<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14A-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
TORCHMARK CORPORATION
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Filing Fee Required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF TORCHMARK CORPORATION APPEARS HERE]
March 27, 1998
To the Stockholders of
Torchmark Corporation:
Torchmark's 1998 annual meeting of stockholders will be held in the
auditorium at the executive offices of the Company, 2001 Third Avenue South,
Birmingham, Alabama at 10:00 a.m., Central Daylight Time, on Thursday, April
23, 1998.
The accompanying formal notice and proxy statement discuss matters which
will be presented for a stockholder vote. If you have any questions or
comments about the matters discussed in the proxy statement or about the
operations of your Company, we will be pleased to hear from you.
It is important that your shares be voted at this meeting. Please mark,
sign, and return your proxy. If you attend the meeting in person, you may
withdraw your proxy and vote your stock if you desire to do so.
We hope that you will take this opportunity to meet with us to discuss the
results and operations of the Company during 1997.
Sincerely,
/s/ R.K. Richey
R. K. Richey
Chairman
/s/ C. B. Hudson
C. B. Hudson
Chief Operating Officer
<PAGE>
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1998
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To the Holders of Common Stock of
Torchmark Corporation
The annual meeting of stockholders of Torchmark Corporation will be held at
the executive offices of the Company, 2001 Third Avenue South, Birmingham,
Alabama 35233 on Thursday, April 23, 1998 at 10:00 a.m., Central Daylight
Time, for the following purposes:
(1) To elect the nominees shown in the proxy statement as directors to
serve for three year terms or until their successors have been duly elected
and qualified.
(2) To approve the Torchmark Corporation 1998 Stock Incentive Plan.
(3) To consider the appointment of independent auditors.
(4) To transact such other business as may properly come before the
meeting.
These matters are more fully discussed in the accompanying proxy statement.
The close of business on Thursday, March 5, 1998 has been fixed as the date
for determining the stockholders who are entitled to notice of and to vote at
the annual meeting. All stockholders, whether or not they expect to attend the
annual meeting in person, are requested to mark, date, sign, and return the
enclosed form of proxy in the accompanying envelope. Your proxy may be revoked
at any time before it is voted.
The annual meeting for which this notice is given may be adjourned from time
to time without further notice other than announcement at the meeting or any
adjournment thereof. Any business for which notice is hereby given may be
transacted at any such adjourned meeting.
By Order of the Board of Directors
/s/ Carol A. McCoy
Carol A. McCoy
Associate Counsel & Secretary
Birmingham, Alabama
March 27, 1998
<PAGE>
PROXY STATEMENT
SOLICITATION OF PROXIES
The Board of Directors of Torchmark Corporation (the "Company" or
"Torchmark") solicits your proxy in the form enclosed with this statement for
use at the annual meeting of stockholders to be held at the executive offices
of the Company, 2001 Third Avenue South, Birmingham, Alabama 35233 at 10:00
a.m., Central Daylight Time, on Thursday, April 23, 1998, and at any
adjournment of such meeting. R. K. Richey and C.B. Hudson are named as proxies
in the form and have been designated as directors' proxies by the Board of
Directors.
When the enclosed proxy/direction card is returned, properly executed, and
in time for the meeting, the shares represented thereby will be voted at the
meeting. All proxies will be voted in accordance with the instructions set
forth on the proxy/direction card, but if proxies which are executed and
returned do not specify a vote on the proposals considered, the proxies will
be voted FOR such proposals. Any stockholder giving a proxy has the right to
revoke it by giving written notice of revocation to the Secretary of the
Company (at the address set forth above) at any time before the proxy is
voted.
The card is considered to be voting instructions furnished to the respective
trustees of the Torchmark Corporation Savings and Investment Plan, the Waddell
& Reed Financial, Inc. Savings and Investment Plan, the Liberty National Life
Insurance Company 401(k) Plan and the Profit-Sharing and Retirement Plan of
Liberty National Life Insurance Company with respect to shares allocated to
individual accounts under such plans. To the extent that account information
is the same, participants in one or more of the plans who are also
shareholders of record will receive a single card representing all shares. If
a plan participant does not return a proxy/direction card to the Company, the
trustees of a plan in which shares are allocated to his or her individual
account will vote such shares in the same proportion as the total shares in
such plan for which directions have been received.
A simple majority vote of the holders of the issued and outstanding common
stock of the Company represented in person or by proxy at the stockholders
meeting is required to elect directors and approve all other matters put to a
vote of stockholders. Abstentions are considered as shares present and
entitled to vote and therefore have the same legal effect as a vote against a
matter presented at the meeting. Any shares regarding which a broker or
nominee does not have discretionary voting authority under applicable New York
Stock Exchange rules will be considered as shares not entitled to vote and
will therefore not be considered in the tabulation of the votes.
RECORD DATE AND VOTING STOCK
Each stockholder of record at the close of business on March 5, 1998 is
entitled to one vote for each share of common stock held on that date upon
each matter to be voted on by the stockholders at the meeting. At the close of
business on March 5, 1998, there were 140,286,468 shares of common capital
stock of the Company outstanding (not including 142,088,564 shares held by the
Company and its subsidiaries which are non-voting while so held). There is no
cumulative voting of the common stock.
1
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PRINCIPAL STOCKHOLDERS
The following table lists all persons known to be the beneficial owner of
more than five percent of the Company's outstanding common stock as of
December 31, 1997.
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS NUMBER OF SHARES(1) CLASS
---------------- ------------------- ----------
<S> <C> <C>
AMVESCAP PLC 9,225,730 6.6%
11 Devonshire Square
London EC2M 4YR
England
</TABLE>
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(1) All stock reported is held by holding companies (AVZ Inc., AIM Management
Group Inc., AMVESCAP Group Services, Inc., INVESCO, Inc. and INVESCO North
American Holdings, Inc.) and investment advisers (INVESCO Capital
Management, Inc. and INVESCO Funds Group, Inc.), which are subsidiaries of
AMVESCAP PLC. These entities share the voting and the dispositive power
over the shares and have disclaimed beneficial ownership of such stock.
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
The Company's By-laws provide that the number of directors shall be not less
than seven nor more than fifteen with the exact number to be fixed by the
Board of Directors. In March, 1998, upon the completion of the initial pubic
offering of Waddell & Reed Financial, Inc., Keith A. Tucker resigned as a
director of the Company. No one has been named by the Board of Directors to
serve for the remaining of Mr. Tucker's term and this director's position
currently remains vacant.
The Board of Directors proposes the election of Joseph M. Farley, C.B.
Hudson and Joseph L. Lanier, Jr. as directors, to hold office for a term of
three years, expiring at the close of the annual meeting of stockholders to be
held in 2001 or until their successors are elected and qualified. The current
terms of office of Messrs. Farley, Hudson and Lanier expire in 1998. The term
of office of each of the other five directors continues until the close of the
annual meeting of stockholders in the year shown in the biographical
information below.
Non-officer directors retire from the Board of Directors at the annual
meeting of stockholders which immediately follows their 75th birthday.
Directors who are officers of the Company retire from active service as
directors at the annual stockholders meeting immediately following their 65th
birthday, except that such a director may be elected annually to additional
one year terms not to continue beyond the annual meeting of stockholders
following his 75th birthday. The Chairman of the Executive Committee serves at
the pleasure of the Board on an annual basis until the annual meeting
following his 75th birthday.
If any of the nominees becomes unavailable for election, which is not
anticipated, the directors' proxies will vote for the election of such other
person as the Board of Directors may recommend unless the Board reduces the
number of directors.
The Board recommends that the stockholders vote FOR the nominees.
PROFILES OF DIRECTORS AND NOMINEES(/1/)
David L. Boren (age 57) has been a director of the Company since April,
1996. His term expires in 2000. He is a director of Waddell & Reed, Phillips
Petroleum Corporation, AMR Corporation and Texas Instruments, Inc. Principal
occupation: President of The University of Oklahoma, Norman, Oklahoma since
November, 1994. (United States Senator from Oklahoma, 1979-1994; Member,
Senate Finance Committee).
Joseph M. Farley (age 70) has been a director of the Company since 1980. He
is director of Waddell & Reed. Principal occupation: Of Counsel at Balch &
Bingham, Attorneys and Counselors, Birmingham, Alabama since November, 1992.
2
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Louis T. Hagopian (age 72) has been a director of the Company since 1988.
His term expires in 2000. He is a director of Waddell & Reed. Principal
occupation: Owner of Meadowbrook Enterprises, Darien, Connecticut, an
advertising and marketing consultancy, since January, 1990. Vice Chairman,
Partnership for a Drug-Free America, New York, New York.
C. B. Hudson (age 52) has been a director since 1986. He is a director of
Vesta Insurance Group, Inc. Principal occupation: Chairman and Chief Executive
Officer of the Company since March, 1998; Chairman of Liberty, United American
and Globe since October, 1991 and Chief Executive Officer of Liberty since
December, 1989, of United American since November, 1982 and of Globe since
February, 1986. (Chairman of Insurance Operations of the Company, January,
1993-March, 1998; President of Liberty, January, 1993-December, 1994).
Joseph L. Lanier, Jr. (age 66) has been a director of the Company since
1980. He is a director of Waddell & Reed, Dan River Incorporated, Flowers
Industries, Inc., Dimon Inc. and SunTrust Banks, Inc. Principal occupation:
Chairman of the Board and Chief Executive Officer of Dan River Incorporated,
Danville, Virginia, a textile manufacturer, since November, 1989.
Harold T. McCormick (age 69) has been a director since April, 1992. His term
expires in 2000. He is a director of Waddell & Reed. Principal occupation:
Chairman and Chief Executive Officer of Bay Point Yacht & Country Club, Panama
City, Florida, since March, 1988; Chairman, First Ireland Spirits Co., Ltd.,
Abbeyleix, Ireland, since February, 1996.
George J. Records (age 63) has been a director of the Company since April,
1993. His term expires in 1999. He is a director of Waddell & Reed. Principal
occupation: Chairman of Midland Financial Co., Oklahoma City, Oklahoma, a bank
and financial holding company for retail banking and mortgage operations,
since 1982.
R. K. Richey (age 71) has been a director of the Company since 1980. His
term expires in 1999. He is a director of Full House Resorts, Inc., Vesta
Insurance Group, Inc., Waddell & Reed, the United Group of Mutual Funds (17
funds), Waddell & Reed Funds, Inc. (6 funds) and TMK/United Funds, Inc. (10
funds). Principal occupation: Chairman of the Executive Committee of the Board
of Directors of the Company since March, 1998. (Chairman of Company, August,
1986-March, 1998 and Chief Executive Officer of the Company, December, 1984-
March, 1998).
- --------
(1) "Liberty", "Globe" and "United American" as used in this proxy statement
refer to Liberty National Life Insurance Company, Globe Life And Accident
Insurance Company and United American Insurance Company, respectively,
subsidiaries of the Company. "Waddell & Reed" as used in this proxy
statement refers to Waddell & Reed Financial, Inc., in which the Company
owns an approximate 64% interest.
3
<PAGE>
PROPOSAL NUMBER 2
DESCRIPTION OF THE 1998 TMK INCENTIVE PLAN
On March 2, 1998, the Board of Directors of the Company adopted the
Torchmark Corporation 1998 Stock Incentive Plan (the "1998 TMK Incentive
Plan"), subject to approval by the stockholders of the Company. The 1998 TMK
Incentive Plan replaces the restated Torchmark Corporation 1987 Stock
Incentive Plan, the Torchmark Corporation 1996 Executive Deferred Compensation
Stock Option Plan, and the 1996 Torchmark Non-Employee Director Stock Option
Plan, each of which will be frozen as of the effective date of the 1998 TMK
Incentive Plan. The full text of the 1998 TMK Incentive Plan, as amended and
restated, is attached hereto as Exhibit 1 and the following description is
qualified in its entirety by reference to Exhibit 1. Unless otherwise defined,
capitalized terms used herein shall have the same meaning as set forth in the
1998 TMK Incentive Plan.
The following is a description of the 1998 TMK Incentive Plan as submitted
for stockholder approval. Shareholder approval of the Plan is being sought in
order to comply with the requirements of the New York Stock Exchange and the
Internal Revenue Code Section 162(m) performance based compensation
requirements to insure the Company receives the maximum Federal income tax
deduction.
The 1998 TMK Incentive Plan authorizes the Compensation Committee to grant
Stock Options, Stock Appreciation Rights, Restricted Stock and/or Deferred
Stock awards to officers, other key employees and consultants of the Company
and its Subsidiaries and Affiliates through April 23, 2008. Each Non-Employee
Director of the Company is automatically granted a Non-Employee Director Stock
Option for 6,000 shares on the first day of each calendar year on which the
Company's common stock is traded on the New York Stock Exchange. Non-Employee
Directors may from time to time be awarded, in the sole discretion of the
Board, nonformula-based Non-Employee Director Stock Options in such amounts
and upon such terms as are determined by the Board.
A maximum of 14,000,000 shares of common stock of the Company are available
for awards under the terms of the 1998 TMK Incentive Plan, subject to
adjustment for future stock splits, stock dividends, mergers, reorganizations
and similar events. However, no person shall be granted Stock Options and/or
Stock Appreciation Rights on more than 800,000 shares in any calendar year.
Options, awards and other grants under the 1998 TMK Incentive Plan that expire
unexercised or are forfeited are generally not counted against the maximum
shares authorization. Presently, all of the shares remain available for awards
pursuant to the 1998 TMK Incentive Plan. The closing price of Company common
stock on the New York Stock Exchange on March 5, 1998 was $45.50 per share.
The 1998 TMK Incentive Plan permits the granting of Incentive Stock Options
and nonqualified stock Options. However, Incentive Stock Options may only be
granted to employees of the Company and its Subsidiaries. The Stock Option
term is set by the Compensation Committee but cannot exceed ten years in the
case of Incentive Stock Options. Automatic formula-based Non-Employee Director
Stock Options are nonqualified stock Options with a ten year and two day term.
Nonformula-based Non-Employee Director Stock Options are nonqualified Options
with the term specified by the Board at the time of grant. The exercise price
for any Stock Option and formula-based Non-Employee Director Stock Option will
be determined by the Compensation Committee but will never be less than 100%
of the market price of the stock on the date of grant. A nonformula-based Non-
Employee Director Stock Option may be awarded by the Board, in its discretion,
with an exercise price equal to the fair market value of the stock on the
grant date or at a discount not to exceed 25% of the market value on the grant
date. Options become exercisable, in full or in installments, at the time
determined by the Compensation Committee, which can also accelerate the
exercisability of Options. Generally, Stock Options and Non-Employee Director
Stock Options (both formula-based and discretionary) may not be exercised
prior to six months from the option grant date except in certain circumstances
more fully described below. The Compensation Committee may also substitute new
Stock Options for previously granted Stock Options including Options granted
under other plans applicable to the participant and previously granted Stock
Options having higher prices.
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<PAGE>
All shares purchased upon the exercise of a Stock Option or either type of
Non-Employee Director Stock Option must be paid for in full at the time of
purchase in cash or, if permitted by the Compensation Committee, by delivery
of unrestricted stock, restricted stock or deferred stock valued at Fair
Market Value on the exercise date. The Compensation Committee may allow
"pyramiding" in the exercise of Stock Options or the exercise and simultaneous
sale ("cashless exercise") of Stock Options and Non-Employee Director Stock
Options through a program operated in conjunction with local brokerages.
Stock Options, in the case of termination of employment or consulting status
by death or Normal Retirement, and Non-Employee Director Stock Options, in all
situations where Non-Employee Director status terminates, become immediately
exercisable upon the termination date and may thereafter be exercised during
the period that ends upon the expiration of the stated term of the option or
in the case of death, the expiration of the stated term of the option or the
first anniversary of the optionee's death, whichever is later.
The Compensation Committee is authorized to grant Non-Qualified Stock
Options that may be transferred during the optionee's lifetime in limited
circumstances with the express written consent of the Compensation Committee.
For Stock Options granted to employees and consultants, such transfers may
only be made to members of the Immediate Family of the optionee, a partnership
where such Immediate Family members are the only partners, or one or more
trusts for the benefit of such Immediate Family members, and without
consideration for the transfer. Any Stock Option not (i) granted pursuant to
any agreement expressly allowing the transfer of said Stock Option or (ii)
amended expressly to permit its transfer will not be transferable otherwise
than by will or by the laws of descent and distribution.
Optionees recognize income for purposes of Federal income tax immediately
upon the exercise of nonqualified Options, generally in an amount equal to the
option spread on the date of exercise, and the employer corporation generally
receives a deduction in the same amount, subject to limitations on
deductibility imposed by Sections 162(m) and 280G of the Internal Revenue
Code. Upon the exercise of Incentive Stock Options if the optionee holds the
shares received for the longer of one year from the date of the option
exercise or two years from the date of the option grant, the optionee
generally does not recognize income until the shares are actually sold (at
which time the difference between the sale proceeds and the exercise price is
taxed as capital gain) and the employer corporation does not receive any
deduction.
The 1998 TMK Incentive Plan provides that optionees may elect, subject to
the approval of the Compensation Committee, to have their tax withholding
obligations met by the reduction of the number of shares of stock or amount of
cash otherwise issuable or payable to such person.
Stock Appreciation Rights ("SARs") may be granted in conjunction with Stock
Options, entitling the holder upon exercise to receive an amount in any
combination of cash or unrestricted common stock of the Company (as determined
by the Compensation Committee), not greater in value than the increase in the
value of the shares covered by such right since the date of grant. Each SAR
will terminate upon the termination of the related option.
The Compensation Committee may also award non-transferable restricted shares
of common stock subject to such conditions and restrictions as it may
determine, which may include continued employment or the attainment of
performance goals. The Compensation Committee may permit the restrictions to
lapse in installments within the restricted period and may accelerate or waive
any restrictions at any time (including after termination of employment). A
recipient of restricted stock may be required to pay a purchase price per
share for such stock or may receive such restricted stock without any payment
in cash or property as determined by the Compensation Committee. If a
participant who holds shares of restricted stock terminates employment for any
reason other than Normal Retirement or death prior to the lapse or waiver of
the restrictions, the participant will forfeit the shares in exchange for the
amount, if any, that the participant paid for them.
