GLOBE LIFE INC. - FORM 8-K - EX-99.1 - April 8, 2013

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EXHIBIT 99.1

 

April 8, 2013

 

To the Stockholders of Torchmark Corporation (the Company):

 

We recently sent you proxy materials for the annual meeting of the stockholders of Torchmark Corporation, scheduled to be held on April 25, 2013. The original proxy materials delivered to you contained disclosure indicating that in 2012 the Company’s Executive Chairman of the Board, Mark S. McAndrew, was granted stock options to purchase 160,000 shares of the Company’s common stock. The Company has subsequently determined that stock options with respect to 70,000 shares of common stock approved in 2012 were not validly granted pursuant to the Company’s 2011 Incentive Plan because they exceeded the limit on the number of stock options that may be granted to any individual participant within any 12 month period. Accordingly, the attempted grant of these excess stock options was ineffective, and they were never granted under the 2011 Incentive Plan. The Company is in the process of testing and evaluating the implementation of new processes and procedures to provide reasonable assurance that such a mistake will not occur in the future.

 

The following disclosures amend the previous disclosures with respect to Mr. McAndrew’s 2012 compensation contained in the original proxy materials that were previously sent to stockholders for the 2013 annual meeting. Amendments to disclosures are indicated in bold face.

 

Summary Compensation Table

 

The table below summarizes various categories of compensation earned in 2012 by the persons who served as the Company’s Chief Executive Officer at any time during 2012, its Chief Financial Officer at any time during 2012 and the three next most highly compensated executive officers of the Company. The seven named executive officers had 2012 salaries and bonuses (as reflected in the Bonus column or the Non-Equity Incentive Plan Compensation column below) in the aggregate which were 32.5% of their total compensation in 2012.

 

None of the executive officers listed in the table has a written or unwritten employment agreement or arrangement with the Company or any of its subsidiaries.

 

Name and

Principal Position

   Year
     Salary
($)
(1)
    Bonus
($)
     Stock
Awards
($)
(2)(3)
     Option
Awards
($)
(4)
     Non-Equity
Incentive Plan
Compensation
($)
     Change in
Pension Value
and Nonquali-
fied Deferred
Compensation
Earnings
($)
(5)
     All Other
Compensation
($)
(6)
     Total
($)
  
Mark S. McAndrew,     2012        1,084,615        0        1,461,600        1,502,100        2,300,000        1,167,632        45,528 (6)(7)      7,561,475   
Executive Chairman of the     2011        993,846        0        1,198,440        2,764,800        2,104,000        866,026        141,073 (6)      8,068,185   

Board since June 2012;

Chairman and Chief

Executive Officer until June 2012

     2010        955,080        0        833,580        1,864,800        1,900,000        679,005        41,656 (6)      6,274,121   
Gary L. Coleman,     2012        703,846        0        1,227,250        1,006,200        1,100,000        2,136,579        61,742 (6)      6,235,617   
Co-Chief Executive Officer     2011        595,769        0        1,864,240        1,152,000        674,000        1,141,242        39,378 (6)      5,466,629   

since June 2012;

Executive Vice President

& Chief Financial Officer until June 2012

     2010        542,207        0        370,480        777,000        550,000        524,681        13,294        2,777,662   
Larry M. Hutchison,     2012        703,846        0        1,227,250        1,006,200        1,100,000        1,738,220        16,543        5,792,059   
Co-Chief Executive Officer     2011        594,231        0        1,864,240        1,152,000        674,000        1,075,842        14,739        5,375,052   
since June 2012; Executive Vice President & General Counsel until June 2012     2010        522,309        0        370,480        777,000        550,000        610,044        13,144        2,842,977   

Frank M. Svoboda

     2012        376,154        180,000        68,235        510,840        0        265,106        21,382 (6)      1,421,717   

Executive Vice President &

     2011        344,000        100,000        0        576,000        0        162,153        24,142 (6)      1,206,295   

Chief Financial

Officer since June 2012

     2010        328,598        90,000        0        388,500        0        107,500        21,327 (6)      935,925   

Name and

Principal Position

   Year
     Salary
($)
(1)
    Bonus
($)
     Stock
Awards
($)
(2)(3)
     Option
Awards
($)
(4)
     Non-Equity
Incentive Plan
Compensation
($)
     Change in
Pension Value
and Nonquali-
fied Deferred
Compensation
Earnings
($)
(5)
     All Other
Compensation
($)
(6)
     Total
($)
  
