UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment
No. )
Filed
by the Registrant [X]
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Filed
by a Party other than the Registrant
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Check
the appropriate box:
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[X]
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Preliminary
Proxy Statement
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[ ]
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[ ]
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Definitive
Proxy Statement
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to §240.14a-12
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National
Western Life Insurance Company
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Payment
of Filing Fee (Check the appropriate box):
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[X]
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No
fee required.
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[ ]
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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[ ]
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Fee
paid previously with preliminary materials.
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[ ]
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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.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No:
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3)
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Filing
Party:
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4)
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Date
Filed:
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National
Western Life Insurance Company
850
East Anderson Lane
Austin,
Texas 78752-1602
(512)
836-1010
May 14,
2010
To Our
Stockholders:
We
cordially invite you to attend the 2010 Annual Meeting of Stockholders of
National Western Life Insurance Company to be held on Tuesday, June 29, 2010 at
8:30 a.m., local time, at the offices of National Western Life Insurance Company
at 850 East Anderson Lane, Austin, Texas 78752-1602. We
have enclosed a Notice of Annual Meeting of Stockholders, proxy statement, and
form of proxy with this letter.
We
encourage you to read the Notice of Annual Meeting of Stockholders and proxy
statement so that you may be informed about the business to come before the
meeting. Your participation in our business is important, regardless
of the number of shares you own.
We look
forward to seeing you on June 29, 2010.
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Sincerely,
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/S/
Robert L. Moody
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Robert
L. Moody
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Chairman
of the Board
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and
Chief Executive Officer
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National
Western Life Insurance Company
850
East Anderson Lane
Austin,
Texas 78752-1602
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
the Stockholders of National Western Life Insurance Company:
The 2010
Annual Meeting of Stockholders (“Annual Meeting”) of National Western Life
Insurance Company (the “Company” or “National Western”) will be held on Tuesday,
June 29, 2010 at the Company’s offices at 850 East Anderson Lane, Austin,
Texas 78752-1602 at 8:30 a.m. local time for the following
purposes:
1. To
elect nine nominees for election to the board of directors, who shall hold
office until the next annual stockholders’ meeting or until their respective
successors have been elected or appointed;
2. To
approve the Executive Officer Bonus Program;
3. To
ratify the appointment of the firm of KPMG LLP as the Company’s independent
registered public accounting firm for the fiscal year ending December 31, 2010;
and
4. To
transact other business that may properly come before the Annual Meeting, or any
adjournment or adjournments thereof.
These
items are fully described in the proxy statement, which is part of this
notice.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS: Copies of the proxy
statement and the Annual Report on Form 10-K for the year ended December 31,
2009, are available at www.nationalwesternlife.com
or may be viewed at the United States Securities and Exchange Commission (“SEC”)
Public Reference Room in Washington, D.C. or at the SEC’s Internet site at
www.sec.gov.
The
Company has not received notice of other matters that may be properly presented
at the Annual Meeting.
The Board
of Directors of the Company has fixed the close of business on April 26, 2010 as
the record date for the determination of the shareholders entitled to notice of
and to vote at the Annual Meeting or any adjournment or adjournments
thereof. A complete list of stockholders will be open to examination
by any stockholder for any purpose germane to the Annual Meeting between the
hours of 9:00 a.m. and 5:00 p.m., local time, at the offices of the Company at
850 East Anderson Lane, Austin, Texas 78752-1602 for ten (10) days prior to the
Annual Meeting. If you would like to view the stockholder list,
please call the Company Secretary at (512) 836-1010 to schedule an
appointment. The list will also be available at the Annual Meeting
and may be inspected by any stockholder who is present.
Regardless
of the number of shares of National Western Life Insurance Company common stock
you hold, as a stockholder your vote is important and the Board of Directors of
the Company strongly encourages you to exercise your right to
vote. To ensure your vote is recorded promptly, please vote as soon
as possible, even if you plan to attend the Annual Meeting.
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By
Order of the Board of Directors
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Date:
May 14, 2010
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/S/James
P. Payne
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James
P. Payne
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Senior
Vice President and Secretary
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IMPORTANT
STOCKHOLDERS
WHO DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE TO ENSURE ITS ARRIVAL IN TIME
FOR THE ANNUAL MEETING. PLEASE USE THE ENCLOSED POSTAGE-PAID
ENVELOPE.
National
Western Life Insurance Company
850
East Anderson Lane
Austin,
Texas 78752-1602
(512)
836-1010
2010
ANNUAL MEETING OF STOCKHOLDERS
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS: Copies of the proxy
statement and the Annual Report on Form 10-K for the year ended December 31,
2009 are available at www.nationalwesternlife.com.
This
proxy statement and the accompanying proxy card are being mailed to stockholders
on or about May 14, 2010 in connection with the solicitation by the Board of
Directors (the “Board of Directors”) of National Western Life Insurance Company
of proxies to be used at the 2010 Annual Meeting of Stockholders (the “Annual
Meeting”) of National Western Life Insurance Company to be held on Tuesday, June
29, 2010 at our offices at 850 East Anderson Lane, Austin, Texas 78752-1602 at
8:30 a.m. local time. Our principal executive offices are
located at 850 East Anderson Lane, Austin, Texas 78752-1602. Unless
the context requires otherwise, references in this proxy statement to “National
Western,” “the Company,” “we,” “us,” or “our” refer to National Western Life
Insurance Company.
QUORUM
AND VOTING
Holders
of record of our Class A common stock, par value $1.00 per share (the “Class A
Stock”) and our Class B common stock, par value $1.00 per share (the “Class B
Stock” and, together with the Class A Stock, the “Common Stock”), at the close
of business on April 26, 2010, will be entitled to notice of and to vote at the
Annual Meeting or any adjournment or adjournments thereof. As of
April 26, 2010, there were 3,425,966 shares of Class A Stock outstanding, held
by 4,308 holders of record and 200,000 shares of Class B Stock outstanding, held
by two (2) holders of record. The number of holders does not include
any beneficial owners for whom shares of Common Stock may be held in “nominee”
or “street” name.
Stockholders
of record at the close of business on April 26, 2010 will be entitled to vote at
the Annual Meeting. Each stockholder is entitled to one vote per
share held by such holder on all matters coming before the Annual Meeting,
except as otherwise described below.
Article 4
of the Amended and Restated Articles of Incorporation of the Company provides
that the Class A stockholders have the exclusive right to elect one-third (1/3)
of the members of the Board of Directors, plus one director for any remaining
fraction, and that the Class B stockholders have the exclusive right to elect
the remaining members of the Board of Directors. In view of Robert L.
Moody’s ownership, as of March 26, 2010, of more than 99% of the Class B Stock
outstanding, as well as Mr. Moody’s ownership of 33.83% of the Class A Stock
outstanding (see Stock Ownership table below), Mr. Moody holds the voting power
to elect a majority of the Board of Directors. The Company is
considered to be a controlled company and Mr. Moody is the controlling
stockholder.
The
presence, in person or by proxy, of the holders of one-half (1/2) of the total
of each of the Class A Stock and the Class B Stock will constitute a quorum at
the Annual Meeting. If a quorum is not present or represented at the
Annual Meeting, the stockholders entitled to vote thereat, present in person or
represented by proxy, have the power to adjourn the Annual Meeting from time to
time without further notice, other than announcement at the Annual Meeting,
until a quorum is present. At such reconvened Annual Meeting at which
a quorum is present, any business may be transacted as originally
noticed. Abstentions and broker non-votes (shares held by a broker or
nominee that does not have the authority to vote on a matter, and has not
received instructions from the beneficial owner) are counted as present in
determining whether the quorum requirement is met.
Our
Amended and Restated Bylaws require the affirmative vote of a majority of the
votes cast for all matters to be determined at the Annual Meeting, other than
the election of directors, including the proposal to approve the executive
officer bonus program and to ratify the appointment of KPMG LLP as our
independent registered public accounting firm. On these matters,
abstentions and broker non-votes will be treated as unvoted for purposes of
determining approval of the proposal and will have neither the effect of a vote
for or vote against the proposal.
The
Inspector of Elections for the Annual Meeting will be James P. Payne, our Senior
Vice President - Secretary, and he will tabulate the votes. We will
announce preliminary voting results at the Annual Meeting. The final
official voting results from the Annual Meeting will be disclosed in an 8-K to
be filed within four business days after the meeting.
You may
vote your proxy by Internet, telephone, or mail, as explained
below. Votes submitted electronically over the Internet or by
telephone must be received by 7:00 p.m., Eastern Daylight Savings Time, on June
28, 2010. Voting your proxy does not limit your right to vote in
person should you decide to attend the Annual Meeting. The law of
Colorado, under which National Western is incorporated, specifically permits
electronically transmitted proxies, provided that each such proxy contains or is
submitted with information from which the Inspector of Elections of the Annual
Meeting can determine that such electronically transmitted proxy was authorized
by the stockholder. If your shares are held in the name of a broker,
bank, or other holder of record, you will be provided voting instructions from
the holder of record. If you
vote by Internet or telephone, please do not mail the enclosed proxy
card.
● Internet. Access
the Internet voting site at www.continentalstock.com. Follow
the on-screen instructions and be sure to have the control number listed on your
proxy card available when you access the Internet voting site. Please
note that stockholders that vote by Internet must bear all costs associated with
electronic access, including Internet access fees.
● Telephone. Dial
toll free 1 (866) 894-0537 from any touch-tone telephone. Follow the
voice prompts and be sure to have the control number listed on your proxy card
available when you call.