Deferred stock awards may be made by the Compensation Committee under the
1998 TMK Incentive Plan. These non-transferable awards entitle the recipient
to receive shares without any payment in cash or property in one or more
installments at a future date or dates, as determined by the Compensation
Committee. Receipt of deferred stock may be conditioned on such matters as the
Compensation Committee shall determine, including
5
<PAGE>
continued employment or attainment of performance goals. All such rights will
generally terminate upon the participant's termination of employment. Any
deferral restrictions under a deferred stock award may be accelerated or
waived by the Compensation Committee at any time (including following
termination of employment).
The 1998 TMK Incentive Plan also permits Eligible Executives and Non-
Employee Directors to defer compensation into an interest-bearing account,
subject to a one-time opportunity to convert that year's compensation into
Options, granted either at market value or at a designated discount not to
exceed 25%, to acquire Company common stock. The Company's six current Non-
Employee Directors, any subsequently elected Non-Employee Directors and
Eligible Executives will be eligible to participate in this aspect of the 1998
TMK Incentive Plan. Each year, the Chairman of the Board or the Compensation
Committee or other designee will designate the Eligible Executives.
On or before December 31 of each year, each Non-Employee Director will
determine whether to receive all or a portion of his or her annual retainer
and Board and committee meeting fees for the following calendar year in cash
or to defer all or a portion (in 10% increments, but not less than 50%) of
such Annual Compensation (assuming maximum attendance at scheduled Board and
Committee meetings) into an interest-bearing account in the 1998 TMK Incentive
Plan. In the case of a newly elected Non-Employee Director, such determination
to defer compensation must be made within the 30-day period immediately
following election to the Board. On or before the last day of each calendar
quarter, an Eligible Executive may elect to receive all or a portion of his or
her salary for the next calendar quarter in cash or may irrevocably elect to
defer all or a portion, in 10% or $10,000 increments, of next quarter's salary
into an Interest Account for Salary under the Executive Deferral Plan by
delivering a Primary Election Form for Salary to the plan administrator. At
any time prior to December 31 of each year, an Eligible Executive may also
elect to receive all or a portion of his or her bonus for the current calendar
year in cash or may irrevocably elect to defer all or a portion (in 10% or
$10,000 increments) of such current calendar year bonus into an Interest
Account for Bonus under the Executive Deferral Plan by delivering a Primary
Election Form for Bonus to the plan administrator.
The determination to defer, if made, shall be indicated upon a Primary
Election Form by Non-Employee Directors, which shall specify the percentage of
compensation deferred and the method for payment of the interest-bearing
account balance (a lump sum or up to 120 monthly payments) to the participant
upon the earliest of (a) December 31 of the fifth year after the year with
respect to which the deferral was made, (b) the first Business Day of the
fourth month after the participant's death or (c) termination as a Non-
Employee Director or employee, for any reason other than by death.
At any time, but only once, during the calendar year immediately following
the end of the calendar year in which the Non-Employee Director filed a
Primary Election Form, a participating Non-Employee Director may elect to
convert the then current balance in his or her Interest Account for the
calendar year to which such Primary Election Form relates into Options to
acquire Company common stock. For example, if a Primary Election Form was
filed in December 1998 deferring Annual Compensation to be earned in 1999, the
Non-Employee Director may elect at any time during 1999 to convert such
deferred amount plus accrued interest to the conversion election date into
stock Options. The irrevocable election to receive Options as of this election
date, which is made on a Secondary Election Form, will specify the percentage
of such stock Options to be granted at an exercise price of 100% of the Fair
Market Value per Share on the Option Grant Date and the percentage of Options
to be granted at an exercise price of not less than 75% of the Fair Market
Value per Share (with the discount of up to 25% to be determined by the
Compensation Committee in its discretion). Non-Employee Directors may elect to
receive discounted stock Options, market value stock Options or a combination
of both. To the extent that a Non-Employee Director chooses to receive
discounted stock Options, he or she will receive Options on a smaller number
of shares with a lower exercise price per share while a decision to receive
market value Options will result a larger number of shares subject to option
with a higher exercise price per share.
6
<PAGE>
At any time, but only once, during the calendar year immediately following
the end of the calendar year with respect to which an Eligible Executive
deferred Salary into this plan, such Eligible Executive will have the right to
convert all of some of his or her Interest Account for Salary for the previous
year into Options in Company common stock by filing an irrevocable Secondary
Election Form for Salary. Also, at any time, but only one time, during the
twelve month period following the end of a calendar year with respect to which
an Eligible Executive has deferred Annual Bonus into the plan, such executive
shall have the right to convert all or some of his or her Interest Account for
Bonus for such previous year into Options in Company common stock by filing an
irrevocable Secondary Election Form for Bonus. The filing of such Secondary
Election Form for Salary or Secondary Election Form for Bonus will result in
receipt by the executive of Options as of the date of such filing. The
Secondary Election Form will specify the percentage of the balance of the
Interest Account to convert into Options, the percentage of Options to be
granted at an Exercise Price of 100% of the Fair Market Value per Share on the
Option Grant Date and the percentage of Options to be granted at an exercise
price of not less than 75% of the Fair Market Value per Share on the Option
Grant Date (with the discount of up to 25% to be determined by Compensation
Committee in its discretion). An Eligible Executive may elect to receive
market value stock Options, discounted stock Options or a combination of both.
To the extent that an Eligible Executive selects market value Options, he or
she will receive Options on a larger number of shares with a higher exercise
price than if discounted Options on fewer shares with a lower exercise price
were selected.
Options issued pursuant to the provisions relating to deferred compensation
will be Non-Qualified Stock Options. Based upon the participant's decision as
to the exercise price (discounted or market value) of the Options to be
received, the number of Shares subject to such option will be the whole number
of Shares equal to the dollar amount that the participant has elected to
convert to Options divided by the per share value of an Option on the Option
Grant Date, as determined using an option valuation model selected by the
Compensation Committee. Options are first exercisable, cumulatively, as to 10%
of the Shares on each of the first through tenth anniversaries of the Option
Grant Date. The term of the Option will be as specified by the Committee but
in no event may the period of time over which an Option may be exercised
exceed the longer of eleven years from the Option Grant Date or the thirtieth
day of the calendar year immediately following the year in which the executive
ceased to be a Covered Employee. In no event will death, retirement or other
termination of employment shorten the term of any outstanding Option. Options
will be subject to accelerated vesting and shall be immediately exercisable
upon the executive's death, normal retirement, a Change in Control of the
Company, as defined in the plan, or the unanimous decision of the Compensation
Committee to accelerate. Upon acceleration, an Option remains exercisable for
the remainder of its original term.
Deferred compensation options may be exercised in whole or in part. Shares
will be issued pursuant to the exercise of an Option only upon receipt by the
Company of payment in full in cash of the aggregate purchase price for the
Shares subject to the Option or portion thereof being exercised. The
Compensation Committee may determine the specific method of payment, including
permitting "cashless exercises" (exercise and simultaneous sale), and other
terms and provisions of Options in their sole discretion.
Deferred compensation options will not be assignable or transferable other
than by will or by the laws of descent and distribution; however, the
Compensation Committee may permit transfers that it, in its sole discretion,
concludes do not result in accelerated taxation and which are otherwise
appropriate and desirable taking into account any applicable securities laws.
Based upon current Federal tax laws, a participant will not recognize income
upon the making of a proper and timely deferral to the Interest Account nor
will income be recognized upon the conversion of such account balance to
Options. The participant will recognize income for purposes of Federal income
tax when the amount in his or her Interest Account is paid out or immediately
upon the exercise of the Options, generally in an amount equal to the option
spread on the date of exercise. The Company generally receives a corresponding
tax deduction when the participant recognizes income subject to any applicable
deductibility limitations of the Internal Revenue Code.
7
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The 1998 TMK Incentive Plan authorizes the Company, with the consent of the
Compensation Committee, to make or arrange for loans to employees in
connection with the exercise of Options or the payment of any purchase price
for restricted stock granted under the 1998 TMK Incentive Plan. The
Compensation Committee has full authority to decide whether to make such loans
and to determine the terms and provisions of any such loans including the
interest charged and repayment terms.
The 1998 TMK Incentive Plan provides that (1) in the event of a Change of
Control, unless otherwise determined by the Compensation Committee prior to
such Change of Control, or (2) to the extent expressly provided by the
Compensation Committee at or after the time of grant, in the event of a
Potential Change of Control, (i) all stock Options and related SARs will
become immediately exercisable, (ii) the restrictions and deferral limitations
applicable to outstanding restricted stock awards and deferred stock awards
will lapse and the shares in question will fully vest, and (iii) the value of
such Options and awards, to the extent determined by the Compensation
Committee, will be settled on the basis of the highest price paid (or offered)
during the preceding 60 day period, as determined by the Compensation
Committee. In the sole discretion of the Committee, such settlements may be
made in cash or in stock, as shall be necessary to effect the desired
accounting treatment for the transaction resulting in the Change of Control.
In addition, at any time prior to or after a Change of Control or a Potential
Change of Control, the Compensation Committee may accelerate awards and waive
conditions and restrictions on any awards to the extent it may determine
appropriate. Generally, if an optionee's employment or consultant status with
the Company or a director's status as a Non-Employee Director terminates by
reason of or within three months following a merger or other business
combination resulting in a Change of Control, the plan provides that such
optionee's stock Options will terminate upon the latest of (i) six months and
one day after the merger or business combination, (ii) ten business days
following the expiration of the period during which publication of financial
results covering at least thirty days of postmerger combined operations has
occurred, and (iii) the expiration of the stated term of such Stock Option or
Non-Employee Director Stock Option.
The Company will not be obligated to pay any amount that would be an Excess
Parachute Payment. If an Excess Parachute Payment would result from full
vesting upon a Change of Control or a Potential Change of Control, the Company
will reduce its payment to the minimum extent necessary to avoid an Excess
Parachute Payment. Subject to certain exceptions, the Company will pay the
participant a Gross-Up Payment if a court or an Internal Revenue Service
administrative hearing finally determines that any such payment (or portion
thereof) is an Excess Parachute Payment.
The table below reflects the options awarded in 1997 pursuant to the three
predecessor plans, the TMK Incentive Plan, the TMK Executive Deferral Plan and
the TMK Director Deferral Plan. No Stock Options have been awarded pursuant to
the proposed 1998 TMK Incentive Plan as of March 27, 1998. It is within the
sole discretion of the Compensation Committee whether Stock Options will be
granted to officers, consultants and key employees under this plan. It is
within the sole discretion of Non-Employee Directors and Eligible Executives
(if any executives have been so designated) whether to defer compensation and
convert such deferred compensation balances into Stock Options. Furthermore,
the Compensation Committee authorized a substantial restoration option program
in 1997 and may not determine to authorize comparable restoration option
programs in the future. Thus, the 1997 options shown below as awarded to
officers and employees may not be indicative of any future Stock Options which
might be granted to such persons and Stock Options awarded in 1997 upon the
conversion of 1996 deferred compensation interest account balances of Eligible
Executives and Non-Employee Directors may not be indicative of future
decisions to defer compensation and the making of elections to convert any
such deferred compensation to Stock Options. Non-Employee Directors annually
receive formula-based Non-Employee Director Stock Options for a fixed number
of shares pursuant to the provisions of the 1998 TMK Incentive Plan. Such
formula-based Non-Employee Director Stock Options are reflective of the number
of shares to be awarded in the future years. No nonformula-based Non-Employee
Director Stock Options were awarded in 1997.
8
<PAGE>
TORCHMARK CORPORATION 1998 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
R. K. Richey......................................................... 627,962
Chairman and CEO
Keith A. Tucker...................................................... 386,892
Vice Chairman
C. B. Hudson......................................................... 476,936
Chairman & CEO of Liberty, Globe and United American
Henry J. Hermann..................................................... 124,600
Vice President and Chief Investment Officer of W&R Financial
Bernard Rapoport..................................................... 36,500
Chairman and CEO of American Income
Executive Group...................................................... 1,652,890
Non-Executive Director Group......................................... 358,172
Non-Executive Officer Employee Group................................. 1,474,200
</TABLE>
The Board recommends that stockholders vote FOR the adoption of the 1998 TMK
Incentive Plan.
9
<PAGE>
PROPOSAL NUMBER 3
APPROVAL OF AUDITORS
A proposal to approve the appointment of the firm of KPMG Peat Marwick LLP
as the principal independent accountants of the Company to audit the financial
statements of the Company and its subsidiaries for the year ending December
31, 1998 will be presented to the stockholders at the annual meeting. The
audit committee of the Board recommends the appointment of the firm, which has
served as the principal independent accountants for the Company since 1981. A
representative of KPMG Peat Marwick LLP is expected to be present at the
meeting and available to respond to appropriate questions and, although the
firm has indicated that no statement will be made, an opportunity for a
statement will be provided.
If the stockholders do not approve the appointment of KPMG Peat Marwick LLP,
the selection of independent auditors will be reconsidered by the Board of
Directors.
The Board recommends that stockholders vote FOR the proposal.
OTHER BUSINESS
The directors know of no other matters which may properly be and are likely
to be brought before the meeting. If any other proper matters are brought
before the meeting, however, the persons named in the enclosed proxy, or in
the event no person is named, R. K. Richey and C.B. Hudson will vote in
accordance with their judgment on such matters.
10
<PAGE>
INFORMATION REGARDING DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
The following table shows certain information concerning each person deemed
to be an executive officer of the Company during 1997, except those persons
also serving as directors. Each executive officer is elected by the Board of
Directors of the Company or its subsidiaries annually and serves at the
pleasure of that board. There are no arrangements or understandings between
any executive officer and any other person pursuant to which the officer was
selected.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
AND BUSINESS EXPERIENCE
NAME AGE FOR THE PAST FIVE YEARS(1)
---- --- --------------------------
<C> <C> <S>
Keith A. Tucker............. 53 Vice Chairman of Company May, 1991-March 10,
1998.
Henry J. Herrmann........... 55 Vice President and Chief Investment Officer
of W&R Financial since April, 1993; Senior
Vice President and Chief Investment Officer
of Waddell & Reed since March, 1987;
President and Chief Investment Officer of
WRAMCO since September, 1987.
Bernard Rapoport............ 80 Chairman of the Board and Chief Executive
Officer of American Income since 1975.
(Chairman of the Board and Chief Executive
Officer of American Income Holding, Inc.
1988-1995).
</TABLE>
- --------
(1) Waddell & Reed Financial Services, Inc. ("W&R Financial"), Waddell & Reed
Asset Management Company ("WRAMCO") were wholly-owned subsidiaries of the
Company until March 10, 1998. American Income Life Insurance Company
("American Income") is a wholly-owned subsidiary of the Company.
11
<PAGE>
STOCK OWNERSHIP
The following table shows certain information about stock ownership of the
directors, director nominees and executive officers of the Company as of
December 31, 1997.
<TABLE>
<CAPTION>
COMPANY COMMON STOCK
OR OPTIONS BENEFICIALLY
OWNED AS OF
DECEMBER 31, 1997(1)
-------------------------
NAME DIRECTLY(2) INDIRECTLY(3)
---- ----------- -------------
<S> <C> <C>
David L. Boren....................................... 3,300 0
Norman, OK
Joseph M. Farley..................................... 123,810 4,800
Birmingham, AL
Louis T. Hagopian.................................... 121,008 0
Darien, CT
C. B. Hudson......................................... 1,557,329 23,539
Plano, TX
Joseph L. Lanier, Jr. ............................... 118,517 18,912
Lanett, AL
Harold T. McCormick ................................. 25,127 7,200
Panama City, FL
George J. Records.................................... 30,727 0
Oklahoma City, OK
R. K. Richey......................................... 1,385,341 1,003,169
Birmingham, AL
Keith A. Tucker...................................... 547,549 68,231
Kansas City, MO
Henry J. Herrmann.................................... 228,400 0
Overland Park, KS
Bernard Rapoport..................................... 58,200 0
Waco, TX
All Directors, Nominees and Executive Officers as a
group:(4)............................................ 4,199,308 1,125,851
</TABLE>
- --------
(1) No directors, director nominees or executive officers other than R. K.
Richey (1.65%) and C.B. Hudson (1.09%) beneficially own 1% or more of the
common stock of the Company.
(2) Includes: for David L. Boren, 2,000 shares; for Joseph Farley, 54,400
shares; for Joseph Lanier, 65,417 shares; for Louis Hagopian, 70,408
shares; for Harold McCormick, 25,127 shares; for George Records, 21,027
shares; for R. K. Richey, 613,198 shares; for C. B. Hudson, 597,949
shares; for Keith Tucker, 404,749 shares; for Henry Herrmann, 166,100
shares; for Bernard Rapoport, 51,500 shares and for all directors,
executive officers and nominees as a group, 2,071,975 shares, that are
subject to presently exercisable Company stock options.
(3) Indirect beneficial ownership includes shares (a) owned by the director,
executive officer or spouse as trustee of a trust or executor of an
estate, (b) held in a trust in which the director, executive officer or a
family member living in his home has a beneficial interest, (c) owned by
the spouse or a family member living in the director's, executive
officer's or nominee's home or (d) owned by the director or executive
officer in a personal corporation. Indirect beneficial ownership also
includes 11,539 Company shares, 23,848 Company shares, and 4,481 Company
shares held in the accounts of Messrs. Hudson, Richey, and Tucker,
respectively, in the Company or Waddell & Reed Savings and Investment
Plans.
Mr. Lanier disclaims beneficial ownership of 16,512 shares owned by his
spouse and 2,400 shares owned by his children. Mr. Farley disclaims 4,800
shares held as trustee of a church endowment fund.
(4) All directors, nominees and executive officers as a group, beneficially
own 3.68% of the common stock of the Company.