Vern D. Herbel     2012        488,077        0        416,610        774,000        525,000        1,129,984        21,048 (6)      3,354,719   
Executive Vice President & Chief     2011        463,846        0        399,480        1,036,800        522,000        742,147        38,058 (6)      3,202,331   
Administrative Officer     2010        447,694        0        277,860        669,300        430,000        441,008        20,036 (6)      2,285,898   
Roger C. Smith     2012        471,923        0        651,260        928,800        500,000        766,959        16,335        3,335,277   
Chief Executive Officer, American     2011        433,846        0        466,060        1,152,000        400,000        479,212        4,028        2,935,146   
Income and President & Chief Executive Officer, Liberty(8)    
 2010
   
     417,848        300,000        347,325        777,000       
 0
   
     261,344        24,217 (6)      2,127,734   
Charles F. Hudson President &     2012        438,077        265,000        301,085        743,000        0        844,622        12,352        2,604,136   
Chief Executive Officer of Globe     2011        413,846        250,000        266,320        921,600        0        600,474        12,182        2,464,422   
      2010        395,824        225,000        185,240        543,900        0        414,338        9,745        1,774,047   
                 
                 
(1)   For 2010, the following listed executives repaid 2009 salary overpayments in 2010: McAndrew ($4,920); Coleman ($2,793); Hutchison ($2,691); Svoboda ($1,640); Herbel ($2,306); R. Smith ($2,153) and Hudson ($1,973).
(2)   Amounts shown in this column for Messrs. Svoboda, R. Smith and Hudson for 2012 and all amounts shown for each named executive officer for 2011 and 2010 are time-vested restricted stock. The fair values of restricted stock awards are calculated in accordance with ASC 718, Compensation – Stock Compensation (ASC 718), using the NYSE market closing price on the grant date of the stock.
(3)   Amounts shown in this column for Messrs. McAndrew, Coleman and Hutchison for 2012 are performance share awards valued based upon the probable outcome of the performance conditions as of the grant date, which were the target levels on their February 21, 2012 (Coleman and Hutchison) or February 22, 2012 (McAndrew) grant dates. The fair values of performance shares are calculated in accordance with ASC 718, using the NYSE market closing price on the grant date of the performance share award. The fair values of such performance shares at maximum levels on the grant dates are McAndrew ($2,923,200), Coleman ($2,454,500) and Hutchison ($2,454,500).
(4)   Assumptions used in calculating the aggregate grant date fair value in accordance with ASC 718 are set out in Footnote 1 to the Company’s audited financial statements contained in the Form 10-K for the fiscal year ended December 31, 2012.
(5)   Change in Pension Value and Non-Qualified Deferred Compensation Earnings:

 

Executive

    Year
      Increase
in Present
Value Pension
Plan ($)
      Decrease
in Present Value
Pension
Plan ($)
     Increase
in Present
Value  New
SERP
($)
  

McAndrew

      2012         226,911                 940,721   
       2011         166,702                 699,324   
       2010         135,504                 543,501   

Coleman

      2012         296,897                 1,839,682   
       2011         220,192                 921,050   
       2010         178,608                 346,073   

Hutchison

      2012         273,565                 1,464,655   
       2011         199,673                 876,169   
       2010         159,394                 450,650   

Svoboda

      2012         134,815                 130,291   
       2011         87,905                 74,248   
       2010         62,422                 45,168   

Herbel

      2012         248,295                 881,689   
       2011         172,361                 569,786   
       2010         131,709                 309,299   

R. Smith

      2012         161,292                 605,667   
       2011         117,063                 362,149   
       2010                  0 (a)      261,344   

Hudson

      2012         265,806                 578,816   
       2011         187,055                 413,419   
       2010         144,812                 269,526   
(a)   

Result of execution of qualifying domestic relations order for former spouse.

