to comply with this legislation when guidance is released.
Favorable Say on Pay
Based on the structure of the compensation plans, the absence of excessive perquisites, the demonstrated pay-for-performance practices and the
strength of the Companys compensation processes and practices, the Committee recommended and the Board has approved an annual Say on Pay advisory vote by Shareholders. At our 2013 Annual Meeting of Shareholders, we received
substantial support for the compensation of our NEOs, with 98.4% of the votes cast in favor of the Say on Pay advisory vote on executive compensation. The Compensation Committee and the Board appreciate and value the views of our
Shareholders. In considering the results of this advisory vote, the Compensation Committee was pleased that a significant majority of our Shareholders approved the proposal, showing strong support for the structure of the compensation plans, the
absence of excessive perquisites, the demonstrated pay-for-performance practices and the strength of the Companys compensation processes and practices.
Hedging
NEOs and other Reportable Insiders
are prohibited from engaging in hedging transactions in HMEC common stock.
Pledging
Beginning in 2013, NEOs and other Reportable Insiders have been prohibited from pledging their HMEC common stock shares.
Perquisites and Personal Benefits
The
Company does not offer perquisites and personal benefits that exceed $5,000 in the aggregate to any individual NEO.
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2014 Proxy Statement Compensation Discussion and Analysis
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15
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Executive Compensation Program
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Oversight
The Committee
oversees our executive compensation program. The current members of the Committee are Dr. Futrell, Mr. Hasenmiller, Mr. Shaheen and Mr. Wright. Mr. Wright serves as the Committee Chair. Consistent with the listing standards
of the NYSE, the Committee is composed entirely of independent Directors.
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The Compensation Committee
is composed entirely of
independent Directors.
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The Committee has retained CAP to provide information and advice on the competitive market for executive talent,
evolving market practices in our industry and the general employment market, regulatory and other external developments, and our executive compensation philosophy and incentive program design. The CAP consultants report directly to the Committee,
attend the Committee meetings and portions of executive sessions of the Committee at the Chairs request and serve at the pleasure of the Committee. CAP performs no other services for management or the Committee. CAP works with management to
obtain necessary data and perspectives on the Companys strategic objectives, business environment, corporate culture, performance and other areas. This information is used by CAP to formulate its recommendations related to competitive
compensation performance targets and overall design. CAPs findings and recommendations are reported directly to the Committee. The services provided by CAP during 2013 are described in more detail throughout this analysis. Pursuant to
regulatory requirements, the Committee has assessed CAPs independence and concluded that CAPs work did not raise any conflict of interest. In addition, the Committee has the authority to hire other experts and advisors as it deems
necessary.
Management also supports the Committee by providing analysis and recommendations. When setting levels of executive
compensation, the Committee requests, receives and considers the recommendations of the CEO regarding the performance of her direct reports and other Executive Officers. Members of the management team from Human Resources also attend and contribute
to Committee meetings as relevant to the Committee agenda.
The Committee discusses its fundamental views on compensation and guiding
principles, as well as its expectations of the CEOs performance and annual goals, with the CEO and subsequently proposes the CEOs goals to the Board for approval. The Committee does not include the CEO or other members of management in
its discussions with CAP on the CEOs compensation, nor does the CEO or management participate in the Committees recommendation to the Board on the CEOs compensation. The Committee reviewed the performance and compensation of all
Long-term Incentive Plan (LTI) participants on a common review date concurrent with the annual review of the prior years performance under the incentive plans.
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Guiding
Principles
The Committee has established the following core principles that underlie our
executive
compensation program:
Executive interests should be aligned with Shareholders;
Incentive compensation should be structured to drive long-term value creation and reward
strong performance;
A significant portion of compensation should be at risk based on the Companys
performance; and
Compensation levels should be market competitive.
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Executive interests should be aligned with Shareholders
Our incentive plans facilitate stock ownership and include performance measures that drive long-term sustained shareholder value. The Company
grants equity awards with multi-year performance periods to reward sustained performance and multi-year vesting to encourage retention. We allow deferrals of RSU awards and our executives are also required to satisfy meaningful stock ownership
requirements. In 2013 through the Long-term Incentive Plan, we delivered approximately 41% of Ms. Zuraitiss compensation in equity. With respect to the other NEOs, approximately 38% to 45% of their compensation was delivered in equity.
Incentive compensation should be structured to drive long-term value creation and reward strong performance
Our executive compensation program includes significant cash-based and equity-based incentives intended to drive short-term and long-term value
creation. The Annual Incentive is solely performance-based and paid in cash. The Long-term Incentive Plan delivers 50% of the long-term incentive opportunities in performance-based and 50% in service-based equity awards. The minimum vesting period
for any equity award is three years and the maximum is five years.
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2014 Proxy Statement Compensation Discussion and Analysis
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A significant portion of compensation should be at risk based on the Companys performance
Generally, over 65% of the CEOs target total pay and over 55% of target total pay for all other NEOs (base salary plus target annual
incentive plus target long-term incentive) is at risk, is variable from year to year, and demonstrates a strong link between pay and performance. To further enhance the pay-for-performance linkage, we incorporate performance relative to comparable
companies into our long-term incentive measures.
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Over 65% of the CEOs target total pay is at risk and
over 55% of target total pay for all other NEOs is at risk.
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Compensation levels should be market competitive
The Committee believes a competitive compensation program is critical in attracting and retaining top executives. Consequently, when making
compensation decisions, the Committee considers the compensation opportunities provided to similarly situated executives at comparable companies as well as how compensation is delivered (e.g., short-term vs. long-term and fixed vs. variable).
Assessing Compensation Competitiveness
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The Committee intends to set total direct compensation for the NEOs salary and target annual and long-term incentive opportunities
within a reasonable range of the median of the competitive market, while providing the opportunity for additional compensation if warranted by performance. To determine competitive pay levels, we use comparable survey market data provided by our
independent consultant, CAP,
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and from published survey sources including Mercer LLC, LOMA and Towers Watson. The data from these surveys is scaled to our
size by CAP based on revenues or asset ranges as provided by the various surveys. The NEOs are assessed against comparable functional matches in the insurance industry and the broader general industry, as appropriate.
Every year, CAP provides the Committee with a comparison of
the base salary, annual incentives and long-term incentives of the CEO with those of other chief executive officers based on survey data. Based on the data, CAP makes recommendations for CEO compensation for the Committees consideration. The
Committee then deliberates in executive session to determine its recommendation for approval by the Board of Directors.
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2013 Consultant
Survey Sources
Mercer:
Global Premium Executive Remuneration Database
Mercer:
Insurance Compensation Survey
LOMA: Executive Compensation Survey
Towers Watson: Survey on Top Management Compensation
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For 2013, the CAP analysis demonstrated that the average of 2013 total direct compensation was consistent with
target pay positioning at the median of the market. This is consistent with the Committees compensation philosophy.
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2014 Proxy Statement Compensation Discussion and Analysis
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Compensation Mix
We structure our executive compensation program to deliver the majority of pay through incentives driving both operating results and long-term
value and positioning more than half of each NEOs pay at risk. The targeted compensation mix of total direct compensation for the NEOs at the beginning of 2013 is illustrated below. The mix of 2013 actual compensation varied as a result of
actual incentives earned.
Base Salary
Competitive base salaries are critical to attracting and retaining superior executive talent. The Committee seeks to pay salaries that
approximate median industry salaries for executives of similar companies in like positions. In order to determine competitive positioning, the Committee requests CAP to assess compensation for the CEO and four other NEOs. CAP makes their comparisons
based on industry norms, represented by survey compensation for comparable positions in the insurance industry and general industry, and this information is used as a reference point for the Committee. However, in recruiting new executives, these
guidelines are sometimes exceeded to attract qualified candidates. There may also be instances where an existing executives compensation deviates from the median, either up or down, due to performance, responsibilities, compensation history,
internal equity and/or retention risk with no pre-determined goals assigned to such considerations.
