<PAGE> 1
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:
/x/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE LIBERTY CORPORATION
- ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / 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:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
PRELIMINARY DRAFT
March 27, 1997
Dear Shareholder:
We cordially invite you to attend the 1997 Annual Meeting of Shareholders
of The Liberty Corporation on Tuesday, May 6, 1997, at 10:30 a.m. in the
Company's Headquarters Building located at 2000 Wade Hampton Boulevard,
Greenville, South Carolina.
The accompanying Notice of Meeting and Proxy Statement describe the
matters to be considered and voted upon at the meeting. We will also review the
major Company developments in 1996.
Your participation in the affairs of Liberty is important, regardless of
the number of shares you hold. To ensure your representation at the meeting,
whether or not you attend, please complete and return the enclosed proxy card
as soon as possible.
We look forward to seeing you on May 6. Coffee will be served prior to the
meeting, when the members of the Board of Directors hope to visit with you.
Cordially,
HAYNE HIPP
Chairman and Chief Executive Officer
<PAGE> 3
PRELIMINARY DRAFT
THE LIBERTY CORPORATION
Wade Hampton Boulevard
Greenville, S. C. 29615
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 27, 1997
To the Shareholders of The Liberty Corporation:
The Annual Meeting of Shareholders of The Liberty Corporation will be held
at The Liberty Corporation Headquarters Building, Wade Hampton Boulevard,
Greenville, South Carolina, on Tuesday, May 6, 1997 at 10:30 a.m., local time,
for the following purposes:
1. To elect four directors to serve for three-year terms.
2. To consider and act upon a proposal to amend the Restated
Articles of Incorporation regarding director liabilities.
3. To consider and act upon a proposal to approve the material amendments
to, and the eligible participants under, the Performance Incentive
Compensation Program.
4. To ratify the selection of independent public accountants.
5. To transact such other business as may properly come before the
meeting.
Holders of Common Stock and Preferred Stock at the close of business on
March 15, 1997 will be entitled to vote at the meeting or any adjournment
thereof.
A copy of the 1996 Annual Report to Shareholders is enclosed.
By Order of the Board of Directors
Martha G. Williams
Vice President, General Counsel
& Secretary
Each shareholder is urged to execute and return the enclosed proxy promptly. In
the event a shareholder decides to attend the meeting, he may, if he wishes,
revoke his proxy and vote his shares in person.
<PAGE> 4
PRELIMINARY DRAFT
Mailing Date: March 27, 1997
THE LIBERTY CORPORATION
Wade Hampton Boulevard
Greenville, S. C. 29615
PROXY STATEMENT
The 1997 Annual Meeting of Shareholders of The Liberty Corporation
("Liberty" or the "Company") will be held on May 6, 1997 for the purposes set
forth in the Notice of Annual Meeting. The accompanying form of proxy is
solicited on behalf of the Board of Directors in connection with this meeting
and any adjournment thereof. Officers of Liberty may solicit proxies by mail,
telephone and personal interview, which expense will be borne by Liberty. In
addition, the Company has engaged the services of Corporate Communications,
Inc., Nashville, Tennessee, to assist in the solicitation of proxies at an
estimated fee of $6,000 plus out-of-pocket expenses.
A proxy in the accompanying form which is properly executed, duly returned
and not revoked will be voted in accordance with instructions contained
therein. If no instructions are given with respect to a specified matter to be
acted upon, proxies will be voted in favor of such matter. Proxies may be
revoked at any time prior to the voting of the proxy by written notice to the
Company's Corporate Secretary, by delivery of a later dated proxy, or by
attending the Annual Meeting and voting in person.
Each shareholder is entitled to one vote for each share of Common Stock
and each share of Preferred Stock of Liberty held at the close of business on
March 15, 1997, the record date for the Annual Meeting. On that date there were
20,240,065 shares of Common Stock, 668,207 shares of Series 1994-A Preferred
Stock, 590,469 shares of Series 1994-B Preferred Stock, and 599,985 shares of
Series 1995-A Preferred Stock outstanding.
In voting by proxy on the election of directors (Item 1), shareholders may
vote in favor of all nominees or withhold their votes as to some or all
nominees. In voting by proxy on the approval of the amendment to the Restated
Articles of Incorporation (Item 2), amendment to the Performance Incentive
Compensation Program (Item 3), and ratification of the selection of independent
public accountants (Item 4), shareholders may vote FOR, AGAINST or ABSTAIN with
respect to each proposal. Unless other instructions are indicated on the proxy
card, all properly executed proxies received by the Company will be voted FOR
the election of all the nominees for director set forth below under "Election
of Directors," and FOR Items 2, 3 and 4. Some proxies may be broker non-votes
(marked to indicate that the shares are not being voted on any one or more of
these items).
The election of directors will require the affirmative vote of a plurality
of the shares voting in person or by proxy at the Annual Meeting. Votes
withheld and broker non-votes will not be included in vote totals for director
nominees and will have no effect on the outcome of the vote. Item 2 will
require the affirmative vote of two-thirds of the shares entiled to vote at the
Annual Meeting. Items 3 and 4 will require the affirmative vote of a majority
of the shares voting in person or by proxy at the Annual Meeting. The outcome
of the vote for Items 2, 3 and 4 will not be affected by abstentions and broker
non-votes.
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares is necessary to constitute a quorum at the Annual
Meeting. Any proxy authorized to be voted at the meeting on any matter
(including on routine matters pursuant to the discretionary authority granted
in management's proxy), whether or not the proxy is marked to "WITHHOLD
AUTHORITY", to "ABSTAIN" or to effect a broker non-vote on any proposal, will
be counted in establishing a quorum.
<PAGE> 5
ITEM 1. ELECTION OF DIRECTORS
INFORMATION RESPECTING THE BOARD AND NOMINEES
The Board, which held four meetings during 1996, has standing Audit,
Compensation, Investment and Finance, and Nominating Committees. The
memberships and principal responsibilities of these Committees are as follows:
The Audit Committee, which met three times during 1996, currently includes
Edward E. Crutchfield, Chairman, John R. Farmer, Lawrence M. Gressette, Jr.,
and J. Thurston Roach. The Audit Committee is responsible for recommending to
the Board of Directors the engagement or discharge of the independent public
accountants, reviewing with the independent public accountants the plan and
results of the audit engagement, maintaining direct reporting responsibility
and regular communication with the Company's internal audit staff, reviewing
the scope and results of the Company's internal audit procedures, approving the
services to be performed by the independent public accountants, reviewing the
degree of independence of the public accountants, considering the range of
audit and non-audit fees and reviewing the adequacy of the Company's system of
internal accounting controls.
The Compensation Committee, which met three times during 1996, currently
includes William O. McCoy, Chairman, John H. Mullin, III and Eugene E. Stone,
IV. This Committee establishes the salaries and other forms of executive
compensation for senior executives of the Company and its subsidiaries,
develops and maintains compensation plans for such senior executives and grants
benefits under such plans.
The Investment and Finance Committee, which did not meet during 1996,
currently includes W. W. Johnson and J. Thurston Roach. This Committee advises
the Board with regard to the Company's capital structure and long-term capital
and borrowing needs; the Company's broad investment policies and guidelines;
and the quality and performance of the investment portfolios.
The Nominating Committee, which met one time since the last annual
meeting, currently includes Buck Mickel, Chairman, Rufus C. Barkley, Jr., W. W.
Johnson and Dr. Benjamin F. Payton. This Committee recommends selection to
management and to the Board of Directors of nominees for election as Directors
and considers the performance of incumbent Directors in determining whether to
nominate them for re-election. The Nominating Committee will consider nominees
recommended by shareholders for the 1998 meeting provided such nominations are
made in writing and submitted to the Nominating Committee at the Company's
above stated address no later than December 1, 1997.
The Board of Directors is divided into three classes. At each annual
meeting, one class is elected for a three-year term. The Nominating Committee
has recommended the election of Hayne Hipp, Buck Mickel, J. Thurston Roach and
William B. Timmerman as Directors to hold office for terms of three years,
expiring with the annual shareholders meeting to be held in 2000 and until
their successors are duly elected and qualified. The terms of office of the
other eight Directors continue until the annual meeting of shareholders held in
the year shown for their respective classes. The Board of Directors and
management concur in this recommendation.
Should any one or more of the nominees become unavailable to accept
nomination for election as a Director, the persons named in the enclosed proxy
will vote for the election of such other persons as management may recommend,
unless the Board reduces the number of Directors. The nominees receiving a
plurality of the votes cast will be elected as Directors.
Following is information about each nominee for Director or Director whose
term continues after the meeting, including certain biographical data.
2
<PAGE> 6
NOMINEES FOR DIRECTOR
FOR TERMS EXPIRING IN MAY 2000:
HAYNE HIPP is Chairman, President and Chief Executive Officer of Liberty,
having been elected Chairman in 1995. Also serving as Chairman of Liberty Life,
Mr. Hipp first became a Director of Liberty in 1977. He also serves on the
Boards of Wachovia Corporation and SCANA Corporation. He is 57 years old.
BUCK MICKEL is the retired Vice Chairman of the Board and President of
Fluor Corporation, a company headquartered in Irvine, California, and engaged
primarily in furnishing engineering and construction services and producing
natural resources. Mr. Mickel has been a member of Liberty's Board of
Directors since 1969 and is also a Director of Fluor Corporation, Duke Power
Company, Delta Woodside Industries, Incorporated, Insignia Financial Group, RSI
Holdings Inc. and Emergent Group Incorporated. Mr. Mickel is 71 years old.
J. THURSTON ROACH is President and a Director of Simpson Timber Company, a
subsidiary of Simpson Investment Company, a privately-held company
headquartered in Seattle, Washington, engaged in growing and harvesting timber
and manufacturing lumber, plywood, pulp, and paper. Until January, 1996, when
he became President of Simpson Timber Company, he served as Senior Vice
President, Chief Financial Officer and Secretary of Simpson Investment Company.
Mr. Roach also serves as a Director of Celulosa del Pacifico S.A. and was first
elected a Director of Liberty in 1994. He is 55 years old.
WILLIAM B. TIMMERMAN. is Chairman of the Board, President and Chief
Executive Officer of SCANA Corporation, a utilities company located in
Columbia, South Carolina. He has held these positions since March 1, 1997.
Mr. Timmerman was elected President of SCANA on December 13, 1995 and Chief
Operating Officer on August 21, 1996. From May 1, 1994 to December 13, 1995,
he was Executive Vice President, Chief Financial Officer and Controller.
Previously, he was Senior Vice President of SCANA as well as its Chief
Financial Officer and Controller. Mr. Timmerman is being nominated as a
Director of Liberty for the first time and also serves as a Director of
InterCel, Inc. and Wachovia Bank of South Carolina. He is 50 years old.
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN MAY 1998:
EDWARD E. CRUTCHFIELD is Chairman and Chief Executive Officer of First
Union Corporation, a bank holding company, located in Charlotte, North
Carolina. Mr. Crutchfield has served as a Director of Liberty since 1989 and
also serves as a Director of VF Corporation. He is 55 years old.
JOHN R. FARMER is a Limited Partner of Goldman, Sachs & Co., New York, New
York, and Vice Chairman of Goldman Sachs Europe, Limited, London, England,
investment banking firms. He assumed this position in 1994 and, previously,
served as a General Partner of Goldman, Sachs & Co. and Managing Director of
Goldman, Sachs, International. Mr. Farmer was first elected a Director of
Liberty in 1995. He is 58 years old.
WILLIAM O. MCCOY is Vice President and Chief Financial Officer of the
University of North Carolina, Chapel Hill, North Carolina, a position he
assumed in 1995. Previously, he served as Vice Chairman of the Board of
BellSouth Corporation, Atlanta, Georgia, and as President and Chief Executive
Officer of BellSouth Enterprises, Incorporated. Mr. McCoy has served as a
Director of Liberty since 1984 and also serves as a Director of Carolina Power
and Light Company, Kenan Transport Company, Fidelity Investments and The Weeks
Corporation. He is 63 years old.
JOHN H. MULLIN, III is Chairman of Ridgeway Farm, Inc., a wholesale shade
and ornamental tree nursery located in Brookneal, Virginia. Serving as a
Managing Director of Dillon, Read & Co. Inc., of New York, New York, until
1989, Mr. Mullin remains a Director of Dillon, Read & Co. Inc. and also serves
as a Director of ACX Technologies, Inc., Alex. Brown Realty, Inc. and The
Ryland Group, Inc. He has served as a Liberty Director since 1989. Mr. Mullin
is 55 years old.
3
<PAGE> 7
TERMS EXPIRING IN MAY 1999:
RUFUS C. BARKLEY, JR. is the Chairman of the Board of Cameron and Barkley
Company, an industrial and electrical and electronics supplier of Charleston,
South Carolina. He has held this position since 1959 and also served as Chief
Executive Officer until January 1, 1992. Mr. Barkley, who is also a Director
of Wachovia Corporation, first became a Director of Liberty in 1970. He is 67
years old.
W. W. JOHNSON is Chairman of the Executive Committee of the Board of
Directors of NationsBank Corporation, a bank holding company, headquartered in
Charlotte, North Carolina. Mr. Johnson first became a Director of Liberty in
1973 and is also a Director of NationsBank Corporation, Duke Power Company and
Alltel Corporation. He is 66 years old.
BENJAMIN F. PAYTON is President of Tuskegee University, Tuskegee, Alabama.
He was elected a Director of Liberty in 1973 and is also a Director of AmSouth
Bancorporation, ITT Corporation, Morrison Health Care Incorporated, Praxair,
Incorporated, Ruby Tuesday, Inc. and Sonat Incorporated. Dr. Payton is 64
years old.
EUGENE E. STONE, IV, is Chief Executive Officer of Stone Manufacturing
Co., an apparel manufacturer, and Chairman of Umbro International, a marketer
of sports apparel and equipment. Both companies are located in Greenville,
South Carolina. Mr. Stone first became as a Director of Liberty in 1996 and
also serves as a Director of Carolina First Bank. He is 58 years old.
- ---------------------
1. References to "Liberty Life" are to Liberty Life Insurance Company, a
wholly-owned subsidiary of Liberty.
2. Dr. Benjamin F. Payton attended 60% of the aggregate of the total number
of meetings of the Board and the meetings held by all committees of the
Board on which he sat.
4
<PAGE> 8
EXECUTIVE COMPENSATION
The following information is given as to the Chief Executive Officer and
the other four most highly compensated officers (collectively the "Senior
Executives") who received salary and bonus for 1996 from Liberty and its
subsidiaries of more than $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- ----------------------------
SHARES
RESTRICTED UNDERLYING ALL OTHER
NAME AND STOCK STOCK COMPENSATION
PRINCIPAL POSITION (1) YEAR SALARY ($) BONUS ($) ($) (2) OPTIONS(#)(3) ($)(4)
- ---------------------- ---- ---------- --------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
James M. Keelor 1996 $ 262,215 $ 349,528 $ 305,156 -0- $ 21,945
President 1995 262,586 203,399 252,669 -0- 21,795
of Cosmos 1994 234,808 190,259 150,766 -0- 21,750
H. Ray Eanes 1996 382,333 185,000 262,500 -0- 16,945
Senior VP & CFO 1995 360,000 175,000 51,634 -0- 15,678
of Liberty 1994 264,167 215,000 772,500 -0- -0-
Hayne Hipp 1996 383,333 101,000 937,500 -0- 23,743
Chairman, President 1995 333,334 103,350 1,062,500 -0- 23,786
& CEO of Liberty 1994 350,000 -0- 772,500 -0- 23,454
Porter B. Rose
President 1996 232,000 144,658 244,844 -0- 23,945
of Liberty Investment 1995 226,667 163,233 163,012 -0- 23,986
Group 1994 211,334 95,780 177,546 -0- 23,656
W. Kenneth Hunt, III 1996 225,000 88,462 112,188 -0- 20,683
President 1995 216,333 74,849 45,928 -0- 20,730
of Liberty Life 1994 178,334 38,320 425,277 -0- 20,266
</TABLE>
1. References to "Cosmos" are to Cosmos Broadcasting Corporation and
to "Liberty Investment Group" are to a group of companies comprised of
Liberty Capital Advisors, Inc. and Liberty Properties Group, Inc. All
companies referenced are wholly-owned subsidiaries of Liberty.
2. The aggregate restricted shareholdings at December 31, 1996 for
each individual named in the Summary Compensation Table were as follows:
James M. Keelor - 25,065 shares valued at $983,801; H. Ray Eanes - 34,180
shares valued at $1,341,565; Hayne Hipp - 95,600 shares valued at
$3,752,300; Porter B. Rose - 22,112 shares valued at $867,896; and W.
Kenneth Hunt, III - 17,496 shares valued at $686,718. Dividends are paid
on restricted stock at the same rate as paid on all outstanding shares of
the Company's Common Stock.
3. No stock options were granted to or exercised by any of the Senior
Executives during 1996.
4. "All Other Compensation" was comprised of the following items
during 1996 (the last completed fiscal year): a.) the full dollar value
of the entire premiums paid by the Company on behalf of the named
individuals for split dollar life insurance policies: James M. Keelor -
$7,500, Hayne Hipp - $6,798, Porter B. Rose - $7,000, and W. Kenneth Hunt,
III - $3,738; b.) Company contributions under the 401(k) Thrift Plan for
each named individual: James M. Keelor - $4,500, H. Ray Eanes - $4,500,
Hayne Hipp - $4,500, Porter B. Rose - $4,500, and W. Kenneth Hunt, III -
$4,500; and (c) Company contributions allocated to each named individual
pursuant to the profit sharing plan: James M. Keelor - $9,945, H. Ray
Eanes - $12,445, Hayne Hipp - $12,445, Porter B. Rose - $12,445, and W.