● Mail. Simply mark, sign,
date, and return the proxy card to Continental Stock Transfer & Trust
Company. A postage-prepaid envelope has been provided for your
convenience if you wish to vote your proxy by mail.
If a
stockholder completes, signs, dates, and returns the proxy card, or calls the
toll-free telephone number or properly uses the Internet voting procedures
described on the proxy card by 7:00 p.m., Eastern Daylight Savings Time, on June
28, 2010, his, her, or its shares will be voted at the Annual Meeting in
accordance with his, her, or its instructions. If a stockholder
returns a proxy card unsigned, his, her, or its vote cannot be
counted. If a stockholder signs and dates a proxy card, but does not
fill out the voting instructions on the proxy card, the shares represented by
the proxy will be voted in accordance with the Board of Directors’
recommendations, as follows:
● FOR the election of each of
the nominees to the Board of Directors to hold office until the next annual
stockholders’ meeting or until their respective successors have been elected or
appointed;
● FOR the approval of the
Executive Officer Bonus Program; and
● FOR the ratification of the
appointment of the firm of KPMG LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2010.
In
addition, if any other matters come before the Annual Meeting, James P.
Payne, our Senior Vice President
-Secretary, the named proxy, has discretionary authority to vote on those
matters in accordance with his best judgment. The Board of Directors
is not currently aware of any other matters that may come before the Annual
Meeting.
REVOCABILITY
OF PROXY
The form
of proxy card enclosed is for use at the Annual Meeting if a stockholder will be
unable to attend in person. The proxy (whether submitted by mail,
telephone, or Internet) may be revoked by a stockholder at any time before it is
exercised on the date of the Annual Meeting by:
● executing and delivering a
written notice of revocation to the Secretary of National Western at our
principal executive offices;
● submitting a later-dated
proxy by Internet in the manner specified above, by telephone in the manner
specified above, or in writing to the Secretary of National Western at our
principal executive offices; or
● attending and voting in
person at the Annual Meeting.
Attendance
at the Annual Meeting will not revoke a proxy unless a stockholder provides
written notice of revocation to the Secretary of National Western before the
proxy is exercised or unless the stockholder votes his or her shares in person
at the Annual Meeting. Street name holders that vote by proxy may
revoke their proxies by informing the holder of record in accordance with that
entity’s procedures.
SOLICITATION
This
solicitation is made on behalf of the Board of Directors. The cost of
preparing, assembling, printing, and mailing the Notice of Annual Meeting of
Stockholders, this proxy statement, the enclosed proxy card, and any additional
materials, as well as the cost of soliciting the proxies will be borne by us,
including reimbursement paid to brokerage firms and other custodians, nominees,
and fiduciaries for reasonable costs incurred in forwarding the proxy materials
to, and solicitation of proxies from, the beneficial owners of shares held by
such persons. The solicitation will be made initially by
mail. Our Board of Directors may later decide to make further
solicitations by mail, telephone, telex, facsimile, or personal calls by our
directors, officers, and employees. We will not pay
additional compensation to our directors, officers, and employees for their
solicitation efforts, but we will reimburse them for any out-of-pocket expenses
they incur in their solicitation efforts.
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The
information provided below sets forth certain information as of March 26, 2010,
regarding (i) the ownership of voting securities of the Company by each person
who is known to the management of the Company to have been the beneficial owner
of more than five percent (5%) of the outstanding shares of the Company’s Class
A Stock or Class B Stock; (ii) the ownership interest of each director of the
Company; (iii) the ownership interest of the executive officers of the Company;
(iv) the ownership interest of officers and directors of the Company as a group;
and (iv) the total number of stock options outstanding for all such persons and
entities. Insofar as is known to the Company, each such person,
entity, or group has sole voting and investment power with respect to all such
shares of Class A Stock and Class B Stock, except as may otherwise be
noted.
For
purposes of the tables below, the amounts and percentages of Class A Stock and
Class B Stock beneficially owned are reported on the basis of regulations of the
SEC governing the determination of beneficial ownership of
securities. Under the rules of the SEC, a person is deemed to be a
“beneficial owner” of a security if that person has or shares “voting power,”
which includes the power to vote or to direct the voting of such security, or
“investment power,” which includes the power to dispose of or to direct the
disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has a right to acquire
beneficial ownership within 60 days, including through the exercise of options
or warrants. Under these rules, more than one person may be deemed a
beneficial owner of the same securities and a person may be deemed a beneficial
owner of securities as to which he has no economic interest.
Owners of More Than 5% of Our
Common Stock or Preferred Stock
Based
solely upon filings made with the SEC, the following persons are the only
persons known by us to own beneficially more than 5% of the outstanding shares
of Class A Stock or Class B Stock as of March 26, 2010. Percent of
class is calculated based on 3,425,966 shares of Class A Common Stock and
200,000 shares of Class B Common Stock outstanding as of March 26,
2010.
Name
and Address
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Title
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Amount
and Nature
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Percent
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of
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of
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of
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of
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Beneficial
Owners
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Class
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Beneficial
Ownership
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Class
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Robert
L. Moody(1)
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Class
A Common
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1,179,796(1)
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34.44%
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2302
Post Office Street, Suite 702
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Class
B Common
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198,074
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99.04%
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Galveston,
Texas
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Third
Avenue Management, LLC (2)
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Class
A Common
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321,033
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9.37%
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622
Third Avenue
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New
York, New York
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(1)
Robert L. Moody of Galveston, Texas, is Chairman of the Board of Directors and
Chief Executive Officer of the Company. Mr. Moody is the controlling
stockholder of the Company, and he holds the voting power to elect more than a
majority of the members of the Board of Directors. Of the shares
listed as owned, 20,700 shares are issuable upon the exercise of stock options
that are either currently exercisable or that will become exercisable within 60
days of March 26, 2010.
(2) The
Company is advised that Third Avenue Management, LLC, has sole voting power with
respect to 321,033 Class A shares held in certain TAM accounts.
Directors
and Executive Officers
Except
under applicable community property laws or as otherwise indicated in the
footnotes to the table below, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock beneficially
owned. The address of all directors and executive officers in this
table is c/o National Western Life Insurance Company, 850 East Anderson, Austin,
Texas 78752-1602. Ownership amounts are as of March 26,
2010. Percent of class is calculated based on 3,425,966
shares of Class A Common Stock and 200,000 shares of Class B Common Stock
outstanding as of March 26, 2010.
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Percent
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Directors
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Title
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Amount
and Nature of
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of
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and
Officers
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of
Class
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Beneficial
Ownership†
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Class
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Directors
and Named Executive Officers:
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Robert
L. Moody
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Class
A Common
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1,179,796.0
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34.44
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Class
B Common
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198,074.0
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99.04
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Ross
R. Moody
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Class
A Common
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17,042.0
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+
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Class
A Common*
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625.0
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+
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Class
B Common*
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481.5
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+
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Charles
D. Milos
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Class
A Common
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9,828.0
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+
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Class
B Common
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-
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-
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Directors:
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Stephen
E. Glasgow
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Class
A Common
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650.0
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+
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Class
B Common
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-
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-
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E.
Douglas McLeod
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Class
A Common
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2,410.0
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+
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Class
B Common
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-
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-
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Frances
A. Moody-Dahlberg
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Class
A Common
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3,250.0
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+
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Class
A Common*
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625.0
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+
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Class
B Common*
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481.5
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+
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Russell
S. Moody
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Class
A Common
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4,250.0
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+
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Class
A Common*
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625.0
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+
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Class
B Common*
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481.5
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+
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Louis
E. Pauls, Jr.
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Class
A Common
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2,810.0
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+
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Class
B Common
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-
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-
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E.
J. Pederson
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Class
A Common
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1,500.0
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+
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Class
B Common
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-
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-
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Named
Executive Officers:
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Scott
E. Arendale
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Class
A Common
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590.0
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-
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Class
B Common
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-
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-
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S.
Christopher Johnson
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Class
A Common
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-
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-
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Class
B Common
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-
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-
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Brian
M. Pribyl
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Class
A Common
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800.0
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-
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Class
B Common
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-
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-
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Directors
and Executive
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Class
A Common
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1,224,801.0
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35.75
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Officers
as a Group
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Class
B Common
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199,518.5
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99.76
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(12
Persons)
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* Shares
are owned indirectly through the Three R Trusts. The Three R Trusts
are four Texas trusts for the benefit of the children of Mr. Robert L. Moody
(Robert L. Moody, Jr., Ross R, Moody, Russell S. Moody, and Frances A.
Moody-Dahlberg). The Three R Trusts own a total of 2,500 shares of
Class A Stock and 1,926 shares of Class B Stock.
+
Indicates ownership of less than one percent of the class.
† Class A
Common includes the below noted number of shares that are issuable upon the
exercise of stock options that are either currently exercisable or that will
become exercisable within 60 days of March 26, 2010.
Robert L.
Moody – 20,700
Ross R.
Moody – 15,400
Charles
D. Milos – 5,300
Stephen
E. Glasgow – 600
E.
Douglas McLeod – 2,400
Frances
A. Moody-Dahlberg – 1,400
Russell
S. Moody – 2,400
Louis E.
Pauls, Jr. – 2,400
E.J.
Pederson – 1,400
Scott E.
Arendale – 590
S.
Christopher Johnson – 0
Brian M.