Salaries for Executive Officers are
reviewed every 12 months in connection with the review of financial results for the prior fiscal year. In addition to considering market data, the Committee reviews each executives performance, including the accomplishment of key corporate,
strategic, operational, financial and management goals, and upholding our standards of ethical conduct.
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Name
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2012
Annualized
Salary
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2013
Annualized
Salary
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Percent
of 2013
Increase
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Reason For Increase
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Marita Zuraitis
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NA
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$650,000
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NA
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New hire in 2013
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Peter H. Heckman
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$650,000
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$700,000
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7.69%
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Merit increase based on strong performance
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Dwayne D. Hallman
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$380,004
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$430,008
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13.16%
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Merit increase based on strong performance and to bring base salary closer to the median of the market
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Stephen P. Cardinal
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$403,704
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$412,008
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2.06%
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Merit increase based on strong performance
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Thomas C. Wilkinson
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$327,804
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$338,004
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3.11%
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Merit increase based on strong performance
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Matthew P. Sharpe
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$300,000
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$325,008
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8.34%
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Merit increase based on strong performance and to bring base salary closer to the median of the market
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2014 Proxy Statement Compensation Discussion and Analysis
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Annual Incentive Plan
Our Annual Incentive Plan (AIP) is designed to drive and reward strong performance over a one-year period. The annual incentive is a
key part of our overall compensation structure and is directly linked to the Companys annual business plan. Under the Companys 2010 Comprehensive Executive Compensation Plan (CECP), the Committee establishes Company-wide and
business unit/division performance objectives every March, as well as the related threshold, target and maximum bonus opportunities for each NEO. In setting these objectives and opportunities, the Committee considers, among other things, the
strategic goals of the Company, corporate financial projections and the degree of difficulty in achieving the targets. It is the goal of the Committee to establish measurements and targets that are reasonable, but not easily achieved. As evidence of
this, the AIP has generated awards ranging from approximately 102% to 172% of target over the past 5 years, with an average of approximately 133% for the five-year period. During this period, the Company has consistently maintained strong earnings,
including record operating earnings per share in 2013, and dividend growth that has provided solid total shareholder returns. The variability and average level of the awards earned confirms the Committees practice of establishing reasonable
yet aggressive goals for the Companys AIP. The measures and targets are discussed with the CEO, other NEOs, other members of the Board and CAP before they are set. Each March, the Committee also certifies performance and determines annual
incentive award payouts for the prior year.
Target incentive opportunities for the NEOs are intended to approximate the median of the bonus potential
for similarly situated executives in comparable companies. Maximum incentive opportunities are set at 200% of target. Changes made to these opportunities, if any, generally take effect for the next fiscal year. Based on the 2013 performance of the
Company relative to the Corporate Measures, the Committee approved the resulting award of 139.5% of target for Ms. Zuraitis and the other NEOs. The annual incentives paid to the NEOs are shown in the Non-Equity Incentive Plan Compensation
column of the Summary Compensation Table. For 2013, the target annual incentive opportunities for the NEOs, the actual AIP paid (139.5% of target) along with the actual AIP expressed as a percentage of base salary as of December 31,
2013, were as follows:
|
|
|
|
|
|
|
|
|
Name
|
|
2013 Target
AIP Opportunity
|
|
2013 Actual
AIP
Paid
|
|
2013 Actual AIP Paid
as a Percent of Salary
|
|
|
Marita Zuraitis
|
|
75%
|
|
$500,063
|
|
76.93%
|
|
|
Peter H. Heckman
|
|
90%
|
|
$863,156
|
|
123.31%
|
|
|
Dwayne D. Hallman
|
|
50%
|
|
$281,540
|
|
65.47%
|
|
|
Stephen P. Cardinal
|
|
50%
|
|
$285,928
|
|
69.40%
|
|
|
Thomas C. Wilkinson
|
|
50%
|
|
$233,979
|
|
69.22%
|
|
|
Matthew P. Sharpe
|
|
50%
|
|
$222,332
|
|
68.41%
|
|
|
For 2013, 100% of the CEOs and all other NEOs annual incentive opportunities were tied to
Company-wide performance. For Ms. Zuraitis, the actual AIP paid was adjusted for length of service. The Committee believes that this provides appropriate alignment for an executives compensation as it recognizes that the Company as a
whole must perform well in order to deliver value to our Shareholders.
|
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
|
19
|
Annual Incentive Plan Targets
The Committee finalized targets for the 2013 corporate performance measures in its March 2013 meeting. The targets for the Operating Income and
Insurance Revenues measures were based on a review of market conditions and expectations of other companies in the industry as well as our financial plan for 2013 (Plan). The financial plan was the basis of our 2013 earnings guidance,
which was publicly disclosed in February 2013 in connection with our release of earnings for the year ended December 31, 2012. All measures are defined as absolute (meeting specific established internal goals, i.e., earnings, revenues and
sales). For 2013, the corporate measures (Corporate Measures), bonus targets and results were as follow:
|
|
|
|
|
|
|
|
|
|
|
Annual 2013 Corporate
Measures (1)
|
|
Measurement
Weighting
|
|
Target
|
|
Results
|
|
Actual
Weighted
Results
|
|
Absolute vs.
Relative
|
Adjusted
Operating Income
|
|
50%
|
|
$77.0 million
|
|
$93.9 million
|
|
100.0%
|
|
Absolute
|
Auto Renewal
Ratio
|
|
15%
|
|
85.0 percent
|
|
84.8 percent
|
|
12.0%
|
|
Absolute
|
Insurance
Revenues
|
|
|
|
|
|
|
|
|
|
|
True New Auto
Sales Units
|
|
10%
|
|
49,000
|
|
47,700
|
|
0.0%
|
|
Absolute
|
Total Annuity
Sales
|
|
10%
|
|
$262.5 million
|
|
$279.9 million
|
|
20.0%
|
|
Absolute
|
Horace Mann
Life Sales
|
|
15%
|
|
$6.2 million
|
|
$5.7 million
|
|
7.5%
|
|
Absolute
|
Total
|
|
100%
|
|
|
|
|
|
139.5%
|
|
|
(1)
|
The Corporate Measures, as defined by the AIP, include:
|
|
|
|
Adjusted operating income GAAP net income after tax, excluding realized investment gains and losses, adjusted for P&C catastrophe costs
different than Plan, Annuity & Life DAC unlocking / change in GMDB reserve due to capital gains and losses and market performance different than Plan, and the impact of share repurchases on investment income.
|
|
|
|
Auto Renewal Ratio The percentage of auto policies remaining in force from the previous years policy in-force count.
|
|
|
|
True New Auto Sales Units The number of new auto policies sold to first-time auto customers.
|
|
|
|
Total Annuity Sales The amount of annuity new business sold during the year as measured by premiums and deposits to be collected over the 12
months following the sale of the new contract.
|
|
|
|
Horace Mann Life Sales The amount of new Horace Mann life insurance products sold during the year as measured by premiums to be collected
over the 12 months following the sale.
|
|
|
|
20
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
Long-term Incentive Plan
The Company awards long-term incentives to NEOs and other executives who can have the greatest impact on the Companys long-term success.
Long-term incentives are intended to focus executives on driving operating performance as well as long-term value creation. They are also an effective vehicle for attracting and retaining executive talent. All long-term incentive grants are made
under the Companys 2010 Comprehensive Executive Compensation Plan. As discussed previously, the Companys Long-term Incentive Plan is comprised of three vehicles, performance-based RSUs, service-based RSUs and stock options.
|
(1)
|
Graph represents percent of target performance-based awards earned in the year the long-term incentive measurement period ended. Performance-based
RSUs comprise 45-50% of the total long-term incentive opportunity.
|
In setting targets for performance-based RSUs under
the Long-term Incentive Plan, the Committee considers, among other things, the external competitive and financial markets environment, the strategic goals of the Company, internal financial projections, and the difficulty of meeting those goals and
projections. Over the last 5 years, awards earned under the Long-term Incentive Plan have ranged from 0% to approximately 176% of target, with an annual average of 103.4% of target for the performance periods, as illustrated in the graph above.