Kenneth Hunt, III - $12,445.
5
<PAGE> 9
PENSION PLAN TABLE
The following table shows estimated annual benefits payable after
retirement to a participant covered by the Supplemental Retirement Income Plan
at its termination on December 31, 1984:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------
Remuneration 15 20 25 30 or More
- ------------ -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$100,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000
150,000 45,000 60,000 75,000 90,000
200,000 60,000 80,000 100,000 120,000
250,000 75,000 100,000 125,000 150,000
300,000 90,000 120,000 150,000 180,000
350,000 105,000 140,000 175,000 210,000
400,000 120,000 160,000 200,000 240,000
450,000 125,000 180,000 225,000 270,000
500,000 150,000 200,000 250,000 300,000
550,000 165,000 220,000 275,000 330,000
600,000 180,000 240,000 300,000 360,000
</TABLE>
A participant's remuneration covered by the Supplemental Retirement Income
Plan is his or her average salary and bonus (as reported in the Summary
Compensation Table) during the three consecutive years of the final five years
of employment which will produce the highest average. Estimated annual benefits
under the Supplemental Retirement Income Plan as listed in the table would be
reduced by Social Security benefits and any benefits received under the 401(k)
Thrift Plan resulting from employer contributions and under the Retirement
Plan, any annuity contract or any other qualified profit sharing or pension
plan for which the Company provides the consideration. It is assumed that the
participant's account balances under the 401(k) Thrift Plan resulting from
employer contributions and under the Retirement Plan and any other qualified
profit sharing or pension plans for which the Company provided the compensation
would be used to purchase a single life annuity on the employee's retirement
date. As of December 31, 1984, the termination date of the Supplemental
Retirement Income Plan, the years of service for each of the persons listed in
the Summary Compensation Table are as follows: Hayne Hipp - 15 years, W.
Kenneth Hunt, III - 4 years, James M. Keelor - 11 years, and Porter B. Rose -
16 years.
DIRECTORS COMPENSATION
Each Director who is not also an officer of Liberty or one of its
subsidiaries receives $16,000 annual compensation, plus $2,000 for each meeting
of the Board which he attends. Travel expenses incurred by a Director in
attending a meeting of the Board or a Committee are also reimbursed.
The Compensation Committee Report on Executive Compensation and the
performance graph which follow shall not be deemed to be incorporated by
reference into any filing made by the Company under the Securities Act of 1933
or the Securities Exchange Act of 1934, notwithstanding any general statement
contained in any such filing incorporating this proxy statement by reference,
except to the extent the Company incorporates such Report and graph by specific
reference.
6
<PAGE> 10
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is currently composed of Messrs. William O.
McCoy, Chairman, Eugene Stone, and John H. Mullin, III, all of whom are
non-employee directors. The Committee establishes the salaries and other forms
of compensation for executive officers of the Company and its subsidiaries. It
also administers the Performance Incentive Compensation Program for such
executive officers and grants benefits under such Program. Set forth below is a
report of the Compensation Committee addressing the Company's compensation
policies for 1996 as they affected the Company's executive officers, including
Hayne Hipp and Messrs. Eanes, Hunt, Keelor and Rose, the four executive
officers other than Mr. Hipp who were the Company's most highly paid executives
(collectively with Mr. Hipp, the "Senior Executives") during 1996.
Policies. The Compensation Committee's executive compensation policies
are designed to:
- Pay for performance by basing a substantial portion of annual
compensation on corporate, business unit and individual performance;
- Motivate executive officers to achieve strategic business objectives and
reward them for achievements;
- Align the interests of executives with the long-term interests of the
shareholders through stock option, restricted stock and other stock-based
awards; and
- Provide pay scales and compensation plans which are comparable to those
offered by other companies in the insurance and broadcasting industries, thus
allowing the Company to compete for and retain talented executives who are
critical to the Company's performance.
At present, the executive compensation program is composed of annual
incentive cash bonuses, long-term incentive stock options and restricted stock
grants, and salary and benefits generally available to executives in the
insurance and broadcasting industries. The incentive programs are designed to
reward participants on the basis of individual and corporate performance that
benefit the Company and its shareholders. The Committee believes that it is
desirable for executive compensation to be deductible for federal income tax
purposes, to the extent that achieving deductibility is practicable, consistent
with the Company's overall objectives, and in the best interests of the Company
and its shareholders. Accordingly, the Committee may from time to time take
appropriate action intended to qualify compensation as "performance based" for
tax deductibility as within the meaning of Section 162(m)of the Internal
Revenue Code. As discussed in Item 3 of this proxy statement, the Company is
seeking shareholder approval of amendments to the Performance Incentive
Compensation Program so that awards under the Program qualify as "performance
based" compensation under Section 162(m). The loss of deduction generally
applies only to compensation that could otherwise be deducted in a taxable
year, which excluded compensation deferred by an executive. The Chief Executive
Officer deferred income in 1996, and the Company does not expect that Section
162(m) will limit the deductibility of his compensation.
Comparability. The Committee annually reviews the executive compensation
program including an analysis of competitive market data. This data compares
the Company's compensation practices to those of groups of comparator companies
that have business operations in the insurance and broadcasting industries and
that are similar in size in terms of revenues and assets. Salaries are
generally targeted at the 50th percentile of the salaries of comparable
positions at the comparator companies, and in 1996 most of the executive
officers received salaries equal to this level. The opportunity for executive
officers to earn compensation in excess of the 50th percentile is provided by
the annual performance-based bonus plan and the long-term incentive stock
option and restricted stock plan. The Chief Executive Officer's 1996 salary was
below the median level. The Performance Graph in this proxy statement displays,
in addition to the Company and the S&P 500, the Dow Jones Media and the Dow
Jones Life Insurance indices. These indices are comprised of a broad range of
broadcasting and insurance companies, including those companies in the
comparator groups used for compensation purposes.
Annual Performance Incentive. The Compensation Committee's emphasis on
tying pay to corporate, business unit and individual performance is reflected
in the incentive bonuses awarded pursuant to the 1996 Annual Management Bonus
Plan (the "Bonus
7
<PAGE> 11
Plan"). The Bonus Plan provided for cash bonus awards to executive officers
based on the 1996 actual versus target earnings performance of the Company and
its major business units and various other individual or operating measures
tailored to an individual executive's area of responsibility.
The Bonus Plan established separate target bonus pools for the Company and
each of its major business units. Bonuses are determined primarily by the
achievement of the Company's return on shareholders' equity target. As Company
earnings and shareholder value increases, bonus payouts increase
proportionally. The target awards to be paid to the executive officers from the
bonus pools reflected the Committee's subjective judgment as to the extent to
which the participant could contribute to the achievement of the Company's
financial goals. Threshold actual earnings, which varied among the Company and
its business units, were required before an executive officer became eligible
for a bonus. No bonuses would have been awarded to officers of the Company if
the actual earnings of the Company had been lower than target earnings of the
Company by 5%. No bonuses would have been awarded to officers of the insurance
business unit if its actual earnings had been lower than its target earnings by
7%. Similarly, no bonuses would have been awarded to officers of the
broadcasting subsidiary if actual broadcasting earnings had been lower than its
target earnings by 10%. Thresholds at the indicated percentages were
established in order to level the effect on the bonus pools of year-to-year
earnings volatility due to acquisitions, divestitures and cyclical broadcasting
revenues.
The bonus awards paid to the Senior Executives ranged from 75% to 411% of
target awards that would have been paid if the entire target bonus pool had
been distributed. The Chief Executive Officer's bonus award was 50% of his
target award. 59% of combined salary and bonus paid to the Senior Executives in
1996 was derived from the performance based bonus. 21% of combined salary and
bonus paid to the Chief Executive Officer was derived from performance based
bonus.
Long-term Performance Incentive. The Company's Performance Incentive
Compensation Program (the "Program") is designed to align a significant portion
of the executive compensation program with shareholder interests. Although the
proposed amendments to the Program will authorize additional types of
stock-based awards, the Program currently permits the granting of two types of
stock-based awards:
- Stock Option. A right vesting over a period of years as established by
the Compensation Committee and terminating after ten years to purchase shares
of Common Stock at the current market value as of the date the option is
granted; and
- Restricted Stock. Shares of Common Stock which the recipient cannot sell
or otherwise dispose of until a restriction period lapses and which are
forfeited if the recipient terminates employment for any reason other than
retirement, disability or death prior to the lapse of the restriction period.
In granting restricted stock in 1996 the Committee utilized a formula tied
to the amount of bonus earned by an executive officer under the prior year's
Bonus Plan and did not place emphasis on previous grants. In addition, the
Committee awarded grants of restricted stock to some executive officers to
reflect increased responsibilities or superior performance over a period of
years. Senior Executives, other than the Chief Executive Officer, were awarded
restricted stock having a value as of the date of the award equal to 1.0 to 1.5
times the Senior Executive's cash bonus paid pursuant to the 1995 Bonus Plan.
The value of the restricted stock grant equaled market value of the stock
underlying the restricted stock grant as of the date of the award.
Salaries. Executive officers were granted base salary increases effective
May 1, 1996 after evaluating executives' levels of performance, responsibility
and internal equity issues, and after evaluating the range of salaries paid by
the comparator companies.
Chief Executive Officer. At its May 7, 1996 meeting, the Committee
reviewed the competitive salary and bonus market data and noted that the Chief
Executive's base salary combined with his 1996 annual bonus award was below the
50th percentile of salaries and bonuses paid by the comparator companies.
Evaluating the competitive total compensation market data for the comparator
companies, the Committee determined that a restricted stock grant of 30,000
shares together with a salary increase of
8
<PAGE> 12
$50,000 would be appropriate and within the range of total compensation paid by
the comparator companies.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
Eugene E. Stone, IV William O. McCoy, Chairman John H. Mullin, III
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996 there were no interlocking relationships between the Company's
executive officers and its directors.
CERTAIN TRANSACTIONS
Edward E. Crutchfield, Chairman and Chief Executive Officer of First Union
Corporation, is a Director of Liberty. Liberty Life writes mortgage protection
policies for customers of First Union Insurance Group, a subsidiary of First
Union Corporation. As of December 31, 1996, annualized insurance premiums in
force for these policies were approximately $785,854. Effective March 21, 1995,
Liberty entered into a Credit Agreement with a syndicate of banks pursuant to
which Liberty could borrow up to $375 million. First Union National Bank of
North Carolina was among the banks participating in the syndicate of banks and
its portion of the total debt at December 31, 1996 was $21.0 million.
William B. Timmerman is President of SCANA Corporation, an affiliate of
South Carolina Electric and Gas Company, and is a nominee for Director of
Liberty. Liberty Life writes universal life insurance policies for employees of
South Carolina Electric and Gas Company. Premiums and interest paid on policy
loans on these policies totaled approximately $357,800 during 1996.
Liberty Life entered into mortgage loan transactions of $1,640,000 to Top
Notch Retail Limited Partnership during 1992 and of $1,000,000 to PhotoMarker
II during 1996. The principals for each of these transactions include children
of Buck Mickel; and collectively, their ownership interest in each transaction
exceeds 10%. At December 31, 1996, the balance on the Top Notch Retail loan was
$1,206,937 and the balance on the PhotoMarker II loan was $988,590. Management
believes that the terms of the arrangements described in this paragraph are as
favorable to Liberty as are similar transactions between unrelated parties.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS AND
CHANGE-OF-CONTROL ARRANGEMENTS
On May 20, 1994, H. Ray Eanes became the Senior Vice President, Treasurer
and Chief Financial Officer of Liberty pursuant to an employment agreement
which expires on December 31, 1999. Mr. Eanes' initial base salary under the
agreement was $350,000 per year, subject to review and increase by the
Compensation Committee of the Board of Directors in subsequent years as
appropriate, decreasing to $100,000 in the final two years of the term of the
agreement. For 1997 the Compensation Committee has increased Mr. Eanes' salary
to $388,500. He is also entitled to receive an annual bonus of a minimum of 50%
of base salary determined in accordance with the Annual Management Bonus Plan
and an award of restricted stock under the Performance Incentive Compensation
Program at the discretion of the Compensation Committee. In January, 1997, W.
Kenneth Hunt, III entered into a one-year employment agreement terminating on
December 31, 1997. Pursuant to this agreement, Mr. Hunt is entitled to a base
salary of $225,000 and benefits of the type available to all Company employees.
9
<PAGE> 13
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The Performance Graph below compares cumulative, five-year shareholder
returns on an indexed basis with the S&P 500 Stock Index, the Dow Jones Life
Insurance Index and the Dow Jones Media Index.
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE RETURN *
AMONG THE LIBERTY CORPORATION, THE S&P 500 INDEX, THE DOW JONES
LIFE INSURANCE INDEX AND THE DOW JONES MEDIA INDEX
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Liberty Corporation 100 130 114 122 166 197
S & P 500 100 108 118 120 165 203
Dow Jones Life 100 131 130 117 162 215
Dow Jones Media 100 118 143 137 197 203
</TABLE>
*Assumes $100 invested on December 31, 1991 in Stock or Index, including
reinvestment of dividends. Fiscal year ending December 31.
10
<PAGE> 14
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table shows as of January 31, 1997, the shares of Liberty
Common Stock and Liberty Preferred Stock beneficially owned (as that term is
defined by Rule 13d-3 issued by the SEC under the Securities Exchange Act of
1934) by all persons who beneficially own more than 5% of the shares of each
such class of Liberty stock. Hayne Hipp and John B. Hipp are brothers. Jane
Gage Hipp Caulder, Mary Ladson Hipp Haddow, Edward F. Hipp, H. Neel Hipp, Jr.
and William F. Hipp are brothers and sisters. Jo Love Little, James S. Love,
III and Mary E. McMillan are brother and sisters.
<TABLE>
<CAPTION>
Nature and Amount of Beneficial Ownership
---------------------------------------------
Sole Voting Shared Voting Total
and/or and/or Shares Percentage Percentage
Investment Investment Beneficially of of
Name and Address (1) Power (2) Power (3) Owned Common Preferred
- ----------------------- -------------- -------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Jane Gage Hipp Caulder
Travelers Rest, SC 157,138 1,394,606 (4) 1,551,744 7.67% --
Mary Ladson Hipp Haddow
Atlanta, GA 131,769 (5) 1,454,227 (6) 1,585,996 7.84% --
Edward F. Hipp
Hendersonville, NC 133,686 1,382,912 (7) 1,516,598 7.50% --
H. Neel Hipp, Jr
Greenville, SC 99,033 (8) 1,603,560 (9) 1,702,593 8.42% --
Hayne Hipp
Greenville, SC 385,934 (10) 2,495,608 (11) 2,881,542 14.25% --
John B. Hipp
Atlanta, GA 16,598 1,141,733 (12) 1,158,331 5.73% --
William F. Hipp
Atlanta, GA 115,020 (13) 1,521,230 (14) 1,636,250 8.09% --
Frances M. McCreery
Chagrin Falls, OH 1,064,658 (15) 7,200 (16) 1,071,858 5.30% --
William R. Patterson
999 Peachtree Street, NE
Atlanta, GA 30309-3996 -0- 2,142,025 (17) 2,142,025 10.59% --
Jo Love Little
#2 Birch Cove
Gulfport, MS 30503 174,490 (18) -0- 174,490 -- 9.39%
James S. Love, III
12137 Hickman Road
Biloxi, MS 39532 176,045 (18) -0- 176,045 -- 9.47%
Mary E. McMillan
1200 Meadowbrook, #34
Jackson, MS 39206 171,224 (18) -0- 171,224 -- 9.21%
The Mighty Mite Corporation
25165 Bickham Road
Jackson, LA 70748 232,935 (18) -0- 232,935 -- 12.53%
</TABLE>
Notes:
1. The mailing address for the individuals listed above, with the
exception of Mr. Patterson, Ms. Love, Mr. Love, Ms. McMillan and
The Mighty Mite Corporation is P. O. Box 789, Greenville, South
Carolina 29602.
2. Except as otherwise indicated in these Notes, each person has sole
voting and investment power with respect to the designated shares.
11
<PAGE> 15
3. Shares shown in this column are included in the totals for more than
one person as follows: (a) Hayne Hipp shares voting and investment
power with John B. Hipp and other persons with respect to 741,535
shares; (b) Hayne Hipp shares voting and investment power with William
R. Patterson and other persons with respect to 416,000 shares; (c) Jane
Gage Hipp Caulder, Mary Ladson Hipp Haddow, Edward F. Hipp, H. Neel
Hipp, Jr. and William F. Hipp share voting and investment power with
William R. Patterson and each other with respect to 1,373,392 shares;
(d) Jane Gage Hipp Caulder, Mary Ladson Hipp Haddow, Edward F. Hipp, H.
Neel Hipp, Jr. and William F. Hipp share voting and investment power
with each other and another individual with respect to 270,000 shares;
(e) H. Neel Hipp, Jr. shares voting and investment power with the
spouse of each of his brothers and sisters with respect to 65,477
shares; and (f) H. Neel Hipp, Jr. shares voting and investment power
with William F. Hipp and another individual with respect to 70,830
shares. Except as otherwise indicated in these Notes, both voting and
investment power are shared with respect to the shares designated in
this column.