 

2

(6)   Includes the categories and quantified amounts (if required) of perquisites and personal benefits required to be reported by SEC Regulation S-K, Item 402 (c)(2)(ix) for executives in the years shown in the following table:

 

     Perquisites
  

Executive

    Fitness
Center  Dues
      Country
Club
Dues
      Personal Use
Company
Aircraft(a)
    Personal
Use
Company-
Purchased
Tickets
      Personal
Use
Company
Pool
Vehicle
      Holiday Gift
      Subsidiary’s
Sales
Convention
Expenses
  

McAndrew

      2012                2012      2012         2012         2012            
       2011                2011 ($93,304)      2011         2011                     
       2010                2010      2010                              

Coleman

                      2012 ($42,575)      2012                  2012            
                       2011      2011                  2011            

Svoboda

      2012         2012              2012         2012         2012            
       2011         2011              2011         2011                     
                2010              2010                              

Herbel

               2012              2012                  2012            
                2011       2011      2011                  2011         2011   
                2010              2010                  2010            

R. Smith

      2010                2010      2010                  2010            
Messrs. Hutchison and Hudson had no reportable perquisites or personal benefits in 2012, 2011 or 2010. Mr. R. Smith had no reportable perquisites and personal benefits in 2012 or 2011. Mr. Coleman had no reportable perquisites and personal benefits in 2010.    
(a)   

The value of personal use of Company aircraft is calculated based on the actual variable costs incurred by the Company in providing such flights, net of federal and state tax benefits and the lost tax benefits to the Company attributable to such flights. The variable costs associated with such flights include fuel, maintenance of the planes, “dead head” flights, pilot travel expenses, on-board catering, landing and parking fees and other variable costs. Fixed costs, such as pilots’ salaries, are not included since they do not change with usage. Costs incurred by the Company in providing personal flights to executives are deductible for federal income tax purposes only to the extent that income is imputed to the executive for income tax purposes for the flights. Accordingly, a tax deduction for the costs associated with personal flights is not allowed to the extent that such costs exceed the imputed income to the executive.

 

(7)   Includes $12,336 premium for additional group term life insurance for executive.

 

(8)   As a result of a 2010 divorce decree and accompanying qualified domestic relations orders, Mr. Smith will forfeit exercisable and unexercisable stock options with aggregate grant date fair values totaling $1,453,300 and unvested restricted stock with aggregate grant date fair values totaling $106,684 to his former spouse.

 

2012 Grants of Plan-based Awards

 

              Estimated Future Payouts Under
Non-Equity Incentive Plan  Awards
(1)
     Estimated Future Payouts Under
Equity Incentive Plan
Awards(2)
     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
($/Sh)
     Grant Date
Fair
Value of Stock
and Option
Awards($)(5)
  

Name

   Award Type
   Grant
Date
     Threshold
($)
     Target
($)
     Maximum
($)
     Threshold
(#)
     Target
(#)
     Maximum
(#)
          

Mark S. McAndrew

   Options     2/22/12                                                                90,000        48.72        1,502,100   
    Performance
Shares		  

 

2/22/12

  

                          

 

15,000

  

  

 

30,000

  

  

 

60,000

  

                             1,461,600   
    Annual Cash             825,000        1,650,000        3,374,00                                                           

Gary L. Coleman

   Options     1/23/12                                                                65,000        45.49        1,006,200   
    Performance
Shares		  

 

2/21/12

  

                          

 

12,500

  

  

 

25,000

  

  

 

50,000

  

                             1,227,250   
    Annual Cash             414,500        829,000        1,151,000                                                           

Larry M. Hutchison

   Options     1/23/12                                                                65,000        45.49        1,006,200   
    Performance
Shares		  

 

2/21/12

  

                          

 

12,500

  

  

 

25,000

  

  

 

50,000

  

                             1,227,250   
    Annual Cash             414,500        829,000        1,151,000                                                           

Frank M. Svoboda

   Options     1/23/12                                                                33,000        45.49        510,840   
    Restricted Stock     1/23/12                                                        1,500 (3)                      68,235   

 

3

              Estimated Future Payouts Under
Non-Equity Incentive Plan  Awards
(1)
     Estimated Future Payouts Under
Equity Incentive Plan Awards(2)
   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
($/Sh)
     Grant Date
Fair
Value of Stock
and Option
Awards($)(5)
  

Name

   Award Type
   Grant
Date
     Threshold
($)
     Target
($)
     Maximum
($)
     Threshold
(#)
   Target
(#)
   Maximum
(#)
        

Vern D. Herbel

   Options     1/23/12                                                    50,000        45.49        774,000   
    Restricted Stock     1/23/12                                            7,000 (3)                      318,430   
    Restricted Stock     2/21/12                                            2,000 (3)                      98,180   
    Annual Cash             190,000        380,000        528,000                                               