12
<PAGE>
During 1997, the Board of Directors met seven times. In 1997, all of the
directors attended more than 75% of the meetings of the Board and the
committees on which they served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has the following committees: audit, comprised in
1997 of Messrs. Farley, Hagopian and McCormick; compensation, comprised in
1997 of Messrs. Farley, Lanier, Hagopian and Records; finance, comprised in
1997 of Messrs. Farley, Lanier, McCormick and Records; and nominating,
comprised in 1997 of Messrs. Boren, Farley, Hagopian, Lanier, McCormick and
Records
The audit committee recommends the independent auditors to be selected by
the Board; discusses the scope of the proposed audit with the independent
auditors and considers the audit reports; discusses the implementation of the
auditors' recommendations with management; reviews the fees of the independent
auditors for audit and non-audit services; reviews the adequacy of the
Company's system of internal accounting controls; reviews, before publication
or issuance, the annual financial statement and any annual reports to be filed
with the Securities and Exchange Commission and periodically reviews pending
litigation. Additionally, the audit committee meets with the Company's
independent accountants and internal auditors both with and without management
being present. The audit committee met twice in 1997.
The compensation committee determines the compensation of senior management
of the Company and its subsidiaries and affiliates. Additionally, the
compensation committee administers the stock incentive plans of the Company.
The compensation committee met three times in 1997.
The finance committee serves as the pricing committee in connection with
capital financing by the Company. The finance committee did not meet in 1997.
The nominating committee reviews the qualifications of potential candidates
for the Board of Directors from whatever source received, reports its findings
to the Board and proposes nominations for Board membership for approval by the
Board of Directors and for submission to the stockholders for approval.
Recommendations of potential Board candidates may be directed to the
nominating committee in care of the Corporate Secretary of the Company at the
address stated herein. The nominating committee met once in 1997.
13
<PAGE>
COMPENSATION AND OTHER TRANSACTIONS WITH
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------- --------------------------------
AWARDS
---------------
(G)
(E) SECURITIES (I)
(A) (C) (D) OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND (B) SALARY BONUS COMPENSATION OPTIONS/SARS(4) COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(2) ($) (3) (#) ($)(5)
------------------ ---- --------- ------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
R.K. Richey 1997 1,000,008 0 187,526 627,962 26,872
Chairman and CEO 1996 1,166,688 0 315,592 200,000 25,058
1995 1,166,688 500,000 181,716 300,000 24,401
Keith A. Tucker 1997 800,016 0 386,892 6,619
Vice Chairman(1) 1996 700,008 0 130,000 6,114
1995 700,008 350,000 200,000 6,062
C.B. Hudson 1997 800,000 400,000 476,936 5,806
Chairman and Chief 1996 650,000 185,000 130,000 5,442
Executive Officer of 1995 650,000 250,000 200,000 5,412
Liberty, Globe and
United American
Henry J. Herrmann 1997 420,000 715,000 124,600 4,800
Vice President and 1996 420,000 392,000 36,000 4,500
Chief Investment 1995 320,000 357,000 44,000 4,500
Officer of W&R Financial
Bernard Rapoport 1997 525,000 100,000 10,351 36,500 9,600
Chairman and CEO of 1996 480,000 115,000 9,405 80,000 9,000
American Income 1995 480,000 175,269 7,695 40,000 9,000
</TABLE>
- --------
(1) At year end 1997, Mr. Tucker held 48,000 restricted shares valued at
$2,025,000 (based on a year end closing price of $42.1875 per share).
Restrictions on the 120,000 share award made pursuant to the Capital
Accumulation and Bonus Plan expire over a ten year period and 12,000
shares vest annually commencing May 1, 1992. Dividends on all these
restricted shares are paid directly to Mr. Tucker at the same rate as on
unrestricted shares. Mr. Tucker's restricted stock has been adjusted to
reflect the 100% stock dividend effected as a stock split in August, 1997.
(2) Messrs. Richey, Tucker and Hudson elected to defer $816,673, $425,000 and
$200,000, respectively, of their 1996 bonuses to the Torchmark Corporation
1996 Executive Deferred Compensation Stock Option Plan ("TMK Executive
Deferral Plan"). Messrs. Richey, Tucker and Herrmann elected to defer
$1,000,000, $400,000 and $100,000, respectively, of their 1997 bonuses to
the TMK Executive Deferral Plan.
(3) Includes perquisites for Mr. Richey--$121,102 in each of 1997 and 1996 as
premium equivalent for group term life insurance; $89,265 as additional
premiums paid for group term life insurance in 1995; and $57,728 in 1996
for 1996, $57,728 in 1996 for 1997 and $57,728 for 1995 as premiums for
personal life insurance. Includes for Mr. Rapoport--$10,351, $9,405 and
$7,695 paid to him from the American Income Life Insurance Company Exempt
Employees 401K Profit Sharing Plan ("American Income Profit Sharing Plan")
in 1997, 1996 and 1995, respectively.
(4) Messrs. Richey, Tucker, Hudson, Herrmann and Rapoport received stock
option grants in Company common stock pursuant to the Torchmark
Corporation 1987 Stock Incentive Plan ("TMK Incentive Plan") in 1995. In
1996, Messrs. Richey, Tucker, Hudson, Herrmann and Rapoport received stock
option grants of 200,000, 130,000, 130,000, 36,000 and 80,000 shares,
respectively, pursuant to the TMK Incentive Plan. On January 31, 1997,
Messrs. Richey, Tucker and Hudson elected to convert all 1996 bonus
amounts plus accrued interest of $4,703 $2,447 and $1,151, respectively,
held in the TMK Executive Deferral Plan, subject to shareholder approval,
to stock options of 314,162, 163,492 and 76,936 shares, respectively. In
1997, Messrs. Richey, Tucker, Hudson, Herrmann and Rapoport elected to
participate in a program under the TMK Incentive Plan whereby they
exercised existing stock options and received restoration options for
14
<PAGE>
313,800 shares, 223,400 shares, 399,900 shares, 124,600 shares and 11,500
shares, respectively. Mr. Rapoport also was awarded options pursuant to the
TMK Incentive Plan on an additional 25,000 shares in 1997. Mr. Hudson also
was awarded options on 100 additional shares in 1997 and on 99,900 shares
on January 2, 1998 under the TMK Incentive Plan. All shares reflected as
securities underlying options in 1996 and 1995 have been adjusted to
reflect the 100% stock dividend effected as a stock split in August 1997.
(5) Includes Company contributions to Torchmark Corporation Savings and
Investment Plan, a funded, qualified defined contribution plan, for each
of Messrs. Richey, Tucker and Hudson of $4,800.00 in 1997 and $4,500.00 in
1996 and 1995. Includes in 1997, 1996 and 1995, interest only on prior
contributions to the Torchmark Corporation Supplemental Savings and
Investment Plan, an unfunded, non-qualified defined contribution plan, for
Mr. Richey of $21,951.86, $20,557.75 and $19,901.08, for Mr. Tucker of
$1,723.24, $1,613.82 and $1,562.26 and for Mr. Hudson of $1,006.00,
$942.11 and $912.03, respectively. Includes in 1997 for Messrs. Richey and
Tucker, interest on deferred compensation in the Restated Deferred
Compensation Plan for Directors, Advisory Directors, Directors Emeritus,
and Officers, as amended, of $120.00 and $96.00, respectively. Includes
for Mr. Herrmann, employer company contributions to the Savings and
Investment Plan, a funded, qualified defined contribution plan, of
$4,800.00 in 1996 and of $4,500 in 1996 and 1995. Includes for Mr.
Rapoport, employer company contributions to the American Income Profit
Sharing Plan, a funded, qualified defined contribution plan, of $9,600.00
in 1997 and $9,000.00 in 1996 and 1995, respectively.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ---------------------------------------------------------------------- -----------------------------------
NUMBER OF
SECURITIES % OF EXERCISE
UNDERLYING TOTAL OPTIONS OR
OPTIONS GRANTED TO BASE
GRANTED(1) EMPLOYEES IN PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
(A) (B) (C) (2) (D) (E) 0% ($) (F) (G)
- ----------------------- ---------- ------------- --------- ---------- ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Company Common
Shareholders(3) N/A N/A N/A N/A 0 3,722,011,521 9,432,299,643
R.K. Richey 314,162 56.65% 25.875 1-31-08 0 5,112,251 12,955,436
313,800 11.04% 39.125 9-27-07 0 7,721,211 19,567,048
CEO gain on 1997 grants
as % of All Company
Common Shareholders
gain N/A N/A N/A N/A N/A 34.5% 34.5%
Keith A. Tucker 163,492 29.48% 25.875 1-31-08 0 2,660,449 6,742,095
223,400 7.86% 39.125 9-27-07 0 5,496,872 13,930,142
C.B. Hudson 76,936 13.87% 25.875 1-31-08 0 1,251,953 3,172,692
399,900 14.07% 39.125 9-27-07 0 9,839,746 24,935,827
100 .004% 38.875 12-26-07 0 2,448 6,196
Henry J. Herrmann 124,600 4.38% 39.125 9-27-07 0 3,065,847 7,769,452
Bernard Rapoport 11,500 .40% 39.125 9-27-07 0 282,963 717,084
25,000 .88% 38.875 12-26-07 0 611,207 1,548,918
</TABLE>
- --------
(1) Options expiring 1-31-08 are non-qualified stock options acquired pursuant
to elections to convert 1996 interest bearing deferred compensation
accounts in the TMK Executive Deferral Plan to options in Company common
stock. These options are granted with an eleven year term, an exercise
price equal to the closing price of Company common stock on the date of
the conversion election (the grant date) and vest 1/10 per year commencing
on the first anniversary of the grant date. Options expiring 9-27-07 are
non-qualified stock options granted in a restoration option program under
the TMK Incentive Plan with a ten year and two day term at an exercise
price equal to the closing price of Company common stock on the grant
date. As restoration options issued in connection with the exercise of
fully vested options, they are fully exercisable as of their 9-25-97 grant
date. Options expiring 12-26-07 are non-qualified stock options granted in
Company common stock pursuant to the TMK Incentive Plan with a ten year
and two day term at an exercise price equal to the closing price of the
Company's common stock on the grant date. Such options are not exercisable
during the first two years after the grant date and become first
exercisable on 50% of the shares two years after the grant date and on the
remaining 50% of the shares three years after the grant date.
15
<PAGE>
(2) Percentages shown for Messrs. Richey, Tucker and Hudson are shown
separately for grants under the TMK Executive Deferral Plan (314,162
shares, 163,492 shares and 76,936 shares, respectively) and for grants
under the TMK Incentive Plan (313,800 shares, 223,400 shares and totaling
400,000 shares, respectively. Messrs Herrmann and Rapoport only received
grants pursuant to the TMK Incentive Plan.
(3) Calculated based upon 140,286,468 publicly-held Torchmark common shares
outstanding as of December 31, 1997 (excluding treasury shares and stock
held by subsidiaries which is treated as treasury stock) and the December
31, 1997 stock price of $42.1875.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
- -----------------------------------------------------------------------------------------------------
(C) (D) (E)
(B) VALUE NUMBER OF SECURITIES VALUE OF UNEXERCISED
(A) SHARES ACQUIRED REALIZED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME ON EXERCISE (#)(1) ($) OPTIONS AT FY-END (#) AT FY-END ($)
----- ------------------ ---------- ------------------------- -------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richey, R.K. 524,460 11,571,332 581,782 664,162 6,575,846 11,662,278
Tucker, Keith A. 357,224 7,068,164 388,400 393,492 4,371,350 6,967,588
Hudson, C.B. 774,132 19,235,630 590,256 307,036 5,164,107 5,555,974
Herrmann, Henry J. 198,200 4,204,512 166,100 58,000 1,323,744 1,074,250
Rapoport, Bernard 20,000 442,500 51,500 125,000 948,969 1,877,813
</TABLE>
- --------
(1) Of the shares shown as acquired on exercise, Messrs. Richey, Tucker,
Hudson, Herrman, and Rapoport retained 166,400, 106,500, 289,900, 57,000
and 6,700 shares, respectively, after cashless option exercises.
PENSION PLANS
Torchmark Corporation Pension Plan; Waddell & Reed Retirement Income
Plan. These plans are non-contributory pension plans which cover all eligible
employees who are 21 years of age or older and have one or more years of
credited service. The benefits at age 65 under the Torchmark Pension Plan are
determined by multiplying the average of the participant's earnings in the
five consecutive years in which they were highest during the ten years before
the participant's retirement by a percentage equal to 1% for each of the
participant's first 40 years of credited service plus 2% for each year of
credited service up to 20 years after the participant's 45th birthday and then
reducing that result by a Social Security offset and by other benefits from
certain other plans of affiliates. Benefits under the Waddell & Reed
Retirement Income Plan are determined by multiplying the average of the
participant's earnings in the five consecutive years in which they were
highest during the last ten years before the participant's retirement by a
percentage equal to 2% for each year of credited service up to 30 years and by
1% for each year of credited service for the next 10 years and then reducing
that result by a Social Security offset and by other benefits from certain
other plans of affiliates. Earnings for purposes of the Torchmark Pension Plan
include compensation paid by subsidiaries and affiliates, and do not include
commissions, directors' fees, expense reimbursements, employer contributions
to retirement plans, deferred compensation, or any amounts in excess of
$160,000 (as adjusted). Earnings for purposes of the Waddell & Reed Retirement
Income Plan do not include bonuses or commissions (other than for Regional
Vice Presidents, Division Managers and District Managers), directors' fees,
expense reimbursements, employer contributions to retirement plans, deferred
compensation or any amounts in excess of $160,000 per year (as adjusted).
Benefits under the Torchmark Pension Plan and the Waddell & Reed Retirement
Income Plan vest 100% at five years. Upon the participant's retirement,
benefits under both plans are payable as an annuity or in a lump sum. In 1997,
covered compensation was $160,000 for Messrs. Richey, Tucker, and Hudson under
the Torchmark Pension Plan and for Mr. Herrmann under the Waddell & Reed
Retirement Income Plan.
Vested benefits under the non-qualified Torchmark Supplemental Retirement
Plan, in which Messrs. Richey, Tucker and Hudson have participated, were
frozen as of December 31, 1994 and no additional benefits accrue after that
date pursuant to the supplementary retirement plan. Mr. Herrmann does not
participate in any supplementary pension plan.
Messrs. Richey, Hudson and Tucker have 34 years, 23 years and six years of
credited service under the Torchmark Pension Plan, respectively. Mr. Herrmann
is covered under the Waddell & Reed Retirement Income Plan and has 24 years of
credited service thereunder. Mr. Rapoport is not covered by any pension plan.
16
<PAGE>
The following tables show the estimated annual benefits payable under the
Torchmark Pension Plan along with its supplementary retirement plan (which was
frozen in 1994) and under the Waddell & Reed Retirement Income Plan upon
retirement of participants with varying final average earnings and years of
service. Primarily because of the termination of the Torchmark Supplemental
Retirement Plan, the benefits shown below as payable pursuant to the Torchmark
Pension and Supplemental Retirement Plans may in most cases exceed the actual
amounts paid. The benefits shown are offset as described above and the amounts
are calculated on the basis of payments for the life of a participant who is
65 years of age.
TORCHMARK PENSION AND SUPPLEMENTAL RETIREMENT PLANS*
<TABLE>
<CAPTION>
FINAL YEARS OF CREDITED SERVICE
AVERAGE -----------------------------------------------------------------
EARNINGS 15 20 25 30 35
-------- ------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$1,000,000 450,000 600,000 650,000 700,000 750,000
1,200,000 540,000 720,000 780,000 840,000 900,000
1,400,000 630,000 840,000 910,000 980,000 1,050,000
1,600,000 720,000 960,000 1,040,000 1,120,000 1,200,000
</TABLE>
- --------
* Benefits paid under a qualified defined benefit plan are limited by law in
1997 to $125,000 per year. The balance of the benefit payments shown above
thus comes from the Supplemental Retirement Plan. Because benefit accruals
under the Supplemental Retirement Plan ceased as of December 31, 1994, each
of Messrs. Richey, Tucker and Hudson have three years less of credited
service under the Supplemental Retirement Plan than under the Torchmark
Pension Plan.
UNITED MANAGEMENT RETIREMENT INCOME PLAN*
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000 $ 60,000 $ 80,000 $100,000 $120,000 $120,000
250,000 75,000 100,000 120,000 120,000 120,000
300,000 90,000 120,000 120,000 120,000 120,000
350,000 105,000 120,000 120,000 120,000 120,000
400,000 120,000 120,000 120,000 120,000 120,000
500,000 120,000 120,000 120,000 120,000 120,000
</TABLE>
- --------
*Benefits paid under a qualified defined benefit plan which does not operate
in conjunction with a defined benefit supplementary or excess pension award
plan are limited by law in 1997 to $125,000 per year. The United Management
Retirement Plan has no supplementary or excess pension award plan.
Waddell & Reed, Inc. Career Field Retirement Plan. Until January 1, 1973,
W&R employees participated in the Waddell & Reed, Inc. Career Field Retirement
Plan (the "Career Field Retirement Plan"). Under this plan, W&R contributed
annually up to 10% of its profits less forfeitures, which were allocated to
the participants on the basis of their compensation. Voluntary employee
contributions were permitted under the plan but not required. Since January 1,
1973, no new participants have been admitted to the plan, and participants and
the employer make no further contributions. All participants are fully vested.
Upon the participant's retirement, termination of employment, disability,
death or reaching age 65, his account is used to purchase an annuity or is
paid in a lump sum. Mr. Herrmann is covered under the Career Field Retirement
Plan for his service while employed by W&R prior to 1973. Benefits paid under
this plan do not offset benefits paid under any other pension plan.
PAYMENTS TO DIRECTORS
Directors of the Company are currently compensated on the following basis:
(1) Directors who are not officers or employees of the Company or a
subsidiary of the Company ("Outside Directors") receive a fee of $1,000 for
each attended Board meeting, a fee of $500 for each attended Board
committee meeting, and an annual retainer of $40,000, payable each January
for the entire
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year. They do not receive fees for the execution of written consents in
lieu of Board meetings and Board committee meetings. They receive an
allowance for their travel and lodging expenses if they do not live in the
area where the meeting is held.
Each Outside Director is automatically awarded annually non-qualified
stock options on 6,000 shares of Company common stock on the first day of
each calendar year in which stock is traded on the New York Stock Exchange.