4. Includes 10,045 shares held of record by her husband or by or for her
minor children and 11,837 shares held in trust for the benefit of her
children of which her husband serves as Co-Trustee. Jane Gage Hipp Caulder
disclaims beneficial ownership of the 14,950 shares held by her husband
and in trust for her children.
5. Includes 2,200 shares held in trust for the benefit of her children of
which Mary Ladson Hipp Haddow serves as sole Trustee.
6. Includes 1,568 shares held jointly with her husband, 59,357 shares held of
record by her husband or by or for her minor children and 25,362 shares
held in trust for the benefit of her children of which her husband serves
as Co-Trustee. Mary Ladson Hipp Haddow disclaims beneficial ownership of
the 40,881 shares held by her husband and in trust for her children.
7. Includes 7,415 shares held of record by his wife or by or for his minor
children and 8,485 shares held in trust for the benefit of his children of
which his wife serves as Co-Trustee. Edward F. Hipp disclaims beneficial
ownership of these shares.
8. Includes options to purchase 6,000 shares currently exercisable under
Liberty's Performance Incentive Compensation Program and 5,341 restricted
shares as to which he has sole voting but no investment power. Also
includes 14,300 shares held in trust for the benefit of his brother's
children of which he serves as sole Trustee.
9. Includes 79,887 shares held of record by his wife or by or for his
minor children and 2,810 shares held in trust for the benefit of his
children of which he and his wife serve as Co-Trustees. H. Neel Hipp,
Jr. disclaims beneficial ownership of the 79,887 shares held by his
wife or by or for his minor children.
10. Includes 95,600 restricted shares as to which he has sole voting power but
no investment power and 38,287 shares held in trust for the benefit of
charity and/or family and non-family members of which Hayne Hipp serves as
sole Trustee.
11. Includes 12,045 shares held of record by his wife, 160,219 shares held in
trust for the benefit of his children and/or charity of which his wife
serves as Co-Trustee and 2,440 shares held by him as custodian.
12. Includes 54,498 shares held of record by his minor children.
13. Includes 1,740 shares held in trust for the benefit of his children of
which William F. Hipp serves as sole Trustee.
14. Includes 62,927 shares held of record by his wife or by or for his
minor children and 19,793 shares held in trust for the benefit of his
children of which his wife serves as Co-Trustee. William F. Hipp disclaims
beneficial ownership of these shares.
12
<PAGE> 16
15. Includes 100,000 shares held in trust for her benefit and for the
benefit of family members of which Frances M. McCreery serves as sole
Trustee.
16. Includes 800 shares held in trust for the benefit of her husband.
Frances M. McCreery disclaims beneficial ownership of these shares.
17. Includes 2,142,025 shares for which shared voting power is held and
1,789,392 shares for which shared investment power is held.
18. The shares shown as being owned by Jo Love Little, James S. Love, III and
Mary E. McMillan are shares of Liberty's Series 1995-A Preferred Stock;
and the shares shown as being owned by The Mighty Mite Corporation are
shares of Liberty's Series 1994-A Preferred Stock, which entitles these
holders to receive an equal number of shares of Liberty Common Stock upon
conversion of the shares of Preferred Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the shares of Liberty Common Stock owned
beneficially (as that term is defined by Rule 13d-3 issued by the SEC under the
Securities Exchange Act of 1934), unless otherwise indicated, by each Director
and nominee and by all executive officers and Directors of Liberty as a group
on January 31, 1997.
<TABLE>
<CAPTION>
Percentage of
Number of Shares Outstanding Shares
Shareholder of Common Stock of Common Stock
- ----------- ---------------- --------------------
<S> <C> <C>
Rufus C. Barkley, Jr. 3,908 (2) .02%
Edward E. Crutchfield 2,000 .01%
H. Ray Eanes 47,600 (3) .24%
John R. Farmer 5,000 .02%
Lawrence M. Gressette, Jr. 1,000 .01%
Hayne Hipp 2,881,542 (4) 14.25%
W. Kenneth Hunt, III 40,763 (5) .20%
W. W. Johnson 800 .00%
James M. Keelor 75,396 (6) .37%
William O. McCoy 1,400 .01%
Buck Mickel 8,000 .04%
John H. Mullin, III 2,600 (7) .01%
Benjamin F. Payton 200 .00%
J. Thurston Roach 2,000 .01%
Porter B. Rose 73,563 (8) .36%
Eugene E. Stone, IV 1,000 .01%
William B. Timmerman 0 .00%
All Directors, Nominees for
Director and Executive Officers
as a Group
(21 persons) 3,355,274 (9) 16.59%
</TABLE>
1. None of the Directors and executive officers is the beneficial owner of
any Preferred Stock or of any equity securities of any of Liberty's
subsidiaries. Except as otherwise indicated in these Notes, each of the
individuals named above has sole voting and investment power with respect
to the shares listed for such person.
2. Includes 200 shares held of record by his wife and 3,708 shares held
by a partnership of which a trust established for the benefit of his
mother and of which he serves as Co-Trustee is a general partner.
Rufus C. Barkley, Jr. disclaims beneficial ownership of these shares.
3. Includes 34,180 restricted shares as to which he has sole voting power
but no investment power.
4. See "Principal Holders of Voting Securities" table and Notes 3, 10 and 11
thereto for a more complete description of the nature and amount of
beneficial ownership by Hayne Hipp.
13
<PAGE> 17
5. Includes 17,496 restricted shares as to which he has sole voting power
but no investment power.
6. Includes options to purchase 28,000 shares currently exercisable under
Liberty's Performance Incentive Compensation Program and 25,065 restricted
shares as to which he has sole voting power but no investment power.
7. Includes 600 shares held in trust for the benefit of his children of
which John H. Mullin, III serves as Co-Trustee.
8. Includes options to purchase 8,000 shares currently exercisable under
Liberty's Performance Incentive Compensation Program and 22,112 restricted
shares as to which he has sole voting power but no investment power.
9. Includes options to purchase 76,800 shares currently exercisable under
Liberty's Performance Incentive Compensation Program and 238,844
restricted shares as to which they have sole voting power but no
investment power.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Act of 1934 requires the Company's
Directors and executive officers and persons who own more than ten percent of
the Company's Common Stock to file with the SEC and the New York Stock Exchange
various reports as to ownership of such Common Stock. Such persons are required
by SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, based solely on a review of the copies
of such forms furnished to the Company and written representations to the
Company that no other reports were required, all the aforesaid Section 16(a)
filing requirements were complied with during 1996.
ITEM 2. PROPOSAL TO AMEND THE RESTATED ARTICLES OF INCORPORATION REGARDING
DIRECTOR LIABILITIES
INTRODUCTION
The Board of Directors recommends that the shareholders consider and
approve a proposal to amend the Company's Restated Articles of Incorporation to
include a new Article 10. Proposed Article 10 would limit the personal
liability of the Company's directors to the Company or its shareholders for
monetary damages for certain breaches of fiduciary duty.
Proposed Article 10 is designed to implement the liability limitations
authorized by Section 33-2-102(e) the South Carolina Business Corporation Act
(the "SCBCA"). The SCBCA permits South Carolina corporations to include in
their Articles of Incorporation a provision limiting directors' liability for
monetary damages for certain breaches of their fiduciary duties, including
their duty of care. Section 33-2-102(e) is an enabling provision only. An
amendment to the Articles of Incorporation approved by the shareholders is
required to effect the permitted limitation on liability.
The Board of Directors believes that it is appropriate and advisable that
the shareholders adopt the proposed amendment to the Restated Articles of
Incorporation and recommends that the shareholders vote to approve and adopt
the proposed amendment. If approved, the proposed amendment will be delivered
to the Secretary of State of South Carolina for filing as soon thereafter as
practical and will become effective upon filing. The text of the proposed
Article 10, which is described in greater detail below, is set forth as Exhibit
A to this Proxy Statement.
BACKGROUND AND REASONS FOR PROPOSED AMENDMENT
In performing their duties, directors are obligated as fiduciaries to
exercise their business judgment and act in what they reasonably determine in
good faith, after appropriate consideration, to be in the best interests of the
corporation and its shareholders. Decisions made on that basis are protected by
the so-called "business judgment rule" and should not be seconded-guessed by a
court in the event
14
<PAGE> 18
of lawsuit challenging such decisions. The business judgment rule is designed
to protect directors from personal liability to the corporation or its
shareholders when their business decisions are subsequently challenged.
However, due to the expense of defending lawsuits, the frequency with which
unwarranted litigation is brought against directors and the inevitable
uncertainties with respect to the application of the business judgment rule to
particular facts and circumstances, as a practical matter, directors and
officers of a corporation rely on indemnity from, and insurance procured by,
the corporation they serve to provide a financial backstop in the event of such
expenses or unforeseen liability. The SCBCA has for some time specifically
permitted corporations to provide indemnity and procure insurance for its
directors and officers, and the Company's Bylaws provide for indemnification of
officers and directors to the extent permitted under South Carolina law,
without adoption of the proposed amendment to the Articles of Incorporation.
Without adoption of the proposed amendment to the Articles of Incorporation,
South Carolina law does not authorize indemnification for judgments against
directors in derivative actions brought by shareholders in the right of the
corporation. Consistent with South Carolina law, the Company's Bylaws also
authorize the Company to purchase insurance to protect its officers and
directors.
Recent changes in the market for directors and officers liability
insurance are making it increasingly more difficult, and in some cases,
impossible, for directors and officers of many corporations to obtain any
meaningful liability insurance coverage. Insurance carriers have in certain
cases declined to renew existing directors and officers liability policies, or
have increased premiums to such an extent that the cost of obtaining such
insurance becomes prohibitive. Moreover, current policies often exclude
coverage for areas where the service of qualified independent directors is most
needed. For example, many policies do not cover liabilities or expenses arising
from directors and officers activities in response to attempts to take over a
corporation. Such limitations on the scope of insurance coverage, along with
high deductibles and low limits of liability, have undermined meaningful
directors and officers liability insurance coverage.
The increasing difficulty in obtaining meaningful directors and officers
liability insurance is attributable to a number of factors, many of which are
affecting the liability insurance industry generally, including the granting of
unprecedented damage awards. Although the Company has up to now been able to
obtain insurance coverage for directors and officers on a basis which it
considered acceptable, the Company would like to avoid the increase in premiums
and limitations in the scope of coverage which is symptomatic of the problems
generally in the liability insurance industry.
According to published sources, the inability of corporations to provide
meaningful director liability insurance has had a damaging effect on the
ability of public corporations to recruit and retain corporate directors.
Although the Company has not directly experienced this problem, the Company's
Board of Directors believes that the Company should take every possible step to
ensure that the Company will continue to be able to attract and retain the best
possible directors.
The proposed Article 10 is intended to provide directors with substitute
assurance under certain circumstances against potentially unreasonable personal
liability should the Company experience reduced insurance coverage due to
increased exceptions and for reduced dollar limits. Proposed Article 10 is
intended to reduce the risks incident to serving as a director by providing
that, subject to the limitations described below, directors would not have
monetary liability to the Company or its shareholders for breaches of their
fiduciary duties of care. The primary purpose of the proposed amendment and the
reason it is being recommended to shareholders is to ensure that the Company
will continue to be able to attract and retain individuals of the highest
quality and ability to serve as its directors and that such individuals will
feel free to continue to make entrepreneurial decisions on behalf of the
Company without undue fear of personal liability. There has not been any
litigation threatened or brought against the Company's Board of Directors for
any breach of their fiduciary duties to the Company. Thus, the proposed Article
10 is a response to conditions facing corporate directors generally, including
the increased difficulty in obtaining the insurance coverage traditionally
provided in the past, and is not a response to any recent litigation involving
the Company's directors. Moreover, no director presently in office has
indicated an intention to resign if the proposed Article 10 is not adopted.
15
<PAGE> 19
ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES
Proposed Article 10 provides that a director of the Company will not be
personally liable to the Company or its shareholders for monetary damages for
breach of the director's duty of care or other duty as a director except for
liability (a)for any breach of the director's duty of loyalty to the Company or
its shareholders; (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (c) for approving a
payment of a dividend or a stock repurchase in violation of Section 33-8-330 of
the SCBCA; or (d) for any transaction from which the director derived an
improper personal benefit. If the Code is amended after approval by the
shareholders of the proposed Article 10 to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Company would be eliminated or limited to the fullest
extent permitted by the SCBCA, as so amended.
Under Section 33-8-300(a) of the SCBCA, a director must discharge his
duties as a director in good faith and "with the care an ordinarily prudent
person in a like position would exercise under similar circumstances." The
SCBCA provides that a director who performs his duties in compliance with these
standards will not be liable for actions taken as a director or for failure to
take any action. Absent adoption of proposed Article 10, however, directors
could be held liable for certain actions or inactions if they fail to meet the
above-described standard of care. Subject to the requirement of good faith and
the other limitations listed earlier, proposed Article 10, if adopted by the
shareholders, would absolve directors for any monetary liability arising from
actions or failures to act in violation of their duties to the Company and its
shareholders, provided that the director was not grossly negligent.
Accordingly, if proposed Article 10 is adopted, shareholders will be giving up
a cause of action against the directors for certain breaches of their fiduciary
duty. In this regard, the relief from liability by South Carolina law and
proposed Article 10 is more limited than that allowed by the laws in certain
other states which allow directors to be absolved even if the director is
grossly negligent. Directors would remain liable for improper appropriation of
the Company's business opportunities, acts or omissions which are not in good
faith or which involve intentional misconduct, gross negligence or a knowing
violation of law, certain matters specified in Section 33-8-330 of the SCBCA
and transactions from which a director derives improper personal benefit.
Proposed Article 10 would not eliminate or limit liability of directors arising
in connection with causes of action brought under federal securities laws.
The directors have a personal interest in having the limited liability
provision adopted, at the potential expense of the shareholders who might
otherwise seek and obtain monetary damages from the directors for breach of
their duty of care. Proposed Article 10 probably will reduce the likelihood of
derivative litigation against directors and may discourage shareholders from
bringing a lawsuit against directors for breach of their duty of care even
though such an action, if successful, might otherwise have benefited the
Company and its shareholders. The directors believe, however, that any such
potential disadvantage to the shareholders is outweighed by the benefits that
proposed Article 10 will provide by encouraging well qualified people to serve
as directors of the Company and to take legitimate business risks, as directors
have historically been free to do, without excessive fear of personal
liability.
Although proposed Article 10 would provide directors with protection from
awards of monetary damages for certain breaches of the duty of care or other
duties as a director, it does not eliminate the directors' duties, including
the duty of care. Accordingly, proposed Article 10 would not affect the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of duties, including the duty of care. Furthermore,
liabilities which may arise out of acts of omissions occurring prior to the
adoption and effectiveness of proposed Article 10 would not be affected, so
that directors would remain potentially liable for monetary damages in
connection with any such acts or omissions. In addition, proposed Article 10
would apply only to claims against a director arising out of his role as a
director, and would not apply, if he is also an officer, to his role as an
officer or in any capacity other than that of a director. The limitation of
liability would only apply with respect to claims by the Company (including
derivative actions) or its shareholders and does not extend to claims by third
parties.
16
<PAGE> 20
VOTE REQUIRED
Under the SCBCA, the affirmative vote of the holders of two-thirds of the
outstanding stock of the Company entitled to vote at the Annual Meeting is
required to adopt the proposed amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL OF THE AMENDMENT TO LIMIT DIRECTOR LIABILITY.
ITEM 3. PROPOSAL TO APPROVE THE MATERIAL AMENDMENTS TO, AND THE ELIGIBLE
PARTICIPANTS UNDER, THE PERFORMANCE INCENTIVE COMPENSATION PROGRAM
On December 26, 1996 and February 4, 1997, the Board of Directors and the
Compensation Committee approved various amendments to the Company's Performance
Incentive Compensation Program (the "Program"). Except for one immaterial
modification not requiring shareholder approval, the amendments (the "Material
Amendments") were adopted subject to shareholder approval and are described
below under the caption "Material Amendments and Eligible Participants." The
Board of Directors and the Compensation Committee consider the Program to be
helpful in attracting and retaining the services of valuable officers and key
employees of the Company (which includes its subsidiaries) and providing
significant incentives for high levels of performance. Under the Material
Amendments, awards also may be granted to non-employee directors of the
Company, which will facilitate the use of stock-based compensation for
directors. The Program has been in effect since initially approved by the
shareholders in 1983. In 1990, the shareholders approved an extension in the
term of the Program and an increase in the number of shares subject to the
Program.
The following discussion first summarizes the Program as a whole, as
modified by the Material Amendments (the "Amended Program") and then focuses on
the Material Amendments and the reasons for recommending that the shareholders
approve them. This summary is qualified by reference to the Amended Program
attached as Exhibit B to this proxy statement. As explained under the caption
"Material Amendments," the shareholders are being asked to approve changes:
(1) to comply with applicable requirements under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), in order to permit the
Company to claim tax deductions for "performance-based compensation" in excess
of $1 million to certain highly compensated executives;
(2) to give the Compensation Committee more flexibility in granting new
types of awards (unrestricted shares and phantom stock units) and in defining
the terms of certain existing types of awards;
(3) to permit awards under the Program to be made to non-employee
directors of the Company and its subsidiaries, including members of the
Compensation Committee who administer and grant awards under the Program;
(4) to further extend the term of the Program and increase the number of
shares subject to awards under the Program (in lieu of adopting a new plan);
(5) to delete an existing limit that no more than 20% of the shares
subject to the Program may be acquired by any one participant because more
specific limits will be imposed for all future awards in order to comply with
Section 162(m) of the Code;
(6) to authorize the Committee to provide for accelerated vesting of
awards upon a change in control; and
(7) to provide more flexibility to amend the Program without shareholder
approval, as permitted by recent rule changes adopted by the Securities and
Exchange Commission.
