Exhibit 10.12
Form of
SEVERANCE
AGREEMENT
This SEVERANCE AGREEMENT (this
“Agreement”), dated as of
,
20 , is made and entered into by and between
Horace Mann Educators Corporation (“HMEC”), a Delaware
Corporation (the “Parent Company”), Horace Mann Service
Corporation (“HMSC”), an Illinois corporation (the
“Employer Company”), (HMEC and HMSC collectively
referred to as the “Company”), and
(the “Executive”).
WHEREAS , the Company considers the maintenance of a
sound and vital senior management to be essential to protecting and
enhancing the interests of the Parent Company and its subsidiaries,
including the Employer Company, hereinafter collectively referred
to as the “Group”;
WHEREAS , the Company recognizes that, as is the case
with many publicly owned corporations, the possibility of a change
in control of the Group may arise and that such possibility, and
the uncertainty and questions which it may raise among senior
management, may result in the departure or distraction of senior
management personnel to the detriment of the Group; and
WHEREAS , accordingly the Company has determined that
appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the
Company’s senior management to their assigned duties and
long-range responsibilities without distraction in circumstances
arising from the possibility of a change in control of the Group;
and
WHEREAS , the Company believes it important and in the
best interests of the Group, should the Group face the possibility
of a change in control, that the senior management of the Company
be able to assess and advise the Board of Directors of the Company
whether such a proposed change in control would be in the best
interests of the Group and to take such other action regarding such
a proposal as the Board of Directors might determine to be
appropriate, without senior management being influenced by the
uncertainties of their own employment situations; and
WHEREAS , in order to induce the Executive to remain in
the employ of the Company in the event of any actual or threatened
change in control of the Group, the Company has determined to set
forth the severance benefits which the Company will provide to the
Executive under the circumstances set forth below;
NOW THEREFORE
, in consideration of the foregoing
recitals, and the mutual covenants and agreements contained in this
Agreement and for other good and valuable consideration, the
parties hereto agree as follows:
-1-
1. Definitions. Terms not otherwise defined in this Agreement
shall have the meanings set forth in this
Section 1.
(a) Base Year. The
“Base Year” shall be the twelve (12) month period
immediately preceding a Change in Control.
(b) Cash Compensation.
“Cash Compensation” shall mean the sum of (i) the
Executive’s annual base salary and (ii) the cash bonus
paid to the Executive under the Horace Mann Incentive Compensation
Program (or similar program that may replace the Incentive
Compensation Program) for whichever of the five (5) fiscal
years immediately preceding the year in which the Date of
Termination occurs that will result in the highest amount of Cash
Compensation.
(c) Cause. For purposes of
this Agreement, “Cause” shall mean serious, willful
misconduct by the Executive such as, for example, the commission by
the Executive of a felony arising from specific conduct of the
Executive which reasonably relates to his qualification or ability
(personal or professional) to perform his duties to the Company or
its Subsidiaries or a perpetration by the Executive of a common law
fraud against the Company or its Subsidiaries. Notwithstanding the
foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than two-thirds of the entire
membership of the Company’s Board of Directors at a meeting
of the Board called and held for the purpose of considering his
termination for Cause (after reasonable notice to the Executive and
an opportunity for the Executive, together with the
Executive’s counsel, to be heard before the Board). The
resolution of the Board shall contain a finding that in the good
faith opinion of the Board the Executive was guilty of the conduct
set forth above and specifying the particulars thereof in detail.
Notwithstanding the foregoing, the Executive shall have the right
to contest his termination for Cause.
(d) Change in Control. A
“Change in Control” shall be deemed to have occurred if
(i) there shall be consummated (1) any consolidation or
merger of HMEC in which HMEC is not the continuing or surviving
corporation, or pursuant to which shares of HMEC’s Common
Stock would be converted into cash, securities or other property,
other than a merger of HMEC in which no HMEC shareholder’s
ownership percentage in the surviving corporation immediately after
the merger is less than such shareholder’s ownership
percentage in HMEC immediately prior to such merger by ten percent
(10%) or more, or (2) any sale, lease exchange or other
transfer (in one transaction or a series of related transactions)
of all, or substantially all, of the assets of HMEC; (ii) the
shareholders of HMEC approve any plan or proposal for the
liquidation or dissolution of HMEC which is a part of a sale of
assets, merger, or reorganization of HMEC or other similar
transaction; (iii) any “Person” as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), is or becomes,
directly or indirectly, the “beneficial owner,” as
defined in Rule 13d-3 under the Exchange Act, of securities of HMEC
that represent 51% or more of the combined voting power of
HMEC’s then outstanding securities; or (iv) a majority
of the members of the Company’s Board of Directors are
persons who are then serving on the Board of
-2-
Directors without having been
elected by the Board of Directors or having been nominated by the
Company for election of its shareholders.
(e) Constructive Termination.
“Constructive Termination” shall mean the following
events:
(1) any material diminution in the
Executive’s duties or responsibilities to the
Group;
(2) any required relocation of the
Executive from his present work site to another site more than
fifty (50) miles from the present work site;
(3) a diminution in the
Executive’s annual base salary of more than ten percent
(10%) below the Executive’s salary for the Base Year;
or
(4) a diminution in the
Executive’s annual cash bonus under the Horace Mann Incentive
Compensation Program (or similar program that may replace the
Incentive Compensation Program) of more than fifty percent
(50%) below that paid to the Executive for the Base Year,
except in the event that such diminution is comparable to the
diminution in the cash bonus paid to other employees of the same
business segment as the Executive due to the performance of that
business segment.
Notwithstanding the preceding, a
Constructive Termination shall not be deemed to have occurred until
and unless the Executive provides written notice to the Company
within ninety (90) days after the initial existence of one of
the above conditions and the Company is provided thirty
(30) days to remedy the condition and fails to do
so.
(f) Date of Termination.
“Date of Termination” shall mean the effective date of
the Notice of Termination which results (on such effective date) in
the Executive’s separation from service (as that term is
defined in Section 409A of the Internal Revenue Code of 1986,
as amended, and guidance issued thereunder).
2. Termination Following Change
in Control.
(a) Termination of
Employment. If a Change in Control shall have occurred while
the Executive is still an employee of the Company, the Executive
shall be entitled to the compensation provided in Section 3
if, within 3 years after the Change in Control, the
Executive’s employment is terminated by (i) the Company
without Cause or (ii) the Executive due to Constructive
Termination.
(b) Notice of Termination.
Any purported termination of the Executive’s employment by
the Company or the Executive shall be communicated by a Notice of
Termination to the other party in accordance with Section 10
hereof. The Notice of Termination shall set forth in reasonable
detail the reasons for termination and, if termination is for
Cause, the facts and circumstances claimed to provide a basis
for
-3-
termination of the Executive’s
employment and, in the case of a Constructive Termination, the
information specified in Section 1(e).
3. Severance Compensation upon
Termination of Employment. If the Executive becomes entitled to
compensation pursuant to Section 2(a), then the Company
shall:
(i) pay to the Executive as
severance pay in a lump sum, in cash, on the fifth day following
the Date of Termination, an amount equal to
times the
Executive’s Cash Compensation;
(ii) arrange to provide to the
Executive for &