Pribyl – 800
PROPOSAL
1: ELECTION OF DIRECTORS
Our
Amended and Restated Articles of Incorporation and Amended and Restated Bylaws
provide that the Board of Directors shall consist of a minimum of seven (7)
directors and a maximum of twenty-seven (27) directors. The Board of
Directors currently consists of nine (9) members. A Board of
Directors composed of nine (9) persons is recommended by the Board of Directors
to be elected at the 2010 Annual Meeting to serve until the next Annual Meeting
of Stockholders, or until their successors have been duly elected and
qualified. Article 4 of the Amended and Restated Articles of
Incorporation of the Company provides that the Class A stockholders shall have
the exclusive right to elect one-third (1/3) of the Board of Directors, plus one
director for any remaining fraction, and that the Class B stockholders shall
have the exclusive right to elect the remaining members of the Board of
Directors. Accordingly, the Board of Directors recommends the
election of three (3) Class A and six (6) Class B nominees indicated
below. The plurality of each class of stock voting separately will be
necessary to elect the directors of that particular class. It is the
intention of the persons named in the enclosed proxy to vote for the nominees of
the particular class, unless the proxy has been marked to withhold authority to
vote for the nominees. The Amended and Restated Bylaws of the Company
do not permit cumulative voting for directors.
It is the
intention of the persons named in the enclosed proxy, in the absence of a
contrary direction, to vote FOR the election of each of
the nine persons named in this proxy statement as nominees for director for a
one-year term expiring at the 2011 Annual Meeting of Stockholders or until their
successors are duly elected and qualified or until their earlier death,
resignation, or removal.
Nominees
for the Board of Directors
Our
nominees for the election of directors include three independent directors, as
defined by the NASDAQ Listing Rules, and three members of our senior
management. The names of the nominees for election as a director to
serve until the 2011 Annual Meeting of Stockholders, and certain additional
information with respect to each of them, are set forth below. The
nominees have consented to be named in this proxy statement and to serve as
directors, if elected. Except as indicated in “Relationships among
Directors and Executive Officers” below, there are no family relationships among
any of our executive officers or the director nominees.
If, at
the time of or prior to the Annual Meeting, any of the nominees is unable or
declines to serve, the persons named as proxies may use the discretionary
authority provided in the proxy to vote for a substitute or substitutes
designated by the Board of Directors. If the proxy has been marked to
withhold authority to vote for the nominees, the proxy will not then be voted
either for or against such substitute nominees. The Board of
Directors has no reason to believe that any substitute nominee or nominees will
be required.
If, at
the time of or prior to the Annual Meeting, any of the nominees is unable or
declines to serve, the persons named as proxies may use the discretionary
authority provided in the proxy to vote for a substitute or substitutes
designated by the Board of Directors. If the proxy has been marked to
withhold authority to vote for the nominees, the proxy will not then be voted
either for or against such substitute nominees. The Board of
Directors has no reason to believe that any substitute nominee or nominees will
be required
|
|
Principal
Occupation During Last Five
|
|
|
|
|
|
Director
|
Name
of Director
|
|
Years
and Directorships
|
|
Class
|
|
Age
|
|
Since
|
|
|
|
|
|
|
|
|
|
Robert
L. Moody
|
|
Chairman
of the Board and Chief
|
|
Class
A
|
|
74
|
|
1963
|
(1)
(3)
|
|
Executive
Officer of the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
E. Glasgow
|
|
Partner,
G-2 Development, L.P.
|
|
Class
A
|
|
47
|
|
2004
|
(2)
(4)
|
|
Austin,
Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E.
J. Pederson
|
|
Management
Consultant
|
|
Class
A
|
|
62
|
|
1992
|
(2)
(4)
|
|
Former
Executive Vice President,
|
|
|
|
|
|
|
|
|
The
University of Texas
|
|
|
|
|
|
|
|
|
Medical
Branch, Galveston, Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ross
R. Moody
|
|
President
and Chief Operating Officer
|
|
Class
B
|
|
47
|
|
1981
|
(1)
(3)
|
|
of
the Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E.
Douglas McLeod
|
|
Director
of Development, The Moody
|
|
Class
B
|
|
68
|
|
1979
|
|
|
Foundation,
Galveston, Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
D. Milos
|
|
Senior
Vice President of the Company
|
|
Class
B
|
|
64
|
|
1981
|
(1)
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frances
A. Moody-Dahlberg
|
|
Executive
Director,
|
|
Class
B
|
|
40
|
|
1990
|
|
|
The
Moody Foundation,
|
|
|
|
|
|
|
|
|
Dallas,
Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell
S. Moody
|
|
Investments,
League City, Texas
|
|
Class
B
|
|
48
|
|
1988
|
|
|
|
|
|
|
|
|
|
Louis
E. Pauls, Jr.
|
|
President,
Louis Pauls & Company;
|
|
Class
B
|
|
74
|
|
1971
|
(2)
(4)
|
|
Investments,
Galveston, Texas
|
|
|
|
|
|
|
(1)
Member of Executive Committee.
(2)
Member of Audit Committee.
(3)
Member of Investment Committee.
(4)
Member of Compensation and Stock Option Committee.
There are
no arrangements or understandings pursuant to which any director was
elected. All directors hold office for a term of one year or until
their successors are elected and qualified.
ROBERT
L. MOODY
Chairman
of the Board & Chief Executive Officer from 1963-1968, 1971-1980, and
1981-Present; Chief Executive Officer of American National Insurance Company
since 1991 and Chairman of the Board since 1982; Director of American National
Insurance Company since 1960; Chairman of the Board, Chief Executive Officer,
and Director of Moody National Bank (banking services); and Trustee of The Moody
Foundation (charitable and educational foundation) since 1955. Mr.
Moody’s tenure as Chief Executive Officer affords him extensive insight into the
Company’s operations and qualifies him to serve as Chairman of our Board of
Directors.
ROSS R.
MOODY
President
and COO since 1992; Director, Officer, and/or Manager of various Company
subsidiaries; Trustee of The Moody Foundation (charitable and educational
foundation); and Director of the following indirect subsidiaries of American
National Insurance Company (American National Property and Casualty Company,
American National General Insurance Company, ANPAC Louisiana Insurance Company,
Pacific Property and Casualty Company, Farm Family Holdings, Inc., Farm Family
Life Insurance Company, United Farm Family Insurance Company, Farm Family
Casualty Insurance Company, and American National County Mutual Insurance
Company). Mr. Moody’s prior experience as our President and Chief
Operations Officer provides him with significant insight into our operations and
qualifies him to serve as a member of our Board of Directors.
STEPHEN
E. GLASGOW
Managing
Partner of Texas GSA Holdings, LP, G-2 Development, LP, and RAM Investments,
real estate development and investment companies. Mr. Glasgow has
developed and built a variety of different projects, including residential
subdivisions, single and multi-family products, commercial office buildings,
retail centers, and government properties. Mr. Glasgow’s
independence, experience, and financial acumen qualify him to serve as a member
of our Board of Directors.
E.
DOUGLAS McLEOD
Director
of Development of The Moody Foundation (charitable and educational foundation);
Chairman and Director of Moody Gardens, Inc. (charitable corporation); Director
of ANREM Corporation (American National Insurance Company subsidiary real estate
management corporation); Director of American National County Mutual Insurance
Company; and Director of ANH2O, Inc. (American National Insurance Company
subsidiary real estate management and development corporation). Mr.
McLeod’s significant directorships and experience provide him with the
capabilities to manage the Company’s operations and qualify him to serve as a
member of our Board of Directors.
CHARLES
D. MILOS
Senior
Vice President – Mortgage Loans and Real Estate since 1983; Director, officer,
and/or manager of various Company subsidiaries; and President of Regent Care
Management and Regent Care Management Services since 2005. Mr. Milos
was Vice President of Seal Fleet, Inc. from 1981-1983 and an Investment Analyst
for National Western Life Insurance Company from 1976-1981. Mr.
Milos’ considerable experience as a senior officer of the Company, along with
his understanding of its operations, qualifies him to serve as a member of our
Board of Directors.
FRANCES
ANNE MOODY-DAHLBERG
Executive
Director of The Moody Foundation (charitable and educational foundation) since
January 1998; Coordinator, Charitable Requests for the Company since March 15,
2010; a Trustee of The Moody Foundation since February 2004; Director of
American National Insurance Company since 1987; Past Director of Gal-Tex Hotel
Corporation (hotel management corporation) from March 2000 to December 2003; and
past Director of The Moody Endowment (charitable corporation) from 1991 to
February 2004. Mrs. Moody-Dahlberg’s significant director experience
affords her with the qualities necessary to serve as a member of our Board of
Directors.
RUSSELL
S. MOODY
Investments,
League City, Texas; Director of American National Insurance Company, since 1986;
and past Director of Gal-Tex Hotel Corporation (hotel management company) from
March 2000 to December 2003. Mr. Moody’s longstanding directorships
provide him with the experience and understanding to qualify him to serve as a
member of our Board of Directors.
LOUIS
E. PAULS, Jr.
Owner and
President of Louis Pauls & Co., a municipal bond and investment firm, since
1958. Mr. Paul’s longstanding business knowledge and experience
directing the management of our Company qualifies him to serve as a member of
the Board of Directors.
E.
J. PEDERSON
Management
consultant since January 2007; Executive Vice President, The University of Texas
Medical Branch, Galveston from 1986-2007; Vice President Business Affairs of the
University of Texas at San Antonio from 1984-1986; and Vice President Business
Affairs of the University of Texas at Dallas from 1980-1984. Mr.