In addition to the Material Amendments, to comply with Code Section
162(m), the shareholders also are being asked to approve the officers, key
employees and directors of the Company and its subsidiaries as the group
eligible to participate in the Program.
17
<PAGE> 21
GENERAL. The Amended Program will continue to be administered by the
Compensation Committee (the "Committee"), which has been appointed by the Board
of Directors for this purpose. Although not explicitly required by the terms of
the Amended Program, the Company intends that the Committee will continue to be
composed of "non-employee directors" as that term is defined in Rule 16b-3
adopted by the Securities and Exchange Commission ("SEC") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and "outside directors"
as that term is used in the regulations adopted by the Internal Revenue Service
("IRS") under Section 162(m) of the Code. The Committee is authorized to
establish rules and regulations for administration of the Amended Program and
to make determinations under and interpretations of the Amended Program and the
Awards granted thereunder. The Amended Program provides for grants of incentive
stock options within the meaning of Section 422 of the Code, nonstatutory stock
options, performance units, restricted share awards, unrestricted share awards,
phantom stock units, and any combination of the foregoing (collectively,
"Awards"). The Amended Program will expire on May 6, 2007, except with respect
to Awards then outstanding.
ELIGIBILITY TO PARTICIPATE. Officers and key employees of the Company and
its subsidiaries are eligible to participate in the Program, and non-employee
directors of the Company and its subsidiaries also will be eligible to
participate under the Amended Program. As of January 31, 1997, sixty-seven
officers and key employees were eligible to participate in the Program. The
Company currently has eleven non-employee directors who will become eligible to
participate in the Amended Program upon shareholder approval of the Material
Amendments. All directors of the Company's subsidiaries are also employees
already eligible to participate in the Program. The Committee's determinations
as to which officers, key employees and directors will receive Awards will be
made on the basis of such individuals' responsibilities and present and
potential contributions to the success of the Company and its subsidiaries.
SHARES AVAILABLE FOR ISSUANCE UNDER THE AMENDED PROGRAM. A total of
4,300,000 shares of Common Stock may be subject to Awards, including Awards
previously granted and previously settled, all as adjusted in accordance with
the terms of the Program. The shares of Common Stock issuable under the Program
may be authorized but unissued shares or shares reacquired by the Company,
including shares purchased in the open market. At March 3, 1997, the closing
market price of the Company's Common Stock on the New York Stock Exchange was
$41.00 per share.
Per Participant Limits. More specific per participant limits are
included in the Material Amendments to replace the previous restriction that no
participant may acquire more than 20% of the shares subject to the Program.
Subject to antidilution adjustments, a participant may not be granted options
on or after May 6, 1997 (or prior to that date if their grant was conditioned
on shareholder approval of the Material Amendments), covering more than 400,000
shares of Common Stock during a single calendar year. Subject to antidilution
adjustments, for other stock-based Awards granted on or after May 6, 1997 (or
prior to that date if their grant was conditioned on shareholder approval of
the Material Amendments), total grants cannot be made to a single participant
with respect to more than 100,000 shares in any calendar year. Awards that are
not stock-based and are granted on or after May 6, 1997 may not result in a
payment to a single participant in excess of $2,000,000 in any calendar year.
For awards (other than stock options) granted on or after May 6, 1997, the
total payments or other settlements cannot be made to a single participant in
excess of $5,000,000 in cash and 1,000,000 shares in any calendar year.
Effect of Forfeitures, Cancellations, Etc. After May 6, 1997, if any
Award is cancelled, is forfeited, expires or terminates without exercise or is
settled in cash instead of Common Stock and if any Award or any shares subject
to an Award are exchanged for or cancelled in connection with the grant of new
Awards, the shares of Common Stock so affected will be restored to the total
shares available under the Amended Program. For any such event or circumstance
that occurs after May 6, 1997, the shares of Common Stock so affected will be
counted against the applicable per participant limits described above (although
not against the aggregate limits).
STOCK OPTIONS. Options may be granted at any time for the purchase of
shares of the Company's Common Stock. The Committee may grant options to
officers, key employees and directors of the Company and its subsidiaries for
such number of
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shares as the Committee designates, subject to the limits described above. No
incentive stock options, however, may be granted to any non-employee directors.
In addition, the fair market value of the shares subject to one or more
incentive stock options first exercisable in any calendar year may not exceed
$100,000 (determined at grant date and without regard to any restriction other
than a restriction which by its terms will never lapse).
The option price under each option will be at least 100% of the fair
market value of the shares on the date such option is granted, as determined by
the Committee. If an incentive stock option is granted to an individual who, at
the time of the grant, owns stock having more than 110% of the total combined
voting power of the Company or any of its subsidiaries (a "10% shareholder"),
the exercise price of such incentive stock option must be at least 10% of the
fair market value of the shares on the date of grant, as determined by the
Committee. Upon exercise of any option, the option price must be paid in full.
Payment must be made in cash or, if permitted by the Committee, may be made in
Common Stock valued at its fair market value on the date of exercise or, at the
discretion of the Committee, in any combination of the foregoing.
Each option will become exercisable in such amounts and at such times as
the Committee may prescribe. No option may be exercisable more than ten years
after the date of the grant. For any incentive stock options granted to a 10%
Stockholder, the maximum term is five years instead of ten. Options are not
transferable except by will or the laws of descent and distribution and, during
the lifetime of the employee to whom granted, may be exercised only by such
employee.
Subject to the exceptions noted below, each option may be exercised only
during the continuance of the optionee's employment with (or service as a
non-employee director of) the Company or one of its subsidiaries. For incentive
stock options granted after 1997, unless the option agreement is amended by the
Company and the participant to treat it as a nonstatutory option, the option
may be exercised only for three months after termination of employment (or for
one year after termination of employment due to disability or if the
participant dies within three months of terminating employment, or for three
years after termination of employment due to death). Nonstatutory stock options
granted after 1996 may be exercised for up to one year after termination of
employment for any reason. Subject to the shorter limits described above for
the retirement or disability of a holder of incentive stock options granted
after 1996, if an optionee's employment (or service as a non-employee director)
is terminated due to death, disability or retirement at normal retirement age
under the Retirement Plan of the Company or of any applicable subsidiary (or
any applicable retirement policy for non-employee directors), any options then
exercisable will remain exercisable by such optionee, or, if applicable, a
beneficiary or legal representative, for three years from the date of such
termination of employment or until expiration of the option, whichever occurs
first.
PERFORMANCE UNITS. Performance units may be awarded from time to time at
the discretion of the Committee. The Committee is authorized, when making any
Award of Performance Units, to assign a value to the performance units and
define the terms and conditions as to their values and the basis on which such
values will be determined. Performance standards will be established by the
Committee each time performance units are granted. At the time the performance
standards are met (and subject to the Committee certification required by
Section 9 of the Program in the case of Qualifying Awards), performance units
will be paid in cash equal to the appropriate amount earned and established by
the Committee.
Unless waived in the circumstances described below, these standards must
be met during the continuance of the participant's employment with the Company
prior to any payment with respect to such units. If a participant's employment
(or service as a non-employee director) is terminated due to death, disability
or retirement at normal retirement age under the Retirement Plan of the Company
or of any applicable subsidiary (or any applicable retirement policy for
non-employee directors), the Committee shall have complete discretion to waive
all or part of the employment and performance standard requirements for payment
in respect of one or more performance units, except as otherwise provided for
any performance units that constitute Qualifying Awards. Performance units may
not be transferred except by will or the
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<PAGE> 23
laws of descent and distribution and, during the lifetime of the participant to
whom awarded, payment may be made with respect to such performance units only
to the participant or his personal representative.
RESTRICTED SHARES. The Amended Program authorizes the Committee to grant
restricted shares with any restriction period (the "Restriction Period") that
the Committee deems appropriate. The Committee also has the discretion to set
vesting schedules and vesting conditions for such Awards. During the applicable
Restriction Period, restricted shares may not be sold, assigned, transferred,
pledged or otherwise encumbered. In addition to the requirement of continued
employment (or service as a non-employee director) during the Restriction
Period, the Committee may condition vesting of restricted shares on the
satisfaction of performance goals within certain time periods. The time periods
in which performance goals must be satisfied may be the same as the applicable
vesting schedule based on employment (or service as a non-employee director) or
they may be shorter. As a result, the applicable restrictions on transfer may
continue to apply to restricted shares after all performance goals have been
satisfied. During the applicable Restriction Period, the participant is
entitled to full dividend and voting rights in respect of the shares that are
the subject of the Award, unless and until the restricted shares are forfeited.
If a participant's employment (or service as a non-employee director)
terminates due to death, disability or retirement at normal retirement age
under the Retirement Plan of the Company or of any applicable subsidiary (or
any applicable retirement policy for directors), the restrictions imposed on
any restricted shares will terminate as of the date of such termination of
employment (or service as a non-employee director), except as otherwise
provided for any restricted shares that constitute Qualifying Awards. If a
participant's employment (or service as a non-employee director) terminates for
any reason other than as provided above, a participant will forfeit all rights
in respect of any restricted shares as of the date of such termination of
employment (or service as a non-employee director) subject to the exceptions
described below.
For restricted share Awards prior to 1997, if there is a merger,
consolidation, sale of all or substantially all of the Company's assets, or
other corporate reorganization in which the Company is not the surviving
corporation, the restrictions then applicable to any restricted shares will
terminate as of the date of that event or such earlier date as the Committee
may determine. For restricted share Awards granted after 1996, the terms of the
particular Awards will govern the extent (if any) to which the restrictions on
those restricted shares may terminate as a result of any transaction described
above or in the event of any other change in control event.
PHANTOM STOCK UNITS. Under the Amended Program, the Committee may grant to
participants phantom stock units which represent an unfunded and unsecured
promise on the part of the Company to deliver to a participant stock, cash or a
combination of stock and cash equal to the value of a number of phantom shares
established by the Committee when granting the Award. Phantom stock units, like
restricted shares, will be subject to a Restriction Period that the Committee
deems appropriate. In addition to the requirement of continued employment (or
service as a non-employee director) during the Restriction Period, the
Committee may condition vesting of phantom stock units on the satisfaction of
performance goals within certain time periods, which may be the same as or
shorter than the applicable vesting schedule based on employment (or service as
a non-employee director).
Phantom stock units may be settled in stock, cash or some combination of
both. The Committee may determine whether the participant will receive stock or
cash, or may grant to the participant the right to make such an election. In
addition, the Committee may grant the participant the right to defer vesting or
payment of a phantom stock unit. The grant of a phantom stock Award does not
give the holder any rights as a shareholder with respect to the phantom shares
represented by the unit, but it will give the holder a right to receive
additional cash compensation equal to the amount of cash dividends payable with
respect to a corresponding number of actual shares of Common Stock. The Program
contemplates that the Company may from time to time establish one or more
grantor trusts administered by a financial institution, as trustee, and
contribute shares to any such trust to be used to satisfy the Company's
obligations under Awards. To the extent this is done with respect to phantom
stock units, participants may be given a right to direct the Trustee as to the
voting of a number of shares of Common Stock corresponding to
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<PAGE> 24
their phantom shares even though the participants have no rights as
shareholders as a result of the grant of phantom stock units. (See "Certain
Plan Benefits" beginning on page 29 for a contemplated use of this feature with
respect to the Chief Executive Officer.)
If a participant's employment (or service as a non-employee director)
terminates due to death, disability or retirement at normal retirement age
under the Retirement Plan of the Company or of any applicable subsidiary (or
any applicable retirement policy for non-employee directors), the vesting
conditions imposed on phantom stock units will terminate as of the date of such
termination of employment (or service as a non-employee director), except as
otherwise provided for any phantom stock units that constitute Qualifying
Awards. In the event of termination of employment (or service as a non-employee
director) for any reason other than as provided above, a participant shall
forfeit all rights in respect of any unvested phantom stock units as of the
date of such termination of employment (or service as a non-employee director).
UNRESTRICTED SHARES. The Committee may from time to time in its discretion
grant awards of unrestricted shares of Common Stock to officers, key employees
and directors as consideration for services rendered to the Company or its
subsidiaries. Without limiting the Committee's authority, it is contemplated
that Awards of unrestricted shares may be granted to non-employee directors in
lieu of or as a supplement to cash fees for services rendered as directors.
QUALIFYING AWARDS. The Committee may grant to any eligible participant in
the Program an award designed to qualify as performance-based compensation
under Section 162(m) of the Code ("Qualifying Award"). A Qualifying Award may
be a stock option or an award of restricted shares, phantom stock units or
performance units, provided that any award of restricted shares, phantom stock
units or performance units is conditioned upon satisfaction within a set period
of time of performance goals established by the Committee in accordance with
Section 10(A) of the Program. Unless otherwise specified in writing by the
Committee, either at the time an Award is granted or at any time thereafter,
all Awards issued under the Program that are either stock options or other
Awards as to which the settlement or vesting of the Award is conditioned upon
achievement of performance goals established by the Committee in accordance
with Section 10(A) of the Program, will be treated as Qualifying Awards. Awards
of unrestricted shares cannot be Qualifying Awards.
For all Qualifying Awards granted on or after May 6, 1997, these
performance goals must be based on any one or more (or any combination) of the
following business criteria: revenues, net income (before or after tax),
earnings, earnings per share, shareholders' equity, return on equity, assets,
return on assets, capital, return on capital, book value, economic value added,
operating margins, profit margins, cash flow, shareholder return, expenses,
sales or market share, expense management, return on investment, improvements
in capital structure, budget comparisons, profitability of an identifiable
business unit or product, or stock price of the Company. The performance goals
for a Qualifying Award also may be based on any of the foregoing business
criteria either: (1) before the effect of acquisitions, divestitures,
accounting changes, restructuring or other special charges or other
extraordinary items or (2) after giving effect to an adjustment to reflect any
such transaction or extraordinary item, to the extent, in each such case, the
Committee specifies, when granting the Award, that any such extraordinary items
will be disregarded or that a particular formula or other objective method will
be used to make an appropriate adjustment to reflect any such transaction or
extraordinary item.
The foregoing objectives may be applicable to the Company as a whole,
one or more of its divisions, subsidiaries, business units, or business lines,
or any combination of the following. Such performance goals also may be based on
the attainment of specified levels of Company performance under one or more of
the measures described above relative to the performance of other businesses.
The Committee may require that payment of a Qualifying Award be subject to other
conditions, such as completion of a period of service, even if the performance
goals specified in the Qualifying Awards are satisfied. The Committee also has
the discretion to reduce (but not to increase) some or all of the amount that
would otherwise be payable under the Qualifying Award upon satisfaction of
performance and other conditions.
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If a participant's employment terminates due to death or disability, the
restrictions or other vesting conditions imposed on any Qualifying Award will
terminate as of the date of such termination of employment; but in that event,
the Committee may defer or accelerate the payment of such Award in its sole and
absolute discretion. If employment terminates for any reason other than as
provided above, a participant will forfeit, as of the date of such termination
of employment, all rights with respect to any shares represented by, and will
forfeit all rights to receive any other settlement of, all unvested awards that
constitute Qualifying Awards.
CHANGE IN CONTROL EVENTS. The Committee may provide, when granting an
Award or at any time thereafter, whether and to what extent a "Change in
Control Event" will cause the restrictions imposed on any outstanding Awards to
terminate and such Awards to become fully exercisable, fully vested or fully
earned. A "Change in Control Event" is deemed to occur when: (1) a tender or
exchange offer has been made (other than by the Company, its subsidiaries or
any of their employee benefit plans) which, if completed, will cause the
offeror to become an "Acquiring Person" (as defined below), provided that the
offeror actually acquires shares of the Common Stock pursuant to the offer; (2)
any person or entity (other than the Company, its subsidiaries or any of their
employee benefit plans) becomes an Acquiring Person (other than in an
acquisition from the Company or in a transaction approved by the Incumbent
Board, as defined below); or (3) the directors who constitute the Incumbent
Board as of the relevant time fail to constitute at least a majority of the
Board of Directors. At any relevant time, a director will be deemed a member of
the Incumbent Board if that director either (a) served as a director of the
Company on February 4, 1997 or (b) was elected or nominated with the approval
by a majority of the Incumbent Board as then constituted (unless the
individual's initial assumption of office was in connection with an actual or
threatened election contest relating to the election of the Company's
directors).
The Amended Program defines an "Acquiring Person" as any person or group
of affiliated or associated persons which, after February 4, 1997, becomes the
beneficial owner of 20% or more of either the Company's Common Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors, except for any person
that beneficially owns 20% or more of either the Company's Common Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors: (1) as a result of a
reduction in the number of shares of Common Stock outstanding due to the
Company's acquisition of its Common Stock; (2) as a result of: (a) a will or
the laws of descent and distribution, (b) the transfer of shares to any member
of the transferor's immediate family or to a trust for the benefit of a member
of the transferor's family (a "Transferee Trust"), (c) a divorce decree or
settlement or (d) the transfer of shares held on February 4, 1997 by any trust
or held at any time by Transferee Trust to any beneficiary of any such trust;
or (3) as a result of any acquisition by such person of shares pursuant to any
employee benefit plan of the Company or any of its subsidiaries.