The entire Board may, for calendar years commencing with 1996, award non-
qualified stock options on a non-formula basis to all or such individual
Outside Directors as it shall select. Such options may be awarded at such
times and for such number of shares as the Board in its discretion
determines. The price of such options may be fixed by the Board at a
discount not to exceed 25% of the fair market value on the grant date or at
the fair market value of the stock on the grant date.
Commencing with 1997 retainer and meeting and committee fees (assuming
attendance at all scheduled meetings), Outside Directors may annually elect
to make deferrals of such compensation for the following year into the
interest-bearing account of the Non-Employee Director Plan and subsequently
elect to convert such balances to stock options with either fair market
value or discounted exercise prices. In 1997, Messrs. Hagopian, Lanier,
McCormick, and Records chose to make such deferrals of 1998 compensation,
which were converted into options on 10,319, 9,751, 11,114, and 9,721
shares, respectively, in 1998.
(2) Beginning in January, 1993, directors who are officers or employees
of the Company or a subsidiary of the Company waived receipt of all fees
for attending Board meetings. They do not receive fees for the execution of
written consents in lieu of Board meetings. They also do not receive a fee
for attending Board committee meetings or an annual retainer. They are
reimbursed their travel and lodging expenses, if any.
Each person who has retired as a director and who is not currently serving
as an advisory director may receive a retirement benefit payable annually, in
an amount equal to $200 a year for each year of service as a director or
advisory director up to 25 years, but not less than $1,200 a year. In
determining this benefit, the number of years of service may include years as
a director of a subsidiary of the Company if the payment for such years by the
Company is in place of a payment which would otherwise be made by the
subsidiary.
OTHER TRANSACTIONS
Robert Richey, Vice President of a Company subsidiary and son of R. K.
Richey, received compensation and fringe benefits in 1997 of $125,699.
In 1997, the Company paid Cavendish Services, Ltd. $252,317 for services
relating to foreign currency trading and data services. Director Harold
McCormick holds a limited partnership interest in Cavendish Services, Ltd.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors, its
executive officers, and any persons holding more than ten percent of the
Company's common stock are required to report their initial ownership of the
Company's common stock and other equity securities and any subsequent changes
in that ownership to the Securities and Exchange Commission and the New York
Stock Exchange and to submit copies of these reports to the Company. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports
were required, during the fiscal year ended December 31, 1997, all required
Section 16(a) filings applicable to its executive officers, directors, and
greater than ten percent beneficial owners were timely and correctly made
except that James L. Sedgwick filed Form 3 after its due date and Mark S.
McAndrew, Michael K. Fagin, Spencer H. Stone and Carol A. McCoy reported on
Form 5 share balances in Company employee benefit plans inadvertently omitted
from Forms 3 of 5,069 shares, 263 shares, 1,241 shares and 59 shares,
respectively.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation of senior executives of Torchmark and its subsidiaries and
affiliates is determined by the Compensation Committee of the Board of
Directors (the "Committee"). The Committee, comprised entirely of outside
directors, meets to fix annual salaries in advance and bonuses for the current
year of executives earning more than $150,000, to review annual goals and
reward outstanding annual performance of executives, to grant stock options
pursuant to the 1987 TMK Incentive Plan and to determine senior executives
eligible to participate in the TMK Executive Deferral Plan.
In 1993, the Committee employed an unaffiliated executive compensation
consulting firm, Towers Perrin, to assist it in reviewing executive
compensation policies and the payment of bonuses to executives. In 1997, the
Committee utilized an unaffiliated executive compensation consultant from KPMG
Peat Marwick LLP to review certain of its executive compensation policies and
practices. The Committee met on several occasions in 1997 with the Chairman to
discuss the salaries and bonuses of the five most highly compensated
executives, including the Chairman. Also, the Committee received written
reports from certain of the other four most highly compensated executives of
the Company discussing compensation of persons reporting to that executive.
COMPENSATION PRINCIPLES
The business philosophy of the Company focuses on maintenance and
improvement of insurance operating margins and other operating margins through
the efficient management of assets and control of costs. The Company's
executive compensation program is based on principles which align compensation
with this business philosophy, company values and management initiative. The
program seeks to attract and retain key executives necessary to the long-term
success of the Company, to mesh compensation with both annual and long-term
strategic plans and goals and to reward executives for their efforts in the
continued growth and success of the Company. Annual goals for executive
compensation focus on insurance operating income for the insurance
subsidiaries and operating income in other Company subsidiaries.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of various payments and
benefits. Some types of compensation payments and their deductibility depend
upon the timing of an executive's vesting or exercise of previously granted
rights. Further, interpretations of and changes in the tax laws and other
factors beyond the Committee's control also affect the deductibility of
compensation. For these and other reasons, the Committee will not necessarily
and in all circumstances limit executive compensation to that deductible under
Section 162(m). The Committee will consider various alternatives to preserving
the deductibility of compensation payments and benefits to the extent
reasonably practicable and to the extent consistent with its other
compensation objectives.
SALARY AND BONUS SYSTEM
For some time the Company has used a system of salaries and bonuses to
reward executives of the Company and its subsidiaries for performance relative
to annual goals. These goals focus on insurance operating income for the
insurance subsidiaries and operating income for the other subsidiaries and
vary by operating company based upon that particular company's current
position. Annually, the Committee, in consultation with the Company's Chairman
and Chief Executive Officer and with the Chief Executive Officer of certain
operating subsidiaries, reviews each subsidiary's performance relative to the
goals and fixes salaries and bonuses for that operating subsidiary's
executives. The degree to which these executives have met their particular
subsidiary's goals in turn determines the amount of the bonus, if any, and
whether senior executive officers of the Company receive salary increases.
Such executives do not receive any cost of living salary adjustments.
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STOCK OPTION PROGRAM
The Company began awarding stock options to executives and key employees in
1984. The option plan under which options in Company common stock are
currently awarded was adopted in 1987 and has as its stated purpose attracting
and retaining employees who contribute to the Company's, its subsidiaries' and
affiliates' success and enabling those persons to participate in that long-
term success and growth through an equity interest in the Company. To this
end, the Committee, as administrator of the TMK Incentive Plan, grants non-
qualified stock options to officers and key employees at the market value of
the Company's common stock on the date of the grant, the size of the grant
being based generally on the current compensation of such officers or key
employees. The five most highly compensated executive officers are paid
salaries and bonuses commensurate with the level of their responsibilities and
therefore they typically are awarded a larger number of option shares than
other employees with lesser levels of compensation and responsibility. In
1997, for the five most highly compensated executive officers, the options
granted were in proportion to current compensation adjusted by a subjective
factor ranging from 6% to 63%.
Decisions regarding stock option grants are made annually and the number of
options previously awarded to an individual executive officer is not a
substantial consideration in determining the amount of options granted to that
officer in the future. Once an officer has been awarded options and becomes a
part of the stock option program, he or she will typically continue to receive
from year to year stock options related to salary.
Stock options may be exercised using cash or previously-owned stock for
payment or through a simultaneous exercise and sale program. Such stock
options become first exercisable to the extent of 50% of the shares on the
second anniversary of the option grant date and on the remaining 50% of the
shares on the third anniversary of the option grant date.
DEFERRED COMPENSATION OPTION PROGRAM
The Company implemented, upon receiving shareholder approval in 1997, a
executive deferred compensation stock option plan. Pursuant to their authority
under this plan, the Committee designated Messrs. Richey, Tucker and Hudson
eligible to participate in the plan in 1997. The plan permits eligible
executives to defer salary and/or bonus on an annual basis into an interest-
bearing account and subsequently on a one time basis within a limited time
period to elect to convert all or a portion of their deferred compensation
into Company stock options granted at Market Value or at a discount not to
exceed 25%.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
R. K. Richey, was deeply involved in the formation of the Company in 1980
and has served as one of its principal executives and a director since that
time. He assumed the responsibilities of Chief Executive Officer of the
Company on January 1, 1985. Since 1980, the market value of Torchmark has
increased over 15 times, at over $5.9 billion, and the number of outstanding
shares has been reduced by 38%. The market price per share of Company stock
has increased 24.7 times since 1980. Cash dividends during the same period
increased at a 10.9% compound growth rate and the market capitalization of the
Company has compounded at 17.4%.
The Committee, in determining Mr. Richey's bonus for 1997, focused primarily
on operating earnings per share and return on equity, while giving
consideration to Mr. Richey's ability and determination as well as his vision
and leadership in continuing to enhance the long term value of the Company.
In 1997, there was 18% growth in operating earnings per share resulting in
an earnings per share bonus component of 50% and return on equity exceeded 20%
resulting in a return on equity bonus component of 50%, making Mr. Richey
eligible pursuant to the formula for the maximum bonus on his base salary. The
Committee thus awarded him a bonus of $1,000,000 for 1997.
During 1993, the Committee developed, in conjunction with its consultant
Towers Perrin, and adopted a precise bonus formula for Mr. Richey as Chairman
and Chief Executive Officer of the Company based upon the combination of
growth in earnings per share and in return on equity adjusted for certain
items, including, but not limited to, changes in income tax rates, guaranty
fund assessments and punitive damage awards.
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Mr. Richey's base salary and any stock option award to him are not directly
related to specific measures of corporate performance. His base salary is
determined by his tenure of service with the Company and its subsidiaries and
affiliates, his current job responsibilities and the progression of
responsibilities and positions he has assumed in the Company over the course
of his career. Mr. Richey's total cash compensation has been capped by the
Committee at $2,000,000, including a specific cap on his base salary and an
effective cap on any bonus he may be awarded.
Any stock options awarded to Mr. Richey are also not directly tied to
specific measures of corporate performance. Such award is generally based on
his current compensation. To the extent that his current compensation is
related to base salary, there is no tie to specific measures of corporate
performance. To the extent that his current compensation has a bonus
component, any stock option award to him maybe indirectly impacted by measures
of corporate performance.
In 1997, all directors and active employees of the Company and its
subsidiaries who held of exercisable Company stock options were offered the
opportunity to participate in a program where such options were exercised and
the optionee received Company shares and a restoration option. Mr. Richey
participated in this program and received such a restoration option.
In 1996, Mr. Richey elected to defer all of his 1996 bonus into the TMK
Executive Deferral Plan. In 1997, Mr. Richey elected to convert his entire
interest account balance in that plan into Company stock options granted at
market value. In 1997, Mr. Richey also elected to defer all of any 1997 bonus
he received into the TMK Executive Deferral Plan.
COMPENSATION OF OTHER EXECUTIVES
The other executive officers listed in the Summary Compensation Table in the
Proxy Statement are compensated by salary and a bonus based upon growth in
insurance operating income and/or operating income of the various Company
subsidiaries, affiliates or areas of operation for which each is responsible.
Mr. Tucker's 1997 bonus compensation was based upon the combined insurance
operating income of United Investors Life Insurance Company and the operating
income of the Waddell & Reed, Inc. group of companies, entities for which he
is responsible. Mr. Hudson is in charge of all insurance operations of the
Company except United Investors Life. Messrs. Tucker and Hudson were eligible
for 1997 bonuses based upon a formula providing for 5% of their Committee
approved salary for each 1% growth in insurance operating income and/or
operating income, subject to a cap of 50% of salary. Additionally, the
Committee, in its sole discretion could award Messrs. Hudson and Tucker a
bonus of up to 20% of 1997 salary. The total of the discretionary bonus and
the formula bonus generally may not exceed 60% of the current year base
salary.
Combined insurance operating income and operating income of the companies
for which Mr. Tucker is responsible increased 10% in 1997 entitling him to a
maximum formula bonus of 50% of base salary or $400,000, which was the bonus
granted to Mr. Tucker by the Committee.
Insurance operating income before administrative expense for 1997 in Mr.
Hudson's areas of supervision grew 6% resulting in a bonus of 30% of base
salary or $240,000. A discretionary bonus of 20% of base salary was granted to
Mr. Hudson by the Committee, resulting in a total bonus of $400,000 for 1997.
Mr. Herrmann is the Chief Investment Officer of the Waddell & Reed group of
companies. Mr. Herrmann's bonus is based on meeting earnings and asset
retention targets set by the Committee. In 1997, Mr. Herrmann's bonus was
$815,000.
Mr. Rapoport has served for a number of years as the Chairman of the Board
and Chief Executive Officer of American Income. Mr. Rapoport's bonus is
subjectively determined based upon a number of factors, including growth in
earnings and growth in insurance operating income of American Income.
COMPENSATION AND COMPANY PERFORMANCE
As indicated above, the annual aspect of executive compensation at Torchmark
centers on increases in insurance operating income or operating income. Over
the last three years insurance operating income has
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increased 30.5% from $312 million in 1994 to $407 million in 1997. Operating
income at the non-insurance subsidiaries rose from $92 million in 1994 to $121
million in 1997, an increase of 31.8%. Insurance operating income comprised
83.4%, 76.9% and 79.8% of the Company's pre-tax earnings for 1995, 1996 and
1997, respectively, while operating income at the non-insurance subsidiaries
was 25.9%, 22.2% and 23.7%, respectively, of the Company's pre-tax earnings
for the same periods.
Mr. Richey's salary and bonus compensation has been capped by the Committee
at $2 million. The above performance resulted in compensation increases to
certain of the Company's other executives shown in the Summary Compensation
Table. Excluding Mr. Richey, cash compensation paid to the other persons
listed in the Summary Compensation Table on page 14 as a group increased 28%
from 1996 to 1997, because of salary increases to Messrs. Tucker and Rapoport
and bonus increases to Messrs. Hudson and Herrmann.
The long-term portion of the executive compensation program centers on stock
value through the granting of stock options. Over the last three fiscal years
earnings per share from continuing operations excluding realized investment
gains and the related acquisition cost adjustment have increased 32% and rose
from $274 million in 1994 to $362 million in 1997.
George J. Records, Chairman
Joseph M. Farley
Louis T. Hagopian
Joseph L. Lanier, Jr.
The foregoing Compensation Committee Report on Executive Compensation shall
not be deemed "filed" with the Securities and Exchange Commission or subject
to the liabilities of Section 18 of the Securities Exchange Act of 1934.
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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG TORCHMARK CORPORATION, THE S&P 500 INDEX
AND THE S&P INSURANCE (LIFE/HEALTH) INDEX
[GRAPH APPEARS HERE]
TORCHMARK CORPORATION S&P 500 S&P INSURANCE (LIFE/HEALTH)
12/92 $100 $100 $100
12/93 80 110 101
12/94 64 112 84
12/95 85 153 121
12/96 98 189 147
12/97 167 252 184
*$100 INVESTED ON 12/31/92 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
The line graph shown above compares the yearly percentage change in
Torchmark's cumulative total return on its common stock with the cumulative
total returns of the Standard and Poor's 500 Stock Index ("S&P 500") and the
Standard and Poor's Insurance (Life/Health) Index ("S&P Insurance
(Life/Health)"). Torchmark is one of the companies whose stock is included
within both the S&P 500 and the S&P Insurance (Life/Health). The graph
reflects $100 invested on December 31, 1992 in each of Torchmark stock and the
two indices with all dividends being reinvested.
Information for graph produced by Research Data Group.
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MISCELLANEOUS INFORMATION
PROPOSALS OF STOCKHOLDERS
In order for a proposal by a stockholder of the Company to be eligible to be
included in the proxy statement and proxy form for the annual meeting of
stockholders in 1999, the proposal must be received by the Company at its home
office, 2001 Third Avenue South, Birmingham, Alabama 35233, on or before
November 25, 1998.
GENERAL
The cost of this solicitation of proxies will be borne by the Company. The
Company will request certain banking institutions, brokerage firms,
custodians, trustees, nominees, and fiduciaries to forward solicitation
material to the beneficial owners of shares of the Company held of record by
such persons, and the Company will reimburse reasonable forwarding expenses.
THE ANNUAL REPORT OF THE COMPANY FOR 1997, WHICH ACCOMPANIES THIS PROXY
STATEMENT, INCLUDES A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1997 AND THE FINANCIAL STATEMENTS AND SCHEDULES THERETO. UPON REQUEST AND
PAYMENT OF THE COST OF REPRODUCTION, THE EXHIBITS TO THE FORM 10-K WILL BE
FURNISHED. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO INVESTOR RELATIONS
DEPARTMENT, TORCHMARK CORPORATION AT ITS ADDRESS STATED HEREIN.
By Order of the Board of Directors
/s/ Carol A. McCoy
Carol A. McCoy
Associate Counsel & Secretary
March 27, 1998
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TORCHMARK CORPORATION
1998 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the Torchmark Corporation 1998 Stock Incentive Plan
(the "Plan"). The purpose of the Plan is to enable Torchmark Corporation (the
"Company") and its Subsidiaries to attract and retain employees, consultants
and directors who contribute to the Company's success by their ability,
ingenuity and industry, and to enable such employees, consultants and
directors to participate in the long-term success and growth of the Company
through an equity interest in the Company. This Plan replaces the Company's
prior stock plans: The Restated Torchmark Corporation 1987 Stock Incentive
Plan, The Torchmark Corporation 1996 Executive Deferred Compensation Stock
Option Plan, and the 1996 Torchmark Corporation Non-Employee Director Stock
Option Plan (the "Prior Plans"), which have been frozen as of the effective
date of this Plan. Options, stock appreciation rights, restricted stock, or
other stock rights granted under the Prior Plans before the effective date of
this Plan shall continue to be governed by the terms of the Prior Plans,
except to the extent specifically provided otherwise hereinafter, but no
additional options, stock appreciation rights, restricted stock, or other
stock rights shall be granted under the Prior Plans after the effective date
of this Plan.
For purposes of the Plan, the following terms shall be defined as set forth
below:
"Affiliate" means (i) any corporation (other than a Subsidiary),
partnership, joint venture or any other entity in which the Company owns,
directly or indirectly, at least a 10 percent beneficial ownership interest,
and (ii) the Company's former Subsidiary, Waddell & Reed Financial, Inc., at
such time as it ceases to be a Subsidiary.
"Annual Bonus" means the annual cash bonus payable by the Company to an
Eligible Executive for services to the Company or any of its affiliates, as
such amount may be determined from year to year.