The variability and average level of the awards earned confirms the Committees practice of establishing reasonable yet aggressive goals
for the Companys Long-term Incentive Plan.
The intent of the program is to focus executives on shareholder value and key strategic
objectives, while promoting retention and recognizing the market trend to deliver long-term incentives through a mix of equity-based compensation vehicles. Further, in combination with the cash component of the AIP, the compensation program provides
a meaningful incentive without encouraging excessive risk taking. To ensure that our executives interests are aligned with those of our Shareholders, our executives are required to invest and defer earned and vested RSU awards until their
stock ownership requirements are met.
|
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
|
21
|
Long-term Incentive Plan Design and Target Setting
2012-2013 Long-term Incentive Plan Grants and Awards
|
|
|
|
|
|
|
The 2012 awards were 100% equity-based and were comprised of 50% performance-based RSUs, 20% service-based RSUs
and 30% service-based stock options. The performance period for the 2012 awards began January 1, 2012 and ended December 31, 2013. The Committee believes that granting awards entirely in equity-based components appropriately drives
long-term performance and creates alignment with Shareholders interests. The Long-term Incentive Plan measures and performance targets for the performance-based RSUs for the 2012-2013
|
performance period were established at the Committees March 2012 meeting. Measures were weighted to reward performance based on achievement of the 2013
voluntary auto policy
|
|
|
|
Peer
Companies for 2012-2013 Long-term Incentive Relative TSR Measure
|
in-force goal (25%), the 2013 annuity contract deposit target (15%), a two-year operating income objective (30%) and total shareholder return
(TSR) over the two-year period relative to a peer group of companies (30%). It is the Committees belief that all these measures impact shareholder value creation. Measures are defined as absolute (meeting specific established
internal goals, i.e., earnings, revenues
|
|
|
|
State Auto Financial
Corporation
Mercury General Corporation
The Progressive Corporation
The Chubb Corporation
Cincinnati Financial
Corporation
Infinity Property and Casualty
Corporation
|
|
The
Hanover Insurance Group, Inc.
The Allstate Corporation
The
Travelers Companies, Inc.
American Financial Group, Inc.
The
Hartford Financial Services
Group,
Inc.
Kemper Corporation
|
and sales) or relative (specified performance levels measured against a peer group of companies, i.e. TSR). Above target performance for the
2012-2013 period resulted in 175.8% of performance-based RSUs granted in 2012 being earned. The 2012-2013 performance period measures, targets and results were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2012-2013
Performance
Measures (1)
|
|
Measurement
Weighting
|
|
2012-2013
Performance Period
Targets
|
|
2012-2013
Performance Period
Results
|
|
Actual
Weighted
Results
|
|
Absolute
vs. Relative
|
2013 Voluntary Auto
Policies In
Force
|
|
25%
|
|
473,400 policies
|
|
478,170 policies
|
|
43.9%
|
|
Absolute
|
2013 Annuity Contract
Deposits
|
|
15%
|
|
$432.3 million
|
|
$423.0 million
|
|
11.9%
|
|
Absolute
|
Operating Income
(Cumulative 2
years)
|
|
30%
|
|
$160.5 million
|
|
$177.4 million
|
|
60.0%
|
|
Absolute
|
Total Shareholder Return
|
|
30%
|
|
Median of TSR peer group
|
|
100
th
percentile
|
|
60.0%
|
|
Relative
|
Total
|
|
100%
|
|
|
|
|
|
175.8%
|
|
|
|
(1)
|
The Performance Measures, as defined under the Long-term Incentive Plan, include:
|
|
|
|
Voluntary Auto Policies in Force The number of auto policies in force, excluding Commerce, Facilities and Assigned Risk, as of
December 31, 2013.
|
|
|
|
Annuity Contract Deposits Amounts received from customers on deposit-type annuity contracts.
|
|
|
|
Operating Income GAAP net income after tax, excluding realized investment gains and losses, adjusted for P&C catastrophe costs different
than Plan, Annuity & Life DAC unlocking / change in GMDB reserve due to capital gains and losses and market performance different than Plan, and the impact of share repurchases on investment income for the two-year period.
|
|
|
|
Total Shareholder Return The total return on HMEC Common Stock to an investor, which combines share price appreciation/decline and dividends.
|
|
|
|
22
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
2013-2015 Long-term Incentive Plan Grants and Awards
The 2013 awards were 100% equity-based and were comprised of 50% performance-based RSUs, 20% service-based RSUs and 30%
service-based stock options. All measures are defined as relative, specified performance levels measured against a peer group of companies. The peer group of companies is made up of all insurance companies included in the Russell 2000
®
Index, except for brokerage, reinsurance, financial guarantee, and health companies. The performance measures and targets for the performance-based RSUs are as follows:
|
|
|
|
|
|
|
2013-2015
Performance Measures (1)
|
|
Measurement
Weighting
|
|
2013-2015
Performance
Period Targets
|
|
Absolute
vs. Relative
|
Operating Earnings per Share Growth
|
|
30%
|
|
50
th
Percentile of Peer Group
|
|
Relative
|
Operating Return on Equity
|
|
30%
|
|
50
th
Percentile of Peer Group
|
|
Relative
|
Total Shareholder Return
|
|
40%
|
|
50
th
Percentile of Peer Group
|
|
Relative
|
Total
|
|
100%
|
|
|
|
|
|
(1)
|
The Performance Measures, as defined under the Long-term Incentive Plan, include:
|
|
|
|
Operating Earnings per Share Growth Relates to the total percentage increase or decrease in Operating Earnings per share for the three year
period measured against a peer group of companies.
|
|
|
|
Operating Return on Equity Relates to the average annual Operating Income return on average equity for the three year period measured against
a peer group of companies.
|
|
|
|
Total Shareholder Return Relates to the Total Shareholder Return for the three year period measured against a peer group of companies.
|
In setting the dollar value of the 2013 long-term incentive opportunity for each NEO, the Committee targeted an amount
that would achieve the Companys overall objective of positioning total compensation at approximately the market median. The 2013 target grant values for the NEOs for the 2013-2015 performance period were as follows:
|
|
|
|
|
Name
|
|
Long-term Incentive
Target in 2013
|
|
|
Marita Zuraitis
|
|
$800,000
|
|
|
Peter H. Heckman
|
|
$1,200,000
|
|
|
Dwayne D. Hallman
|
|
$500,000
|
|
|
Stephen P. Cardinal
|
|
$500,000
|
|
|
Thomas C. Wilkinson
|
|
$350,000
|
|
|
Matthew P. Sharpe
|
|
$300,000
|
|
|
Performance-Based RSUs
We believe the RSUs are an effective vehicle for
rewarding executives based on performance and have a high value in promoting executive retention. RSUs were granted on March 5, 2013 for the 2013-2015 performance period and will be earned on December 31, 2015 based on achievements
relative to the three-year performance period targets. Participants can earn up to 200% of their target award of RSUs based on performance. Under the 2013-2015 program, any RSUs earned at the end of 2015 are 100% vested on January 1, 2016
following the performance period. Once vested, the RSUs are subject to holding requirements until the executives stock ownership requirements are met. See Stock Ownership and Holding Requirements. From the date of grant, RSUs
accrue dividends at the same rate as dividends paid to our Shareholders, but are only paid on the corresponding shares that are earned. If no shares are earned, the dividends are forfeited. Earned dividends are converted into additional RSUs.