Pederson’s combination of independence, financial expertise, and experience
qualify him to serve as a member of our Board of Directors.
The
Board of Directors recommends that you vote “FOR” the election of the nominees
for director to serve until the 2011 Annual Meeting of
Stockholders. All proxies executed and returned will be voted “FOR”
the nominees unless the proxy specifies otherwise.
EXECUTIVE
OFFICERS
The
following persons are our executive officers, serving at the discretion of the
Board of Directors, as of March 26, 2010. Except as set forth below,
there are no family relationships among any of our executive officers or
nominees for director.
Name
|
|
Age
|
|
Position
Held
|
|
|
|
|
|
Robert
L. Moody
|
|
74
|
|
Chairman
of the Board and Chief Executive Officer (1963-1968, 1971-1980, 1981),
Director
|
|
|
|
|
|
Ross
R. Moody
|
|
47
|
|
President
and Chief Operating Officer (1992), Director
|
|
|
|
|
|
Scott
E. Arendale
|
|
65
|
|
Senior
Vice President - International Marketing (2006)
|
|
|
|
|
|
Paul
D. Facey
|
|
58
|
|
Senior
Vice President - Chief Actuary (1992)
|
|
|
|
|
|
Michael
P. Hydanus
|
|
58
|
|
Senior
Vice President - Chief Administrative Officer (2008)
|
|
|
|
|
|
Charles
D. Milos
|
|
64
|
|
Senior
Vice President - Mortgage Loans and Real Estate (1990),
Director
|
|
|
|
|
|
S.
Christopher Johnson
|
|
41
|
|
Senior
Vice President - Chief Marketing Officer (2006)
|
|
|
|
|
|
James
P. Payne
|
|
65
|
|
Senior
Vice President - Secretary (1998)
|
|
|
|
|
|
Brian
M. Pribyl
|
|
51
|
|
Senior
Vice President - Chief Financial Officer and Treasurer
(2001)
|
|
|
|
|
|
Patricia
L. Scheuer
|
|
58
|
|
Senior
Vice President - Chief Investment Officer (1992)
|
|
|
|
|
|
Michael
G. Kean
|
|
53
|
|
Vice
President - Controller and Assistant Treasurer
(2008)
|
The
biographies for Robert L. Moody, our Chairman of the Board and Chief Executive
Officer, Ross R. Moody, our President and Chief Operating Officer, and Charles
D. Milos our Senior Vice President – Mortgage Loans and Real Estate, are listed
above under the heading “Nominees for the Board of Directors.”
All of
our executive officers listed above have served in various executive capacities
with the Company for more than five years, except as described
below.
There are
no arrangements or understandings pursuant to which any officer was elected. All
officers hold office for a term of one year or until their successors are
elected and qualified, unless otherwise specified by the Board of
Directors.
SCOTT
E. ARENDALE
Mr.
Arendale has been Senior Vice President – International Marketing since June
2006. Mr. Arendale was an Assistant Vice President and Vice President
with National Western from July 1993 through June 2006, General Manager of
International SOS Asst. from October 1992 to June 1993, and a Manager and
Division Manager for Seguros Pan American from January 1971 to October
1992.
PAUL
D. FACEY
Mr. Facey
has been Senior Vice President & Chief Actuary since March
1992. Mr. Facey was Director of Actuarial Services for Variable
Annuity Life Insurance Company from June 1987 to March 1992, Assistant Vice
President of Marketing and Actuarial Services for Gerling Global Life Insurance
Company from April 1985 to June 1987, and was with Northern Life Assurance
Company from June 1973 to March 1985.
MICHAEL
P. HYDANUS
Mr.
Hydanus was previously with Financial Industries Corporation (Austin, TX)
serving as Chief Operations Officer from 2005 to 2007 and Interim President and
Chief Executive Officer from early 2007 to the sale of the company in
2008. Prior to that Mr. Hydanus operated Sage Consulting Group
(California and Tennessee) from 2001 to 2005, and in his earlier career,
1980-2001, he held various senior management positions at MetLife, Baltimore
Life, Columbian Financial Group, Delta Life & Annuity, and National Guardian
Life.
S.
CHRISTOPHER JOHNSON
Mr.
Johnson was Senior Regional Vice President of Allstate - Lincoln Benefit Life
from 1999 to 2006; Senior Sales Representative with Mutual of Omaha from 1998 to
1999; Field Sales Manager of Financial Brokerage from 1995 to 1998;
Agent/Consultant with Financial Facts & Services from 1994 to 1995; and
Branch Manager of Hooper Holmes/Portamedic from 1993 to 1994.
JAMES
P. PAYNE
Mr. Payne
has been Senior Vice President - Secretary since 1998. Mr. Payne was
Vice President – Secretary of the Company from October 1994 to 1998, was self
employed from July 1993 to October 1994, Vice President of Government Relations
for United American Insurance Company from February 1991 to July 1993, President
and CEO of Great Republic Insurance Company from July 1990 to February 1991,
Vice President, Secretary, and General Counsel of Reserve Live Insurance Company
from February 1983 to July 1990, and employed by Lone Star Life Insurance
Company from February 1975-February 1983 where he ultimately served as Vice
President, Secretary, and General Counsel .
BRIAN
M. PRIBYL
Mr.
Pribyl has been Senior Vice President – Chief Financial Officer and Treasurer
since 2001. Mr. Pribyl was an Executive Vice President – Chief
Financial Officer, Treasurer and Secretary for Interstate Assurance Company from
July 1990 to April 2001, and an Audit Manager for Price Waterhouse from 1983 to
1990.
PATRICIA
L. SCHEUER
Ms.
Scheuer has been Senior Vice President & Chief Investment Officer since
1992. She was a Fixed Income Manager for Texas Permanent School Fund
from February 1988-August 1992, a Sr. Financial Analyst for Public Utility
Commission of Texas from December 1984 to February 1988, and a Management
Consultant for Deloitte Haskins & Sells from July 1983 to November
1984.
MICHAEL
G. KEAN
Mr. Kean
was a Consultant with Resources Global Professionals from June 2008- September
2008; Assistant Vice President and Vice President of Scottish Reinsurance from
2005-2007; Contractor with Accrue Partners from 2004-2005; Global Finance
Manager and Assistant Controller of Royal & Sun Alliance from 1993-2004; and
Assistant Treasurer and Director of Internal Audit for Allied Group, Inc., from
1980-1993.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Other
than as set forth in the following paragraphs, we are not aware of any
transactions since the beginning of 2009 or any currently proposed transaction
between us or our subsidiaries and any member of the Board of Directors, any of
our executive officers, any security holder who is known to us to own of record
or beneficially more than 5% of our Common Stock, or any member of the immediate
family of any of the foregoing persons, in which the amount involved exceeds
$120,000 and in which any of the foregoing persons had, or will have, a direct
or indirect material interest. Except as otherwise noted and as
applicable, we believe that each transaction described below is, or was, as the
case may be, on terms at least as favorable to us as we would expect to
negotiate with an unaffiliated party.
Relationships
among Directors and Executive Officers
Ross R.
Moody of Austin, Texas, the President and Chief Operating Officer and a director
of the Company, is the son of Robert L. Moody and the brother of Russell S.
Moody and Frances A. Moody-Dahlberg. Frances A. Moody-Dahlberg of
Dallas, Texas, an employee and director of the Company, is the daughter of
Robert L. Moody and the sister of Ross R. Moody and Russell S.
Moody. E. Douglas McLeod of Galveston, Texas, a director of the
Company, is the brother-in-law of Robert L. Moody. Russell S. Moody
of League City, Texas, a director of the Company, is the son of Robert L. Moody
and the brother of Ross R. Moody and Frances A. Moody-Dahlberg.
Please
read “Compensation Discussion and Analysis” below for information regarding the
payments and awards we made to each of the individuals during 2009.
Transactions
with Related Persons, Promoters and Certain Control Persons
Robert L.
Moody, Jr. (“Mr. Moody, Jr.”) is the son of Robert L. Moody, the Company’s
Chairman and Chief Executive Officer, and is the brother of Ross R. Moody, the
Company's President and Chief Operating Officer, and of Russell S. Moody and
Frances A. Moody-Dahlberg who serve as directors of National
Western.
Mr.
Moody, Jr. wholly owns an insurance marketing organization that maintains agency
contracts with National Western pursuant to which agency commissions are paid in
accordance with the Company's standard commission schedules. Mr. Moody, Jr. also
maintains an independent agent contract with National Western for policies
personally sold under which commissions are paid in accordance with standard
commission schedules. In 2009, commissions paid under these agency
contracts aggregated approximately $249,000. In his capacity as an
insurance marketing organization with the Company, Mr. Moody, Jr. also received
marketing consulting fees of $48,000 and use of a Company vehicle valued at
$4,000.
Mr.
Moody, Jr. further serves as the agent of record for several of the Company’s
benefit plans including the self-insured health plan. In 2009,
amounts paid to Mr. Moody, Jr. as commissions and service fees pertaining to the
Company’s benefit plans approximated $58,000.
Mr.
Moody, Jr. is an Advisory Director of a wholly owned subsidiary of the
Company. As an Advisory Director, Mr. Moody, Jr. received director
fees of $500 during 2009, and $13,351 of Company paid guest travel to attend
Company sales conferences and functions.