"Annual Compensation" means the annual cash retainer and meeting fees
payable by the Company to a Non-Employee Director for services as a director
(and, if applicable, as the member or chairman of a committee of the Board) of
the Company, as such amount may be changed from time to time. For purposes of
an election to receive Options under the Plan in lieu of Annual Compensation,
meeting fees will be deemed to be earned at the beginning of the year for all
scheduled meetings during the year, whether or not the Optionee later attends
such meetings.
"Beneficiary" means any person or persons designated by a Participant, in
accordance with procedures established by the Committee or Plan Administrator,
to receive benefits hereunder in the event of the Participant's death. If any
Participant shall fail to designate a Beneficiary or shall designate a
Beneficiary who shall fail to survive the Participant, the Beneficiary shall
be the Participant's surviving spouse, or, if none, the Participant's
surviving descendants (who shall take per stirpes) and if there are no
surviving descendants, the Beneficiary shall be the Participant's estate.
"Board" means the Board of Directors of the Company.
"Bonus Deferral Election Date" means the date established by the Plan as the
date by which an Eligible Executive must submit a valid Primary Election Form
for Bonus to the Plan Administrator in order to defer Annual Bonus under the
Plan for a calendar year. For each calendar year, the Bonus Deferral Election
Date is December 31 of the calendar year for which the Bonus is to be earned.
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"Business Day" shall mean a day on which the New York Stock Exchange or any
national securities exchange or over-the-counter market on which the Stock is
traded is open for business.
"Cause" means a 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 or Affiliate.
"Change in Control" means the happening of any of the following:
(i) when any "person", as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) (other than the Company or a Subsidiary thereof or any
Company employee benefit plan), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding securities;
(ii) the occurrence of any 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 of the Securities and Exchange Commission
under the Exchange Act;
(iii) when, during any period of two consecutive years during the
existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board, cease for any reason other than death to
constitute at least a majority thereof, unless each director who was not a
director at the beginning of such period was elected by, or on the
recommendation of, at least two-thirds of the directors at the beginning of
such period; or
(iv) the occurrence of a transaction requiring stockholder approval for
the acquisition of the Company by an entity other than the Company or a
subsidiary thereof through the purchase of assets, by merger, or otherwise.
"Code" means the Internal Revenue Code of 1986, as amended, or any successor
thereto.
"Commission" means the Securities and Exchange Commission.
"Committee" means the Compensation Committee of the Board. If at any time no
Committee shall be in office, then the functions of the Committee specified in
the Plan shall be exercised by the Board.
"Company" means Torchmark Corporation, a corporation organized under the
laws of the State of Delaware (or any successor corporation).
"Covered Employee" means an individual who the Committee determines is, or
is expected to be as of the relevant date for determining the Company's tax
deduction, a covered employee as defined in Section 162(m)(3) of the Internal
Revenue Code of 1986, as amended, with respect to the Company.
"Deferred Stock" means an award made pursuant to Section 9 below of the
right to receive Stock at the end of a specified deferral period.
"Director Stock Option" means any option to purchase shares of Stock granted
pursuant to Section 6 or 10.
"Election Date" means the date by which a Non-Employee Director must submit
a valid Primary Election Form to the Plan Administrator in order to
participate under Section 10 of the Plan for a calendar year. For each
calendar year, the Election Date is December 31 of the preceding calendar
year; provided, however, that the Election Date for a newly eligible
Participant shall be the 30th day following the date on which such individual
becomes a Non-Employee Director.
"Eligible Executive" means an executive officer of the Company or any of its
Subsidiaries or Affiliates, as such officers may be selected by the Chairman
of the Board of Directors or the Committee or its designee from year to year,
to be eligible for Executive Deferred Compensation Stock Options pursuant to
Section 10 below.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor thereto.
"Fair Market Value" means, as of any given date, the closing price of the
Stock on such date on the New York Stock Exchange Composite Tape.
"Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
"Immediate Family" means the children, grandchildren or spouse of any
Optionee.
"Interest Account" means the Interest Account for Bonus and/or the Interest
Account for Salary or the Interest Account for Annual Compensation, as the
context requires. The maintenance of individual Interest Accounts is for
bookkeeping purposes only.
"Interest Account for Bonus" means the account established by the Company
for each Eligible Executive for Annual Bonus deferred pursuant to the Plan and
which shall be credited with interest on the last day of each calendar quarter
(or such other day as determined by the Plan Administrator).
"Interest Account for Annual Compensation" means the account established by
the Company for each Non-Employee Director for Annual Compensation deferred
pursuant to the Plan and which shall be credited with interest on the last day
of each calendar quarter (or such other day as determined by Plan
Administrator).
"Interest Account for Salary" means the account established by the Company
for each Eligible Executive for Salary deferred pursuant to the Plan and which
shall be credited with interest on the last day of each calendar quarter (or
such other day as determined by the Plan Administrator).
"Non-Employee Director" means a director of the Company who is not an
employee of the Company or of any Subsidiary or Affiliate (as determined by
the Committee).
"Non-Qualified Stock Option" means any Stock Option that is not an Incentive
Stock Option.
"Normal Retirement" means retirement from active employment with the
Company, any Subsidiary, and any Affiliate on or after the normal retirement
date specified in the applicable tax-qualified company pension plan.
"Option Grant Date" means the date upon which a Stock Option is granted to
an Eligible Executive pursuant to Article 6.
"Optionee" means a director, consultant, officer or key employee to whom a
Stock Option has been granted or, in the event of such individual's death
prior to the expiration of a Stock Option, such individual's Beneficiary.
"Participant" means any director, consultant, officer or key employee who
has been awarded a Stock Option, Restricted Stock, Stock Appreciation Right,
or Deferred Stock Right under the Plan.
"Plan" means this 1998 Stock Incentive Plan.
"Plan Administrator" means one or more agents to whom the Committee shall
have delegated administrative duties under the Plan.
"Primary Election Form" means a Primary Election Form for Salary and/or a
Primary Election Form for Bonus, or a form, substantially in the form attached
hereto as Exhibit E, pursuant to which a Non-Employee Director elects to defer
Annual Compensation under the Plan as the context requires.
"Primary Election Form for Bonus" means a form, substantially in the form
attached hereto as Exhibit B, pursuant to which an Eligible Executive elects
to defer Bonus under the Plan.
"Primary Election Form for Salary" means a form, substantially in the form
attached hereto as Exhibit A, pursuant to which an Eligible Executive elects
to defer Salary under the Plan.
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"Restricted Stock" means an award of shares of Stock that are subject to
restrictions under Section 8.
"Salary" means the salary payable by the Company to an Eligible Executive
for services to the Company, any of its Subsidiaries or any of its Affiliates,
as such amount may be changed from time to time.
"Salary Deferral Election Date" means the date established by the Plan as
the date by which an Eligible Executive must submit a valid Primary Election
Form for Salary to the Plan Administrator in order to defer Salary under the
Plan for a calendar quarter. For each calendar quarter, the Salary Deferral
Election Date is the last day of the preceding calendar quarter.
"Secondary Election Form" means a Secondary Election Form for Salary and/or
a Secondary Election Form for Bonus, or a form, substantially in the form
attached hereto as Exhibit F, pursuant to which a Non-Employee Director elects
to convert previously deferred compensation to Options pursuant to Section 10
of the Plan, as the context requires.
"Secondary Election Form for Bonus" means a form, substantially in the form
attached hereto as Exhibit D, pursuant to which an Eligible Executive elects
to convert previously deferred Annual Bonus to Options pursuant to
Section 10(m) of the Plan.
"Secondary Election Form for Salary" means a form, substantially in the form
attached hereto as Exhibit C, pursuant to which an Eligible Executive elects
to convert previously deferred Salary to Options pursuant to Section 10(m) of
the Plan.
"Stock Option Award Notice" means a written award notice to an Eligible
Executive or a Non-Employee Director from the Company evidencing an Option.
"Stock" means the Common Stock of the Company.
"Stock Appreciation Right" means a right granted under Section 7 below to
surrender to the Company all or a portion of a Stock Option in exchange for an
amount equal to the difference between (i) the Fair Market Value, as of the
date such Stock Option or such portion thereof is surrendered, of the shares
of Stock covered by such Stock Option or such portion thereof, and (ii) the
aggregate exercise price of such Stock Option or such portion thereof.
"Stock Option" or "Option" means any option to purchase shares of Stock
granted pursuant to Section 5, 6 or 10.
"Subsidiary" means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if each of the corporations
(other than the last corporation in the unbroken chain) owns stock possessing
50% or more of the total combined voting power of all classes of stock in one
of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Committee which shall at all times
comply with the requirements of Rule 16b-3 of the Exchange Act. All members of
the Committee shall also be "outside directors" within the meaning of Section
162(m) of the Code.
The Committee shall have the power and authority to grant to eligible
persons, pursuant to the terms of the Plan: (i) Stock Options; (ii) Stock
Appreciation Rights; (iii) Restricted Stock or (iv) Deferred Stock.
In particular, the Committee shall have the authority:
(i) to select the consultants, officers and other key employees of the
Company, its Subsidiaries, and its Affiliates to whom Stock Options, Stock
Appreciation Rights, Restricted Stock or Deferred Stock awards or a
combination of the foregoing from time to time will be granted hereunder;
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(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock or
Deferred Stock, or a combination of the foregoing, are to be granted
hereunder;
(iii) to determine the number of shares of Stock to be covered by each
such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (other than Director
Stock Options granted pursuant to Section 6(a)), including, but not limited
to, any restriction on any Stock Option or other award and/or the shares of
Stock relating thereto based on performance and/or such other factors as
the Committee may determine, in its sole discretion, any vesting
acceleration features based on performance and/or such other factors as the
Committee may determine, in its sole discretion, reload features,
transferability features, and other features not inconsistent with the
Plan;
(v) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under this Plan
shall be deferred either automatically or at the election of a participant,
including providing for and determining the amount (if any) of deemed
earnings on any deferred amount during any deferral period.
The Committee shall have the discretionary authority to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan
as it shall, from time to time, deem advisable; to construe and interpret the
terms and provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
the Plan.
The Committee may delegate administrative duties under the Plan to one or
more agents as it shall deem necessary or advisable. No member of the
Committee or the Board or the Plan Administrator shall be personally liable
for any action or determination made in good faith with respect to the Plan or
any Option or to any settlement of any dispute between a Non-Employee Director
and the Company.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and Plan
Participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 14,000,000, which may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
In the event of any sale of assets, merger, reorganization, consolidation,
recapitalization, Stock dividend, or other change in corporate structure
affecting the Stock, an equitable substitution or adjustment shall be made in
(i) the aggregate number of shares reserved for issuance under the Plan, (ii)
the number and option price of shares subject to outstanding Stock Options
granted under the Plan, (iii) the number of shares subject to Restricted Stock
or Deferred Stock awards granted under the Plan, (iv) the aggregate number of
shares available for issuance to any employee pursuant to Section 4(a), and
(v) the number of Non-Employee Director Stock Options to be granted each year
pursuant to Section 6, as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number of shares subject
to any award shall always be a whole number. Such adjusted option price shall
also be used to determine the amount payable by the Company upon the exercise
of any Stock Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY.
(a) Officers, other key employees and consultants of the Company, its
Subsidiaries or its Affiliates (but, except as provided in Sections 6 and 10,
excluding members of the Committee and, any person who serves only as a
director) who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company, its Subsidiaries, or its
Affiliates are eligible to be granted Stock Options, Stock Appreciation
Rights, Restricted Stock or Deferred Stock awards.
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Except as provided in Section 6, the optionees and participants under the
Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall determine, in
its sole discretion, the number of shares covered by each award or grant;
provided, however, that no person shall be granted Stock Options and/or Stock
Appreciation Rights on more than 800,000 shares in any calendar year.
(b) Directors of the Company (other than directors who are also officers or
employees of the Company, its Subsidiaries or its Affiliates) are eligible to
receive Non-Employee Director Stock Options pursuant to Sections 6 and 10 of
the Plan.
(c) Consultants who provide services to the Company, a Subsidiary or an
Affiliate are eligible to receive Non-Qualified Stock Options pursuant to
Section 5 of the Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted either alone or in addition to other awards
granted under the Plan. Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve, and the provisions
of Stock Option awards need not be the same with respect to each optionee.
The Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Non-Qualified Stock Options.
The Committee shall have the authority to grant any Optionee Incentive Stock
Options, Non-Qualified Stock Options, or both types of Stock Options (in each
case with or without Stock Appreciation Rights) except that Incentive Stock
Options shall only be granted to employees of the Company or a Subsidiary. To
the extent that any Stock Option does not qualify as an Incentive Stock
Option, it shall constitute a separate Non-Qualified Stock Option.
Except as provided in Section 5(1), no term of this Plan relating to
Incentive Stock Options shall be interpreted, amended or altered, nor shall
any discretion or authority granted under the Plan be so exercised, so as to
disqualify either the Plan or any Incentive Stock Option under Section 422 of
the Code. Notwithstanding the foregoing, in the event an optionee voluntarily
disqualifies an option as an Incentive Stock Option within the meaning of
Section 422 of the Code, the Committee may, but shall not be obligated to,
make such additional grants, awards or bonuses as the Committee shall deem
appropriate, to reflect the tax savings to the Company which results from such
disqualification.
Stock Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem
desirable:
(a) Option Price. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Committee at the time of grant but
shall be not less than 100% of the Fair Market Value of the Stock on the date
of the grant of the Stock Option.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date such Incentive Stock Option is granted.
(c) Exercisability. Subject to paragraph (l) of this Section 5 with respect
to Incentive Stock Options, Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee, provided, however, that, except as provided in Section 5(f), 5(g),
5(h) or 14, no Stock Option shall be exercisable prior to six months from the
date of the granting of the option. Notwithstanding the limitations set forth
in the preceding sentence, the Committee may accelerate the exercisability of
any Stock Option, at any time in whole or in part, based on performance and/or
such other factors as the Committee may determine in its sole discretion.
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(d) Method of Exercise. Stock Options may be exercised in whole or in part
at any time during the option period, by giving written notice of exercise to
the Company specifying the number of shares to be purchased, accompanied by
payment in full of the purchase price, in cash, by check or such other
instrument as may be acceptable to the Committee (including instruments
providing for "cashless exercise"). As determined by the Committee, in its
sole discretion, at or after grant, payment in full or in part may also be
made in the form of unrestricted Stock already owned by the Optionee or, in
the case of the exercise of a Non-Qualified Stock Option, Restricted Stock or
Deferred Stock subject to an award hereunder (based, in each case, on the Fair
Market Value of the Stock on the date the option is exercised, as determined
by the Committee). If payment of the option exercise price of a Non-Qualified
Stock Option is made in whole or in part in the form of Restricted Stock or
Deferred Stock, the shares received upon the exercise of such Stock Option
shall be restricted or deferred, as the case may be, in accordance with the
original term of the Restricted Stock award or Deferred Stock award in
question, except that the Committee may direct that such restrictions or
deferral provisions shall apply to only the number of such shares equal to the
number of shares of Restricted Stock or Deferred Stock surrendered upon the
exercise of such Option. No shares of unrestricted Stock shall be issued until
full payment therefor has been made. An Optionee shall have the rights to
dividends or other rights of a stockholder with respect to shares subject to
the Option when the Optionee has given written notice of exercise and has paid
in full for such shares.
(e) Transferability of Options. A Stock Option agreement may permit an
optionee to transfer the Stock Option to members of his or her Immediate
Family, to one or more trusts for the benefit of such Immediate Family
members, or to one or more partnerships where such Immediate Family members
are the only partners if (i) the agreement setting forth such Stock Option
expressly provides that the Stock Option may be transferred only with the
express written consent of the Committee, and (ii) the optionee does not
receive any consideration in any form whatsoever for said transfer. Any Stock
Option so transferred shall continue to be subject to the same terms and
conditions in the hands of the transferee as were applicable to said Stock
Option immediately prior to the transfer thereof.
Any Stock Option not (i) granted pursuant to any agreement expressly
allowing the transfer of said Stock Option or (ii) amended expressly to permit
its transfer shall not be transferable by the Optionee otherwise than by will
or by the laws of descent and distribution and such Stock Option thus shall be
exercisable during the Optionee's lifetime only by the Optionee.
(f) Termination by Death. Unless otherwise determined by the Committee, if
an Optionee's employment with the Company, any Subsidiary, and any Affiliate
terminates by reason of death (or if an Optionee dies following termination of
employment by reason of Normal Retirement), any Stock Option shall become
immediately exercisable and may thereafter be exercised by the legal
representative of the estate or by the legatee of the Optionee under the will
of the Optionee, during the period ending on the expiration of the stated term
of such Stock Option or the first anniversary of the Optionee's death,
whichever is later.
(g) Termination by Reason of Normal Retirement. Unless otherwise determined
by the Committee, if an Optionee's employment with the Company, any Subsidiary
and any Affiliate terminates by reason of Normal Retirement, any Stock Option
held by such Optionee shall become immediately exercisable. A Stock Option
held by an Optionee whose employment has terminated by reason of Normal
Retirement shall expire at the end of the stated term of such Stock Option,
unless otherwise determined by the Committee.
In the event of termination of employment by reason of Normal Retirement, if
an Incentive Stock Option is exercised after the exercise periods that apply
for purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(h) Termination for Cause. Notwithstanding Section 5(g), if the Optionee's
employment or consulting relationship with the Company, any Subsidiary and any
Affiliate is terminated for Cause, or the Committee determines that the
Optionee has engaged in conduct that would be grounds for termination with
Cause, the Stock Option shall immediately be forfeited to the Company upon the
giving of notice of termination of employment or on the event constituting
Cause.
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(i) Committee Discretion. Notwithstanding the other provisions of this
Section 5 to the contrary, upon the request of an Optionee whose employment
has terminated or is expected to terminate in the near future, the Committee
may, in its sole and absolute discretion, agree to allow the Optionee's Stock
Option to terminate on a date following the date that it would otherwise
terminate pursuant to the provisions of this Section 5.
(j) Other Termination. If the Optionee's employment or consulting
relationship with the Company, any Subsidiary and any Affiliate is terminated
for any reason other than what is specified in Section 5(f), 5(g) or (5(h)
(including, without limitation, early retirement, voluntary termination,
termination without Cause, or for any other reason), the Stock Option shall
immediately be forfeited to the Company upon such termination of employment.