Roger C. Smith

   Options     1/23/12                                                    60,000        45.49        928,800   
    Restricted Stock     1/23/12                                            10,000 (3)                      454,900   
    Restricted Stock     2/21/12                                            4,000 (3)                      196,360   
    Annual Cash             196,000        392,000        544,000                                               

Charles F. Hudson

   Options     1/23/12                                                    48,000        45.49        743,040   
    Restricted Stock     1/23/12                                            5,000 (3)                      227,450   
    Restricted Stock     2/21/12                                            1,500 (3)                      73,635   
(1)   Estimated future payouts under non-equity incentive plan awards are calculated pursuant to the Company’s Section 162(m) Plan. This plan provides a single estimated bonus payout at the maximum level available to the participating executive if objectives are met, subject to the Compensation Committee’s discretion to reduce the amount pursuant to an incentive plan framework and subjective criteria as described on pages      and     . On January 24, 2013, the Compensation Committee certified attainment of the bonus objectives for Messrs. Herbel and Smith who were paid the bonuses shown in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table shortly thereafter. On February 27, 2013, the independent members of the Board approved the payment of the bonus as shown in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table to Messrs. McAndrew, Coleman and Hutchison based upon receipt of the Compensation Committee’s January 24, 2013 certification of attainment of their bonus objectives.
(2)   Performance shares awarded February 21, 2012 and February 22, 2012 pursuant to the Company’s 2011 Plan and to be issued following completion of the three year performance period commencing January 1, 2012 and ending December 31, 2014 upon attainment of specified targets for cumulative earnings per share, underwriting income and average return on equity for the performance period.
(3)   Restricted shares awarded January 23, 2012 and February 21, 2012 pursuant to the Company’s 2011 Plan vest 20% per year over a five-year period commencing on the first anniversary of the award date, based upon continued employment. If the executive dies or retires at or after age 65 (a normal retirement), any remaining unvested restricted stock vests in full as of the date of death or retirement. If the executive retires at or after age 60, any remaining unvested restricted stock vests pursuant to the schedule set forth below as of the date of retirement and the balance of the shares are forfeited.

 

Age on

Retirement Date

   

Percentage of Unvested

Restricted Stock which Vests

  

60

      10 % 

61

      20 % 

62

      40 % 

63

      60 % 

64

      80 % 

65

      100 % 

 

     Dividends are paid on both vested and unvested shares at the same rate as that received by all Company common stockholders.
(4)   Non-qualified stock options granted January 23, 2012 and February 22, 2012 have a seven-year term and a grant price equal to the NYSE market closing price of Company common stock on the date awarded by the Compensation Committee. Such options vest as to 50% of the shares on the second anniversary of the grant date and as to the remaining 50% of the shares on the third anniversary of the grant date.
(5)   The values included in this column represent the grant date fair value of restricted stock and option awards computed in accordance with ASC 718. For restricted stock, this involves the use of NYSE market closing price on the grant date of the stock. The assumptions utilized for options are set out in Footnote 1 to the Company’s audited financial statements contained in the Form 10-K for the fiscal year ended December 31, 2012.

 

4

Outstanding Equity Awards at Fiscal Year-End 2012

 

    Option Awards   Stock Awards  
Name  

Grant
Date

    

Number of
Securities
Underlying
Unexercised
Options

(#)
Exercisable

    

Number of
Securities
Underlying
Unexercised
Options

(#)
Unexercisable

    

Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

  

Option
Exercise
Price

($)

     Option
Expiration
Date		  

Grant
Date

    

Number

of Shares
or Units
of Stock
That Have
Not
Vested

(#)

     Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)		     Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)		     Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)		  

Mark S. McAndrew1

     2/22/12                90,000 2          48.7200      2/22/19                                        
      4/28/11                180,000 2          44.3867      4/28/18                                        
      2/25/10        90,000        90,000 2          30.8734      2/25/17                                        
      2/26/09        12,505                    15.6667      2/26/16                                        
      2/26/08        179,999                    41.7867      2/26/15                                        
      4/26/07        156,000                    45.4534      4/26/14                                        
      12/13/04        90,000                    37.4934      12/15/14                                        
      12/11/03        71,250                    29.9267      12/13/13                                        
                                              2/22/12                        60,000 8      1,550,100 5 
                                              4/28/11        21,600 4      1,116,072 5                 
                                              2/25/10        16,200 4      837,054 5                 
                                              2/26/09        10,800 4      558,036 5                 
                                              2/26/08        4,500 4      232,515 5                 
                                                                                 