ADJUSTMENT. The total number of shares subject to the Amended Program, the
maximum number of shares that may be acquired by any one participant, the
number of shares subject to outstanding Awards, and the exercise prices of
outstanding stock options will be adjusted by the Committee in the event of a
merger, reorganization, consolidation, recapitalization, stock dividend,
spin-off, stock split or other change in the corporate structure or other
distribution of stock or property (except ordinary cash dividends) affecting
the Company's Common Stock.
TERM, AMENDMENTS AND DISCONTINUANCE. The Amended Program will terminate
with respect to the granting of Awards on May 6, 2007 (assuming shareholder
approval of the Material Amendments) unless terminated at an earlier date by the
Committee. The Committee may amend, suspend or discontinue the Amended Program.
The Committee may condition the effectiveness of any amendment on shareholder
approval to the extent the Committee determines that shareholder approval is
necessary or desirable to qualify for: certain tax deductions or other desired
treatment under Section 162(m) or other Sections of the Code and related
regulations of the IRS, all as amended from time to time; certain exemptions
under Section 16 of the Exchange Act and related rules adopted by the Securities
and Exchange Commission, all as amended from time to time; or any other desired
exemption or treatment under any applicable law or regulation. No such amendment
may materially and adversely affect the rights of any participant as to any then
outstanding Award without that participant's consent.
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TAX WITHHOLDING. Prior to issuing stock or otherwise settling an Award,
the Company has the right to require any participant to remit to it any amounts
required to satisfy any applicable federal, state or local tax withholding
requirements with respect to such Award. Cash payments by the Company in
settlement of Awards will be net of the amounts necessary to satisfy applicable
withholding requirements (which generally will not be applicable to
non-employee directors). For Awards to be settled in shares of Common Stock,
the participant may elect to surrender, or otherwise authorize the Company to
withhold, a number of shares of Common Stock having a sufficient fair market
value to satisfy the amount of any taxes required to be withheld with respect
to such Common Stock.
FEDERAL INCOME TAX CONSEQUENCES. As discussed above, the Amended Program,
which is not qualified under Section 401(a) of the Code, provides for the grant
to eligible officers, employees and non-employee directors of various types of
Awards. The following summary of tax consequences to the Company and
participants arising under the Program is necessarily general and is based on
present provisions of the Code, rulings and proposed regulations, all of which
are subject to future changes. In addition, state income tax laws may vary in
effect.
Incentive Stock Options. Under current federal tax laws, an optionee will
not recognize income from the grant or exercise of an incentive stock option
for ordinary income tax purposes. However, in computing an optionee's liability
for the alternative minimum tax, the optionee will have income at the date of
exercise equal to the difference between the fair market value of the shares
acquired and the option price paid for the shares. Assuming the optionee does
not sell or otherwise dispose of the stock acquired pursuant to the exercise of
an incentive stock option within two years from the date of grant of such
option or within one year after the exercise of such option, any amount
received upon the subsequent sale or disposition of such stock in excess of the
optionee's tax basis in such stock (generally, the option price of such stock)
will be treated as a long-term capital gain or loss.
If the optionee sells or otherwise disposes of the stock acquired upon
exercise of an incentive stock option within two years from the date of grant
of such option or within one year after the exercise of such option, such sale
or other disposition will constitute a "disqualifying disposition," and the
optionee will recognize ordinary income in an amount not exceeding the amount
of gain realized on the disposition. The Company is not entitled to a deduction
with respect to an incentive stock option unless there is a disqualifying
disposition of shares received upon exercise of such option.
Nonstatutory Stock Options. Under current federal tax laws, an optionee
will not recognize income as a result of the grant of a nonstatutory stock
option. Except as provided below, upon exercise of a nonstatutory stock option,
an optionee will recognize ordinary income in an amount equal to the difference
between the fair market value of the stock on the date of exercise and the
aggregate option price. Subject to Code Section 162(m), either the Company or
the appropriate subsidiary will be entitled to a deduction equal to the amount
of ordinary income recognized by an optionee upon exercise of a nonstatutory
stock option.
Performance Units. Under current federal tax laws, a participant will not
recognize income upon the grant of a performance unit under the Program.
Rather, a participant will recognize ordinary income upon the payment
attributable to a performance unit in an amount equal to the amount of cash
received. Such income is subject to withholding (except for non-employee
directors). Subject to Code Section 162(m), either the Company or the
appropriate subsidiary will be entitled to a deduction equal to the amount of
such ordinary income.
Restricted Shares. Under current federal tax laws, a participant will
not recognize income upon the award of restricted shares under the Program.
Instead, except as provided below, such participant will recognize ordinary
income when the restrictions imposed under the Program terminate and the
previously restricted shares vest in the participant without further
restriction. Subject to Code Section 162(m), the Company will be entitled to a
deduction equal to the amount of such ordinary income.
Alternatively, Section 83(b) of the Code permits a recipient to elect,
within thirty days of the award date, to recognize the fair market value of
restricted shares, determined as of the award date without regard to any
restrictions, as ordinary income subject (except for non-employee directors) to
withholding, even
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though such shares remain subject to forfeiture restrictions. The Company is
entitled to a corresponding deduction at the same time. If such an election is
made, any subsequent appreciation in value of the shares is not taxable as
ordinary income. However, if such shares are subsequently forfeited and
returned to the Company, the employee will not be entitled to a deduction with
respect to such forfeiture.
When a participant disposes of the shares, any amount received in excess
of the fair market value of the shares at the time the restrictions terminate
(or any amount in excess of the fair market value of the shares on the award
date if the participant has made a Section 83(b) election) will be treated as
capital gain.
Phantom Stock Units. Under current federal tax laws, a participant will
not recognize income upon an award of phantom stock units or upon the vesting
of such units, and the Company will not be entitled to a deduction upon the
occurrence of either such event. However, the participant will recognize
ordinary income when phantom stock units are settled by a payment in stock or
cash, in an amount equal to the fair market value of an appropriate number of
shares of Common Stock on the date of settlement. Subject to Code Section
162(m), the Company will be allowed a deduction for the amount of any taxable
income recognized by the participant at the time such income is recognized.
Unrestricted Shares. Under current federal tax laws, a participant will
recognize income upon an award of unrestricted shares, as of the award date.
The amount of the income recognized will be equal to the fair market value of
the unrestricted shares on the date of grant. Such income is subject to
withholding (except for non-employee directors). Subject to Code Section
162(m), either the Company or the appropriate subsidiary will be entitled to a
deduction equal to the amount of such ordinary income.
MATERIAL AMENDMENTS AND ELIGIBLE PARTICIPANTS
The shareholders are being asked to approve both the Material Amendments,
which are described below, and the eligibility of officers, key employees and
directors of the Company and its subsidiaries to participate in the Program.
The Material Amendments will: (1) permit future Awards under the Amended
Program to continue to qualify as performance-based compensation under Code
Section 162(m) by obtaining shareholder approval of: (a) the performance
criteria to be used as the basis of performance goals established by the
Committee; and (b) certain per participant limits on Awards granted or paid in
any calendar year, beginning with Awards granted on or after May 6, 1997 (or
granted prior to that date if the grant was expressly subject to shareholder
approval of the Material Amendments); (2) allow the Committee to make awards of
phantom stock units; (3) provide greater flexibility as to the time periods
during which restricted share awards may vest; (4) provide additional
flexibility as to the time periods during which stock options may be exercised;
(5) permit Awards to be granted to directors of the Company or its subsidiaries
(without regard to whether they are also employees); (6) authorize the
Committee to provide for accelerated vesting of Awards upon certain change of
control events; (7) extend the Program's termination date from May 1, 2000 to
May 6, 2007; (8) increase from 2,800,000 to 4,300,000* (subject to adjustment,
as described below) shares of Common Stock available for Awards under the
Program and clarify the way in which this limit will be applied; and (9)
provide more flexibility for the Program to be amended in the future without
further shareholder approval.
SECTION 162(M) AMENDMENTS AND APPROVAL OF ELIGIBLE PARTICIPANTS. Section
162(m) of the Code limits the Company's tax deduction to $1 million per year
for certain compensation paid to "covered employees," consisting of the chief
executive officer and the four other most highly compensated executive officers
of the Company (the "Million Dollar Cap"). However, this limitation does not
apply to "performance-based compensation." Stock options that have an exercise
price no lower than the grant date market price of the stock subject to option
(as is required under the Program) may automatically qualify as
performance-based compensation if the shareholders approve certain maximum
limits on the number of
- ------------------
* As of the date of this Proxy Statement, approximately 2,754,000 shares have
been used for Awards currently outstanding and Awards previously settled, and
approximately 1,546,000 shares are available for future grants pursuant to the
Program, assuming shareholder approval of the Material Amendments.
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shares underlying such stock options that may be granted to any participant
over a specified period. For other Awards to qualify as performance-based
compensation, three conditions must be satisfied before the Awards are
settled: (1) one or more objective performance goals established by a
compensation committee consisting exclusively of two or more outside directors
(such as the Committee) must be achieved; (2) certain terms of the Program
must be approved by the shareholders, including the class of persons eligible
to participate, the maximum amount payable to any individuals and the
performance criteria to be used by the compensation committee in establishing
specific performance goals; and (3) the compensation committee must certify
that the performance goals and other material conditions precedent to
settlement have been satisfied.
The Million Dollar Cap has not yet presented a significant restriction on
the deductibility of the Company's current compensation levels, although there
have been a few instances when the chief executive officer voluntarily agreed
to defer some of his compensation to avoid exceeding this limit. The Company
considers it prudent and desirable to provide a way to permit the Company to
pay higher levels of compensation and to preserve its tax deduction for future
executive compensation, without the need for any such deferrals. This will
enhance the Company's ability to retain, obtain and motivate highly qualified
senior executives. It also will facilitate the Company's implementation of a
combined package of incentive awards which the Committee is contemplating to
significantly increase senior executives' stock ownership in the Company,
particularly if the Company achieves aggressive performance targets. The types
of awards under consideration by the Committee would involve combined grants of
stock options and restricted stock (or perhaps phantom stock in some instances)
designed to provide incentive compensation over a multi-year period. Such
awards will further align senior management's long-term interests with those of
the Company's other shareholders. If such performance-based awards are fully
earned, there is a greater likelihood that the Company may forfeit significant
compensation deductions unless that compensation qualifies for the exemption
from the Million Dollar Cap.
Accordingly, the proposed amendments will permit the Committee to
structure Awards to qualify as performance-based compensation under Section
162(m) of the Code ("Qualifying Awards"), so as to preserve the Company's tax
deduction for compensation paid pursuant to Qualifying Awards, even though in
excess of the Million Dollar Cap. The Committee also may grant Awards under the
Program that do not qualify as performance-based compensation, in which case
the compensation paid under these Awards will be subject to the Million Dollar
Cap.
Since the Million Dollar Cap became effective, the Company has been
operating under transitional rules that have not required shareholder approval
of maximum limits and performance criteria in order for Awards to be treated as
performance-based compensation. However, this transition period will end with
the Company's 1997 Annual Meeting of Shareholders. Accordingly, the Board of
Directors is seeking shareholder approval of amendments to the Program to
permit the Company to continue to deduct for tax purposes compensation paid to
covered executives under Awards that qualify as performance-based compensation.
The amendments provide that two general types of Qualifying Awards may be
granted under the Amended Program. The first type is stock options. Effective
May 6, 1997 for options granted on or after that date, during a single calendar
year, a participant may not be granted options to purchase more than 400,000
shares of Common Stock, subject to anti-dilution adjustments as provided in the
Program. This limitation is required to be approved by the shareholders in
order for future stock options issued under the Program to qualify as
performance-based compensation.
The second type of Qualifying Awards includes restricted shares, phantom
stock units and performance units whose payment is conditioned upon the
attainment of performance goals set by the Committee. In order for these types
of Awards granted after May 6, 1997 to be Qualifying Awards, the performance
goals set by the Committee must be based on one or more (or any combination) of
business criteria approved by the shareholders. Accordingly, the shareholders
are being asked to approve the business criteria described on page 21 and
contained in Section 10(A) of the Program. The shareholders also are being
asked to approve the applicable per participant limitations for these types of
Awards.
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<PAGE> 29
Effective May 6, 1997, for Awards made on or after that date, a
participant cannot receive grants of restricted shares and phantom stock units
(in any combination of such Awards) covering more than 100,000 shares of Common
Stock during a single calendar year. Any performance units that are not
measured based on a number of actual or phantom shares cannot result in payment
of more than $2,000,000 in any year to any one participant. In addition, a
participant cannot receive more than 1,000,000 shares of Common Stock or
$5,000,000 in cash during a single calendar year upon the vesting and
settlement of any Qualifying Awards of any type other than stock options.
Since the Million Dollar Cap became effective, the Committee has granted
stock options and, in early 1997, performance-based restricted shares that
qualify as performance-based compensation. These types of Awards are described
generally on pages 18 through 20 of this proxy statement. The transitional
rules applicable under Section 162(m) of the Code permitted these Awards to
qualify as performance-based compensation even though they were not contingent
on shareholder approval of the Material Amendments and thus are not subject to
the new per participant limitations imposed by the Material Amendments.
The maximum per participant limits described above are not designed to be
used to provide compensation to any participant above the level otherwise
appropriate for the individual's duties and responsibilities. The maximum
levels established by the amendments are designed to preserve flexibility while
enabling the Company to comply with the technical provisions of the Million
Dollar Cap and to preserve the deductibility of performance-based compensation
paid to the covered executives. The tax benefits derived from such deductions
preserve corporate assets and benefit the Company and its shareholders.
PHANTOM STOCK UNITS. The Committee and the Board of Directors believe
that phantom stock units, with a value measured based on phantom shares of
Common Stock, will provide the Company with desirable flexibility in
structuring compensation awards. Without the Material Amendments, the Program
allows the grant of restricted shares and also allows the grant of performance
units that can be settled only in cash. There has not been a mechanism,
however, for structuring a single Award with flexibility decided at a
subsequent date whether to settle that Award in cash, Common Stock or some
combination thereof. The proposed phantom stock units will provide this
flexibility and also will provide recipients of such awards with added
flexibility for tax planning purposes to defer receipt of the shares or cash
paid in settlement of these Awards.
UNRESTRICTED SHARES. The Committee and the Board of Directors believe the
flexibility to grant Awards of unrestricted shares will provide desirable
flexibility to use shares as a substitute or supplement to cash compensation
for services in appropriate circumstances. This type of Award is particularly
well suited as a substitute for cash fees paid to non-employee directors,
although it is not limited to that use.
CHANGE IN VESTING PARAMETERS FOR RESTRICTED SHARES. The Program
currently provides that the vesting schedule for restricted shares can be no
faster than 20% per year for the first five years and no slower than full
vesting (assuming all conditions to vesting are satisfied) by the end of ten
years. The Company believes additional flexibility regarding vesting schedules
is desirable, particularly in connection with the addition of performance-based
conditions to vesting. Additional flexibility will permit the Committee to
structure awards with shorter vesting schedules, if appropriate, so as to
provide a more direct link between the incentive provided by that settlement
and the achievement of performance goals during periods shorter than five
years. For example, a one or three-year vesting schedule might be more
appropriate for an Award of restricted shares having a performance goal
extending over one year or three years. As a result, the Company is seeking
the flexibility to delete any restrictions on the Committee's discretion to
establish the vesting periods it deems appropriate.
ADDITIONAL FLEXIBILITY FOR OPTION EXERCISE PERIODS. The Material
Amendments would provide added flexibility for the Committee to define the
periods during which stock options may be exercised. A current requirement
that stock options cannot be exercised during the first year after grant would
be deleted. The Committee also would have more flexibility to allow exercise
of an option after termination of employment (or after a participant ceases to
be a non-employee director), without
26
<PAGE> 30
regard to whether that termination occurs in connection with death, disability
or retirement or a change in control event (discussed below). In light of the
increasing trend in today's society for individuals to change from one employer
to another, the Committee and the Board of Directors believe this additional
flexibility is desirable in structuring appropriate compensation packages.
EXTENSION TO NON-EMPLOYEE DIRECTORS. The Material Amendments will permit
Awards under the Amended Program to be made to directors of the Company and its
subsidiaries (without regard to whether they are also employees). In light of
the general recognition by institutional shareholders and others of the
desirability of shifting more of directors' compensation from cash to stock,
the Committee and the Board of Directors believe this change is desirable. The
desirability of using stock to compensate directors is one of the reasons cited
for recent regulatory changes that permit discretionary stock awards to be made
to non-employee directors under compensatory plans, without disqualifying those
non-employee directors from administering the compensatory plans. The Material
Amendments will permit any form of award other than incentive stock options to
be granted to non-employee directors. Without limiting its flexibility to grant
other types of awards, the Committee contemplates that unrestricted shares may
be used, in part, for non-employee directors as a partial substitute for
certain cash fees currently being paid to non-employee directors.