(k) Termination upon Change of Control. Notwithstanding the provisions of
Section 5(j) or the stated term of the Stock Option, if the Optionee's
employment with the Company, any Subsidiary and any Affiliate is involuntarily
terminated by the Optionee's employer without Cause by reason of or within
three months after a merger or other business combination resulting in a
Change of Control, the Stock Option shall terminate upon the later of six
months and one day after such merger or business combination or ten business
days following the expiration of the period during which publication of
financial results covering at least thirty days of post-merger combined
operations has occurred.
(l) Limit on Value of Incentive Stock Option First Exercisable Annually. The
aggregate Fair Market Value (determined at the time of grant) of the Stock for
which "incentive stock options" within the meaning of Section 422 of the Code
are exercisable for the first time by an Optionee during any calendar year
under the Plan (and/or any other stock option plans of the Company, any
Subsidiary and any Affiliate) shall not exceed $100,000. Notwithstanding the
preceding sentence, the exercisability of such Stock Options may be
accelerated by the Committee and shall be accelerated as provided in Sections
5(f), 5(g), 5(h), and 14, in which case Stock Options which exceed such
$100,000 limit shall be treated as Non-Qualified Stock Options. For this
purpose, options granted earliest shall be applied first to the $100,000
limit. In the event that only a portion of the options granted at the same
time can be applied to the $100,000 limit, the Company shall issue separate
share certificates for such number of shares as does not exceed the $100,000
limit, and shall designate such shares as ISO stock in its share transfer
records.
SECTION 6. NON-EMPLOYEE DIRECTOR STOCK OPTIONS.
Non-Employee Director Stock Options granted under the Plan shall be Non-
Qualified Stock Options. Such Non-Employee Director Stock Options may be
granted pursuant to the pre-established formula contained herein or may, in
the sole discretion of the entire Board of Directors, be granted as to such
number of shares and upon such terms and conditions as shall be determined by
said Board of Directors.
Non-Employee Director Stock Options granted under the Plan shall be
evidenced by a written agreement in such form as the Committee shall from time
to time approve, which agreements shall comply with and be subject to the
following terms and conditions:
(a) Formula-based Director Stock Options. For each calendar year, 6,000 Non-
Employee Director Stock Options shall be granted automatically on the first
day of each calendar year on which Stock is publicly traded on the New York
Stock Exchange to each member of the Board on that date who is not a Non-
Employee Director.
The option price per share of Stock purchasable under such Non-Employee
Director Stock Option shall be 100% of the Fair Market Value of the Stock on
the date of the grant of the Option. Except as provided in Section 14, said
Non-Employee Director Stock Options shall become exercisable in full six
months from the date of the grant of the Option and shall remain exercisable
for a term of ten years and two days from the date such Non-Employee Director
Stock Option is granted.
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(b) Non-Formula Based Options. Within its sole discretion, the entire Board
may award Non-Employee Director Stock Options on a non-formula basis to all or
such individual Non-Employee Directors as it shall select. Such Non-Employee
Stock Options may be awarded at such times and for such number of shares as
the Board in its discretion determines. The price of such Non-Employee Stock
Options may be fixed by the Board at a discount not to exceed 25% of the fair
market value of the Stock on the date of grant or may be the fair market value
of the Stock on the grant date. Such Non-Employee Director Stock Options shall
become first exercisable and have an option term as determined by the Board in
its discretion; provided however, that except as described in Section 14 and
in paragraph (e) of this section, no such Option shall be first exercisable
until six months from the date of grant. All other terms and conditions of
such Non-Employee Director Stock Options shall be as established by the Board
in its sole discretion.
(c) Method of Exercise. Any Non-Employee Director Stock Option granted
pursuant to the Plan may be exercised in whole or in part at any time during
the option period, by giving written notice of exercise to the Company
specifying the number of shares to be purchased, accompanied by payment in
full of the purchase price, in cash, by check or such other instrument as may
be acceptable to the Committee (including instruments providing for "cashless
exercise"). Payment in full or in part may also be made in the form of
unrestricted Stock already owned by the Optionee (based on the Fair Market
Value of the Stock on the date the Option is exercised). No shares of
unrestricted Stock shall be issued until full payment therefor has been made.
An Optionee shall have the rights to dividends or other rights of a
stockholder with respect to shares subject to the Option when the Optionee has
given written notice of exercise and has paid in full for such shares.
(d) Transferability of Options. No Non-Employee Director Stock Option shall
be transferable by the Optionee otherwise than by will or by the laws of
descent and distribution, and all Director Stock Options shall be exercisable,
during the Optionee's lifetime, only by the Optionee; provided, however, that
the Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated
taxation, and (ii) is otherwise appropriate and desirable, taking into account
any state or federal securities laws applicable to transferable options.
(e) Termination of Service. Upon an Optionee's termination of status as a
Non-Employee Director with the Company for any reason, any Director Stock
Options held by such Optionee shall become immediately exercisable and may
thereafter be exercised during the period ending on the expiration of the
stated term of such Non-Employee Director Stock Options or the first
anniversary of the Optionee's death, whichever is later. Notwithstanding the
foregoing sentence, if the Optionee's status as an Non-Employee Director
terminates by reason of or within three months after a merger or other
business combination resulting in a "Change of Control" as defined in Section
14 of this Plan, the Non-Employee Director Stock Option shall terminate upon
the latest of (i) six months and one day after the merger or business
combination, (ii) ten business days following the expiration of the period
during which publication of financial results covering at least thirty days of
post-merger combined operations has occurred, and (iii) the expiration of the
stated term of such Non-Employee Director Stock Option.
(f) Deferred Compensation Stock Options. Non-Employee Directors are also
eligible to elect Deferred Compensation Stock Options pursuant to Section 10
below.
SECTION 7. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In
the case of a Non-Qualified Stock Option, such rights may be granted either at
or after the time of the grant of such Non-Qualified Stock Option. In the case
of an Incentive Stock Option, such rights may be granted only at the time of
the grant of such Incentive Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that,
unless otherwise provided by the Committee at the time of grant, a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Stock Option shall only be reduced if and to the extent
that the number of shares covered by the exercise or termination of the
related Stock Option exceeds the number of shares not covered by the Stock
Appreciation Right.
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A Stock Appreciation Right may be exercised by an Optionee, in accordance
with paragraph (b) of this Section 7, by surrendering the applicable portion
of the related Stock Option. Upon such exercise and surrender, the Optionee
shall be entitled to receive an amount determined in the manner prescribed in
paragraph (b) of this Section 7. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate shall be
exercisable in accordance with the provisions of Section 5 and this Section 7
of the Plan; provided, however, that any Stock Appreciation Right granted
subsequent to the grant of the related Stock Option shall not be exercisable
during the first six months of the term of the Stock Appreciation Right,
except that this additional limitation shall not apply in the event of death
of the Optionee prior to the expiration of the six-month period.
(ii) Upon the exercise of a Stock Appreciation Right, an Optionee shall be
entitled to receive up to, but not more than, an amount in cash or shares of
Stock equal in value to the excess of the Fair Market Value of one share of
Stock over the option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the Stock Appreciation
Right shall have been exercised, with the Committee having the right to
determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only when and to the
extent that the underlying Stock Option would be transferable under paragraph
(e) of Section 5 of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related shall be deemed
to have been exercised for the purpose of the limitation set forth in Section
3 of the Plan on the number of shares of Stock to be issued under the Plan.
(v) A Stock Appreciation Right granted in connection with an Incentive Stock
Option may be exercised only if and when the market price of the Stock subject
to the Incentive Stock Option exceeds the exercise price of such Stock Option.
(vi) In its sole discretion, the Committee may provide, at the time of grant
of a Stock Appreciation Right under this Section 7, that such Stock
Appreciation Right can be exercised only in the event of a "Change of Control"
and/or a "Potential Change of Control" (as defined in Section 14 below).
(vii) The Committee, in its sole discretion, may also provide that in the
event of a "Change of Control" and/or a "Potential Change of Control" (as
defined in Section 14 below) the amount to be paid upon the exercise of a
Stock Appreciation Right shall be based on the "Change of Control Price" (as
defined in Section 14 below).
SECTION 8. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be issued either alone or
in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and its Subsidiaries
and Affiliates to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the price, if any, to
be paid by the recipient of Restricted Stock (subject to Section 8(b) hereof),
the time or times within which such awards may be subject to forfeiture, and
all other conditions of the awards. The Committee may also condition the grant
and/or vesting of Restricted Stock upon the attainment of specified
performance goals, or such other criteria as the Committee may determine, in
its sole discretion. The provisions of Restricted Stock awards need not be the
same with respect to each recipient.
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(b) Awards and Certificates. The prospective recipient of an award of shares
of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
(a "Restricted Stock Award Agreement"), has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then applicable
terms and conditions. Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter period as the Committee may specify) after
the award date by executing a Restricted Stock Award Agreement and paying the
price specified in the Restricted Stock Award Agreement. Each Participant who
is awarded Restricted Stock shall be issued a stock certificate registered in
the name of the Participant in respect of such shares of Restricted Stock. The
Committee shall specify that the certificate shall bear a legend, as provided
in clause (i) below, and/or be held in custody by the Company, as provided in
clause (ii) below.
(i) The certificate shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in the
following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Torchmark Corporation 1998 Stock Incentive Plan and a
Restricted Stock Award Agreement entered into between the registered owner
and Torchmark Corporation. Copies of such Plan and Agreement are on file in
the offices of Torchmark Corporation, 2001 Third Avenue South, Birmingham,
Alabama 35233."
(ii) The Committee shall require that the stock certificates evidencing such
shares be held in custody by the Company until the restrictions thereon shall
have lapsed, and that, as a condition of any Restricted Stock award, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 8 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the Restricted Stock Award
Agreements, during such period as may be set by the Committee commencing on
the grant date (the "Restriction Period"), the Participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted Stock
awarded under the Plan. The Committee may, in its sole discretion, provide for
the lapse of such restrictions in installments and may accelerate or waive
such restrictions in whole or in part, before or after the Participant's
termination of employment, based on performance and/or such other factors as
the Committee may determine, in its sole discretion.
(ii) Except as provided in paragraph (c)(i) of this Section 8, the
Participant shall have, with respect to the shares of Restricted Stock, all of
the rights of a stockholder of the Company, including the right to receive any
dividends. Dividends paid in stock of the Company or stock received in
connection with a stock split with respect to Restricted Stock shall be
subject to the same restrictions as on such Restricted Stock. Certificates for
shares of unrestricted Stock shall be delivered to the Participant promptly
after, and only after, the period of forfeiture shall expire without
forfeiture in respect of such shares of Restricted Stock.
(iii) Subject to the provisions of the Restricted Stock Award Agreement and
this Section 8, upon termination of employment for any reason other than
Normal Retirement or death during the Restriction Period, all shares still
subject to restriction shall be forfeited by the Participant, and the
Participant shall only receive the amount, if any, paid by the Participant for
such forfeited Restricted Stock.
SECTION 9. DEFERRED STOCK AWARDS.
(a) Administration. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers and key employees of the Company, its Subsidiaries and Affiliates
to whom, and the time or times at which, Deferred Stock shall be awarded, the
number of shares of Deferred Stock to be awarded to any Participant, the
duration of the period (the "Deferral Period") during which, and the
conditions under which, receipt of the Stock will be deferred, and the terms
and conditions of the award in addition to those set forth in paragraph (b) of
this Section 9. The Committee may also condition the grant and/or vesting of
Deferred Stock upon the attainment of specified performance goals, or such
other criteria as the Committee shall determine, in its sole discretion. The
provisions of Deferred Stock awards need not be the same with respect to each
recipient.
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(b) Terms and Conditions. The shares of Deferred Stock awarded pursuant to
this Section 9 shall be subject to the following terms and conditions:
(i) Subject to the provisions of this Plan and the award agreement, Deferred
Stock awards may not be sold, assigned, transferred, pledged or otherwise
encumbered during the Deferral Period. At the expiration of the Deferral
Period (or Elective Deferral Period, (as defined below) where applicable),
share certificates shall be delivered to the Participant, or his legal
representative, in a number equal to the shares covered by the Deferred Stock
award.
(ii) At the time of the award, the Committee may, in its sole discretion,
determine that amounts equal to any dividends declared during the Deferral
Period (or Elective Deferral Period) with respect to the number of shares
covered by a Deferred Stock award will be: (a) paid to the Participant
currently; (b) deferred and deemed to be reinvested; or (c) that such
Participant has no rights with respect thereto.
(iii) Subject to the provisions of the award agreement and this Section 9,
upon termination of employment for any reason during the Deferral Period for a
given award, the Deferred Stock in question shall be forfeited by the
Participant.
(iv) Based on performance and/or such other criteria as the Committee may
determine, the Committee may, at or after grant (including after the
Participant's termination of employment), accelerate the vesting of all or any
part of any Deferred Stock award and/or waive the deferral limitations for all
or any part of such award.
(v) A Participant may elect to defer further receipt of the award for a
specified period or until a specified event (the "Elective Deferral Period"),
subject in each case to the Committee's approval and to such terms as are
determined by the Committee, all in its sole discretion. Subject to any
exceptions adopted by the Committee, such election must generally be made at
least six months prior to completion of the Deferral Period for a Deferred
Stock award (or for an installment of such an award).
(vi) Each award shall be confirmed by, and subject to the terms of, a
Deferred Stock award agreement executed by the Company and the Participant.
SECTION 10. EXECUTIVE AND NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION STOCK
OPTIONS.
(a) Election to Participate. The Chairman of the Board or the Committee or
its designee shall designate each year those executives who shall be Eligible
Executives for the coming year. An Eligible Executive may participate under
this Section 10 of the Plan by delivering to the Plan Administrator a properly
completed and signed (i) Primary Election Form for Salary on or before the
Salary Deferral Election Date, and/or (ii) Primary Election Form for Bonus on
or before the Bonus Deferral Election Date. In addition, each Non-Employee
Director is automatically eligible to participate under this Section 10 of the
Plan. A Non-Employee Director may participate under this Section 10 of the
Plan for a calendar year by delivering a properly completed and signed Primary
Election Form to the Plan Administrator on or before the Election Date. The
Non-Employee Director's participation in the Plan will be effective as of the
first day of the calendar year beginning after the Plan Administrator receives
the Non-Employee Director's Primary Election Form, or, in the case of a newly
eligible Participant, on the first day of the calendar month beginning after
the Plan Administrator receives such Non-Employee Director's Primary Election
Form. An Eligible Executive's participation in the Plan will be effective (i)
as of the first day of the calendar quarter beginning after the Plan
Administrator receives the Eligible Executive's Primary Election Form for
Salary, or (ii) as of the first day of the year for which an Annual Bonus is
earned, in the case of an Eligible Executive's Primary Election Form for
Bonus. A Participant shall not be entitled to any benefit hereunder unless
such Participant has properly completed the appropriate type of Primary
Election Form and deferred the receipt of his or her Annual Bonus and/or
Salary, or Annual Compensation, in the case of a Non-Employee Director.
(b) Irrevocable Election. A Participant may not revoke or change his or her
Primary Election Form; provided, however, that a Participant may, by filing a
Secondary Election Form with the Plan Administrator within the period provided
in the Plan, subsequently elect to convert the balance in his or her Interest
Account to Stock Options in accordance with Subsection (m) below.
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(c) [Reserved]
(d) Deferred Annual Bonus or Salary. An Eligible Executive may elect to
defer up to 100% (in increments of 10% or $10,000) of his or her Annual Bonus
and/or Salary to his or her Interest Account, and/or by conversion to Stock
Options in accordance with the terms of the Plan. A Non-Employee Director may
elect to defer up to 100% of his or her Annual Compensation (in 10% increments
but not less than 50%) to his or her Interest Account and/or by conversion to
Stock Options in accordance with the terms of the Plan. For bookkeeping
purposes, the amount of the Annual Compensation, Annual Bonus and/or Salary
which Participant elects to defer pursuant to the Plan shall be transferred to
and held in individual Interest Accounts (in annual designations) pending
distribution in cash or the conversion to Stock Options, if applicable,
pursuant to subsection (m) below.
(e) Time of Election of Deferral. An Eligible Executive who wishes to defer
Salary for a calendar quarter must irrevocably elect to do so on or prior to
the Salary Deferral Election Date for such calendar quarter, by delivering a
valid Primary Election Form for Salary to the Plan Administrator. The Primary
Election Form for Salary shall indicate: (1) the percentage or amount of
Salary to be deferred, and (2) the form and timing of payout of deferred
amounts; provided, however, that if a Participant elects to defer Salary for
more than one quarter during a particular calendar year, the form and timing
of payout for each quarter's deferral shall be identical. An Eligible
Executive who wishes to defer Annual Bonus for a calendar year must
irrevocably elect to do so on or prior to the Bonus Deferral Election Date for
such calendar year, by delivering a valid Primary Election Form for Bonus to
the Plan Administrator. The Primary Election Form for Bonus shall indicate:
(1) the percentage of Annual Bonus to be deferred, and (2) the form and timing
of payout of deferred amounts; provided, however, that if a Participant elects
to defer both Salary and Annual Bonus for a particular calendar year, the form
and timing of payout for each shall be identical. A Non-Employee Director who
wishes to defer Annual Compensation for a calendar year must irrevocably elect
to do so on or prior to the Election Date for such calendar year, by
delivering a valid Primary Election Form to the Plan Administrator. The
Primary Election Form shall indicate: (1) the percentage or amount of Annual
Compensation to be deferred, and (2) the form and timing of payout of deferred
amounts.
(f) Interest Accounts. Amounts in a Participant's Interest Account will be
credited with interest as of the last day of each calendar quarter (or such
other day as determined by the Plan Administrator, which, in the case of
amounts converted to Stock Options under the Plan, shall be the date of such
conversion) at the rate set from time to time by the Committee to be
applicable to the Interest Accounts of all Participants under the Plan. To the
extent required for bookkeeping purposes, a Participant's Interest Accounts
will be segregated to reflect deferred compensation on a year-by-year basis
and on the basis of the type of compensation deferred. For example, a 1998
Interest Account for Bonus, a 1998 Interest Account for Salary, a 1999
Interest Account for Bonus, a 1999 Interest Account for Salary, and so on.