Gary L. Coleman

     1/23/12                65,000 2          45.4900      1/23/19                                        
      4/28/11                75,000 2          44.3867      4/28/18                                        
      2/25/10        37,500        37,500 2          30.8734      2/25/17                                        
      2/26/08        75,000                    41.7867      2/26/15                                        
      1/19/07        37,500                    43.0600      1/19/14                                        
      12/13/04        82,500                    37.4934      12/15/14                                        
                                              2/21/12                        50,000 8      1,291,750 5 
                                              4/28/11        39,600 3      2,046,132 5                 
                                              2/25/10        7,200 4      372,024 5                 
                                              2/26/09        4,800 4      248,016 5                 
                                              2/26/08        1,800 4      93,006 5                 
                                                                                 

Larry M. Hutchison

     1/23/12                65,000 2          45.4900      1/23/19                                        
      4/28/11                75,000 2          44.3867      4/28/18                                        
      2/25/10        37,500        37,500 2          30.8734      2/25/17                                        
      2/26/08        75,000                    41.7867      2/26/15                                        
      1/19/07        37,500                    43.0600      1/19/14                                        
      12/13/04        82,500                    37.4934      12/15/14                                        
                                             

 

 2/21/12

4/28/11

   

  

     39,600 3      2,046,132 5     
 50,000
 8 
     1,291,750 5 
                                              2/25/10        7,200 4      372,024 5                 
                                              2/26/09        4,800 4      248,016 5                 
                                              2/26/08        1,800 4      93,006 5                 
                                                                                 

 

5

    Option Awards     Stock Awards
Name  

Grant
Date

    

Number of
Securities
Underlying
Unexercised
Options

(#)
Exercisable

    

Number of
Securities
Underlying
Unexercised
Options

(#)
Unexercisable

    

Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

  

Option
Exercise
Price

($)

     Option
Expiration
Date		    

Grant
Date

    

Number

of Shares
or Units
of Stock
That Have
Not
Vested

(#)

     Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)		     Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)		   Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)

Frank M. Svoboda

     1/23/12                33,000 2          45.4900        1/23/19                                   
      4/28/11                37,500 2          46.3867        4/28/18                                   
      2/25/10        18,750        18,750 2          30.8734        2/25/17                                   
      2/26/09        37,500                    15.6667        2/26/16                                   
      2/26/08        27,000                    41.7867        2/26/15                                   
      1/19/07        12,750                    43.0600        1/19/14                                   
      12/13/04        9,000                    37.4934        12/15/14                                   
                                                  1/23/12        1,500 4      77,505           

Vern D. Herbel

     1/23/12                50,000 2          45.4900        1/23/19                                   
      4/28/11                67,500 2          44.3867        4/28/18                                   
      2/25/10        33,750        33,750 2          30.8734        2/25/17                                   
      2/26/09        67,500                    15.6667        2/26/16                                   
      2/26/08        66,000                    41.7867        2/26/15                                   
      1/19/07        30,000                    43.0600        1/19/14                                   
      12/13/04        45,000                    37.4934        12/10/14                                   
                                                  2/12/12        2,000 4      103,340 5         
                                                  1/23/12        7,000 4      361,690 5         
                                                  4/28/11        7,200 4      372,024 5         
                                                  2/25/10        5,400 4      279,018 5         
                                                  2/26/09        3,600 4      186,012 5         
                                                  2/26/08        1,500 4      77,505 5         

Roger C. Smith6

     1/23/12                60,000 2          45.4900        1/23/19                                   
      4/28/11                75,000 2          44.3867        4/28/18                                   
      2/25/10        35,189        35,960 7          30.8734        2/25/17                                   
      2/26/09        44,452                    15.6667        2/26/16                                   
      2/26/08        27,865                    41.7867        2/26/15                                   
      1/19/07        11,250                    43.0600        1/19/14                                   
      12/12/06        11,250                    42.4667        12/12/13                                   
      12/13/04        30,000                    37.4934        12/15/14                                   
                                                  2/21/12        4,000 4      206,680           
                                                  1/23/12        10,000 4      516,700           
                                                  4/28/11        8,400 4      434,028 5         
                                                  2/25/10        6,750 4      348,773 5         
                                                  2/26/09        3,000 4      155,010 5         
                                                  2/26/08        1,050 4      54,254 5         
                                                                             