CHANGE IN CONTROL EVENTS. Although the Company is not aware of any
pending change in control events, it recognizes that such events could arise in
the future. The Program currently provides only for acceleration of the
restrictions on restricted shares in a limited number of contexts. The
proposed amendment would expand the number of situations that would be
considered changes in control, and allow the Committee when granting Awards or
at any time thereafter to provide for accelerated vesting of all Awards subject
to restrictions and accelerated exercisability of options upon a change in
control event. A potential disadvantage of an acceleration of an Award as to
which the performance goal had not been completed, is that the Company is
likely to lose the special treatment of performance-based compensation above
the Million Dollar Cap for any compensation received upon acceleration as to
which the performance goal was not attained. Accordingly, the Company may lose
tax deductions for the resulting compensation based on the provisions of Code
Section 162(m), as well as other Code Sections applicable to compensation
payable as a result of a change in control. This would occur only if
acceleration actually occurs and not merely because there is flexibility to
accelerate. The Company believes this potential disadvantage is offset by the
advantages of acceleration in a change of control context and the related
assurance to recipients of Awards that the value of those Awards will not
necessarily be lost due to possible termination of employment or other events
in connection with a change in control of the Company.
The amended change in control acceleration provision may have the effect
of making a change in control of the Company somewhat more difficult because of
the accelerated cost of settling Awards for which acceleration is provided and
the potential loss of deductions for such compensation.
EXTENSION OF PROGRAM'S TERM. Unless extended, the Program will terminate
on May 1, 2000. The Company prefers to continue extending the term of the
existing Program, rather than adopting new incentive programs from time to
time, as many other corporations do. In light of the other actions being taken
this year with respect to the Program, it is more efficient to seek shareholder
approval at this time to extend the term of the Program, rather than deferring
that and then seeking shareholder approval of an extension within one to three
years. Accordingly, subject to shareholder approval of the Material
Amendments, the term of the Program will be extended another ten years to May
7, 2007.
ADDITIONAL SHARES. In connection with the extension of the Program's
term, the other changes being made to the Program, and the Board of Directors'
and the Committee's desire to structure both the terms of and the right to
receive Awards under the Program in a way that will encourage the Company's
senior executives to make significant investments in the Company's Common
Stock, the Board of Directors and the Committee believe it is appropriate at
this time to authorize additional shares for future awards. The additional
shares for which approval is sought represent approximately 7.4% of the
Company's outstanding Common Stock as of the date of this proxy statement. The
Awards granted and to be granted under the
27
<PAGE> 31
Program are designed to align the interests of officers, key employees and
directors with those of other shareholders and to enable the Company to
attract, motivate and retain experienced and highly qualified individuals.
ABILITY TO RECYCLE SHARES. The Material Amendments provide that if any
shares of Common Stock subject to an award are cancelled or forfeited, or if
any award that is stock based terminates without issuance of shares, is settled
in cash, or is exchanged for another award, the shares covered by the initial
award will be restored to the total shares available for awards under the
Program generally, but will continue to count against the per participant
limits applicable to the individual participants who received the initial
award.
ADDED FLEXIBILITY FOR FUTURE AMENDMENT OF THE PROGRAM. New SEC rules that
became effective in November 1996 under Section 16 of the Exchange Act no
longer require shareholder approval of various compensation plans, such as the
Program, or of material amendments thereto in order for awards under such
compensation plans to comply with certain exemptions from the short-swing
profit recovery provisions of Section 16. This and other changes in the SEC
rules under Section 16 reflect a determination by the SEC that transactions
between a company and its executives, other employees and directors pursuant to
compensation plans justify simpler and more flexible exemptions than those
available in the past because these transactions are designed primarily to
reward service or provide incentives for better performance and generally do
not present the same opportunities to profit from non-public information as do
the market transactions by corporate insiders. As part of the SEC's new
simplified approach for such transactions, the SEC determined that approval of
compensation arrangements by the full Board of Directors or by committee of the
Board consisting solely of two or more "non-employee directors" provides an
acceptable substitute for shareholder approval.
Particularly in light of a growing trend, which the Company supports, to
use stock-based awards as a significant component of executive compensation,
the Company believes it is desirable for the Committee to have maximum
flexibility to modify the Program from time to time, as it deems appropriate,
subject to obtaining shareholder approval when deemed appropriate by the
Committee to comply with regulatory requirements or other regulatory exemptions
and benefits. As described earlier, Section 162(m) of the Code continues to
require shareholder approval of the material terms (as defined in the
applicable regulations thereunder) of performance-based compensation in order
to qualify for an exemption from the Million Dollar Cap. In the case of the
Program, this will include amendments to certain material features of the
Program and also will include a requirement that the shareholders reapprove
certain material terms of the Program every five years. In addition, the
Company's Common Stock is listed on the New York Stock Exchange, and the rules
of the New York Stock Exchange require shareholder approval for certain
issuances of listed stock.
The Compensation Committee will continue to evaluate the need for
shareholder approval of any further amendments to the Program based on these
and other factors, but the Company believes it would be desirable to eliminate
any additional requirement in the Program itself that might require shareholder
approval in circumstances where such approval is not otherwise needed to comply
with applicable legal requirements or to obtain desired exemptions or other
desired benefits. This will permit the Committee to make certain adjustments
in the Program faster and more easily when deemed appropriate to enhance the
purposes of the Program. Shareholder approval of the Material Amendments may
provide certain opportunities for the Committee to modify the Program in ways
that might increase the cost of the Program to the Company, but the Company
believes that any such increased cost of the Program would result primarily
from a determination by the Company to use stock-based awards as a larger
component (as compared to cash) of the compensation of the Company's
executives, other key employees and directors.
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<PAGE> 32
CERTAIN PLAN BENEFITS. It is impossible to determine the amount of future
Awards that will be received by particular participants because the grant of
Awards under the Program is within the Committee's discretion. Information
about Awards granted under the Program in 1996 to the Company's five highest
compensated executive officers is set forth in the table on page 5. To
supplement that information, the following table shows information regarding
the Awards granted in 1996 to all executive officers as a group, all directors
who are not executive officers as a group, and all employees, including all
officers who are not executive officers, as a group.
<TABLE>
<CAPTION>
THE PERFORMANCE INCENTIVE COMPENSATION PROGRAM
- ---------------------------------------------------------------------------------------
Options Restricted Shares
- ---------------------------------------------------------------------------------------
Number of
Shares
Dollar Underlying Dollar Number of
Name and Position Value ($)(1) Options Value ($)(2) Shares
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Executive Officer
Group $ 40,000 5,000 $2,946,890 75,080
Non-Executive
Director
Group -0- -0- -0- -0-
Non-Executive
Officer/
Employee Group 768,500 123,945 1,346,079 34,295
- ---------------------------------------------------------------------------------------
</TABLE>
(1) Equal to the net value of the option as of December 31, 1996 based on the
closing market price of the Company's Common Stock on December 31, 1996 minus
the applicable per share exercise price of the option.
(2) Represents value based on the closing market price of the Company's Common
Stock on December 31, 1996, assuming all shares are fully vested.
The Company granted certain Awards on February 4, 1997 that are governed
by the terms of the Program in its current form and are not conditioned on
shareholder approval of the Material Amendments. In addition, in December
1996, the Committee and Mr. Hipp agreed that if the shareholders approve the
Material Amendments, three installments of restricted shares previously granted
to Mr. Hipp that cover a total of 15,600 shares and are scheduled to vest later
in 1997 will be cancelled and will be replaced with grants of 15,600 shares of
phantom stock. Settlement of any such phantom stock awards will be deferred
until July 1998 or such later time as Mr. Hipp may elect. It is contemplated
that the Company will establish a revocable grantor trust and contribute shares
of its Common Stock to that trust to be used to satisfy the Company's
obligations under any such phantom stock awards, and that Mr. Hipp will be
given a right to direct the trustee as to the voting of such shares. No grant
of any phantom stock will occur, however, unless and until the shareholders
approve the Material Amendments.
VOTE REQUIRED.
The affirmative vote of a majority of the shares voting, in person or by
proxy, on this proposal at the Annual Meeting is required to approve the
Material Amendments to, and the class of persons entitled to participate in,
the Amended Program.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE MATERIAL AMENDMENTS TO, AND THE CLASS OF PERSONS ENTITLED TO
PARTICIPATE IN, THE AMENDED PROGRAM.
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<PAGE> 33
ITEM 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to shareholder ratification, the Board of Directors has
appointed the firm of Ernst and Young LLP as independent public accountants
for the year 1997. The appointment was made upon the recommendation of the
Audit Committee, which is composed of Directors who are not officers or
otherwise employees of Liberty.
If the shareholders do not ratify the selection of Ernst and Young LLP,
the selection of independent certified public accountants will be
reconsidered and made by the Board of Directors. It is understood that even
if the selection is ratified, the Board of Directors, in its discretion, may
direct the appointment of a new independent accounting firm at any time
during the year if the Board feels that such a change would be in the best
interests of the Company and its shareholders.
The appointment of the firm of Ernst & Young LLP as independent public
accountants for Liberty was ratified by the shareholders at Liberty's last
Annual Meeting. Representatives of the firm are expected to be present at
the Annual Meeting of Shareholders and will be available to respond to
appropriate questions and will have the opportunity to make a statement
should they so desire.
Ratification of the appointment of independent auditors requires that
the votes cast favoring the action exceed the votes cast opposing the
action. The Board of Directors recommends that shareholders vote "FOR" such
ratification.
SHAREHOLDERS' PROPOSALS
To be considered for inclusion in the proxy materials for the 1998
Annual Meeting under Securities and Exchange Commission regulations, a
shareholder proposal must be received by the Corporate Secretary at the
Company's above stated address on or before December 1, 1997.
In addition, the Company's By-Laws provide certain procedures that a
shareholder must follow to nominate persons for election as directors or to
introduce an item of business at an annual meeting, even if such item is not
to be included in the Company's proxy material. Such procedural
requirements are fully set forth in the Company's By-Laws, a copy of which
may be obtained without charge by any shareholder by written request
addressed to the Corporate Secretary at the principal executive offices of
the Company. To have a nomination or item of business brought before the
1998 Annual Meeting, a shareholder must deliver the required notice of such
nomination or item to the Corporate Secretary not less than sixty days nor
more than ninety days prior to the meeting.
OTHER MATTERS
The management of Liberty knows of no business to be presented at the
meeting other than the four items specified above. If other matters are
duly presented for action, it is the intention of the persons named in the
enclosed proxy to vote on such matters in accordance with their judgment.
Martha G. Williams
Vice President, General Counsel
& Secretary
Greenville, South Carolina
March 27, 1997
30
<PAGE> 34
EXHIBIT A
AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION
TO LIMIT THE DIRECTORS' LIABILITY TO THE EXTENT
PERMITTED BY SOUTH CAROLINA LAW
The Restated Articles of Incorporation would be amended to add a new
Article 10 as follows and to renumber existing Article 10 accordingly:
10. No director of the Corporation shall be personally liable to the
Corporation or its shareholders for the monetary damages for breach of
his or her fiduciary duty as a director occurring after the effective
date hereof; provided, however, the foregoing shall not eliminate or
limit the liability of a director: (a) for any breach of the
director's duty of loyalty to the Corporation or its shareholders; (b)
for acts or omissions not in good faith or which involve gross
negligence, intentional misconduct, or a knowing violation of law; (c)
imposed for unlawful distributions as set forth in Section 33-8-330 of
the South Carolina Business Corporation Act of 1988, as amended from
time to time (the "SCBCA"), or (d) for any transaction from which the
director derived an improper personal benefit. This provision shall
eliminate or limit the liability of a director only to the maximum
extent permitted from time to time by the SCBCA or any successor law or
laws. If the SCBCA is amended after approval by the shareholders of
this Article 10 to further eliminate or limit the personal liability of
directors, the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the SCBCA, as
so amended. Any repeal or modification of the foregoing protection by
the shareholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the
time of such repeal or modification.
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<PAGE> 35
EXHIBIT B
THE PERFORMANCE
INCENTIVE COMPENSATION PROGRAM
AS AMENDED AND RESTATED ON FEBRUARY 4, 1997
(SUBJECT TO SHAREHOLDER APPROVAL OF CERTAIN
AMENDMENTS PRIOR TO THEIR EFFECTIVENESS ON MAY 6, 1997)
The following is the text of the Performance Incentive Compensation
Program (the "Program"):
SECTION 1. PURPOSE. The purpose of this Program is to provide The Liberty
Corporation (the "Company") and its subsidiaries with an effective means of
attracting, retaining and motivating officers, other key employees and
directors (whether or not they are employees) and to encourage and enable them
to acquire common stock of the Company ("Common Stock"), thereby increasing
their proprietary interest in the Company's success. Subject to the
limitations set forth below, the Program provides for the granting of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), nonstatutory stock options, performance units,
restricted share awards, unrestricted share awards, phantom stock units, and
all or any combination of the foregoing ("Awards"), to eligible employees.
SECTION 2. ADMINISTRATION. The Compensation Committee of the Board of
Directors or such other committee of the Board as the Board may subsequently
designate (hereinafter referred to as the "Committee") shall have full power
and authority, subject to such orders or resolutions not inconsistent with the
provisions of the Program as may from time to time be issued or adopted by the
Board, to interpret the provisions and supervise the administration of the
Program. All determinations by the Committee shall be made by the affirmative
vote of a majority of its members, but any determination reduced to writing and
signed by all of the members shall be fully as effective as if it has been made
by a majority vote at a meeting duly called and held. All decisions made by
the Committee pursuant to the provisions of the Program or resolutions of the
Board shall be conclusive and binding on all persons, including the Company,
its shareholders and employees, and participants in the Program.
SECTION 3. SHARES SUBJECT TO THE PROGRAM.
(A) Shares of Common Stock are the only shares that may be delivered
under the Program. The shares of Common Stock to be delivered under the
Program shall be made available from the authorized but unissued shares or
from shares reacquired by the Company, including shares purchased in the
open market.
(B) Subject, in each case, to adjustments made pursuant to the
provisions of Sections 3(C) and 3(D):
(i) The aggregate number of shares that may be subject to
Awards under the Program from its initial inception in 1983 shall
not exceed 4,300,000 shares.
(ii) Effective May 6, 1997, with respect to stock options
granted on or after that date (and any stock options granted prior
to such date if their grant was conditioned upon approval of
amendments to the Program by the shareholders at their annual
meeting on May 6, 1997), the number of shares of Common Stock with
respect to which such stock options may be granted to any one
participant within any calendar year shall not exceed 400,000
shares.
(iii) Effective May 6, 1997, with respect to Awards granted on
or after that date (and any Awards granted prior to such date if
their grant was conditioned upon approval of amendments to the
Program by the shareholders at their annual meeting on May 6, 1997),
the number of shares of Common Stock with respect to which any
such Awards that are measured based on a number of actual or phantom
shares (except for
32
<PAGE> 36
stock options governed by paragraph (ii) above) may be granted
to any one participant within any calendar year shall not exceed
100,000 shares.
(iv) Effective May 6, 1997, with respect to Awards granted on
or after that date (and any Awards granted prior to such date if
their grant was conditioned upon approval of amendments to the
Program by the shareholders at their annual meeting on May 6, 1997),
the maximum amount of compensation that can be paid to any one
participant during any calendar year on account of any such Awards
that are not measured based on a number of actual or phantom shares
of Common Stock shall not exceed $2,000,000.
(v) Effective May 6, 1997, with respect to Awards granted on
and after that date (and any Awards granted prior to such date if
their grant was conditioned upon approval of amendments to the
Program by the shareholders at their annual meeting on May 6, 1997),
under all such Awards (other than stock options) granted under the
Program, in any one calendar year: (x) no one participant may be
paid cash in excess of $5,000,000 and (y) no one participant may
receive more than 1,000,000 shares of Common Stock. For purposes of
this paragraph, the amount paid or received in any calendar year
under an Award described in this paragraph shall be deemed to be the
value or number of shares earned under such Award based on the
attainment of performance objectives, if any, and based on any
downward adjustments, as determined by the Committee, as of the date
of the determination. Except in the case of any prior Awards
granted subject to approval by the shareholders of amendments to the
Program at their May 6, 1997 annual meeting, amounts paid pursuant
to Awards granted under the Program prior to May 6, 1997, shall not
be counted toward and shall not be subject to the limits contained
in this paragraph (v).
(C) The following rules shall apply in determining the amount of
shares or cash that has been used for purposes of the limits in Section
3(B)(i), (ii), (iii), (iv) and (v):
(i) Any shares affected by the expiration or termination
(without exercise) of any option (or portion thereof) prior to May
6, 1997 or by the forfeiture of all or any portion of an award of
restricted shares or phantom stock units prior to May 6, 1997, shall
be restored to the total shares available for use under the Program
for Awards to the same participant or other participants.
(ii) Effective May 6, 1997, if: (a) any shares of Common Stock
subject to an Award are forfeited or cancelled; or (b) if any Award
otherwise relating to shares of Common Stock terminates by
expiration, forfeiture, cancellation or otherwise without the
issuance of such shares or is settled in cash in lieu of Common
Stock; or (c) if any shares of Common Stock subject to an Award, or
any Awards otherwise relating to shares of Common Stock, are, with
the Committee's permission, exchanged for or otherwise surrendered
and cancelled in connection with the grant of other Awards, the
shares of Common Stock so affected (directly or as a measurement of
the Award, to the extent so affected) shall be restored to the total
shares available for use under the Program for Awards generally, but
shall be counted against the limitations contained in Section
3(B)(ii), (iii) and (v) with respect to the participant involved.
Although shares subject to or relating to an Award exchanged for or
otherwise surrendered and cancelled in connection with the grant of
a new Award shall be restored to the total shares available for use
under the Program, the shares subject to or relating to the
resulting new Award shall be counted for all purposes under the
Program. The maximum number of shares available for issuance under
the Program shall not be reduced to reflect any distributions that
may be reinvested in additional shares of Common Stock.