Within a reasonable time after the end of each calendar year, the Plan
Administrator shall report in writing to each Participant the amount held in
his or her Interest Accounts at the end of the year.
(g) Responsibility for Investment Choices. Each Participant is solely
responsible for any decision to defer Annual Bonus and/or Salary or Annual
Compensation into his or her Interest Account or convert Annual Bonus and/or
Salary or Annual Compensation to Stock Options under the Plan and accepts all
investment risks entailed by such decision, including the risk of loss and a
decrease in the value of the amounts he or she elects to defer.
(h) Form of Payment.
(i) Payment Commencement Date. Payment of the balances in a Participant's
Interest Accounts shall commence on the earliest to occur of (a) December 31
of the fifth year after the year with respect to which the deferral was made,
(b) the first Business Day of the fourth month after the Participant's death,
or (c) the Participant's termination as an employee or Non-Employee Director
of the Company or any of its Subsidiaries or Affiliates, other than by reason
of death.
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(ii) Optional Forms of Payment. Distributions from a Participant's Interest
Accounts may be paid to the Participant either in a lump sum or in a number of
approximately equal monthly installments designated by the Participant on his
or her Primary Election Form. Such monthly installments may be for any number
of months up to 120 months; provided, however, that in the event of the
Participant's death during the payout period, the remaining balance shall be
payable to the Participant's Beneficiary in a lump sum on or about the first
Business Day of the fourth month after the Participant's death. If a
Participant elects to receive a distribution of his or her Interest Accounts
in installments, the Plan Administrator may purchase an annuity from an
insurance company which annuity will pay the Participant the desired annual
installments. If the Plan Administrator purchases an annuity contract, the
Participant will have no further rights to receive payments from the Company
or the Plan with respect to the amounts subject to the annuity. If the Plan
Administrator does not purchase an annuity contract, the value of the Interest
Accounts remaining unpaid shall continue to receive allocations of return as
provided in Subsection (f) above. If the Participant fails to designate a
payment method in the Participant's Primary Election Form, the Participant's
Account shall be distributed in a lump sum.
(iii) Irrevocable Elections. A Participant may elect a different payment
form for each year's compensation deferred under the Plan; provided, however,
that if a Participant elects to defer Salary for more than one quarter during
a particular calendar year, or if a Participant elects to defer Salary and
Annual Bonus for a particular calendar year, the form and timing of payout for
each such deferral shall be identical. The payment form elected or deemed
elected on the Participant's Primary Election Form shall be irrevocable.
(iv) Acceleration of Payment. If a Participant elects an installment
distribution and the value of such installment payment elected by the
Participant would result in a distribution of less than $3,000 per year, the
Plan Administrator may accelerate payment of the Participant's benefits over a
lesser number of whole years so that the annual amount distributed is at least
$3,000. If payment of the Participant's benefits over a five year period will
not provide annual distributions of at least $3,000, the Participant's Account
shall be paid in a lump sum.
(v) Effect of Competition. Notwithstanding the Primary Election Form or any
provision set forth herein, the entire balance of a Participant's Interest
Accounts shall be paid immediately to the Participant a lump sum in the event
the Participant ceases to be an employee of the Company or any of its
Subsidiaries or Affiliates and becomes a proprietor, officer, partner,
employee or otherwise becomes affiliated with any business that is in
competition with the Company or an affiliated company, or becomes employed by
any governmental agency having jurisdiction over the activities of the Company
or an affiliated company.
(vi) Effect of Adverse Determination. Notwithstanding the Primary Election
Form or any provision set forth herein, if the Internal Revenue Service
determines, for any reason, that all or any portion of the amounts credited
under this Plan is currently includable in the taxable income of any
Participant, then the amounts so determined to be includable in income shall
be distributed in a lump sum to such Participant as soon as practicable.
(vii) Payment to Beneficiary. Upon the Participant's death, all unpaid
amounts held in the Participant's Account shall be paid to the Participant's
Beneficiary in a lump sum on or about the first Business Day of the fourth
month following the Participant's death.
(i) Financial Hardship. The Plan Administrator may, in its sole discretion,
accelerate the making of payment to a Participant of an amount reasonably
necessary to handle a severe financial hardship of a sudden and unexpected
nature due to causes not within the control of the Participant. All financial
hardship distributions shall be made in cash in a lump sum. Such payments will
be made on a first-in, first-out basis so that the oldest compensation
deferred under the Plan shall be deemed distributed first in a financial
hardship.
(j) Payment to Minors and Incapacitated Persons. In the event that any
amount is payable to a minor or to any person who, in the judgment of the Plan
Administrator, is incapable of making proper disposition thereof, such payment
shall be made for the benefit of such minor or such person in any of the
following ways as the Plan Administrator, in its sole discretion, shall
determine:
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(a) By payment to the legal representative of such minor or such person;
(b) By payment directly to such minor or such person;
(c) By payment in discharge of bills incurred by or for the benefit of such
minor or such person. The Plan Administrator shall make such payments without
the necessary intervention of any guardian or like fiduciary, and without any
obligation to require bond or to see to the further application of such
payment. Any payment so made shall be in complete discharge of the Plan's
obligation to the Participant and his or her Beneficiaries.
(k) Application for Benefits. The Plan Administrator may require a
Participant or Beneficiary to complete and file certain forms as a condition
precedent to receiving the payment of benefits. The Plan Administrator may
rely upon all such information given to it, including the Participant's
current mailing address. It is the responsibility of all persons interested in
receiving a distribution pursuant to the Plan to keep the Plan Administrator
informed of their current mailing addresses.
(l) Designation of Beneficiary. Each Participant from time to time may
designate any person or persons (who may be designated contingently or
successively and who may be an entity other than a natural person) as his or
her Beneficiary or Beneficiaries to whom the Participant's Account is to be
paid if the Participant dies before receipt of all such benefits. Each
Beneficiary designation shall be on the form prescribed by the Plan
Administrator and will be effective only when filed with the Plan
Administrator during the Participant's lifetime. Each Beneficiary designation
filed with the Plan Administrator will cancel all Beneficiary designations
previously filed with the Plan Administrator. The revocation of a Beneficiary
designation, no matter how effected, shall not require the consent of any
designated Beneficiary.
(m) Election to Receive Stock Options. Each Eligible Executive or Non-
Employee Director shall be granted Stock Options subject to the following
terms and conditions:
(i) Stock Options Converted from Deferred Salary. At any time, but only one
time, during the twelve-month period following the end of a calendar year with
respect to which a Participant deferred Salary into the Plan, the Participant
shall have the right to convert some or all of his or her Interest Account for
Salary for such previous year into Stock Options pursuant to this Article 10.
To make such election, the Participant must file with the Plan Administrator a
written irrevocable Secondary Election Form for Salary to receive Stock
Options as of the date of the filing of such Secondary Election Form (the
"Option Grant Date").
(ii) Stock Options Converted from Deferred Bonus. At any time, but only one
time, during the twelve-month period following the end of a calendar year with
respect to which a Participant deferred Annual Bonus into the Plan, the
Participant shall have the right to convert some or all of his or her Interest
Account for Bonus for such previous year into Stock Options pursuant to this
Article 10. To make such election, the Participant must file with the Plan
Administrator a written irrevocable Secondary Election Form for Bonus to
receive Stock Options as of the date of the filing of such Secondary Election
Form (the "Option Grant Date").
(iii) Stock Options Converted from Annual Compensation. At any time, but
only one time, during the calendar year immediately following the filing of a
Primary Election Form, a Non-Employee Director shall have the right to convert
into Stock Options the then-current balance (as of the date of such election
to receive Stock Options) in his or her Interest Account for the calendar year
to which the Primary Election Form relates. For example, if a Primary Election
Form is filed in December 1998 to defer Annual Compensation to be earned in
1999, the director may elect at any time in 1999 to convert such deferred
amount to Options. To make such election, the Participant must file with the
Plan Administrator a written irrevocable Secondary Election Form to receive
Options as of the date of the election (the "Option Grant Date").
(iv) Exercise Price of Stock Options. The exercise price per Share under
each Stock Option granted pursuant to this Article 10 shall, at the election
of the Optionee as indicated on the Secondary Election Form, be either 100% of
the Fair Market Value per Share on the Option Grant Date, or a lesser
percentage (but not less than 75%) of the Fair Market Value per Share on the
Option Grant Date, such lesser percentage to be determined by the Committee
from time to time. Such Secondary Election Form shall indicate the percentage
of such Stock Options to be granted at each Exercise Price, which choice may
affect the number of Stock Options to be received pursuant to this Section
10(m).
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(n) Number and Terms of Options. The number of Shares subject to a Stock
Option granted pursuant to this Article 10 shall be the number of whole Shares
equal to A divided by B, where:
A = the dollar amount which the Eligible Executive has elected pursuant to
Section 6.1 to convert to Stock Options; and
B = the per share value of a Stock Option on the Option Grant Date, as
determined by the Committee using any recognized option valuation model
selected by the Committee in its discretion (such value to be expressed as a
percentage of the Fair Market Value per Share on the Option Grant Date).
In determining the number of Shares subject to a Stock Option, (i) the
Committee may designate the assumptions to be used in the selected option
valuation model, and (ii) any fraction of a Share will be rounded up to the
next whole number of Shares.
(o) Exercise of Stock Options. Each Stock Option shall be first exercisable,
cumulatively, as to 10% commencing on the each of the first through tenth
anniversaries of the Option Grant Date; provided, however, that any Stock
Option held by a Covered Employee shall not be exercisable before the first
day of the calendar year immediately following the year in which the Optionee
ceased to be a Covered Employee. An Optionee's death, retirement or other
termination of employment shall not shorten the term of any outstanding Stock
Option. In no event shall the period of time over which the Stock Option may
be exercised exceed the longer of (i) eleven years from the Option Grant Date,
or (ii) the thirtieth (30th) day of the calendar year immediately following
the year in which an Optionee ceased to be a Covered Employee. A Stock Option,
or portion thereof, may be exercised in whole or in part only with respect to
whole Shares. Shares shall be issued to the Optionee pursuant to the exercise
of a Stock Option only upon receipt by the Company from the Optionee of
payment in full in cash of the aggregate purchase price for the Shares subject
to the Stock Option or portion thereof being exercised.
(p) Accelerated Vesting. Notwithstanding the normal vesting schedule set
forth in Section 6.3 hereof, any and all outstanding Options shall become
immediately exercisable upon the first to occur of (i) the death of the
Optionee, (ii) the Optionee obtaining Normal Retirement Age, (iii) the
occurrence of a Change in Control, or (iv) the unanimous determination by the
Committee that a particular Stock Option or Options shall become fully
exercisable. Upon acceleration, an Option will remain exercisable for the
remainder of its original term.
(q) Stock Option Award Notice. Each Stock Option granted under this Section
10 shall be evidenced by a Stock Option Award Notice which shall be executed
by an authorized officer of the Company. Such Award Notice shall contain
provisions regarding (a) the number of Shares that may be issued upon exercise
of the Stock Option, (b) the exercise price per Share of the Option and the
means of payment therefor, (c) the term of the Stock Option, and (d) such
other terms and conditions not inconsistent with the Plan as may be determined
from time to time by the Committee.
(r) Transferability of Options. No Stock Option granted under this Section
10 shall be assignable or transferable by the Optionee other than by will or
the laws of descent and distribution; provided, however, that the Committee
may (but need not) permit other transfers where the Committee concludes that
such transferability (i) does not result in accelerated taxation, and (ii) is
otherwise appropriate and desirable, taking into account any state or federal
securities laws applicable to transferable Stock Options.
SECTION 11. LOAN PROVISIONS.
With the consent of the Committee, the Company may make, or arrange for, a
loan or loans to an employee with respect to the exercise of any Stock Option
granted under the Plan and/or with respect to the payment of the purchase
price, if any, of any Restricted Stock awarded hereunder. The Committee shall
have full authority to decide whether to make a loan or loans hereunder and to
determine the amount, term and provisions of any such loan or loans, including
the interest rate to be charged in respect of any such loan or loans, whether
the loan or loans are to be with or without recourse against the borrower, the
terms on which the loan is to be repaid and the conditions, if any, under
which the loan or loans may be forgiven.
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SECTION 12. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the right of
an Optionee or Participant under a Stock Option, Director Stock Option, Stock
Appreciation Right, Restricted Stock or Deferred Stock award theretofore
granted, without the Optionee's or Participant's consent.
Amendments may be made without stockholder approval except as required to
satisfy Rule 16b-3 under the Exchange Act, Section 162(m) of the Code, stock
exchange listing requirements, or other regulatory requirements.
The Committee may amend the terms of any award or option (other than
Director Stock Options granted pursuant to Section 6(a)) theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights
of any holder without his consent. The Committee may also substitute new Stock
Options for previously granted Stock Options including options granted under
other plans applicable to the Participant and previously granted Stock Options
having higher option prices.
SECTION 13. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant or Optionee by the Company, nothing set forth herein shall give
any such Participant or Optionee any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards hereunder, provided, however, that the existence of such trusts or
other arrangements is consistent with the unfunded status of the Plan.
SECTION 14. CHANGE OF CONTROL.
The following acceleration and valuation provisions shall apply in the event
of a "Change of Control" or "Potential Change of Control," as defined in this
Section:
(a) In the event of a "Change of Control," unless otherwise determined by
the Committee in writing at or after grant, but prior to the occurrence of
such Change of Control, or, if and to the extent so determined by the
Committee in writing at or after grant (subject to any right of approval
expressly reserved by the Committee at the time of such determination) in the
event of a "Potential Change of Control," as defined in paragraph (c) of this
Section:
(i) any Stock Appreciation Rights and any Stock Options awarded under the
Plan not previously exercisable and vested shall become fully exercisable and
vested;
(ii) the restrictions and deferral limitations applicable to any Restricted
Stock and Deferred Stock awards under the Plan shall lapse and such shares and
awards shall be deemed fully vested; and
(iii) the value of all outstanding Stock Options, Director Stock Options,
Stock Appreciation Rights, Restricted Stock and Deferred Stock Awards, shall,
to the extent determined by the Committee at or after grant, be settled on the
basis of the "Change of Control Price" (as defined in paragraph (d) of this
Section) as of the date the Change of Control occurs or Potential Change of
Control is determined to have occurred, or such other date as the Committee
may determine prior to the Change of Control or Potential Change of Control.
In the sole discretion of the Committee, such settlements may be made in cash
or in stock, as shall be necessary to effect the desired accounting treatment
for the transaction resulting in the Change of Control. In addition, any Stock
Option, Director Stock Option, and Stock Appreciation Right which has been
outstanding for less than six months shall be settled solely in stock.
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(b) [Reserved]
(c) For purposes of paragraph (a) of this Section, a "Potential Change of
Control" means the happening of any of the following:
(i) the entering into an agreement by the Company, the consummation of which
would result in a Change of Control of the Company as defined in paragraph (b)
of this Section; or
(ii) the acquisition of beneficial ownership, directly or indirectly, by any
entity, person or group (other than the Company or a Subsidiary or any Company
employee benefit plan) of securities of the Company representing 5 percent or
more of the combined voting power of the Company's outstanding securities and
the adoption by the Board of Directors of a resolution to the effect that a
Potential Change of Control of the Company has occurred for purposes of this
Plan.
(d) For purposes of this Section, "Change of Control Price" means the
highest price per share paid in any transaction reported on the New York Stock
Exchange Composite Tape, or paid or offered in any transaction related to a
potential or actual Change of Control of the Company at any time during the
preceding sixty day period as determined by the Committee, except that (i) in
the case of Incentive Stock Options and Stock Appreciation Rights relating to
Incentive Stock Options, such price shall be based only on transactions
reported for the date on which the Committee decides to cashout such options,
and (ii) in the case of Director Stock Options, the sixty day period shall be
the period immediately prior to the Change of Control.
SECTION 15. LIMITATIONS ON PAYMENTS.
(a) Notwithstanding Section 14 above or any other provision of this Plan or
any other agreement, arrangement or plan, in no event shall the Company pay or
be obligated to pay any Plan Participant an amount which would be an Excess
Parachute Payment except as provided in Section 15(f) below and except as the
Committee specifically provides otherwise in the Participant's grant
agreement. For purposes of this Plan, the term "Excess Parachute Payment"
shall mean any payment or any portion thereof which would be an "excess
parachute payment" within the meaning of Section 280G(b)(1) of the Code, and
would result in the imposition of an excise tax under Section 4999 of the
Code, in the opinion of tax counsel selected by the Company, ("Tax Counsel").
In the event it is determined that an Excess Parachute Payment would result if
the full acceleration of vesting and exercisability provided in Section 14
above were made (when added to any other payments or benefits contingent on a
change of control under any other agreement, arrangement or plan), the
payments due under Section 14(a) shall be reduced to the minimum extent
necessary to prevent an Excess Parachute Payment; then, if necessary to
prevent an Excess Parachute Payment, benefits or payments under any other
plan, agreement or arrangement shall be reduced. If it is established pursuant
to a final determination of a court or an Internal Revenue Service
administrative appeals proceeding that, notwithstanding the good faith of the
Participant and the Company in applying the terms of this Section 15(a), a
payment (or portion thereof) made is an Excess Parachute Payment, then, the
Company shall pay to the Participant an additional amount in cash (a "Gross-Up
Payment") equal to the amount necessary to cause the amount of the aggregate
after-tax compensation and benefits received by the Participant hereunder
(after payment of the excise tax under Section 4999 of the Code with respect
to any Excess Parachute Payment, and any state and federal income taxes with
respect to the Gross-Up Payment) to be equal to the aggregate after-tax
compensation and benefits he or she would have received as if Sections 280G
and 4999 of the Code had not been enacted.
(b) Subject to the provisions of Section 15(c), the amount of any Gross-Up
Payment and the assumptions to be utilized in arriving at such amount, shall
be determined by a nationally recognized certified public accounting firm
designated by the Company (the "Accounting Firm"). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to Section 15(a), shall be paid by the Company
to the participant within five (5) days after the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be
binding upon the Company and participant.