During
2009, management fees totaling $628,848 were paid to Regent Management Services,
Limited Partnership (“RMS”) for services provided to downstream nursing home
subsidiaries of National Western. RMS is 1% owned by general partner
RCC Management Services, Inc. (“RCC”), and 99% owned by limited partner, Three R
Trusts. RCC is 100% owned by the Three R Trusts. The Three
R Trusts are four Texas trusts for the benefit of the children of Robert L.
Moody (Robert L. Moody, Jr., Ross R. Moody, Russell S. Moody, and Frances A.
Moody-Dahlberg). Charles D. Milos, Senior Vice President-Mortgage
Loans and Real Estate, and a director of the Company, is a director and
President of RCC. Ellen C. Otte, Assistant Secretary of the Company,
is a director and Secretary of RCC.
The
Company holds a common stock investment totaling approximately 9.4% of the
issued and outstanding shares of Moody Bancshares, Inc. at December 31,
2009. Moody Bancshares, Inc. owns 100% of the outstanding shares of
Moody Bank Holding Company, Inc., which owns approximately 98% of the
outstanding shares of The Moody National Bank of Galveston
(“MNB”). The Company utilizes MNB for the Company’s general banking
services and for certain bank custodian services as well as for certain
administrative services with respect to the Company’s defined benefit and
contribution plans. Effective November 1, 2008, the Company entered
into a 36 month sublease on one of the Company’s leased office locations for
$6,000 per month with Moody National Bank. On August 31, 2009, the
Company entered into a revolving credit loan agreement with MNB, pursuant to
which MNB granted to the Company a revolving line of credit up to the principal
amount of $40,000,000, and on October 16, 2009, the Company’s Board authorized
management to execute a Master Repurchase Agreement with MNB providing for the
overnight investment of Company cash balances. Robert L. Moody, the
Company’s Chairman and Chief Executive Officer, serves as Chairman of the Board
and Chief Executive Officer of MNB. The ultimate controlling person
of MNB is the Three R Trusts. During 2009, fees totaling $181,708
were paid to MNB with respect to these services.
During
2009, the Company paid American National Insurance Company (“ANICO”) $237,828 in
premiums for certain company sponsored benefit plans and $1,248,009 in
reimbursements for claim costs for which ANICO provides third party
administrative services. ANICO paid the Company $1,300,010 in
premiums for its company sponsored benefit plans. The Company is
currently considering entering into a Data Recovery Services Agreement with
ANICO, which would accomplish the Company’s goal of relocating a portion of its
information technology computing and networking equipment offsite as part of its
disaster recovery initiatives. Robert L. Moody, the Company’s
Chairman and Chief Executive Officer is also ANICO’s Chairman and Chief
Executive Officer.
Review,
Approval, and Ratification of Transactions with Related Persons
In
accordance with the Company’s Audit Committee Charter, related party
transactions must be reviewed and approved by the Audit Committee of the Board
of Directors, both at inception and on an ongoing basis. Periodic
reports of potential related party transactions are brought to the attention of
the Audit Committee by management and the Audit Committee reviews the
information on a case by case basis to determine if any transaction is a related
party transaction. The standard of review for any related party
transaction is that the transaction must be fair to the Company and the
transaction must be no more favorable to the related party than a similar arm’s
length transaction with a non-related party.
While the
Company has not adopted written procedures for review of, or written standards
for approval of, these transactions, the policies and procedures followed are
evidenced by the Audit Committee Charter, memorandums, and documentation of
review and approvals.
INFORMATION
RELATING TO OUR BOARD OF DIRECTORS
AND
CERTAIN COMMITTEES OF OUR BOARD OF DIRECTORS
The
Board of Directors
Our
business is managed through the oversight and direction of our Board of
Directors. The Board of Directors currently has nine
members.
Meetings
of the Board of Directors
During
2009, the Board of Directors held a total of six meetings. In
addition to meetings, the Board of Directors acts by written consent from time
to time. All of the current directors that were members of the Board
of Directors during 2009 attended more than 75% of the meetings. Each
such director attended more than 75% of the meetings of the committees of which
he is a member that were held during 2009.
Attendance at Annual Meetings of
Stockholders
We do not
require our board members to attend the annual meeting of
stockholders. However, the Board of Directors encourages each member
to attend the annual meeting of stockholders. Eight out of nine of
the then current members of the Board of Directors attended the 2009 annual
meeting of stockholders.
Board
Leadership / Affirmative Determinations Regarding Director
Independence
The
Company is a “Controlled Company” as defined in NASDAQ Listing Rule 5615(c)(1)
and is exempt from the requirement to have a majority of the members of its
Board of Directors as independent directors. The Company qualifies as
a Controlled Company because more than 50% of the voting power for the election
of directors is held by Mr. Robert L. Moody.
The Board
of Directors does not separate the role of Chairman of the Board from the
role of Chief Executive Officer (both of which are held by Mr. Robert L.
Moody) because it believes that this currently provides the most efficient and
effective leadership model for the Company. The Company does not have
a separate lead director. The Board of Directors has affirmatively
determined that Stephen E. Glasgow, Louis E. Pauls, Jr., and E. J. Pederson is
each an “independent director” as such term is defined in NASDAQ Listing Rule
5605(a)(2). These independent directors met in executive
session on two separate occasions during 2009.
If all
nominees are elected at the Annual Meeting, Stephen E. Glasgow, Louis E. Pauls,
Jr., and E. J. Pederson will be the sole members of the compensation and stock
option and audit committees. The Board of Directors has also
affirmatively determined that each such member of these committees satisfies the
independence requirements applicable to audit and compensation committees as
prescribed by the NASDAQ Listing Rules and the rules and regulations of the
SEC. Robert L. Moody, Ross R. Moody, and Charles D. Milos are not
“independent directors” because they are our Chairman of the Board and Chief
Executive Officer, President and Chief Operating Officer, and Senior Vice
President - Mortgage Loans and Real Estate, respectively. Frances A.
Moody-Dahlberg, Russell S. Moody, and E. Douglas McLeod are not “independent
directors” because they are Family Members, as defined by NASDAQ Listing Rule
5605(a)(2), of an individual who is employed by the Company as an Executive
Officer.
Risk
Management
Similar
to other insurers, the Company is exposed to a wide spectrum of financial,
operational, and other risks. Effective enterprise risk management is
a key concern for identifying, monitoring, measuring, communicating, and
managing risks within limits and risk tolerances. The Company’s Board
of Directors and senior management are knowledgeable of and accountable for key
risks. The Board meets at least every other month and regularly hears
reports from the President and Chief Operating Officer, the Chief Financial
Officer, the Chief Actuary, the Chief Investment Officer, and the Chief
Compliance Officer. In addition, the Board has several committees
which include the Audit Committee, the Investment Committee, and the
Compensation and Stock Option Committee that regularly convene to address
various aspects of risk.
The
Company maintains several management groups and committees that meet regularly
to monitor, discuss and manage a variety of issues and risks associated with the
business. These groups and committees include numerous areas such as
regulatory compliance, financial reporting process and controls, fraud unit
investigations, product spread management, and business strategy. Key
members of senior management are involved with these groups and committees
providing direction and oversight and serve as a reporting liaison with the
Company’s Board of Directors and sub-committees.
Committees
of the Board of Directors
Our Board
of Directors has the following standing, separately-designated committees: (i)
an executive committee, (ii) audit committee; (iii) an investment committee, and
(iv) a compensation and stock option committee. Information regarding
each of the committees is set forth below.
Executive
Committee
The
Company’s Executive Committee may exercise all of the authority of the Board of
Directors in the management of the business and affairs of the corporation,
except where action of some or all members of the Board of Directors is required
by statute or the Articles of Incorporation or the Bylaws or resolution of the
Board. The Chairman of the Board serves as Chairman of the Executive
Committee. Robert L. Moody, Ross R. Moody, and Charles D. Milos are
members of the Executive Committee and Robert L. Moody, as Chairman of the
Board, serves as Chairman of the Executive Committee. During 2009,
the Executive Committee held seven meetings.
Audit
Committee
The Audit
Committee of the Board of Directors consists of three non-employee
directors. The committee is primarily responsible for oversight of
the Company’s financial statements and controls; assessing and ensuring the
independence, qualifications, and performance of the independent auditors;
approving the independent auditor’s services and fees; reviewing and approving
all related party transactions; reviewing potential conflict of interest
situations where appropriate; overseeing and directing internal audit
activities; reviewing the Company’s financial risk assessment process and
ethical, legal, and regulatory compliance programs; and reviewing and approving
the annual audited financial statements for the Company before
issuance. Stephen E. Glasgow, Louis E. Pauls, Jr. and E. J. Pederson
are members of the audit committee. Louis E. Pauls, Jr. serves as
Chairman of the Audit Committee. The Audit Committee Charter is
available on the Company’s website at www.nationalwesternlife.com. During
2009, the Audit Committee held ten meetings.
The
Company has at least one person that it believes is qualified to be the Audit
Committee Financial Expert. However, the Company has not
designated anyone as an Audit Committee Financial Expert at this time as the
Company’s Board of Directors has concluded that the ability of the Audit
Committee to perform its duties would not be impaired by the failure to
designate one of the committee members as an “Audit Committee Financial Expert”
if its members otherwise satisfied the NASDAQ standards and rules and
regulations of the SEC.
Investment
Committee
The
Investment Committee of the Board of Directors is comprised of three directors
(and one Company officer) and has the responsibility for oversight of the
Company’s investment transactions including compliance with investment
guidelines approved by the full Board of Directors. Robert L.