Target RSU opportunities for the 2013-2015 performance period for the NEOs were established as 50% of the total long-term incentive opportunity
in March 2013. On an annualized basis, the awards of RSUs ranged from approximately 46% to 86% of base salary. Maximum opportunities were set at 200% of target and threshold opportunities were set at 50% of target.
The performance measures for the 2013-2015 performance period operating earnings per share growth, operating return on equity, along
with total shareholder return, each relative to a peer group of insurance companies provide strong alignment with Shareholder interests. Each of the performance measures are required to be at or above the 25th percentile of peers to earn an
award. At the 25th percentile, participants can earn 50% of their target award and at the peer group median participants can earn their target award. If the performance measure is at or above the 90th percentile of peers, 200% of the target award
can be earned.
Service-Based RSUs
We believe service-based RSUs, like stock options, provide strong
alignment with Shareholder interests and a long-term focus for our executives and assist in the retention of key executive talent. Service-based RSUs were granted on March 5, 2013 and comprise 20% of the long-term incentive opportunity.
Service-based RSUs vest 33% after the third year, vest an additional 33% after the fourth year and vest the final 34% after the fifth year. Once vested, the RSUs are subject to a holding requirement until the executives stock ownership
requirements are met. See Stock Ownership and Holding Requirements. From the date of the grant, the RSUs accrue dividends at the same rate as dividends paid to our Shareholders. These dividends are converted into additional RSUs and vest
when the underlying RSUs vest.
Stock Options
We believe that stock options provide strong alignment
with Shareholder interests, as participants do not realize any value unless our stock price appreciates. Stock options granted under the Long-term Incentive Plan have an exercise price equal to the closing stock price on the date of grant, vest
ratably over a four-year period and have a seven-year term. In determining the number of stock options granted on March 5, 2013, we divided 30% of the total target long-term incentive opportunity by the Black-Scholes value of an option. For
additional information
|
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
|
23
|
regarding assumptions used for these valuations, see the Companys 2013 Annual Report on Form 10-K Notes to Consolidated Financial Statements Note 1 Summary of
Significant Accounting Policies Stock Based Compensation. Beginning with the options granted March 9, 2011, upon exercise Executive Officers are required to hold shares equivalent to any proceeds (net of exercise price and related
taxes and the costs of the exercise) for a minimum of twelve months.
Timing of Equity Grants
The
Committee has granted long-term incentives only at its regularly scheduled Board meetings. The Company uses the closing stock price on the date of the grant to determine the exercise price for stock options. For regularly scheduled annual awards or
for awards pursuant to the Long-term Incentive Plan, the grant effective date is the approval date of the applicable resolution or as otherwise specified in the duly authorized resolution. For other awards, the grant effective date is the first
business day of the next securities trading window established by the Company following the approval date. Under no circumstances does the grant effective date precede the approval date of a given award.
Stock Ownership and Holding Requirements
Stock ownership requirements were established in 1998. Currently, our NEOs are required to satisfy meaningful stock ownership levels within five
years of attaining their position. Stock ownership may be achieved by direct ownership or beneficial ownership through a spouse or child. The following types of beneficial ownership are considered in determining stock ownership: direct
ownership of HMEC Common Stock, HMEC Common Stock held in the Company 401(k) Plan, HMEC deferred Common Stock equivalent units and RSUs (vested and unvested). Outstanding stock options are not used in determining stock ownership. Beginning with the
2010-2011 Long-term Incentive Plan, NEOs are required to defer receipt of their RSUs until the stock ownership requirements are met. The CEO is required to maintain beneficial stock ownership with a book value of at least 500% of base salary and all
other NEOs are required to maintain beneficial stock ownership with a book value of at least 350% of base salary. As of December 31, 2013, all NEOs (with the exception of Mr. Sharpe who has only been with the Company for two years) have
exceeded their stock ownership requirements. Given the volatility of the stock market in recent years, we have migrated to an approach whereby the value of the shares required to be owned is based on the Companys book value, not stock price,
as we believe book value is closely aligned with stock price but is less volatile. For this purpose, the Companys book value per share is determined by dividing total shareholders equity, less the fair value adjustment for investments,
by the number of outstanding shares of common stock.
Beginning with the March 9, 2011 stock option grants, the NEOs are required to
hold shares equivalent to any proceeds from a long-term incentive stock option exercise, net of exercise price and related taxes and the costs of the exercise, for a minimum of twelve months after the date of exercise.
As of December 31, 2013, as shown below, the CEO and all the NEOs (with the exception of Mr. Sharpe) have exceeded their stock
ownership requirements. However, even though Mr. Sharpe joined the Company in 2012, he has already achieved 269% towards his 350% requirement and is anticipated to meet the remainder of this requirement within the next year.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
2013 Stock
Ownership
|
|
|
2013
Value (1)
|
|
|
|
Marita Zuraitis
|
|
|
153,876
|
|
|
$
|
3,666,865
|
|
|
|
Peter H. Heckman
|
|
|
283,749
|
|
|
$
|
6,761,739
|
|
|
|
Dwayne D. Hallman
|
|
|
111,301
|
|
|
$
|
2,652,303
|
|
|
|
Stephen P. Cardinal
|
|
|
137,113
|
|
|
$
|
3,267,403
|
|
|
|
Thomas C. Wilkinson
|
|
|
118,681
|
|
|
$
|
2,828,168
|
|
|
|
Matthew P. Sharpe
|
|
|
36,730
|
|
|
$
|
875,276
|
|
|
(1)
|
Based on the Companys December 31, 2013 book value per share excluding the fair value adjustment for investments of $23.83.
|
|
|
|
24
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
Retirement Plans
The NEOs participate in our Company-wide tax-qualified retirement plans and a supplemental defined contribution plan designed to provide
benefits that cannot be provided under our tax-qualified defined contribution plan because of various limitations imposed by the Internal Revenue Code. Each of these plans includes a Company contribution and the amounts contributed for each NEO are
included in the Summary Compensation Table. The Companys intent is to provide plans that are customarily offered within our industry to enhance our ability to attract and retain employee talent. No NEO participates in the
Companys defined benefit plan or supplemental defined benefit retirement plan because participation in those plans was limited to individuals hired prior to January 1, 1999.
Deferred Compensation
Prior to 2009, the
Long-term Incentive Plan provided a performance-based cash component. To further encourage ownership of HMECs Common Stock, deferred compensation accounts were established that permitted executives to defer their long-term cash incentives into
deferred Common Stock equivalent units. Deferred Common Stock equivalent units accrue dividends at the same rate as dividends paid to our Shareholders. These dividends are converted into additional deferred Common Stock equivalent units. No other
investment options are provided.
Perquisites and Personal Benefits
The Company does not offer perquisites or executive benefits that exceed $5,000 annually in the aggregate to any individual. The Company does
offer executives membership to a private dining club in Springfield, Illinois and memberships to airline clubs (airport lounge facilities) as well as a corporate credit card membership, all of which are provided to help facilitate meetings outside
the office and business related travel.
Tax Implications
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1,000,000
paid for any fiscal year to the corporations Chief Executive Officer and three other most highly compensated Executive Officers (other than the CFO) as of the end of the fiscal year. However, the statute exempts qualifying performance-based
compensation from the deduction limit if certain requirements are met.
The Annual Incentive Plan and Long-term Incentive Plan are designed
to permit full deductibility and the Committee expects all compensation to be fully deductible. However, the Committee believes that Shareholder interests are best served by not restricting the Committees discretion and flexibility in
developing compensation programs, even though such programs may result in certain non-deductible compensation expenses.
Executive Severance and CIC
Plans
To maintain market competitiveness and allow for the successful recruitment of key executives, the Company adopted the Horace
Mann Service Corporation Executive Severance Plan and the Horace Mann Service Corporation Executive CIC Plan. The Executive Severance Plan provides benefits due to loss of position with or without a Change in Control. Currently, all NEOs participate
in the Executive Severance Plan. The Executive CIC Plan provides for benefits only in the event of a Change-in-Control and only includes those positions that typically would be at risk in the event of a change of control or which are
integral to negotiating a transaction. This plan does not have tax gross-up provisions. Currently, Ms. Zuraitis and Mr. Sharpe participate in the Executive CIC Plan. Those who participate in both the Executive Severance Plan and the
Executive CIC Plan, or have individual CIC agreements, would not receive duplicate benefits.