33
<PAGE> 37
(D) In the event of a merger, reorganization, consolidation,
recapitalization, stock dividend, spin-off, stock split or any other
change in corporate structure or other distribution of stock or property
(except for ordinary cash dividends) affecting the Company's Common Stock,
such adjustments shall be made in the aggregate number of shares subject
to the Program, the maximum number of shares which may be acquired by, or
subject to an Award granted or paid to, any participant under the Program,
the number and option price of shares subject to then outstanding options
granted under the Program, the number of restricted shares then subject to
restrictions under the Program and the number of shares used to determine
the value of then outstanding phantom stock units as may be determined to
be appropriate by the Committee. In no event shall any "Qualifying Award"
(as described in Section 10) that is then held by a "Covered Employee" as
defined in Section 162(m) of the Code be adjusted pursuant to Section 3(D)
to the extent it would cause such Award to fail to qualify as
"Performance-Based Compensation" under Section 162(m) of the Code.
SECTION 4. ELIGIBILITY FOR PARTICIPATION. The individuals eligible to
participate in the Program shall consist of officers, other key employees and
directors of the Company and its subsidiaries, whether or not such directors
are also employees of the Company or its subsidiaries, as determined by the
Committee. Subject to the limitations of the Program, the Committee shall,
after consultation with and consideration of the recommendations of management,
select the officers, employees and directors to so participate and determine
whether an officer, employee or director is to receive Awards hereunder;
provided, however, that no incentive stock option may be granted to any
director who is not an employee of the Company (or any of its subsidiaries).
The Committee, in its discretion, may impose any conditions that it deems
desirable on the grant of any new Award, including without limitation a
condition requiring the applicable participant to surrender for cancellation an
outstanding Award in order to obtain a new Award that the Committee desires to
grant in substitution of any such outstanding Award.
SECTION 5. STOCK OPTIONS.
(A) Stock options shall be granted to participants by the Committee
from time to time at its discretion. Each option shall be evidenced by an
option agreement which shall contain such terms and conditions as may be
approved by the Committee and shall be signed by an officer of the Company
and the participant. Incentive stock options and nonstatutory stock
options shall be evidenced by separate and distinct option agreements.
(B) A participant shall not be granted any incentive stock option if
the receipt of that option would result in the participant owning
incentive stock options (under the Program and any other plan maintained
by the Company or any subsidiary) that become exercisable for the first
time in any one calendar year into stock of the Company or any of its
subsidiaries with a fair market value in excess of $100,000. For purposes
of the preceding sentence, the fair market value of the stock of the
Company or any of its subsidiaries will be determined by the Committee as
of the grant of the incentive stock options without regard to any
restriction other than a restriction which by its terms will never lapse.
(C) The price at which shares may be purchased upon exercise of a
particular option shall be not less than 100% of the fair market value of
such shares on the date such option is granted, as determined by the
Committee without regard to any restriction other than a restriction which
by its terms will never lapse. In the case of an individual who, at the
time an option is granted, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (or any
of its subsidiaries) (a "10% Shareholder"), the exercise price of any
incentive stock option shall be not less than 110% of the fair market
value of the shares subject to the option on the date such option is
granted, as determined by the Committee without regard to any restriction
other than a restriction which by its terms will never lapse.
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<PAGE> 38
(D) Options may be granted for any period of time as established by
the Committee, except that:
(i) The term of any incentive stock option shall not be longer
than ten years (or five years if granted to a 10% Shareholder) from
the date the option is granted.
(ii) No Option granted prior to 1997 may be exercised before
the expiration of a one year period of continued employment by the
optionee with the Company or a subsidiary thereof commencing on the
date the option is granted, except as provided in Section 5(E)(iv)
below or except as provided in any amendment to the applicable
option agreement approved and authorized through specific action by
the Committee in a manner consistent with terms permitted hereunder
for options granted after 1996.
(E) Subject to the limitations in this Section 5 and the terms and
conditions of the option agreement, each option shall be exercisable at
such time or times and in such amount or amounts as the Committee may
prescribe and specify in the applicable option agreement.
(i) No incentive stock option granted after 1996 under this
Program may be exercised more than three months (or one year in the
case of a disabled employee or a deceased employee who died within
three months of terminating employment or during a disability that
terminated employment) after the participant holding such option
ceased being an employee of the Company or a subsidiary thereof,
unless: (x) a longer period applies under Section 5(E)(iv) below
for the beneficiary or legal representative of a deceased employee
whose death terminated employment, or (y) the Company and such
participant (or a deceased participant's beneficiary or legal
representative) mutually agree in writing that such option will be
amended to treat it as a nonstatutory stock option.
(ii) Unless the option agreement specifies a longer or shorter
time for exercise, a nonstatutory stock option granted after 1996
must be exercised no later than one year after the participant
holding such option ceases to be an employee (or ceases to be a
non-employee director) of the Company or a subsidiary thereof,
unless a longer period applies under Section 5(E)(iv) below.
(iii) In the case of options granted prior to 1997 (both
incentive stock options and nonstatutory stock options), unless the
option agreement is amended by specific action by the Committee
(with the consent of the holder if required) in a manner consistent
with terms permitted hereunder for options granted after 1996, each
such option may be exercised only during the continuance of the
optionee's employment with the Company or one of its subsidiaries,
except as provided in Section 5(E)(iv) below.
(iv) Except as otherwise provided in Section 5(E)(i) with
respect to the disability or retirement of the holder of incentive
stock options granted after 1996, in the event of termination of
employment (or service as a non-employee director) by an optionee by
reason of death, disability or retirement at normal retirement age
under the Company's Retirement Plan or any applicable Retirement
Plan of any of the Company's subsidiaries (or any applicable
retirement policy for non-employee directors), any options then
exercisable by such optionee shall remain exercisable by the
optionee or, if applicable, a beneficiary or legal representative,
for three years from the date of such termination of employment (or
service as a non-employee director) or until the expiration of the
option, whichever occurs first.
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(F) No shares shall be delivered pursuant to the exercise of any
option, in whole or in part, until qualified for delivery under such laws
and regulations as may be deemed by the Committee to be applicable thereto
and until payment in full of the option price therefor is received by the
Company. Payment of the purchase price shall be made in cash, cash
equivalent or, at the discretion of the Committee, in Common Stock of the
Company valued at its fair market value on the date of exercise or, at the
discretion of the Committee, in a combination of the foregoing.
(G) An option granted under the Program may not be transferred except
by will or the laws of descent and distribution and, during the lifetime
of the participant to whom granted, may be exercised only by such
participant or his or her personal representative.
SECTION 6. PERFORMANCE UNITS.
(A) Performance units may be awarded by the Committee to participants
from time to time at its discretion. Such units shall have defined terms
and conditions as to their value and the basis on which such values will
be determined.
(B) Performance units may be awarded in lieu of, or in combination
with, any other Awards, as the Committee may determine. Performance
standards shall be established by the Committee each time performance
units are granted and, except as provided in Section 6(D) below, these
standards must be met during the continuance of the participant's
employment with (or service as a non-employee director of) the Company or
one of its subsidiaries and prior to the making of any payment with
respect to such units.
(C) Performance units shall be assigned a value by the Committee upon
the award of such units.
(D) The value of performance units as established pursuant to Section
6(C) above shall be paid in cash promptly after the performance standards
established pursuant to Section 6(B) above shall have been met and, for
Qualifying Awards, the Committee certification required under Section 10
shall have occurred. In the event of termination of employment (or
service as a non-employee director) by reason of death, disability or
retirement at normal retirement age under the Company's Retirement Plan or
any applicable Retirement Plan of any of the Company's subsidiaries (or
any applicable retirement policy for non-employee directors), the
Committee shall have complete discretion to waive all or a part of the
continued employment or service requirements and performance standard
requirements for payment in respect of one or more performance units that
are not Qualifying Awards (as defined below).
(E) Performance units awarded under the Program may not be
transferred except by will or the laws of descent and distribution and,
during the lifetime of the participant to whom awarded, payment may be
made with respect to such performance units only to the participant or
such participant's personal representative.
SECTION 7. RESTRICTED SHARES.
(A) Awards of restricted shares of Common Stock of the Company shall
be granted to participants by the Committee from time to time in its
discretion. Upon the grant of such an award to a participant, the
Committee shall notify the participant in writing of the terms of such
award, as described below. Each award of restricted shares shall be
evidenced by an agreement which shall contain such terms and conditions as
may be approved by the Committee and which are consistent with the
applicable provisions of the Program and shall be signed by an officer of
the Company and the participant.
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(B) No consideration will be paid by a participant pursuant to an
award of restricted shares under the Program.
(C) Except as provided for in Section 7(D) and Section 7(F) below,
restricted shares awarded to a participant under the Program shall vest in
the participant during a period commencing on the date such shares are
awarded to a participant and ending on a date to be specified by the
Committee, in accordance with a vesting schedule to be determined by the
Committee in its discretion and specified in the award. Subject to the
immediately preceding sentence, the Committee may condition the vesting of
any restricted shares awarded after November 7, 1995 on any additional
terms and conditions (including performance achievement goals applicable
to all or any portion of the overall vesting period) for such period or
periods as shall be determined by the Committee. If the award document
relating to any Award of restricted shares granted prior to November 7,
1995 fails to contain any vesting schedule, then such shares shall vest in
equal annual installments (of 20% on each anniversary of the award date)
over the five year period commencing on the date such shares are awarded.
(i) To the extent that the shares remain non-vested under the
vesting schedule and any additional vesting terms and conditions set
by the Committee, such shares shall be deemed to be subject to a
Restriction Period. The Restriction Period for restricted shares
shall terminate when and to the extent that such shares vest in the
participant in accordance with their stated vesting terms or in
accordance with the accelerated vesting provided in Section 7(D),
Section 7(F) or the terms of any Award implementing the provisions
of Section 12 below, subject, in each case, to the need for
Qualifying Awards to comply with Section 10, and except to the
extent such shares have been forfeited as provided in Section 7(E)
or 7(G) below.
(ii) Restricted shares under the Program which are subject to a
Restriction Period may not be assigned, transferred, pledged or
otherwise encumbered or disposed of, except by forfeiture to the
Company as provided in Section 7(E) or 7(G) below.
(iii) During the applicable Restriction Period: (x) the
Company shall retain possession of the certificates for restricted
shares awarded under the Program, (y) the participant shall execute
and deliver to the Company a stock power in blank with respect to
such shares and (z) the participant shall be entitled to full
dividend and voting rights in respect of such shares. After the end
of the applicable Restriction Period, the restrictions imposed under
the Program shall cease to apply to the shares previously subject to
such Restriction Period and the certificates for such shares shall
be delivered to the participant.
(D) In the event of termination of employment (or service as a
non-employee director) by reason of death, disability or retirement at
normal retirement age under the Company's Retirement Plan or any
applicable Retirement Plan of any of the Company's subsidiaries (or any
applicable retirement policy for non-employee directors), the restrictions
imposed under the Program in respect of any Awards then subject to a
Restriction Period, except Qualifying Awards, shall terminate as of the
date of such termination of employment (or service as a non-employee
director).
(E) In the event of termination of employment (or service as a
non-employee director) for any reason other than as provided in Section
7(D) above, a participant shall forfeit all rights in respect of any
shares then subject to a Restriction Period as of the date of such
termination of employment (or service as a non-employee director), absent
a contrary determination by the Committee pursuant to the terms of any
Award implementing the provisions of Section 12 in connection with a
Change in Control Event.
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(F) With respect to restricted share Awards granted prior to 1997, in
the event of a merger, consolidation, sale of all or substantially all of
the Company's assets, or other corporate reorganization in which the
Company is not the surviving corporation, the restrictions imposed under
the Program in respect of any shares then subject to a Restriction Period
shall terminate as of the date of such event or as of such earlier date as
determined by the Committee. With respect to restricted share Awards
granted after 1996, the terms of the particular Awards will govern the
extent (if any) to which the restrictions on such restricted shares may
terminate as a result of any transaction described in the immediately
preceding sentence, and in such regard may refer to the provisions of
Section 12.
(G) To the extent all or a portion of a restricted share Award is
subject to additional vesting terms and conditions (such as performance
goals) imposed by the Committee to supplement the vesting schedule
established for such Award, and such additional terms and conditions are
not satisfied during the applicable period established for satisfying such
terms and conditions, the restricted shares subject to such additional
vesting terms and conditions shall be forfeited as of the end of the
period during which such vesting terms and conditions were to be
satisfied. This special forfeiture provision applies only to the number
of restricted shares for which a special vesting term or condition is not
satisfied. To the extent a portion of the restricted shares granted
initially as part of the same Award are not subject to any special vesting
terms or conditions (other than the vesting schedule based on continued
employment (or service as a non-employee director) over the vesting
period) or are subject to special terms and conditions that have been
satisfied, or may be satisfied by a later deadline, such restricted shares
shall not be forfeited pursuant to this Section 7(G) unless and until the
later deadline for satisfying any remaining special terms and conditions
occurs without such terms and conditions being satisfied.
SECTION 8. PHANTOM STOCK UNITS. Awards of phantom stock units ("phantom
units") shall be based on a number of phantom shares of Common Stock determined
by the Committee. The Company shall establish a book account ("Book Account")
on its records for each participant receiving an Award of phantom stock units
and shall credit to a participant's Book Account the number of phantom shares
of Common Stock granted to such participant pursuant to the Award. No actual
shares of Common Stock or other certificates shall be issued to a participant
when a phantom unit Award is granted. Phantom unit Awards shall be evidenced
by written agreements in such form as the Committee shall approve from time to
time. A participant shall earn the amount credited to his or her Book Account
from time to time in accordance with a schedule established by the Committee.
The schedule shall provide that a participant's interest will be earned in one
or more increments over a period of time determined by the Committee and may
require that certain performance goals be achieved. The Committee may
establish a different schedule for each phantom unit Award and each
participant.
(A) From the time a phantom unit Award has been granted until the
time it is settled or forfeited, the participant to whom the phantom units
were awarded shall be entitled to receive, as additional compensation,
cash payments equivalent to the amount of dividends that would be paid
with respect to a number of shares of Common Stock corresponding to the
number of phantom units represented by such Award.
(B) No Award of phantom units shall confer on the participant any
voting rights unless and until such phantom unit Award is paid to the
participant in the form of actual shares of Common Stock.
(C) Except as otherwise provided in Section 10 with respect to
Qualifying Awards, if a participant ceases employment with (or service as
a non-employee director of) the Company and its subsidiaries as a result
of death, disability or retirement at normal retirement age under the
Company's Retirement Plan or any applicable Retirement Plan of any of the
Company's subsidiaries (or any applicable retirement policy for
non-employee
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directors), such participant (or his or her beneficiary) shall be entitled
to such participant's full interest in any phantom unit Award (whether or
not earned) on the date of such termination (to the extent not previously
paid). Upon termination of employment with (or service as a non-employee
director of) the Company and its subsidiaries for any other reason, a
participant's interest in any unearned phantom unit Awards shall be
forfeited, absent a contrary determination by the Committee pursuant to
the terms of any Award implementing the provisions of Section 12 in
connection with a Change in Control Event. Notwithstanding the preceding
sentence, whenever a phantom unit Award is granted in substitution for
restricted shares that were subject to an Award granted prior to 1997 and
that are surrendered and cancelled in connection with the grant of such
phantom unit Award, the Committee may provide in such phantom unit Award
that such phantom units will become fully earned under the same
circumstances as the restrictions applicable to the cancelled restricted
shares would have terminated pursuant to Section 7(F).
(D) When the Committee determines that a phantom unit Award is to be
granted, the Committee shall give the participant an opportunity to elect,
the time(s) at which the amount credited to his or her Book Account, once
earned, is to be paid in a form of payment determined under Section 8(E)
below. Thereafter, the participant may make one or more superseding
elections to modify an earlier election in order to further defer (but not
accelerate) the time(s) of payment, provided that any superseding election
must be made prior to the tax year in which the payments affected by the
further deferral would have otherwise been made. All elections under this
Section 8(D) shall be made subject to the provisions of Section 8(E) below
and to the following:
(i) An election may specify that the amount credited to a
participant's Book Account will be paid to the participant in
increments as soon as each increment becomes earned.
(ii) Alternatively, an election may specify that the earned
amounts credited to a participant's Book Account will be paid to the
participant in a lump sum or in increments at a specified time or
times after they become earned even though the participant has not
yet retired, or in substantially equal annual installments
commencing as soon as practicable following the participant's
retirement from employment with (or service as a non-employee
director of) the Company and its subsidiaries. At the time the
participant makes an election, the participant shall designate the
period over which the installment payments will be made. The
Committee will have discretion to modify the form of installment
payment designated by the participant, if the Committee deems such a
modification to be appropriate and in the best interests of the
Company. If a participant elects the deferred payment form of
payment and dies after the installment payments begin, the remaining
installments will be paid to the participant's beneficiary according
to the schedule of installments designated by the participant.
(iii) The Committee may specify in a phantom unit Award or by
rules adopted and amended from time to time reasonable limits on the
minimum amounts and the frequency of payments that shall be required
for a participant to elect multiple installments and a maximum time
period (no sooner than five years following termination of a
participant's employment (or service as a non-employee director))
during which all earned amounts shall be paid.