Moody, Ross R. Moody, Charles D. Milos, and Patricia L. Scheuer are members of
the Investment Committee. Robert L. Moody, as Chairman of the Board
serves as Chairman of the Investment Committee. The Investment
Committee held 12 meetings during 2009.
Compensation
and Stock Option Committee
The
Compensation and Stock Option Committee (“Compensation Committee”) consists of
three independent, outside directors and the committee has oversight
responsibility for the compensation programs for the Company’s named executive
officers as well as all other officers. Stephen E. Glasgow, Louis E.
Pauls, Jr., and E. J. Pederson serve as members of the Compensation Committee
and E. J. Pederson serves as Chairman of the Committee. The
Compensation Committee’s report on executive compensation is included under the
heading “Compensation Committee Report,” below. The Compensation
Committee, which held six meetings during 2009, does not have a
charter.
DIRECTOR
NOMINATIONS
The
Company is a “Controlled Company” as defined in NASDAQ Listing Rule 5615(c)(1)
and is exempt from the requirement that its independent directors oversee the
director nomination process. Therefore, the Company’s Board of
Directors in aggregate oversees the director nomination process.
In
evaluating potential director candidates, the Board of Directors considers the
appropriate balance of experience, skills, and characteristics required of the
Board of Directors. The Board of Directors selects director nominees
based on their personal and professional integrity, depth and breadth of
experience, ability to make independent analytical inquiries, understanding of
and familiarity with our business, willingness to devote adequate attention and
time to duties of the Board of Directors, and such other criteria as is deemed
relevant by the Board of Directors. The Company’s Board of Directors
believes that the backgrounds and qualifications of the directors, considered as
a group, should provide a diverse mix of experience, knowledge, and
skills. The Board of Directors considers the effectiveness of this
policy and the effectiveness of the Board of Directors generally in the course
of nominating directors for election.
In
identifying potential director candidates, the Board of Directors relies on
recommendations made by current directors and officers. In addition,
the Board of Directors may engage a third party search firm to identify and
recommend potential candidates. Finally, the Board of Directors will
consider candidates recommended by stockholders.
Any
stockholder wishing to recommend a director candidate for consideration by the
Board of Directors for the 2011 annual meeting of stockholders must provide
written notice not later than January 14, 2011 to the Corporate Secretary at our
principal executive offices located at 850 East Anderson Lane, Austin, Texas
78752. Any such notice should clearly indicate that it is a
recommendation of a director candidate by a stockholder and must set forth (i)
the name, age, business address and residence address of the recommended
candidate, (ii) the principal occupation or employment of such recommended
candidate, (iii) the class and number of shares of the corporation which are
beneficially owned by such recommended candidate, (iv) a description of all
understandings or arrangements between the stockholder and the recommended
candidate and any other person or persons pursuant to which the recommendations
are to be made by the stockholder and (v) any other information relating to such
recommended candidate that is required to be disclosed in solicitations of
proxies for the election of directors. In addition, such notice must
contain (i) a representation that the stockholder is a holder of record of stock
of the corporation entitled to vote at such meeting, (ii) the name and address,
as they appear on the corporation’s books, of the stockholder proposing such
nomination, (iii) the class and number of shares of the corporation that are
beneficially owned by such stockholder, (iv) any material interest of the
stockholder in such recommendation and (v) any other information that is
required to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, in such stockholder’s capacity as
proponent of a stockholder proposal. Assuming that a stockholder
recommendation contains the information required above, the Board of Directors
will evaluate a candidate recommended by a stockholder by following
substantially the same process, and applying substantially the same criteria, as
for candidates identified through other sources.
DIRECTOR
QUALIFICATIONS
National
Western Director Nominees
Each
candidate for director (whether or not recommended by a stockholder) must
possess at least the following minimum qualifications:
• Each
candidate shall be prepared to represent the best interests of all of our
stockholders and not just one particular constituency.
• Each
candidate shall be an individual who has demonstrated integrity, honesty, and
ethics in his or her professional life.
• Each
candidate shall be prepared to participate fully in Board of Director
activities, including active membership on at least one board committee and
attendance at, and active participation in, meetings of the Board of Directors
and the committees of which he or she is a member, and not have any other
personal or professional commitments that would, in the Board of Directors’ sole
judgment, interfere with or limit his or her ability to do so.
• Each
candidate shall possess a general appreciation for the issues confronting a
public company’s size and operational scope, including corporate governance
concerns, the regulatory obligations of a public company, strategic business
planning, competition in a global business economy and basic concepts of
corporate finance.
• Each
candidate shall be free of any legal or regulatory impediment to service on the
Board of Directors.
In
addition, the Board of Directors also considers it desirable that candidates
possess the following qualities or skills:
• Each
candidate should have knowledge of insurance company regulations or of regulated
industries in general, and be able to meet any specific qualifications imposed
by regulators on insurance company executives and directors.
• Each
candidate should contribute to the Board of Director’s overall diversity –
diversity being broadly construed to mean a variety of opinions, perspectives,
personal and professional experiences and backgrounds, such as gender, race, and
ethnicity differences, as well as other differentiating
characteristics.
• Each
candidate should contribute positively to the existing chemistry and
collaborative culture among board members.
• Each
candidate should possess strategic contacts and involvement in business and
civic affairs.
COMMUNICATIONS
WITH THE BOARD OF DIRECTORS
Stockholders
may communicate with the Board of Directors or with specified individual
directors by sending a letter to our Secretary at the following address:
National Western Life Insurance Company, 850 East Anderson Lane, Austin, Texas
78752-1602.
Communications
to one or more directors will be collected and organized by our Secretary, who
will forward such communications to the identified director(s) as soon as
practicable after receipt of the communication.
CODE
OF ETHICS
The
Company has adopted a Code of Ethics for all directors, officers, and
employees. This Code is intended to comply with the requirement of
the Federal Securities laws and the requirements of NASDAQ. The Code
of Ethics and Conduct has been posted to the Company’s website at www.nationalwesternlife.com
and is available upon request.
COMPENSATION
AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 2009,
Stephen E. Glasgow, Louis E. Pauls, Jr., and E. J. Pederson served as members of
our compensation and stock option committee. Messrs. Pauls, Glasgow,
and Pederson currently meet the independence criteria in the NASDAQ listing
standards and the regulations of the Securities and Exchange
Commission.
During
2009, the following executive officers served as a Director of the Company
and/or one or more of its subsidiaries as follows:
None of
the Company’s executive officers serve as a member of the compensation committee
of any company that has an executive officer serving on the Company’s Board of
Directors. In addition, none of the Company’s executive officers
serve as a member of the board of directors of any company that has an executive
officer serving as a member of the Company’s compensation and stock option
committee.
(1) Mr.
Robert L. Moody, Mr. Ross R. Moody, and Mr. Charles D. Milos served as directors
and also served as officers and employees of National Western Life Insurance
Company.
(2) Mr.
Ross Moody served as an officer and director of the Company’s wholly-owned
subsidiaries, The Westcap Corporation, NWL Investments, Inc., NWL Financial,
Inc., NWL Services, Inc., NWLSM, Inc., Regent Care Limited Partner, Inc., and
Regent Care Operations Limited Partner, Inc., served as an officer of Westcap
Holdings, LLC, a limited liability company whose sole member is The Westcap
Corporation, and served as a manager of Regent Care San Marcos Holdings, LLC, a
limited liability company whose sole member is National Western Life Insurance
Company.
(3) Mr.
Milos served as an officer and director of The Westcap Corporation, Regent Care
General Partner, Inc., and Regent Care Operations General Partner, Inc., and as
an officer of NWL Investments, Inc., NWL Financial, Inc., NWL Services, Inc.,
Regent Care Limited Partner, Inc., Regent Care Operations Limited Partner, Inc.,
NWLSM, Inc., and Westcap Holdings, LLC, a limited liability company whose sole
member is The Westcap Corporation. Mr. Milos served as a manager of
Regent Care San Marcos A-1, LLC, Regent Care San Marcos A-2, LLC, Regent Care
San Marcos B-1, LLC, and Regent Care San Marcos B-2, LLC, all of which are
limited liability companies whose sole member is Regent Care San Marcos
Holdings, LLC.
(4) Mr.
Robert Moody was an officer of NWL Services, Inc., NWLSM, Inc., and Regent Care
Limited Partner, Inc.
Compensation
Discussion and Analysis
Compensation
Discussion and Analysis
Purpose
The
Compensation Committee is appointed by and serves at the discretion of the
Company’s Board of Directors. The Compensation Committee consists of
no fewer than three members who meet the independence requirements of the
listing standards of NASDAQ. The purpose of the Compensation
Committee is to discharge the Board of Directors’ responsibilities for reviewing
and establishing the compensation not just for the Chief Executive Officer,
Chief Financial Officer, and the other three most highly paid executive
officers, but for all of the Company’s officers. These compensation elements
include base salary, annual incentive bonuses, discretionary bonuses and awards,
stock option and stock appreciation right grants, and any other officer
compensation arrangements.
To assist
the Compensation Committee with its responsibilities, it is supported by the
Company’s Human Resource, Legal, and Financial departments. The Compensation
Committee may retain, and has retained, independent compensation consultants who
report directly to the members of the Compensation
Committee. Meetings of the Compensation Committee are scheduled
during the year with additional meetings on an as-necessary interim basis and
include sessions without members of management present. The
Compensation Committee reports to the Board of Directors on its actions and
recommendations.