CEO Executive Transition Agreement
On November 14, 2012, the Company and Mr. Heckman entered into an executive transition agreement to assure Mr. Heckmans
continued employment through December 31, 2013. The executive transition agreement provided that Mr. Heckman continue service as CEO and provide transitional services to his successor and the Company, as needed. In consideration and
compensation for Mr. Heckmans CEO and transitional services, the Company continued the same compensation arrangement in effect prior to the signing of the executive transition agreement, including salary, cash and equity incentive
opportunities. The executive transition agreement included acceleration of vesting of Mr. Heckmans outstanding stock options, service-based equity awards and earned performance-based equity awards.
Effective September 17, 2013, Ms. Zuraitis was appointed to the position of President and Chief Executive Officer, following a
successful four-month transition period. Consistent with the Transition Agreement, Mr. Heckman remained available to the Company on a consultative basis for the remainder of 2013.
Change in Control Agreements
The Company
does have an individual CIC agreement with Mr. Cardinal and a severance agreement with Mr. Hallman. These agreements were entered into at the time of the executives employment or attainment of their current position and cannot be
unilaterally changed. The agreements provide payments, benefits and tax gross-up provisions only if both a change in control of the Company and the executives actual or constructive termination of employment occur. CIC agreement provisions are
described in Potential Payments upon Termination or Change in Control. These agreements are intended to provide a level of security consistent with market practices, mitigate some of the conflicts an executive may be exposed to in a
potential acquisition or merger situation and serve to insure a more stable transition if a corporate transaction were to occur. The Company determined that it will not provide individual CIC agreements for future hires or renew existing individual
CIC agreements which have an expiration date.
|
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
|
25
|
Summary Compensation Table
The following table sets forth information regarding compensation of the Companys Chief Executive Officer, Chief Financial Officer and
three other most highly compensated Executive Officers, the NEOs, during 2013, 2012, and 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Year
|
|
|
Salary
($) (1)
|
|
|
Bonus
($)
(2)
|
|
|
Stock
Awards
($)
(3)
|
|
|
Option
Awards
($)
(4)
|
|
|
Non-Equity
Incentive Plan
Compensation
($) (5)
|
|
|
Change in
Pension Value
And Non-
Qualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Marita Zuraitis
|
|
|
2013
|
|
|
|
413,750
|
|
|
|
2,858,940
|
|
|
|
560,000
|
|
|
|
240,000
|
|
|
|
500,063
|
|
|
|
0
|
|
|
|
192,174
|
|
|
|
4,764,927
|
|
Peter H. Heckman
|
|
|
2013
|
|
|
|
687,500
|
|
|
|
0
|
|
|
|
840,000
|
|
|
|
360,000
|
|
|
|
863,156
|
|
|
|
0
|
|
|
|
44,107
|
|
|
|
2,794,763
|
|
|
|
|
2012
|
|
|
|
637,500
|
|
|
|
0
|
|
|
|
840,000
|
|
|
|
360,000
|
|
|
|
820,367
|
|
|
|
0
|
|
|
|
41,319
|
|
|
|
2,699,186
|
|
|
|
|
2011
|
|
|
|
587,500
|
|
|
|
0
|
|
|
|
715,000
|
|
|
|
385,000
|
|
|
|
420,339
|
|
|
|
0
|
|
|
|
38,395
|
|
|
|
2,146,234
|
|
Dwayne D. Hallman
|
|
|
2013
|
|
|
|
403,642
|
|
|
|
0
|
|
|
|
350,000
|
|
|
|
150,000
|
|
|
|
281,540
|
|
|
|
0
|
|
|
|
29,797
|
|
|
|
1,214,979
|
|
|
|
|
2012
|
|
|
|
365,003
|
|
|
|
0
|
|
|
|
565,000
|
|
|
|
135,000
|
|
|
|
313,136
|
|
|
|
0
|
|
|
|
27,625
|
|
|
|
1,405,764
|
|
|
|
|
2011
|
|
|
|
320,000
|
|
|
|
0
|
|
|
|
227,500
|
|
|
|
122,500
|
|
|
|
163,536
|
|
|
|
0
|
|
|
|
24,645
|
|
|
|
858,181
|
|
Stephen P. Cardinal
|
|
|
2013
|
|
|
|
409,932
|
|
|
|
0
|
|
|
|
350,000
|
|
|
|
150,000
|
|
|
|
285,928
|
|
|
|
0
|
|
|
|
28,472
|
|
|
|
1,224,332
|
|
|
|
|
2012
|
|
|
|
401,715
|
|
|
|
0
|
|
|
|
600,000
|
|
|
|
150,000
|
|
|
|
344,632
|
|
|
|
0
|
|
|
|
28,011
|
|
|
|
1,524,358
|
|
|
|
|
2011
|
|
|
|
393,812
|
|
|
|
40,252
|
|
|
|
325,000
|
|
|
|
175,000
|
|
|
|
201,258
|
|
|
|
0
|
|
|
|
27,891
|
|
|
|
1,163,213
|
|
Thomas C. Wilkinson
|
|
|
2013
|
|
|
|
335,454
|
|
|
|
0
|
|
|
|
68,833
|
|
|
|
19,688
|
|
|
|
233,979
|
|
|
|
0
|
|
|
|
37,047
|
|
|
|
695,001
|
|
|
|
|
2012
|
|
|
|
326,190
|
|
|
|
0
|
|
|
|
495,000
|
|
|
|
105,000
|
|
|
|
223,871
|
|
|
|
0
|
|
|
|
24,735
|
|
|
|
1,174,796
|
|
|
|
|
2011
|
|
|
|
319,012
|
|
|
|
0
|
|
|
|
227,500
|
|
|
|
122,500
|
|
|
|
130,425
|
|
|
|
0
|
|
|
|
24,571
|
|
|
|
824,008
|
|
Matthew P. Sharpe
|
|
|
2013
|
|
|
|
318,756
|
|
|
|
0
|
|
|
|
210,000
|
|
|
|
90,000
|
|
|
|
222,332
|
|
|
|
0
|
|
|
|
25,528
|
|
|
|
866,616
|
|
|
|
|
2012
|
|
|
|
297,884
|
|
|
|
25,000
|
|
|
|
460,000
|
|
|
|
90,000
|
|
|
|
204,444
|
|
|
|
0
|
|
|
|
36,989
|
|
|
|
1,114,317
|
|
(1)
|
Represents each NEOs actual base salary paid for the years ended December 31, 2013, 2012 and 2011, respectively. Ms. Zuraitis was
hired in 2013 and Mr. Sharpe was hired in 2012.
|
(2)
|
For 2013, this represents a sign-on award for Ms. Zuraitis. The Company recognized the need to provide a one-time special equity award for
compensation forfeited in leaving her prior employment. For 2012, this represents a sign-on award for Mr. Sharpe. For 2011, this represents an additional award related to Mr. Cardinals interim leadership of the Life and Annuity
segments.
|
(3)
|
Represents the grant date fair value of service-based and performance-based RSUs granted in each year. Performance-based RSUs are valued based on
the probable performance of Target with the potential of 50% to 200% being earned based on performance results. For 2013, Mr. Wilkinsons performance-based grant was pro-rated for actual time spent in the position. For 2012, this includes
an additional service-based award for Mr. Hallman, Mr. Cardinal, Mr. Wilkinson, and Mr. Sharpe.