Charles F. Hudson

     1/23/12                48,000 2          45.4900        1/23/19                                   
      4/28/11                60,000 2          44.3867        4/28/18                                   
      2/25/10        26,250        26,250 2          30.8734        2/25/17                                   
      2/26/09        26,250                    15.6667        2/26/16                                   
      2/26/08        49,500                    41.7867        2/26/15                                   
      12/13/04        30,000                    37.4934        12/15/14                                   
                                                  2/21/12        1,500 4      77,505           
                                                  1/23/12        5,000 4      258,350           
                                                  4/28/11        4,800 4      248,016           
                                                  2/25/10        3,600 4      186,012           
                                                  2/26/09        2,400 4      124,008           
                                                  2/26/08        900 4      46,503           

 

6

1   

As a result of a 2009 divorce decree and accompanying qualified domestic relations orders, Mr. McAndrew reports at December 31, 2012 a total of 245,915 unexercised exercisable options and 1,012 unvested restricted shares forfeited in 2009 to his former spouse, which he continues to hold as constructive trustee on her behalf until the options are exercised and the restricted shares vest. He held 713,839 unexercised options (443,839 exercisable and 270,000 unexercisable) and 52,087 unvested restricted shares at fiscal year-end 2012 for his personal account.

2   

Stock options vest at the rate of 50% on second and third anniversaries of grant date, with a seven year term.

3   

30,000 of these restricted shares vest 100% on fifth anniversary of grant date and 9,600 of these restricted shares vest at the rate of 20% per year over a five-year period commencing on the first anniversary of the grant date.

4   

Restricted stock vests at the rate of 20% per year over a five-year period commencing on the first anniversary of grant date.

5   

Calculated using 2012 year-end closing market price of $51.67 per share.

6   

As a result of a 2010 divorce decree and accompanying qualified domestic relations order, Mr. Smith reports at December 31, 2012, a total of 874 unvested restricted shares forfeited in 2010 to his former spouse, which shares he continues to hold as constructive trustee on her behalf until the restricted shares vest. He held a total of 32,325 unvested restricted shares at fiscal year-end 2012 for his personal account.

7   

Pursuant to 2010 divorce decree, 35,189 shares of these vested 2/25/2012 and 35,960 shares of these vest 2/25/2013.

8   

Performance shares issued following the completion of a three year performance period commencing January 1, 2012 and ending December 31, 2014, if at all, based upon the degree of satisfaction of three performance criteria. Shares shown reflect potential target award.

 

7

Potential Payments upon Termination or Change-in-Control

 

The Company and its subsidiaries do not have employment contracts, severance agreements, salary continuation agreements or severance plans with the NEOs. Potential payments and benefits not generally available to all salaried employees may be made to the NEOs (1) upon termination of their employment in connection with stock options issued to them under the Company’s various incentive plans, (2) upon termination of employment in connection with restricted stock issued to them under the 2011 Plan and the 2007 Plan, (3) upon termination of employment in connection with performance shares awarded to them under the 2011 Plan; (4) at age 65 in the form of an insurance policy under a Retirement Life Insurance Benefit Agreement, and (5) upon termination of their employment in the executive’s chosen form of annuitized payment under the SERP. Additionally, in the case of a change in control of the Company, the stock options, restricted stock and performance shares held by the NEOs would be subject to vesting and those executive officers would have potential payments as a result.

 

For purposes of the following disclosures, the assumptions used in making the calculations are: (1) the triggering event (termination of employment, retirement, or change-in-control) occurred on December 31, 2012; (2) the per share price of Company stock is $51.67, which was the closing price of the stock on December 31, 2012; (3) the ages of the NEOs as of December 31, 2012 were Mark McAndrew (age 59), Gary Coleman (age 59), Larry Hutchison (age 58), Frank Svoboda (age 51), Vern Herbel (age 55), Roger Smith (age 60) and Charles Hudson (age 56); and (4) the NEOs’ salaries and non-equity incentive plan compensation are what is reflected for them in the Summary Compensation Table.