Compensation
Philosophy and Objectives
The
Company’s overall philosophy in setting compensation policies is to align pay
with performance while at the same time providing a competitive compensation
that allows the Company to retain and attract talented individuals. Within this
overall philosophy, the Compensation Committee has adopted several key
principles to help guide compensation decisions for executive
officers:
·
|
Provide
a competitive total compensation package so the Company can attract,
retain, and motivate talented
individuals;
|
·
|
Tie
compensation in part to overall Company financial performance so that
executives are held accountable through their compensation for the
performance of the business;
|
·
|
Tie
compensation in part to the Company’s stock performance through stock
options and stock appreciation rights to align executives’ interests with
those of the Company’s stockholders;
and
|
·
|
Maintain
a committee of the Board of Directors independent of senior management
that may engage independent compensation consultants as needed to review
and establish compensation for executive
officers.
|
Elements
of Executive Compensation
Officer
compensation arrangements, including executive officers, are reviewed and
approved annually by the Compensation Committee. The Compensation Committee
focuses primarily on the following components in forming the total compensation
package for each Company executive officer:
·
|
Annual
cash incentive bonus based on Company performance versus predetermined
targets;
|
·
|
Discretionary
cash bonus based upon individual performance;
and
|
·
|
Long-term
incentive compensation in the form of stock options and stock appreciation
rights.
|
The mix
of executive compensation elements is based upon a philosophy of correlating a
portion of executive compensation with the Company’s financial results and stock
performance thus putting a segment of executive officer annual and long-term
compensation at-risk. This structure provides upside potential and downside risk
for senior executive positions in recognition that these roles have greater
influence on the Company’s performance. The Compensation Committee
believes that these factors, together with a balance of cash and equity awards,
and short-term and long-term incentives, help ensure that our compensation
program does not create risks that are reasonably likely to have a material
adverse effect on the Company.
Base
Salaries
To ensure
that compensation levels are reasonably competitive with market rates, the
Compensation Committee engages independent compensation consultants from
time-to-time to conduct a survey of executive compensation in a defined group of
companies comparable to the Company. The surveyed companies are
selected based on similar products and product lines, comparable financial size
in terms of assets and revenues, and other known competitive
factors. This process was most recently completed during 2008 and is
expected to be performed again to some degree in 2010 with respect to
compensation policies for 2011. While the primary focus of the survey
was upon base salaries, the independent consultants were also asked to provide
total compensation data for the various officer positions and levels in order to
target current and future appropriate compensation levels. The
Compensation Committee’s past practice has been to generally target base
salaries between the 25th and
50th
percentile range of the identified peer group.
For the
most recent survey, the Company engaged independent compensation consultants
(Towers Perrin) to update the work previously performed in 2005 following the
same criteria and scope as was done at the time of a previous study. Companies
to be considered in the benchmarking process include American Equity Investment
Life, American Fidelity Life, AVIVA, Best Meridian Insurance, Citizens Insurance
Company, Lincoln National Life, Old Mutual Financial Network, Pan-American Life,
and Sammons Financial Group.
In
addition to market information, the Compensation Committee also subjectively
reviews and evaluates the level of performance of the Company and of each
officer. In approving salary and incentive compensation for
individuals other than the Chief Executive Officer and the President and Chief
Operating Officer, the Compensation Committee considers recommendations from
these two individuals concerning the other Company officers incorporating such
factors as individual performance, the scope and complexity of their current
responsibilities, length of time in their current positions, value of the
executive’s position to the market, and difficulty of replacement of the
officer. This evaluation focuses most heavily on the base salary
levels for each officer.
|
Annual Incentive
Compensation
|
For
executive officer positions, the Compensation Committee has determined that
annual incentive bonuses are an integral part of the executive’s compensation
package as the cash bonuses create a direct link between executive compensation
and individual and business performance. Consequently, there are four
bonus programs in effect which are reviewed and approved annually by the
Compensation Committee. The Compensation Committee has approved
similar incentive bonus programs for 2010, but changed the Senior Vice President
Bonus Program into the Officer Bonus Program, and it covers all Company officers
not included in any of the other bonus programs. The 2009 Bonus
Programs are as follows:
·
|
Executive
Officer Bonus Program
|
·
|
Domestic
Marketing Officer Bonus Program
|
·
|
International
Marketing Officer Bonus Program
|
·
|
Senior
Vice President Bonus Program
|
Executive Officer Bonus
Program. Currently, the
participants in the Executive Officer Bonus Program (“Executive Bonus”) are the
Chairman and Chief Executive Officer (Mr. Robert Moody) and the President and
Chief Operating Officer (Mr. Ross Moody). In order to tie the
compensation under the program with the Company’s financial performance, the
Executive Bonus includes metrics associated with the Company’s annual sales
performance, expense management and profitability. In accordance with the
program, the Compensation Committee set performance targets for each metric at
various levels equating to various bonus level percentages as
follows:
Financial
Performance Metric
|
|
Bonus
% Range*
|
|
|
|
Sales
|
|
0%
to 21%
|
Expense
Management
|
|
0%
to 20%
|
Profitability
|
|
0%
to 30%
|
*Max
aggregate bonus is 50%.
The sum
of the achieved bonus percentages for each metric, subject to a maximum
aggregate percentage of 50%, is applied to the base salary approved by the
Compensation Committee for each participant to determine the earned bonus
amount. The profitability metric is based upon the Company’s audited
financial statements for the year. Bonus awards are generally paid in the year
following the annual financial performance concurrent with the completion of the
Company’s audit of the year-end financial statements and approval of the award
amounts by the Compensation Committee. Accordingly, the Executive Bonus payments
paid in 2009 were primarily based upon the results achieved for 2008 financial
performance metrics established by the Compensation Committee and the Executive
Bonus payments earned based on 2009 financial performance were paid on February
18, 2010. The bonus percentage achieved under the program was 33% and 18% in
2009 and 2008, respectively. The 2009 bonus percentage achieved is
comprised of 13% for Sales, 20% for Expense Management, and 0% for
Profitability. For information regarding awards made in 2009 to our
Named Executive Officers, see the Summary Compensation Table on page
24.
Domestic Marketing Officer Bonus
Program. Participants in
the Domestic Marketing Officer Bonus Program (“Domestic Bonus”) are all domestic
marketing officers including assistant vice presidents, vice presidents, and the
senior vice president (Mr. S. Christopher Johnson). As these
individuals are most able to influence the outcome of the Company’s financial
performance in terms of sales, the program is heavily weighted toward this
metric. The measures associated with this program include the
Company’s annual sales performance, persistency of policies sold, and expense
management. These measures were incorporated into the program to
award not only the amount of sales but the quality of sales and the management
of the costs incurred to acquire the business sold. Unlike the
Executive Bonus, the Domestic Bonus metrics assume a targeted level of
performance or “par” level to which the Compensation Committee assigned a
targeted bonus percentage in order to reflect a disproportionate weighting of
the potential bonus award toward the sales metric. If the targeted
par level for each metric is attained, the sum of the metrics is equal to a
bonus percentage of 100% which is applied to the average weighted base salary of
each vice president and senior vice president participant while one-half, or
50%, is applied to the average weighted base salary of each assistant vice
president participant as approved by the Compensation Committee. The
performance metrics set by the Compensation Committee equating to various bonus
level percentages under the program are as follows:
Financial
Performance Metric
|
|
Par
Bonus Level
|
|
Bonus
% Range
|
|
|
|
|
|
Sales
|
|
75%
|
|
0%
to no limit
|
Persistency
|
|
15%
|
|
0%
to 30%
|
Expense
Management
|
|
10%
|
|
0%
to 22.5%
|
The
Domestic Bonus also differs from the Executive Bonus in that the composite bonus
percentage is not subject to a cap and bonus amounts may be advanced quarterly
based upon the year-to-date results achieved. Life insurance sales
metric amounts under the program above the par level increase incrementally with
an additional bonus percentage added for every increment of additional life
insurance sales established by the Compensation Committee (annuity sales are
subject to a cap). However, if the aggregate sum of the three
performance metrics exceeds 100%, the bonus award paid at the end of the
calendar year is limited to 100% for each participant. The bonus
percentage above 100% is applied to the weighted average base salaries of all
participants to create a pool which is paid out to participants in the
subsequent calendar year based upon the recommendation of the Domestic Marketing
senior vice president and subject to approval by the President and Chief
Operating Officer. The Domestic Bonus percentage achieved under the
program was 73.5% and 32.5% in 2009 and 2008, respectively.
International Marketing Officer
Bonus Program. Participants
in the International Marketing Officer Bonus Program (“International Bonus”) are
all international marketing officers including assistant vice presidents, vice
presidents, and the senior vice president (Mr. Scott Arendale). The
International Bonus is identical in format to the Domestic Bonus with the
exception that the metric targets established by the Compensation Committee are
customized for the differences between the domestic and international lines of
business. The performance metrics set by the Compensation Committee
equating to various bonus level percentages under the program are as
follows:
Financial
Performance Metric
|
|
Par
Bonus Level
|
|
Bonus
% Range
|
|
|
|
|
|
Sales
|
|
70%
|
|
0%
to no limit
|
Persistency
|
|
15%
|
|
0%
to 30%
|
Expense
Management
|
|
15%
|
|
0%
to 30%
|
All other
features are similarly administrated. The International Bonus percentage
achieved under the program was 83.0% and 44.0% in 2009 and 2008,
respectively. The 2009 bonus percentage achieved is comprised of 50%
for Sales, 3% for Persistency, and 30% for Expense Management. For
information regarding awards made in 2009 to our Named Executive Officers, see
the Summary Compensation Table on page 24.