|
(4)
|
Represents the grant date fair value of $8.11 per share for stock options granted on March 5, 2013. For 2013, Mr. Wilkinsons stock
option grant was pro-rated for actual time spent in the position. For Ms. Zuraitis, it represents the grant date fair value of $8.93 per share for stock options granted on May 22, 2013.
|
(5)
|
Represents the cash payout for the AIP earned in each year. For Ms. Zuraitis, the payout was adjusted for length of service.
|
Detail of All Other Compensation
The following table sets forth information regarding all other compensation paid to, or earned by, the NEOs during 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Perquisites &
Other Personal
Benefits
($) (1) (2)
|
|
|
Relocation
|
|
|
Company
Contributions to
Defined
Contribution
Plans ($)
|
|
|
Total
($)
|
|
Marita Zuraitis
|
|
|
1,315
|
|
|
|
183,209
|
|
|
|
7,650
|
|
|
|
192,174
|
|
Peter H. Heckman
|
|
|
2,082
|
|
|
|
0
|
|
|
|
42,025
|
|
|
|
44,107
|
|
Dwayne D. Hallman
|
|
|
1,965
|
|
|
|
0
|
|
|
|
27,832
|
|
|
|
29,797
|
|
Stephen P. Cardinal
|
|
|
325
|
|
|
|
0
|
|
|
|
28,147
|
|
|
|
28,472
|
|
Thomas C. Wilkinson
|
|
|
12,625
|
|
|
|
0
|
|
|
|
24,422
|
|
|
|
37,047
|
|
Matthew P. Sharpe
|
|
|
1,940
|
|
|
|
0
|
|
|
|
23,588
|
|
|
|
25,528
|
|
(1)
|
Includes a dining club membership and various airline club memberships, which are provided to help facilitate meetings conducted outside of the
office.
|
(2)
|
For Mr. Wilkinson, the amount also includes payment for his unused 2013 vacation.
|
|
|
|
26
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
Grants of Plan-Based Awards
The following table sets forth information concerning the grant of the 2013 Annual Incentive, the grant of the 2013 Long-term Incentive for the
2013-2015 performance period, and the sign-on RSU grant made to Ms. Zuraitis. Actual payouts under the 2013 AIP are included in the Summary Compensation Table. Payouts for the 2013 Long-term Incentive grant and the determination of
the actual RSUs earned will not occur until after the completion of the 2013-2015 performance period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or Units
(#)
|
|
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#) (4)
|
|
|
Exercise
or Base
Price
of
Option
Awards
($/Sh)
|
|
|
Grant
Date
Fair
Value
of
Stock &
Option
Awards
($) (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
|
Incentive
Plan (1)
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
(2)
|
|
|
|
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
(3)
|
|
|
|
|
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
|
Marita Zuraitis
|
|
|
|
|
|
|
AIP
|
|
|
|
307,500
|
|
|
|
307,500
|
|
|
|
615,000
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
5/22/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
8,815
|
|
|
|
17,629
|
|
|
|
35,258
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$22.69
|
|
|
|
400,002
|
|
|
|
|
5/22/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
7,053
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$22.69
|
|
|
|
160,033
|
|
|
|
|
5/22/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
26,876
|
|
|
|
$22.69
|
|
|
|
240,024
|
|
|
|
|
5/22/2013
|
|
|
|
Service
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
126,000
|
|
|
|
N/A
|
|
|
|
$22.69
|
|
|
|
2,858,940
|
|
Peter H. Heckman
|
|
|
|
|
|
|
AIP
|
|
|
|
309,375
|
|
|
|
618,750
|
|
|
|
1,237,500
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
14,564
|
|
|
|
29,128
|
|
|
|
58,256
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
600,037
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
11,652
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
240,031
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
44,392
|
|
|
|
$20.60
|
|
|
|
359,937
|
|
Dwayne D. Hallman
|
|
|
|
|
|
|
AIP
|
|
|
|
100,911
|
|
|
|
201,821
|
|
|
|
403,642
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
6,068
|
|
|
|
12,136
|
|
|
|
24,272
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
250,002
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
4,857
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
100,054
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
18,496
|
|
|
|
$20.60
|
|
|
|
149,969
|
|
Stephen P. Cardinal
|
|
|
|
|
|
|
AIP
|
|
|
|
102,483
|
|
|
|
204,966
|
|
|
|
409,932
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
6,068
|
|
|
|
12,136
|
|
|
|
24,272
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
250,002
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
4,857
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
100,054
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
18,496
|
|
|
|
$20.60
|
|
|
|
149,969
|
|
Thomas C. Wilkinson
|
|
|
|
|
|
|
AIP
|
|
|
|
83,864
|
|
|
|
167,727
|
|
|
|
335,454
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
4,248
|
|
|
|
8,496
|
|
|
|
16,992
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
175,018
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
3,399
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
70,019
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
12,948
|
|
|
|
$20.60
|
|
|
|
104,984
|
|
Matthew P. Sharpe
|
|
|
|
|
|
|
AIP
|
|
|
|
79,689
|
|
|
|
159,378
|
|
|
|
318,756
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
3,641
|
|
|
|
7,282
|
|
|
|
14,564
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
150,009
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
2,913
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
$20.60
|
|
|
|
60,008
|
|
|
|
|
3/5/2013
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
11,100
|
|
|
|
$20.60
|
|
|
|
90,001
|
|
N/A Not applicable
(1)
|
Service grant represents a sign-on award to Ms. Zuraitis.
|
(2)
|
Represents performance-based 2013 Annual Incentive.
|
(3)
|
Represents performance-based and service-based RSU portions of the 2013 Long-term Incentive grants.
|
(4)
|
Represents the stock option portion of the 2013 Long-term Incentive grant.
|
(5)
|
Totals equate to each NEOs 2013 Long-term Incentive target amount and the service grant described in footnote (1). The fair value of stock
options was determined using the Black-Scholes model.