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(c) Participant shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
Company of a Gross-Up Payment. Such notification shall be given no later than
ten (10) business days after Participant is informed in writing of such claim
and shall apprise the Company of the nature of the claim and the date of
requested payment. Participant shall not pay the claim prior to the expiration
of the thirty (30) day period following the date on which it gives notice to
the Company. If the Company notifies Participant in writing prior to the
expiration of the period that it desires to contest such claim, Participant
shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney selected by the Company and reasonably acceptable to
participant;
(iii) cooperate with the Company in good faith in order to effectively
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to such
claim.
Without limitation on the foregoing provisions of this Section 15(c), the
Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct Participant
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and Participant agrees to prosecute such contest to a
determination before any administration tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Participant
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of the
contest; provided, further, that if the Company directs Participant to pay any
claim and sue for a refund, the Company shall advance the amount of the
payment to Participant, on an interest-free basis, and shall indemnify and
hold Participant harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to the advance or with respect to any imputed income with respect to
the advance.
(d) In the event that the Company exhausts its remedies pursuant to Section
15(c) and Participant thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Gross-Up Payment
required and such payment shall be promptly paid by the Company to or for the
benefit of Participant.
(e) If, after the receipt of Participant of an amount advanced by the
Company pursuant to Section 15(c), Participant becomes entitled to receive any
refund with respect to such claim, Participant shall promptly after receiving
such refund pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by Participant of an amount advanced by the Company pursuant to
Section 15(c), a determination is made that Participant shall not be entitled
to any refund with respect to such claim and the Company does not notify
Participant in writing of its intent to contest such denial of refund prior to
the expiration of thirty (30) days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of
such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
(f) Notwithstanding the foregoing, the limitation set forth in Section 15(a)
shall not apply to a Participant if in the opinion of Tax Counsel or the
Accounting Firm (i) the total amounts payable to the Participant hereunder and
under any other agreement, arrangement or plan as a result of a change of
control (calculated without regard to the limitation of Section 15(a)),
reduced by the amount of excise tax imposed on the Participant under Code
Section 4999 with respect to all such amounts and reduced by the state and
federal income taxes on amounts paid in excess of the limitation set forth in
Section 15(a), would exceed (ii) such total amounts payable after application
of the limitation of Section 15(a). No Gross-Up Payment shall be made in such
case.
19
<PAGE>
SECTION 16. GENERAL PROVISIONS.
(a) All certificates for shares of Stock delivered under the Plan shall be
subject to such stop transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Commission, any stock exchange upon which the Stock is then listed, and any
applicable Federal or state securities law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
(b) Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan
shall not confer upon any consultant, employee or director of the Company, any
Subsidiary or any Affiliate, any right to continued employment (or, in the
case of a consultant or director, continued retention as a consultant or
director) with the Company, a Subsidiary or an Affiliate, as the case may be,
nor shall it interfere in any way with the right of the Company, a Subsidiary
or an Affiliate to terminate the employment of any of its employees at any
time.
(c) Each Participant shall, no later than the date as of which the value of
an award first becomes includible in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee, in its sole discretion, regarding payment of,
any Federal, FICA, state, or local taxes of any kind required by law to be
withheld with respect to the award. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements.
The Committee may permit or require, in its sole discretion, Participants to
elect to satisfy their Federal, and where applicable, FICA, state and local
tax withholding obligations with respect to all awards other than Stock
Options which have related Stock Appreciation Rights by the reduction, in an
amount necessary to pay all said withholding tax obligations, of the number of
shares of Stock or amount of cash otherwise issuable or payable to said
Participants in respect of an award. The Company and, where applicable, its
Subsidiaries and Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes owed hereunder by a Participant from any
payment of any kind otherwise due to said Participant.
(d) At the time of grant or purchase, the Committee may provide in
connection with any grant or purchase made under this Plan that the shares of
Stock received as a result of such grant or purchase shall be subject to a
right of first refusal, pursuant to which the Participant shall be required to
offer to the Company any shares that the Participant wishes to sell, with the
price being the then Fair Market Value of the Stock, subject to the provisions
of Section 14 hereof and to such other terms and conditions as the Committee
may specify at the time of grant.
(e) No member of the Board or the Committee, nor any officer or employee of
the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or
made in good faith with respect to the Plan, and all members of the Board or
the Committee and each and any officer or employee of the Company acting on
their behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, determination or
interpretation.
(f) In the event that any provision of the Plan or any related Stock Option
Award Notice is held to be invalid, void or unenforceable, the same shall not
affect, in any respect whatsoever, the validity of any other provision of the
Plan or any related Stock Option Award Notice.
(g) The rights and obligations under the Plan and any related agreements
shall inure to the benefit of, and shall be binding upon the Company, its
successors and assigns, and the Non-Employee Directors and their
beneficiaries.
(h) Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of the Plan.
20
<PAGE>
(i) The Plan shall be construed, governed and enforced in accordance with the
law of Delaware, except as such laws are preempted by applicable federal law.
SECTION 17. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is approved by a majority vote of
the Company's stockholders.
SECTION 18. TERM OF PLAN.
No Stock Option, Director Stock Option, Stock Appreciation Right, Restricted
Stock award or Deferred Stock award shall be granted pursuant to the Plan on or
after April 23, 2008, but awards theretofore granted may extend beyond that
date.
21
<PAGE>
EXHIBIT A
PRIMARY ELECTION FORM FOR SALARY
FOR THE [SECOND QUARTER OF 1998]
ELECTION TO DEFER SALARY PURSUANT TO SECTION 10 OF THE
TORCHMARK CORPORATION 1998 STOCK INCENTIVE PLAN
The following constitutes the irrevocable election of the undersigned under
the Torchmark Corporation 1998 Stock Incentive Plan (the "Plan") with respect
to the undersigned's salary as an executive officer of Torchmark Corporation
(the "Company") or its subsidiaries and affiliates to be earned by the
undersigned during the calendar quarter identified above ("Next Quarter's
Salary"). Capitalized terms used herein and not otherwise defined have the
meanings assigned such terms in the Plan.
I hereby irrevocably elect to defer into my Interest Account for Salary
under the Plan for the year identified above, % [indicate any percentage
up to 100%, in 10% increments] or $ [indicate any dollar amount in
increments of $10,000] of my Next Quarter's Salary until the earliest of (a)
December 31 of the fifth year after the year identified above, (b) the first
Business Day of the fourth month after my death, or (b) my termination as an
employee of the Company or any of its subsidiaries or affiliates for any
reason other than my death (the "Payment Date"); subject to, however, my
ability under the Plan to make a one-time election at any time during the
twelve-month period following the end of the year identified above, to be
effective on the date such subsequent election is received by the Plan
Administrator, to convert some or all of the balance in my Interest Account
for Salary for such year to Options to purchase common stock of the Company in
accordance with the terms and provisions of the Plan. Any amount remaining in
my Interest Account for Salary on the Payment Date will be paid to me or my
Beneficiary as follows:
if I have previously filed a Primary Election Form for Bonus or a Primary
Election Form for Salary for the year identified above, then in the same
manner as indicated on such form, or
if I have not previously filed a Primary Election Form for Bonus or a
Primary Election Form for Salary for such year, then [please check ONE box]
[ ] in cash in a lump sum on the Payment Date, or [ ] in approximately
equal installments over months [up to 120 months] beginning on the
Payment Date; provided, however, that in the event of my death during such
payout period, the remaining balance shall be payable to my Beneficiary in
a lump sum on the first Business Day of the fourth month after my death.
Executed this day of , 1998.
---------------------------------------
(Name)
<PAGE>
EXHIBIT B
PRIMARY ELECTION FORM FOR BONUS
FOR [CALENDAR YEAR 1998]
ELECTION TO DEFER BONUS PURSUANT TO THE
TORCHMARK CORPORATION 1998 STOCK INCENTIVE PLAN
The following constitutes the irrevocable election of the undersigned under
Section 10 of the Torchmark Corporation 1998 Stock Incentive Plan (the "Plan")
with respect to the undersigned's bonus as an executive officer of Torchmark
Corporation (the "Company") or its subsidiaries and affiliates to be earned by
the undersigned during the calendar year identified above ("Current Year
Bonus"). Capitalized terms used herein and not otherwise defined have the
meanings assigned such terms in the Plan.
I hereby irrevocably elect to defer into my Interest Account for Bonus under
the Plan for the year identified above, % [indicate any percentage up to
100%, in 10% increments] or $ [indicate any dollar amount in increments
of $10,000] of my Current Year Bonus, if any, until the earliest of (a)
December 31 of the fifth year after the year identified above, (b) the first
Business Day of the fourth month after my death, or (c) my termination as an
employee of the Company or any of its subsidiaries or affiliates for any
reason other than my death (the "Payment Date"); subject to, however, my
ability under the Plan to make a one-time election at any time during the
twelve-month period following the end of the year identified above, to be
effective on the date such subsequent election is received by the Plan
Administrator, to convert some or all of the balance in my Interest Account
for Bonus for such year to Options to purchase common stock of the Company in
accordance with the terms and provisions of the Plan. Any amount remaining in
my Interest Account for Bonus on the Payment Date will be paid to me or my
Beneficiary as follows:
if I have filed a Primary Election Form for Salary for the year identified
above, then in the same manner as indicated on such form, or
if I have not filed a Primary Election Form for Salary for such year, then
[please check ONE box] [ ] in cash in a lump sum on the Payment Date, or
[ ] in approximately equal installments over months [up to 120
months] beginning on the Payment Date; provided, however, that in the event
of my death during such payout period, the remaining balance shall be
payable to my Beneficiary in a lump sum on the first Business Day of the
fourth month after my death.
Executed this day of , 1998.
---------------------------------------
(Name)
<PAGE>
EXHIBIT C
SECONDARY ELECTION FORM FOR SALARY
[FOR CALENDAR YEAR 1998]
ELECTION TO RECEIVE STOCK OPTIONS PURSUANT TO THE
TORCHMARK CORPORATION 1998 STOCK INCENTIVE PLAN
The following constitutes the irrevocable election of the undersigned under
the Torchmark Corporation 1998 Stock Incentive Plan (the "Plan") with respect
to the conversion to Options of the balance in the undersigned's Interest
Account for Salary under the Plan for the year identified above. Capitalized
terms used herein and not otherwise defined have the meanings assigned such
terms in the Plan.
I hereby irrevocably elect to convert, as of the date hereof, %
[indicate any percentage up to 100%, in 10% increments] of the balance in my
Interest Account for Salary under the Plan for the year identified above to
Options to purchase common stock of the Company in accordance with the terms
and provisions of the Plan.
I further elect that [please fill in the following blanks]:
% of such Options will be granted at an exercise price of % of the
Fair Market Value of the Company's common stock on the date of grant, and
% of such Options will be granted at an exercise price of 100% of the
Fair Market Value of the Company's common stock on the date of grant.
Executed this day of , 1999.
---------------------------------------
(Name)
<PAGE>
EXHIBIT D
SECONDARY ELECTION FORM FOR BONUS
[FOR CALENDAR YEAR 1998]
ELECTION TO RECEIVE STOCK OPTIONS PURSUANT TO THE
TORCHMARK CORPORATION 1998 STOCK INCENTIVE PLAN
The following constitutes the irrevocable election of the undersigned under
the Torchmark Corporation 1998 Stock Incentive Plan (the "Plan") with respect
to the conversion to Options of the balance in the undersigned's Interest
Account for Bonus under the Plan for the year identified above. Capitalized
terms used herein and not otherwise defined have the meanings assigned such
terms in the Plan.
I hereby irrevocably elect to convert, as of the date hereof, %
[indicate any percentage up to 100%, in 10% increments] of the balance in my
Interest Account for Bonus under the Plan for the year identified above to
Options to purchase common stock of the Company in accordance with the terms
and provisions of the Plan.
I further elect that [please fill in the following blanks]:
% of such Options will be granted at an exercise price of % of the
Fair Market Value of the Company's common stock on the date of grant, and
% of such Options will be granted at an exercise price of 100% of the
Fair Market Value of the Company's common stock on the date of grant.
Executed this day of , 1999.
---------------------------------------
(Name)
<PAGE>
EXHIBIT E
PRIMARY ELECTION FORM
[FOR CALENDAR YEAR 1998]
ELECTION TO DEFER NON-EMPLOYEE DIRECTOR COMPENSATION PURSUANT TO
SECTION 10 OF THE TORCHMARK CORPORATION 1998 STOCK INCENTIVE PLAN
The following constitutes the irrevocable election of the undersigned under
the Torchmark Corporation 1998 Stock Incentive Plan (the "Plan") with respect
to the undersigned's annual cash retainer and meeting fees payable to the
undersigned by Torchmark Corporation (the "Company") for services as a
director (and, if applicable, as a member or chairman of a committee of the
Board of Directors) of the Company during the calendar year identified above
("Next Year's Annual Compensation"). Capitalized terms used herein and not
otherwise defined have the meanings assigned such terms in the Plan.
I hereby irrevocably elect to defer into my Interest Account under the Plan
% [indicate any percentage from 50% to 100%, in 10% increments] of
my Next Year's Annual Compensation until the earliest of (a) December 31 of
the fifth year after the year identified above, (b) the first Business Day of
the fourth month after my death, or (c) my termination as a director of the
Company for any reason other than my death (the "Payment Date"); subject to,
however, my ability under the Plan to make a one-time election at any time
during the calendar year identified above, to be effective on the date such
subsequent election is received by the Plan Administrator, to convert the
balance on such date in my Interest Account for such year to Options to
purchase common stock of the Company in accordance with the terms and
provisions of the Plan. Any amount remaining in my Interest Account on the
Payment Date will be paid to me or my Beneficiary [please check ONE box] [ ]
in cash in a lump sum on the Payment Date, or [ ] in approximately equal
installments over months [up to 120 months] beginning on the
Payment Date; provided, however, that in the event of my death during such
payout period, the remaining balance shall be payable to my Beneficiary in a
lump sum on the first Business Day of the fourth month after my death.
Executed this day of December, 1998.
---------------------------------------
(Name)
<PAGE>
EXHIBIT F
SECONDARY ELECTION FORM
[FOR CALENDAR YEAR 1998]
ELECTION BY NON-EMPLOYEE DIRECTOR TO RECEIVE STOCK OPTIONS PURSUANT TO
SECTION 10 OF THE TORCHMARK CORPORATION 1998 STOCK INCENTIVE PLAN
The following constitutes the irrevocable election of the undersigned under
the Torchmark Corporation 1998 Stock Incentive Plan (the "Plan") with respect
to the conversion to Options of the balance in the undersigned's Interest
Account under the Plan for the year identified above. Capitalized terms used
herein and not otherwise defined have the meanings assigned such terms in the
Plan.
I hereby irrevocably elect to convert, as of the date hereof, the balance in
my Interest Account under the Plan for the year identified above to Options to
purchase common stock of the Company in accordance with the terms and
provisions of the Plan.
I further elect that [PLEASE FILL IN THE FOLLOWING BLANKS]:
% of such Options will be granted at an exercise price of % of the
Fair Market Value of the Company's common stock on the date of grant, and
% of such Options will be granted at an exercise price of 100% of the
Fair Market Value of the Company's common stock on the date of grant.
Executed this day of , 1999.
----------------------------------------
(Name)
<PAGE>
TORCHMARK CORPORATION
PROXY/DIRECTION CARD FOR ANNUAL MEETING ON APRIL 23, 1998
P THIS PROXY/DIRECTION IS SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. The undersigned hereby appoints R. K. Richey and C. B. Hudson,
R jointly and sev-erally with full power of substitution, to vote all
shares of common stock which the undersigned holds of record and is
O entitled to vote at the Annual Meeting of Shareholders to be held at
the offices of the Company, 2001 Third Avenue South, Birmingham,
X Alabama on the 23rd day of April 1998 at 10:00 a.m. (CDT), or any
adjournment thereof. All shares votable by the undersigned in-cluding
Y shares held of record by agents or trustees for the undersigned as a
participant in the Dividend Reinvestment Plan (DRP), Torchmark
Corporation Sav-ings and Investment Plan (TTP), Waddell & Reed
Financial, Inc. Savings and In-vestment Plan (WRTP), Liberty National
Life Insurance Company 401K Plan (LNL 401K) and the Profit Sharing and
Retirement Plan of Liberty National Life In-surance Company (LNL PS&R)
will be voted in the manner specified and in the discretion of the
persons named above or such agents or trustees on such other matters as
may properly come before the meeting.
ELECTION OF DIRECTORS: (change of address/comments)
Joseph M. Farley, C. B. Hudson and
Joseph L. Lanier, Jr.
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
THE PROXY COMMITTEE CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND
RETURN THIS CARD.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
TORCHMARK MAINTAINS A DIVIDEND REINVESTMENT PLAN FOR ALL HOLDERS OF ITS
COMMON STOCK. UNDER THE PLAN, SHAREHOLDERS MAY REINVEST ALL OR PART OF THEIR
DIVIDENDS IN ADDITIONAL SHARES OF COMMON STOCK AND MAY ALSO MAKE PERIODIC
ADDITIONAL CASH PAYMENTS OF UP TO $3,000 TOWARD THE PURCHASE OF TORCHMARK
STOCK. PARTICIPATION IS ENTIRELY VOLUNTARY. MORE INFORMATION ON THE PLAN CAN
BE OBTAINED BY CALLING 1-800-446-2617.
<PAGE>
[ X ] Please mark your 4937
votes as in this
example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS AND
FOR PROPOSALS 2 AND 3.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Approval of 1998 [_] [_] [_]
Directors Incentive Plan
FOR AGAINST ABSTAIN
3. Approval of Auditors [_] [_] [_]
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
Please sign exactly as
name appears hereon. Joint
owners should each sign.
When signing as attorney,
executor, administrator,
trustee or guardian,
please give full title as
such.
------------------------------
------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
TORCHMARK CORPORATION
STOCKHOLDER INQUIRIES
FOR GENERAL INFORMATION CONCERNING YOUR TORCHMARK STOCK,
CALL (205) 325-4270.