(E) Subject to any restrictions on the form of payment that may be
specified by the Committee in the terms of any phantom unit Award, the
Committee shall determine whether a payment shall be made: (i) in whole
shares of Common Stock equal to the number of whole phantom shares of
Common Stock credited to the participant's Book Account, (ii) in cash, or
(iii) in a combination of whole shares of Common Stock and cash, in such
proportions as the Committee deems appropriate. When a payment is made
in cash, the
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phantom shares of Common Stock then credited to the participant's Book
Account shall be valued, for purposes of the payment, at the fair market
value of a share of Common Stock at the time the payment is made.
(F) The Committee shall have the right to defer payment of a
participant's phantom unit Awards, when earned, to the extent that the sum
of (i) the participant's phantom unit Awards that have been earned and are
scheduled to be settled plus (ii) all other "compensation" (as defined for
purposes of Section 162(m) of the Code) with respect to the participant
for the taxable year in which settlement of the earned phantom unit Awards
would otherwise be deductible, may not be deductible by the Company by
reason of Section 162(m) of the Code, as determined by the Committee in
its sole discretion. A phantom unit Award deferred pursuant to this
Section 8(F) shall be settled in subsequent taxable years of the Company
to the extent that the sum of the participant's deferred, but earned,
phantom unit Awards and all other "compensation" with respect to the
participant would be deductible by the Company under Section 162(a) of the
Code. This Section 8(F) shall apply only to the extent that the Committee
determines in its sole discretion that the deferral could allow settlement
of the phantom unit Awards to be deductible in a future year. The
Committee's determination shall be final and binding.
SECTION 9. UNRESTRICTED SHARES. Awards of unrestricted shares of Common
Stock of the Company may be granted by the Committee from time to time in its
discretion to participants in consideration of services rendered to the Company
or its subsidiaries; provided that the Committee obtains adequate authorization
(whether in advance or as ratification) from the Board of Directors to the
extent required to comply with Sections 33-6-210(b) and 33-8-250(e)(8) of the
South Carolina Business Corporation Act of 1988, as it may be amended from time
to time (the "SCBCA"), or any successor provisions, all as in effect at the
time of any such grants. Without limiting the preceding sentence, but subject
to the proviso therein, Awards of unrestricted shares may be granted by the
Committee from time to time to directors of the Company or its subsidiaries in
lieu of or as a supplement to cash fees for services rendered as directors.
SECTION 10. QUALIFYING AWARDS. The Committee may, in its sole discretion,
grant an Award (other than unrestricted shares) to any participant with the
intent that such Award as "performance-based compensation" under Section 162(m)
of the Code (a "Qualifying Award"). Qualifying Awards may be issued as stock
options or, if the settlement or vesting of the Award is conditioned upon
achievement of performance goals established pursuant to Section 10(A) below,
as restricted shares, phantom stock units or performance units. Unless
otherwise specified in writing by the Committee, either at the time an Award is
granted or at any time thereafter, all Awards issued under the Program that are
either stock options or Awards as to which the settlement or vesting of the
Award is conditioned upon achievement of performance goals established by the
Committee in accordance with Section 10(A) below, shall be treated as
Qualifying Awards. The provisions of this Section 10, as well as other
applicable provisions of the Plan not inconsistent with this Section 10, shall
apply to all Qualifying Awards issued under the Program.
(A) For Qualifying Awards, all amounts received upon the settlement
or vesting of restricted shares, phantom stock units and performance units
shall be based upon the attainment of performance goals established by the
Committee in accordance with Section 162(m) of the Code. Such performance
goals may vary by participant and by Award. For Awards granted on or
after May 6, 1997 (or granted prior to such date if their grant was
conditioned upon approval of amendments to the Program by the shareholders
at their annual meeting on May 6, 1997), such performance goals shall be
based on any one or more (or any combination) of the following business
criteria: revenues, net income (before or after tax), earnings, earnings
per share, shareholders' equity, return on equity, assets, return on
assets, capital, return on capital, book value, economic value added,
operating margins, profit margins, cash flow, shareholder return, expenses,
sales or market share, expense management, return on investment,
improvements in capital structure, budget comparisons, profitability of an
identifiable business
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unit or product, or stock price, or shall be based on any one or more (or
any combination) of the foregoing business criteria: (1) before the effect
of acquisitions, divestitures, accounting changes, restructuring or other
special charges or other extraordinary items or (2) after giving effect
to an adjustment to reflect any such transaction or extraordinary item, to
the extent in each such case the Committee specifies, when granting the
Award, that the effect of any such transactions or extraordinary items
shall be disregarded or that a particular formula or other objective
method shall be used to make an appropriate adjustment to reflect any
such transaction or extraordinary item.
(i) The foregoing business criteria and the performance goals
established by the Committee may be applicable to the Company as a
whole, one or more of its subsidiaries, divisions, business units or
business lines, or any combination of the foregoing. The
performance goals also may be based on the attainment of specified
levels of Company performance under one or more of the business
criteria described above relative to the performance of other
corporations.
(ii) The Committee may condition the settlement or vesting of
any such Award on the attainment of other conditions, such as
completion of a period of service, that must be satisfied in
addition to the performance goal or goals specified in the Award and
that may apply during the same or a different time period than the
period used for the performance goal or goals.
(B) The Committee shall have the discretion, by participant and by
Award, to reduce (but not to increase) some or all of the amount that
would otherwise be payable under the Award by reason of the satisfaction
of the performance goals set forth in the Award. In making any such
determination, the Committee is authorized to take into account any such
factor or factors it determines are appropriate, including but not limited
to Company, business unit and individual performance.
(C) Prior to payment of any Qualifying Award, the Committee shall
certify in writing that the performance goals and any other material terms
of the Award were in fact satisfied, all in a manner consistent with the
applicable regulations under Section 162(m) of the Code. Such
certification shall not be required, however, for compensation that is
attributable solely to an increase in the value of the Company's Common
Stock.
(D) If a participant leaves employment with the Company and its
subsidiaries as a result of death or disability, any restrictions with
respect to Qualifying Awards shall terminate as of the date of such
termination; provided however, that the Committee is authorized to defer
or accelerate the actual receipt, payment or settlement of any such
Qualifying Award that is vested or earned as a result of such termination
of employment. In the event of termination of employment for any other
reason, a participant shall forfeit all rights in respect of any
Qualifying Awards as of the date of such termination.
SECTION 11. WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock or issue a certificate free of
restrictions for vesting shares previously subject to forfeiture under the
Program, the Company shall have the right to require the participant to remit to
the Company an amount sufficient to satisfy any applicable federal, state and
local withholding tax requirements prior to the delivery of any certificate or
certificates for such shares. Whenever under the Program payments are to be
made in cash, such payments shall be net of an amount sufficient to satisfy any
applicable federal, state and local withholding tax requirements. A participant
may elect with respect to any stock option (other than an incentive stock
option), restricted share award, restricted stock unit or performance unit to
surrender or authorize the Company to withhold shares of Common Stock (valued at
current fair market value on the date of surrender or withholding of the shares)
in satisfaction of all such applicable withholding requirements (the "Stock
Surrender Withholding Election"); provided, however, that:
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(A) Any Stock Surrender Withholding Election shall be made by written
notice to the Company and thereafter shall be irrevocable by the
participant;
(B) If a participant is an "officer" of the Company or other person
subject to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor law, any Stock Surrender
Withholding Election shall be subject to any additional rules established
from time to time by the Committee;
(C) Any Stock Surrender Withholding Election must be made prior to
the date on which the participant recognizes taxable income with respect
to the receipt of such shares (the "Tax Date");
(D) When the Tax Date falls after the exercise of a stock option and
the participant makes a Stock Surrender Withholding Election, the full
number of shares of Common Stock subject to the stock option being
exercised will be issued, but the participant will be unconditionally
obligated to deliver to the Company on the Tax Date a number of shares of
Common Stock having a value on the Tax Date equal to the participant's
federal, state and local withholding tax requirements; and
(E) For purposes of this Section, the Committee shall have the
discretion to provide (by general rule or a provision in a specific award
document) that, at the election of the participant (and subject to such
conditions as the Committee may impose by general rule or in a provision
in a specific award document), "federal, state and local withholding tax
requirements" shall be deemed to be any amount designated by the
participant which exceeds the amount required by applicable law and
governmental regulations to be withheld but which does not exceed the
participant's total estimated federal, state and local tax obligations
associated with the transaction, including FICA taxes to the extent
applicable.
Shares subject to an award under the Program that are surrendered or
withheld under this Section 11 to satisfy a participant's federal, state and
local withholding tax obligations shall not thereby become available for use
again under the Program.
SECTION 12. COMMITTEE AUTHORITY TO ACCELERATE RIGHT OF EXERCISE AND
ACCELERATE VESTING IN CERTAIN CIRCUMSTANCES. The Committee may determine when
granting any Award (and may specify in the Award document) or may determine at
any time after granting an Award (in circumstances deemed appropriate by the
Committee) that notwithstanding the fact that an outstanding stock option has
not otherwise become exercisable in full in accordance with its terms and
notwithstanding any conditions to the vesting or earning of a participant's
rights with respect to any award of restricted shares, phantom stock units or
performance units, such Award shall become fully exercisable (in the case of
stock options) or otherwise shall become fully exercisable and fully vested and
earned upon a "Change in Control Event" described in this Section 12 or upon
any termination of such participant's employment with (or service as a director
of) the Company or its subsidiary or significant reduction in such
participant's responsibilities or compensation following any such Change in
Control Event. Such determinations may be different as to different Awards.
(A) A "Change in Control Event" shall be deemed to have occurred if:
(i) a tender offer or exchange offer has been made (other than
by the Company, any of its subsidiaries, any employee benefit plan
of the Company or of any of its subsidiaries, or any person
organized, appointed or established by the Company or any of its
subsidiaries for or pursuant to the terms of any such plan) if, upon
consummation thereof, the corporation, person or other entity making
such offer would become an Acquiring Person (as defined below), and
provided that the corporation, person or other entity making such
offer purchases or otherwise acquires shares of the Company's Common
Stock pursuant to such offer; or
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(ii) any person, entity or "group," within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (excluding, for this purpose, any
employee benefit plan of the Company or of any of its subsidiaries,
or any person organized, appointed or established by the Company or
any of its subsidiaries for or pursuant to the terms of any such
plan which acquires beneficial ownership of voting securities of the
Company) becomes an Acquiring Person (other than through
acquisitions from the Company or in a transaction approved by the
"Incumbent Board" as defined below); or
(iii) the individuals who constitute the Incumbent Board fail
for any reason to continue to constitute at least a majority of the
Board of Directors. The "Incumbent Board" at any time shall mean
the persons who are then members of the Board of Directors and who
(a) are members of the Board of Directors as of February 4, 1997 or
(b) become members of the Board of Directors thereafter upon
election, or nomination for election by the Company's shareholders,
by a vote of at least a majority of the Incumbent Board (other than
an election or nomination of an individual whose initial assumption
of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act.)
For purposes hereof, "Acquiring Person" means any person or group of
affiliated or associated persons that, after February 4, 1997, becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either the then outstanding shares of the
Company's Common Stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally in the election
of directors; provided however, that such term does not include any person
who beneficially owns 20% or more of either the Company's Common Stock or
the combined voting power of the Company's then outstanding voting
securities entitled to vote generally in the election of directors: (x)
as a result of the reduction in the number of shares of Common Stock
outstanding due to the Company's acquisition of its Common Stock; (y) as a
result of (1) a will or the laws of descent and distribution, (2) the
transfer of shares to any member of the transferor's immediate family or
to a trust for the benefit of a member of the transferor's immediate
family (a "Transferee Trust"), (3) a divorce decree or settlement or (4)
the transfer of shares held on February 4, 1997 by any trust or held at
any time by a Transferee Trust to any beneficiary of such trust; or (z) as
a result of any acquisition by such person of shares pursuant to any
employee benefit plan of the Company or of any of its subsidiaries.
(B) The relevant Change in Control Event shall be deemed to occur:
(i) in the event of Section 12(A)(i) above, on or after the
date on which shares are purchased pursuant to such tender or
exchange offer; or
(ii) in the event of Section 12(A)(ii) above, at any time after
the date upon which the Company is provided a copy of Schedule 13D
(filed pursuant to Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder) or other notice indicating
that any person, entity or group has become an Acquiring Person or,
if the Company is not subject to Section 13(d) of the Exchange Act,
at any time after the date upon which the Company receives written
notice that any person, entity or group has become an Acquiring
Person; or
(iii) in the event of Section 12(A)(iii) above, on or after the
occurrence of such failure.
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SECTION 13. REGULATORY AND OTHER LEGAL REQUIREMENTS. All aspects of this
Program shall be subject to applicable laws, rules, regulations and approvals
required by governmental entities and stock exchanges. Without limiting the
foregoing, the issuance of shares of the Company's Common Stock under the
Program is subject to applicable provisions of the SCBCA (or any successor
laws); without in any way abdicating its decision making authority in
connection with the grant of any Awards hereunder (including, but not limited
to, the Committee's authority to establish and administer performance goals and
certify as to the attainment of any such performance goals), the Committee may
obtain further parameters from the Board of Directors within which to exercise
the Committee's authority or may obtain ratification of the Committee's
decisions by the full Board of Directors or may do both to the extent deemed
appropriate to comply with the SCBCA (including Sections 33-6-210(b) and
33-8-250(e)(8)) or any successor laws.
SECTION 14. GRANTOR TRUSTS. The Committee may, in its discretion and in a
manner consistent with Section 13, establish one or more grantor trusts (with
such terms as the Committee may determine) and contribute shares of Common
Stock and such other assets as may be deemed desirable for use in satisfying
the Company's obligations to one or more participants under one or more Awards
granted hereunder. The creation and funding of any such trust with respect to
one or more Awards shall not create any obligation on the part of the Company
or any rights in participants receiving other Awards to have the same or any
similar trust created or funded with respect to other Awards. If any such
trust is used for purposes of satisfying the Company's obligations to any
participant under an Award, the Company shall be relieved of its obligation to
satisfy any claim for benefits under such Award to the extent such participant
receives a distribution from the trust of the shares of Common Stock or other
assets due in accordance with the Award, but the Company shall remain liable
for any balance due that is not received from such trust.
SECTION 15. TERM. This Program initially became effective May 3, 1983 for
ten years and was amended, with shareholder approval, in 1990 to extend its
term to May 1, 2000. Subject to approval of certain amendments by the
shareholders of the Company at their annual meeting to be held on May 6, 1997
or at any adjournment thereof, this Program has been further amended, effective
on the date of such shareholder approval, to extend its term to May 6, 2007
unless terminated at an earlier date by the Board. No Awards shall be granted
after termination of the Program, but any then outstanding Awards shall
continue in effect for the remainder of their respective terms, subject to the
conditions of such Awards. No incentive stock options may be granted after
February 4, 2007, which is ten years after the Committee's adoption of the
Program as most recently extended and restated.
SECTION 16. AMENDMENTS AND DISCONTINUANCE. The Committee may amend,
suspend, or discontinue the Program; provided, however, that the Committee may
condition the effectiveness of any amendment on shareholder approval to the
extent the Committee determines that shareholder approval is necessary or
desirable to qualify for: certain tax deductions or other desired treatment
under Section 162(m) or other Sections of the Code and related regulations of
the Internal Revenue Service, all as amended from time to time; certain
exemptions under Section 16 of the Securities Exchange Act of 1934 and related
rules adopted by the Securities and Exchange Commission, all as amended from
time to time; or any other desired exemption or treatment under any applicable
law or regulation. Notwithstanding the foregoing, no such amendment shall
materially and adversely affect the rights of any participant as to any Award
then outstanding without the consent of such participant.
44
<PAGE> 48
APPENDIX A
PRELIMINARY DRAFT
PROXY PROXY
THE LIBERTY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION.
The undersigned hereby appoints Sophia G. Vergas and R. David Black, or
either of them, as proxies, with full power of substitution, to represent the
undersigned at the 1997 Annual Meeting of Shareholders of The Liberty
Corporation ("Liberty") to be held at 10:30 a.m. on May 6, 1997, at The Liberty
Corporation Headquarters Building, Wade Hampton Boulevard, Greenville, South
Carolina, and any adjournment thereof, and to vote all the shares of Liberty
stock which the undersigned would be entitled to vote, if personally present.
<TABLE>
<S> <C> <C>
1. Election of Directors: [ ] FOR ALL 4 NOMINEES [ ] WITHHOLD AUTHORITY
listed below (except to vote for all
as marked to the nominees listed
contrary below) below
</TABLE>
Hayne Hipp, Buck Mickel, J. Thurston Roach and William B. Timmerman
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name on the space provided.)
- ------------------------------------------------------------------------------
2. Proposal to amend the Restated Articles of Incorporation regarding director
liabilities.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve the material amendments to, and the eligible
participants under, the Performance Incentive Compensation Program.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to approve the appointment of Ernst & Young LLP as independent
public accountants for Liberty.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before said meeting.
PLEASE SIGN ON REVERSE SIDE AND RETURN IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
<PAGE> 49
PRELIMINARY DRAFT
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH INSTRUCTIONS CONTAINED HEREIN. IN THE ABSENCE OF SUCH INSTRUCTIONS, THIS
PROXY WILL BE VOTED IN FAVOR OF ALL THE FOREGOING PROPOSALS.
SHARES
Date , 1997
---------------------
---------------------------------
Signature
---------------------------------
Signature
(Please sign your name exactly as
it appears hereon. Executors,
administrators, guardians,
officers of corporations, and
others signing in a fiduciary
capacity should state their full
titles as such.)