 

Stock Options and Termination of Employment

 

Currently outstanding Company stock options provide that the options may be exercised for a period of time after termination of employment that varies with the circumstances of the termination:

 

  (1)   on a voluntary termination—one month after termination of employment or the expiration of the stated term of the option, whichever is shorter;
  (2)   on an involuntary termination without cause—three months after termination of employment or the expiration of the stated term of the option, whichever is shorter;
  (3)   on an early retirement (defined to be at or after age 55)—three years from the date of retirement or the expiration of the stated term of the option whichever is shorter;
  (4)   on retirement at or after age 60 (only for options granted on and after December 13, 2005)—five years from the date of retirement or the expiration of the stated term of the option whichever is shorter;
  (5)   on a normal retirement (defined to be at or after age 65)—the remaining balance of the term of the option, and all options remaining unvested upon the exercise of the option vest in full on the retirement date;

 

8

  (6)   on disability—the remaining balance of the term of the option, and all options remaining unvested immediately vest in full; and
  (7)   on death—the remaining balance of the term of the option or one year from the date of death, whichever is longer, and all options remaining unvested at the date of death immediately vest in full.

 

If employment is terminated for cause, there is no post-termination exercise as all outstanding options are forfeited to the Company. “Cause” is defined by the 2011, 2007 and 2005 Plans as a reason for a plan participant’s termination of employment as that term may be defined in the employment, severance or similar agreement, if any, between the participant and the Company or a subsidiary. If there is no employment, severance or similar agreement and if the grant agreement does not define that term (which is the case for all awards currently outstanding under the 2011, 2007 and 2005 Plans), “cause” is defined as any of the following acts by the plan participant, as determined by the Compensation Committee or the Board of Directors: gross neglect of duty, prolonged absence from duty without the consent of the Company, intentionally engaging in any activity that is in conflict with or adverse to the business or other interests of the Company, or willful misconduct, misfeasance or malfeasance of duty which is reasonably determined to be detrimental to the Company. “Cause” is defined by the Torchmark Corporation 1998 Stock Incentive Plan (1998 Plan) as a plan participant’s willful misconduct or dishonesty, any of which is directly and materially harmful to the business or reputation of the Company or any subsidiary.

 

The table below sets out values for outstanding “in the money” stock options that would have been realized by the NEOs as of December 31, 2012 in the termination of employment situations discussed above. Only those termination of employment situations applicable to each individual NEO based upon the foregoing assumptions are shown.

 

Mark S. McAndrew  

Early Retirement — $11,343,981

   

Disability — $11,343,981

   

Death — $11,343,981

Gary L. Coleman  

Early Retirement — $4,741,385

   

Disability — $4,741,385

   

Death — $4,741,385

Larry M. Hutchison

  

Early Retirement — $4,741,385

   

Disability — $4,741,385

   

Death — $4,741,385

Frank M. Svoboda  

Voluntary termination — $2,244,276

   

Involuntary termination without Cause — $2,634,213

   

Disability — $3,111,276

   

Death — $3,111,276

Vern D. Herbel  

Early Retirement — $6,183,161

   

Disability — $6,183,161

   

Death — $6,183,161

Roger C. Smith  

Early Retirement — $4,898,198

   

Disability — $4,898,198

   

Death — $4,898,198

Charles F. Hudson  

Early Retirement — $3,685,067

   

Disability — $3,685,067

   

Death — $3,685,067

 

9

Change-in-Control—Stock Options and Restricted Stock

 

The 2011 and 2007 Plans provide that (1) in case of a change in control where the new controlling person does not assume or equitably substitute stock options, restricted stock or performance shares, all outstanding options become fully exercisable, all time-based restricted stock vests and 100% of the target awards of performance shares are deemed earned and are paid out on a pro rata basis based upon the length of time within the performance period prior to the change in control and (2) in the case of a change in control where the new controlling person assumes or equitably substitutes stock options, restricted stock or performance shares, if a participant’s employment is terminated without cause or the participant terminates for good reason within two years after the effective date of the change in control, all outstanding options are fully exercisable, time-based restricted stock vests and 100% of the target awards of performance shares are deemed earned and are paid out on a pro rata basis based upon the length of time within the performance period prior to the date of termination.

 

10

The 2005 Plan provides that if a participant’s employment is terminated without cause or the participant resigns for good reason within one year after the effective date of a change in control, all outstanding options and unvested restricted stock issued under the plan become fully exercisable.