|
|
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
|
27
|
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information regarding the exercisable and unexercisable stock options, as well as unvested RSUs held by each NEO
at December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Option Awards
|
|
|
|
|
Stock Awards
(RSUs)
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(1)
|
|
|
Option
Exercise
Price
($)
|
|
|
Grant
Date
|
|
|
Option
Expiration
Date
|
|
|
|
|
Number of
Shares or
Units of
Stock
that Have
Not Vested
(#) (2)
|
|
|
Market
Value of
Shares or
Units of
Stock
that Have
Not Vested
($) (3)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units, or
Other
Rights
that
Have
Not Vested
(#) (4)
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units, or
Other
Rights
that Have
Not Vested
($) (3)
|
|
|
|
Marita Zuraitis
|
|
|
0
|
|
|
|
26,876
|
|
|
|
22.69
|
|
|
|
05/22/13
|
|
|
|
05/22/20
|
|
|
|
|
|
135,874
|
|
|
$
|
4,285,466
|
|
|
|
18,003
|
|
|
$
|
567,815
|
|
|
|
Peter H. Heckman
|
|
|
0
|
|
|
|
7,934
|
|
|
|
13.83
|
|
|
|
03/03/10
|
|
|
|
03/03/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,050
|
|
|
|
31,050
|
|
|
|
17.01
|
|
|
|
03/09/11
|
|
|
|
03/09/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,976
|
|
|
|
44,928
|
|
|
|
17.32
|
|
|
|
03/07/12
|
|
|
|
03/07/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
44,392
|
|
|
|
20.60
|
|
|
|
03/05/13
|
|
|
|
03/05/20
|
|
|
|
|
|
72,147
|
|
|
$
|
2,275,516
|
|
|
|
66,817
|
|
|
$
|
2,107,408
|
|
|
|
Dwayne D. Hallman
|
|
|
5,198
|
|
|
|
3,022
|
|
|
|
13.83
|
|
|
|
03/03/10
|
|
|
|
03/03/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,900
|
|
|
|
9,900
|
|
|
|
17.01
|
|
|
|
03/09/11
|
|
|
|
03/09/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,616
|
|
|
|
16,848
|
|
|
|
17.32
|
|
|
|
03/07/12
|
|
|
|
03/07/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
18,496
|
|
|
|
20.60
|
|
|
|
03/05/13
|
|
|
|
03/05/20
|
|
|
|
|
|
39,142
|
|
|
$
|
1,234,539
|
|
|
|
26,307
|
|
|
$
|
829,723
|
|
|
|
Stephen P. Cardinal
|
|
|
0
|
|
|
|
7,556
|
|
|
|
13.83
|
|
|
|
03/03/10
|
|
|
|
03/03/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,100
|
|
|
|
14,100
|
|
|
|
17.01
|
|
|
|
03/09/11
|
|
|
|
03/09/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,240
|
|
|
|
18,720
|
|
|
|
17.32
|
|
|
|
03/07/12
|
|
|
|
03/07/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
18,496
|
|
|
|
20.60
|
|
|
|
03/05/13
|
|
|
|
03/05/20
|
|
|
|
|
|
47,935
|
|
|
$
|
1,511,870
|
|
|
|
27,841
|
|
|
$
|
878,105
|
|
|
|
Thomas C. Wilkinson
|
|
|
0
|
|
|
|
5,289
|
|
|
|
13.83
|
|
|
|
03/03/10
|
|
|
|
03/03/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,900
|
|
|
|
9,900
|
|
|
|
17.01
|
|
|
|
03/09/11
|
|
|
|
03/09/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,368
|
|
|
|
13,104
|
|
|
|
17.32
|
|
|
|
03/07/12
|
|
|
|
03/07/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
12,948
|
|
|
|
20.60
|
|
|
|
03/05/13
|
|
|
|
03/05/20
|
|
|
|
|
|
37,024
|
|
|
$
|
1,167,737
|
|
|
|
19,488
|
|
|
$
|
614,652
|
|
|
|
Matthew P. Sharpe
|
|
|
3,744
|
|
|
|
11,232
|
|
|
|
17.32
|
|
|
|
03/07/12
|
|
|
|
03/07/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
11,100
|
|
|
|
20.60
|
|
|
|
03/05/13
|
|
|
|
03/05/20
|
|
|
|
|
|
20,024
|
|
|
$
|
631,557
|
|
|
|
16,705
|
|
|
$
|
526,876
|
|
(1)
|
Long-term Incentive stock option grants are service-based and all unexercisable options vest on each anniversary of the grant date at a rate of 25%
of the original grant.
|
(2)
|
Represents the unvested service-based RSUs granted in 2009, 2010, 2011, 2012 and 2013 and a portion of the performance-based RSUs granted in 2011
and earned at the end of 2012.
|
(3)
|
Represents the value of the RSUs based on the closing stock price of $31.54 at December 31, 2013.
|
(4)
|
The performance-based RSUs granted in 2012 were not earned until the end of the 2012-2013 performance period. RSUs earned at the end of the
performance period will vest 50% in 2014 and 50% in 2015. The performance-based RSUs granted in 2013 will not be earned until the end of the 2013-2015 performance period. RSUs earned at the end of the performance period will vest 100% in
2016.
|
|
|
|
28
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
Option Exercises and Stock Vested
The following table sets forth information regarding options exercised and stock awards acquired on vesting by the NEOs in 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Stock Awards (RSUs)
|
|
|
|
Name
|
|
Number of Shares
Acquired
on
Exercise
(#) (1)
|
|
|
Value Realized
on Exercise
($) (2)
|
|
|
|
|
Number
of
Shares
Acquired
on Vesting
(#) (3)
|
|
|
Value
Realized
on
Vesting
($) (4)
|
|
|
|
Marita Zuraitis
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Peter H. Heckman
|
|
|
133,774
|
|
|
|
2,246,325
|
|
|
|
|
|
2,725
|
|
|
|
56,279
|
|
|
|
Dwayne D. Hallman
|
|
|
37,500
|
|
|
|
481,184
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Stephen P. Cardinal
|
|
|
277,276
|
|
|
|
5,186,585
|
|
|
|
|
|
11,760
|
|
|
|
239,290
|
|
|
|
Thomas C. Wilkinson
|
|
|
150,133
|
|
|
|
1,516,598
|
|
|
|
|
|
4,627
|
|
|
|
95,309
|
|
|
|
Matthew P. Sharpe
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
0
|
|
|
|
0
|
|
(1)
|
For Mr. Heckman, Mr. Hallman, Mr. Cardinal and Mr. Wilkinson, it represents the number of options exercised.
|
(2)
|
The value realized on exercise is determined by multiplying the number of options exercised by the difference between the stock price at exercise
and the grant date stock price.
|
(3)
|
For Mr. Heckman, it represents the number of shares vested and acquired as part of the 2010-2011 Long-term Incentive Plan. For
Mr. Cardinal and Mr. Wilkinson, it represents the number of shares vested and acquired as part of the 2009-2010 and 2010-2011 Long-term Incentive Plans.
|
(4)
|
The value realized on vesting of stock awards is determined by multiplying the number of shares vested by the closing stock price on the date of
vesting. The actual amounts realized from vested stock awards will depend upon the sale price of the shares when they are actually sold.
|
Pension Benefits
The defined benefit plans
(qualified and nonqualified) sponsored by the Company were amended to freeze participation to those who were hired prior to January 1, 1999. As all of the Companys NEOs were hired subsequent to that date, they are not eligible to
participate in the defined benefit plans.
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
The Company offered a nonqualified deferred compensation plan to executives, which allowed them to defer receipt of Long-term Incentive cash
compensation prior to 2009 when cash was a component of the Long-term Incentive Plan. Executives were allowed to defer up to 100% of their earned long-term cash incentive into HMECs deferred Common Stock equivalent units. Contributions and
earnings reported below are for the year ended December 31, 2013 and the aggregate balance is as of December 31, 2013.
The
Company also sponsors an unfunded excess pension plan, the Nonqualified Defined Contribution Plan (NQDCP), which covers only the base salary compensation in excess of the Section 415 limit, which in 2013 was $250,000. The NQDCP
accounts are established for the executives at the time their compensation exceeds the Section 415 limit and the NEOs are credited with an amount equal to 5% of the excess. In addition, the NQDCP accounts are credited with the same rate of
return as the qualified plan sponsored by the Company for all employees.
The following table sets forth information regarding
participation by the NEOs in the Companys NQDCP and nonqualified deferred compensation plan as of December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Account
|
|
Executive
Contributions in
Last FY
($)
|
|
|
Registrant
Contributions in
Last FY
($) (1)
|
|
|
Earnings
in Last FY
($) (2)
|
|
|
Balance
at Last FYE
($)
|
|
|
|
Marita Zuraitis
|
|
NQDCP Account
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Peter H. Heckman
|
|
NQDCP Account
|
|
|
0
|
|
|
|
21,625
|
|
|
|
6,990
|
|
|
|
236,992
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
456,616
|
|
|
|
1,182,845
|
|
|
|
Dwayne D. Hallman
|
|
NQDCP Account
|
|
|
0
|
|
|
|
7,432
|
|
|
|
710
|
|
|
|
28,783
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
82,184
|
|
|
|
212,895
|
|
|
|
Stephen P. Cardinal
|
|
NQDCP Account
|
|
|
0
|
|
|
|
7,747
|
|
|
|
795
|
|
|
|
31,643
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Thomas C. Wilkinson
|
|
NQDCP Account
|
|
|
0
|
|
|
|
4,023
|
|
|
|
595
|
|
|
|
22,463
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
44,953
|
|
|
|
116,449
|
|
|
|
Matthew P. Sharpe
|
|
NQDCP Account
|
|
|
0
|
|
|
|
3,188
|
|
|
|
8
|
|
|
|
3,196
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
(1)
|
Represents the 2013 NQDCP Company contributions. These contributions are included in the All Other Compensation column of the Summary
Compensation Table for 2013.
|
(2)
|
Represents (a) the gains in the NQDCP in 2013 and (b) the change in the deferred compensation account balance reflecting changes in the
closing stock price of HMEC Common Stock from December 31, 2012 to December 31, 2013, each excluding contributions reflected in the first two columns.
|
|
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
|
29
|
Potential Payments upon Termination or Change in Control
The NEOs are entitled to receive certain payments and other benefits for termination due to:
|
|
Separation due to disability or death;
|
|
|
Voluntary termination of employment;
|
|
|
Separation due to retirement;
|
|
|
Involuntary termination of employment without cause; and
|
|
|
Separation due to a change in control of the Company.
|
The NEOs payments and benefits for termination (other than change in control) are governed by the terms of the Executive Severance Plans,
non-qualified plan documents, equity grant agreements and bonus plans. A NEOs eligibility for payment and benefits in the event of a change in control requires a termination of employment in addition to a change of control of the Company
before benefits under the Executive Severance Plans are triggered. This double-trigger applies whether the NEO has an individual agreement or is covered under the Executive Change in Control Plan.