 

For purposes of the 2011 Plan, the 2007 Plan and the 2005 Plan, a “change in control” generally consists of any one of the following events:

 

  (i)   An acquisition of 25% or more of the Company’s voting securities, but not including:

 

  –   an acquisition by a person who on the plan’s effective date (April 28, 2011 for the 2011 Plan, April 26, 2007 for the 2007 Plan and April 28, 2005 for the 2005 Plan) was the beneficial owner of 25% or more the Company’s voting securities;

 

  –   an acquisition of securities by or from the Company;

 

  –   an acquisition of securities by a Company employee benefit plan; or

 

  –   an acquisition of securities by a successor corporation pursuant to a transaction which complies with the exception to clause (iii) below.

 

  (ii)   Individuals serving on the Company’s Board on the plan’s effective date (April 28, 2011 for the 2011 Plan, April 26, 2007 for the 2007 Plan and April 28, 2005 for the 2005 Plan) cease to constitute a majority of the Board (with an exception for individuals whose election or nomination was approved by a majority of the then incumbent board, outside the context of an election contest).

 

  (iii)   A reorganization, merger or consolidation of the Company, or a sale of all or substantially all of the Company’s assets, unless, following any such transaction:

 

  –   all or substantially all of the Company’s shareholders prior to the transaction own more than 50% of the voting stock of the Company or its successor in substantially the same proportions as their ownership of the Company’s voting stock prior to the transaction; and

 

  –   no person (excluding any successor corporation or any employee benefit plan of the Company or a successor corporation) acquires 25% or more of the voting securities of the Company or its successor as a result of the transaction, except to the extent that such ownership existed prior to the transaction, and

 

  –   a majority of the members of the Board of the Company or its successor following the transaction were members of the Company’s Board prior to the transaction.

 

  (iv)   The Company’s shareholders approve a complete liquidation or dissolution of the Company.

 

The 1998 Plan, under which named executives hold certain options, provides that on a change of control any stock options awarded under that plan which were not previously exercisable and vested become fully exercisable and vested. The value of all outstanding options under the 1998 Plan will be settled on the basis of the change of control price (defined as the highest price per share paid in any NYSE composite tape transaction at any time during the preceding 60 day period) as of the date the change of control occurs, in cash or in stock as determined in the discretion of the Compensation Committee.

 

For purposes of the 1998 Plan, a “change in control” generally consists of any one of the following events:

 

  (i)   An acquisition of 20% or more of the Company’s voting securities (other than an acquisition by the Company or one its subsidiaries or employee benefit plans).

 

  (ii)   The occurrence of a transaction or event relating to the Company that is required to be described pursuant to the requirements of Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act.

 

  (iii)   When, during any two-year period, the members of the Company’s Board at the beginning of the period cease to constitute at least a majority of the Board (other than due to the death of a director), unless a director is elected or recommended by at least two-thirds of the directors at the beginning of the period.

 

11

  (iv)   An acquisition of the Company by a third party, by merger, purchase of assets or otherwise, requiring stockholder approval.

 

Assuming that the change in control occurred on December 31, 2012, NEOs would have the following intrinsic option values under the 2011, 2007, 2005 and 1998 Plans:

 

Mark S. McAndrew

    $ 11,343,981   

Gary L. Coleman

    $ 4,741,385   

Larry M. Hutchison

    $ 4,741,385   

Frank M. Svoboda

    $ 3,111,276   

Vern D. Herbel

    $ 6,183,161   

Roger C. Smith

    $ 4,898,198   

Charles F. Hudson

    $ 3,685,067   

 

Assuming that the change in control occurred on December 31, 2012, the NEOs would have the values shown below for their unvested restricted stock granted under the 2011, 2007 and 2005 Plans:

 

Mark S. McAndrew

    $ 2,743,677   

Gary L. Coleman

    $ 2,759,178   

Larry M. Hutchison

    $ 2,759,178   

Frank M. Svoboda

    $ 77,505   

Vern D. Herbel

    $ 1,379,589   

Roger C. Smith

    $ 1,715,444   

Charles F. Hudson

    $ 940,394   

 

Assuming the change in control occurred on December 31, 2012, NEOs would have the values shown below for their unvested performance shares awarded under the 2011 Plan:

 

Mark S. McAndrew

    $ 1,550,100   

Gary L. Coleman

    $ 1,291,750   

Larry M. Hutchison

    $ 1,291,750   

 

12

GLOBE LIFE INC. Reports