An overview of benefits available under each scenario is provided below and should be read along with the footnotes accompanying the related
table. These calculations are an estimate only for purposes of this Proxy Statement.
Disability or Death
NEOs do not receive any severance or other non-performance related cash payments. The treatment of AIP and long-term incentives
is as follows:
|
|
|
AIP Any earned but unpaid cash bonus would be paid.
|
|
|
|
Stock Options All stock options vest immediately. With respect to disability,
executives have the full option term to exercise the stock options. With respect to death, the executives estate has the shorter of two years or the remaining option term to exercise the stock options.
|
|
|
|
Service-based RSUs All service-based RSUs vest immediately.
|
|
|
|
Performance-based RSUs With respect to disability, RSUs still subject to performance
conditions vest pro-rata at the end of the performance period based on actual performance and earned but unvested RSUs vest immediately. With respect to death, RSUs still subject to performance conditions vest pro-rata immediately at target level of
performance and earned but unvested RSUs vest immediately.
|
Termination for Cause or Voluntary Termination
NEOs would not receive any severance, AIP amounts, or other cash payments and would forfeit all unpaid and unvested equity
awards.
Involuntary Termination of Employment Without Cause
All NEOs would receive payments under the Executive Severance Plan as follows:
|
|
|
Applicable multiple of base salary plus target AIP bonus;
|
|
|
|
Any earned and unpaid AIP bonus; and
|
|
|
|
Applicable multiple of COBRA premium for the health plan for which they were enrolled prior
to the termination event.
|
|
|
|
Name
|
|
Executive
Severance
Plan Multiple
|
Marita Zuraitis
|
|
2.0
|
Dwayne D. Hallman
|
|
1.5
|
Stephen P. Cardinal
|
|
1.5
|
Matthew P. Sharpe
|
|
1.5
|
|
|
|
30
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
Separation due to a Change in Control of the Company
Ms. Zuraitis and Mr. Sharpe would receive multiples of base salary plus target AIP bonus payments as outlined under
the Executive CIC Plan and are not eligible for tax gross-ups under that Plan. The Executive CIC Plan contains a modified cap provision, where the Company is able to determine whether to pay all change-in-control payments, or scale
back the payments to the 280G limit, in order to not jeopardize tax deductibility of the payments nor trigger an excise tax. The multiples of cash payment for Mr. Hallman and Mr. Cardinal are contained in their individual
agreements and do include provisions for tax gross-ups. Treatment of AIP and equity awards is as follows:
|
|
|
Payment of any earned and unpaid AIP bonus;
|
|
|
|
All stock options vest immediately; and,
|
|
|
|
All service-based RSUs vest immediately.
|
|
|
|
Name
|
|
CIC
Multiple
|
Marita Zuraitis
|
|
2.5
|
Dwayne D. Hallman
|
|
2.0
|
Stephen P. Cardinal
|
|
2.0
|
Matthew P. Sharpe
|
|
2.0
|
Illustration of Potential Payments upon
Termination or Change in Control
The following table presents, for each of the NEOs employed as of March 15, 2014, the estimated
payments and benefits that would have been payable as of the end of 2013 in the event of separation due to disability or death, cause, voluntary termination of employment, retirement, involuntary termination of employment without cause, and a change
of control of the Company.
Consistent with SEC requirements, these estimated amounts have been calculated as if the NEOs employment
had been terminated as of December 31, 2013, the last business day of 2013, using the closing market price of our Common Stock on that date ($31.54). The amounts reported in the following table are hypothetical amounts based on the disclosure
of compensation information about the NEOs. Actual payments will depend on the circumstances and timing of any termination of employment or other triggering event.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Payments ($) Assuming Termination as of December 31, 2013 (1)
|
|
|
|
Name
& Benefits
|
|
Disability or
Death
|
|
|
For
Cause
|
|
|
Voluntary
|
|
|
Retirement
|
|
|
Involuntary
Termination w/o
Cause
|
|
|
Change in
Control
|
|
|
|
Marita Zuraitis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,275,000
|
|
|
|
2,843,750
|
|
|
|
AIP
|
|
|
487,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
487,500
|
|
|
|
487,500
|
|
|
|
Acceleration of Stock Options
|
|
|
237,853
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
237,853
|
|
|
|
Acceleration of RSUs
|
|
|
4,314,216
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,752,511
|
|
|
|
Health and Welfare
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
27,491
|
|
|
|
34,363
|
|
|
|
Modified Cap Adjustment
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
(791,782
|
)
|
|
|
TOTAL
|
|
|
5,039,569
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,789,991
|
|
|
|
7,564,195
|
|
|
|
Dwayne D. Hallman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
967,518
|
|
|
|
1,433,555
|
|
|
|
AIP
|
|
|
215,004
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
215,004
|
|
|
|
215,004
|
|
|
|
Acceleration of Stock Options
|
|
|
639,292
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
639,292
|
|
|
|
Acceleration of RSUs
|
|
|
1,653,801
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,908,990
|
|
|
|
Health and Welfare
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
34,741
|
|
|
|
46,321
|
|
|
|
Tax Gross-Up
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1,233,031
|
|
|
|
TOTAL
|
|
|
2,508,097
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,217,263
|
|
|
|
5,476,193
|
|
|
|
Stephen P. Cardinal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
927,018
|
|
|
|
1,293,617
|
|
|
|
AIP
|
|
|
206,004
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
206,004
|
|
|
|
206,004
|
|
|
|
Acceleration of Stock Options
|
|
|
807,234
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
807,234
|
|
|
|
Acceleration of RSUs
|
|
|
2,000,932
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,256,121
|
|
|
|
Health and Welfare
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
31,972
|
|
|
|
31,972
|
|
|
|
Tax Gross-Up
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1,038,016
|
|
|
|
TOTAL
|
|
|
3,014,170
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,164,994
|
|
|
|
5,632,964
|
|
|
|
Matthew P. Sharpe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
731,268
|
|
|
|
975,024
|
|
|
|
AIP
|
|
|
162,504
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
162,504
|
|
|
|
162,504
|
|
|
|
Acceleration of Stock Options
|
|
|
281,153
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
281,153
|
|
|
|
Acceleration of RSUs
|
|
|
955,914
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,109,041
|
|
|
|
Health and Welfare
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
25,148
|
|
|
|
33,530
|
|
|
|
Modified Cap Adjustment
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
(268,783
|
)
|
|
|
TOTAL
|
|
|
1,399,571
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
918,920
|
|
|
|
2,292,469
|
|
N/A Not applicable
|
(1)
|
All AIP and LTI earned payouts are assumed to be at target. All equity-based awards are valued at the December 31, 2013 closing stock price of
$31.54.
|
|
|
|
2014 Proxy Statement Compensation Discussion and Analysis
|
|
31
|