Senior Vice President Bonus
Program. Participants in the Senior Vice President Bonus
Program (“Senior VP Bonus”) are all Senior Vice Presidents not otherwise
included in any of the other three officer bonus programs. Currently,
these individuals include Senior Vice President, Chief Financial Officer and
Treasurer (Mr. Brian Pribyl), Senior Vice President, Chief Administrative
Officer (Mr. Michael Hydanus), Senior Vice President, Chief Actuary (Mr. Paul
Facey), Senior Vice President, Mortgage Loans and Real Estate (Mr. Charles
Milos), Senior Vice President, Secretary (Mr. James Payne) and Senior Vice
President, Chief Investment Officer (Ms. Patricia Scheuer). The Plan
is essentially comparable to the Executive Bonus, except for the bonus award
percentages, incorporating three measurable performance metrics associated with
the Company’s annual sales performance, expense management, and profitability.
In accordance with the program, the Compensation Committee set performance
targets for each metric at various levels equating to various bonus level
percentages as follows:
Financial
Performance Metric
|
|
Bonus
% Range
|
|
|
|
Sales
|
|
0%
to 9.0%
|
Expense
Management
|
|
0%
to 9.5%
|
Profitability
|
|
0%
to 19.0%
|
The sum
of the achieved bonus percentages for each metric, subject to a maximum
aggregate percentage of 30%, is applied to the base salary for each participant
approved by the Compensation Committee to determine the earned bonus
amount. Like the Executive Bonus, the profitability metric is based
upon the Company’s audited financial statements for the year. Bonus
awards are generally paid in the year following the annual financial performance
concurrent with the completion of the Company’s audit of the year-end financial
statements and approval of the award amounts by the Compensation
Committee. Accordingly, the Senior Vice President Bonus payments in
2009 were primarily based upon the results achieved for 2008 financial
performance metrics established by the Compensation Committee. The
bonus percentage achieved under the program was 15.25% and 0% in 2009 and 2008,
respectively. The 2009 bonus percentage achieved is comprised of
5.75% for Sales, 9.5% for Expense Management, and 0% for
Profitability. For information regarding awards made in 2009 to our
Named Executive Officers, see the Summary Compensation Table on page
24.
Discretionary Bonus
Awards
For
officers who are not participants in any of the four bonus programs above, the
Compensation Committee considers from time-to-time circumstances which merit the
need to recognize outstanding performance in the form of a discretionary
bonus. Although many of these situations may be deemed within the
normal responsibilities of officers, the Compensation Committee on occasion may
provide one-time recognition bonuses to identified officers where the demands of
the situation and the results of the effort warrant such recognition. There were
no discretionary bonuses awarded in 2009 or 2008.
Long-Term Incentive
Compensation
|
Under the
Company’s 1995 Stock and Incentive Plan and 2008 Incentive Plan, the
Compensation Committee provides Company officers with long-term incentive awards
through grants of stock options or stock appreciation rights (“SARs”) directly
aligning the interest of the officers with stockholder interests. The
stock options and SARs have a graded five-year vesting period that begins on the
third anniversary date of the grant in order to promote a long-term perspective
and to encourage key employees to remain at the Company. All options
and SARs to date have been granted at the fair market value of the Company’s
Class A common stock on the date of the grant. The Compensation
Committee believes that stock options and SARs are inherently performance-based
and a form of at-risk compensation since the recipient does not benefit unless
the Company’s common stock price subsequently rises.
The
Compensation Committee is responsible for determining the recipients of the
grants, when the grants should be made, and the number of shares to be
granted. The size of the awards generally reflect each officer’s
position relative to other officers in the Company with consideration to total
compensation targets obtained from the peer group information previously
discussed. In addition, as is the case with base salaries, the
Compensation Committee considers the grant recommendations of the Chairman and
Chief Executive Officer and the President and Chief Operating Officer for other
Company officers.
The
Compensation Committee may consider granting stock options at any time but
generally coordinates the issuance of grants concurrent with its annual review
of officer compensation. In February 2009 the Compensation Committee
approved the issuance of 29,393 SARs to selected officers. Prior to
that the Compensation Committee approved the issuance of 2,750 SARs to new
officers during the third quarter of 2008 and 28,268 stock options to selected
officers in April 2008.
Retirement and Other
Benefits
The
Company’s executive officers are eligible to participate in the health and
welfare, 401(k) and defined benefit retirement benefit plans that are offered to
other Company employees (the Company’s qualified defined benefit pension plan
was frozen as of December 31, 2007). In addition, if eligible,
executive officers may participate in the following plans:
Group Excess Benefit
Plan
|
Company
officers at the senior vice president level and above, including named executive
officers, as well as those hired or promoted to the vice president level prior
to May 1, 2007, are eligible to participate in a group excess benefit plan which
supplements the Company’s core medical insurance plan. Administered
by a third party insurer, the group excess benefit plan provides coverage for
co-pays, deductibles, and other out-of-pocket expenses not covered by the core
medical insurance plan. Offering such a plan to the selected Company
officer levels is viewed as a key component of the overall compensation strategy
for attracting and retaining talented executive officers. The
benefits provided to each named executive officer are reported in the “All Other
Compensation Column” of the Summary Compensation Table.
Non-Qualified
Defined Benefit Plan
This plan
covers those officers of the Company who were in a senior vice president
position or above prior to 1991. The plan provides retirement
benefits to those individuals affected by the revisions to the Company’s
qualified defined benefit pension plan precipitated by the limitations imposed
by Internal Revenue Code Section 401(a)(17) and 415. As of December
31, 2009 and 2008, the active officers participating in this plan were Mr.
Robert Moody and Mr. Charles Milos. Benefits associated with this
plan are disclosed in the Pension Benefits table in the Pension Benefits
section.
Non-Qualified Deferred
Compensation Plan
This plan
allows Company senior officers, including named executive officers, to defer
payment of a percentage of their compensation and to provide for up to a 2%
matching and 2% profit sharing contribution on plan compensation that exceeds
certain qualified plan limits, and additional Company discretionary matching
contribution of up to 2% of plan compensation. Company contributions
are subject to a vesting schedule based upon each officer’s years of service.
Benefit information associated with this plan is disclosed in the Non-Qualified
Deferred Compensation table below and Company contributions are included in the
“All Other Compensation” column in the Summary Compensation Table.
Non-Qualified Defined
Benefit Plan for Robert L.
Moody
|
This plan
specifically covers the Company’s Chairman of the Board and Chief Executive
Officer, Mr. Robert L. Moody, and is intended to supplement the retirement
benefits of the Non-Qualified Defined Benefit Plan, mentioned above, that were
limited by the American Jobs Creation Act of 2004. Mr. Moody’s
benefits associated with this plan are disclosed in the Pension Benefits table
in the Pension Benefits section.
Non-Qualified Defined
Benefit Plan for the President of National Western Life Insurance
Company
|
Similar
to the immediately preceding plan, this plan specifically covers the Company’s
President and Chief Operating Officer, Mr. Ross R. Moody, and is intended to
provide the retirement benefits that comply with the American Jobs Creation Act
of 2004. Mr. Moody’s benefits associated with this plan are disclosed
in the Pension Benefits table in the Pension Benefits section.
National Western Life
Insurance Company Retirement Bonus Program for Robert L.
Moody
This
program provides an annual payment to Mr. Robert L. Moody equal to 2% of his
compensation. The payment made in 2009 related to 2008 compensation
is reported in the “Non-Equity Incentive Plan Compensation” column of the
Summary Compensation table.
Postretirement
Benefits
The
Company’s basic health plan and group excess benefit plan have a provision for
individuals serving in the positions of Chairman of the Board or President for
seven years or more subsequent to 1980 to continue to receive lifetime health
benefits for themselves and their dependents upon retirement. Mr.
Robert L. Moody and Mr. Ross R. Moody currently meet this eligibility
criteria.
Perquisites and Other
Personal Benefits
The
Compensation Committee periodically reviews executive officer perquisites and
other benefits based upon information supplied to it by the Company’s Human
Resources, Legal, and Financial departments. In addition to base
salaries and annual and long-term bonus incentives, the Company provides its
executive officers with certain and varying perquisites and
benefits.
The
perquisites and personal benefits provided to each named executive officer are
reported in the “All Other Compensation Column” of the Summary Compensation
Table included in this Compensation Discussion and Analysis and are described in
further detail in the footnotes to that table.
Stock Ownership
Guidelines
The
Company requires that its directors be shareholders, but the Company does not
require its directors or executive officers to own a particular amount of the
Company’s common stock and accordingly has not established a set of stock
ownership guidelines. The Compensation Committee is satisfied that
the long-term incentive compensation offered to directors and officers in the
form of stock options and SARs adequately aligns this group’s interest with
those of the Company’s stockholders.
Employment
Agreements
The
Company does not utilize employment agreements with its executive officers or
other employees. The Company’s practice has been to issue offer
letters to executive officer candidates when recruited to their
positions. In addition to outlining the executive officer’s
responsibilities, each offer letter specifies the beginning base salary and
eligibility for any additional compensation programs overseen by the
Compensation Committee. Accordingly, the Company does not have any
contractual obligations to its executive officers for severance payments in
connection with any termination or change-in-control.
Financial
Restatements
The
Compensation Committee has not formally adopted a policy with respect to whether
retroactive adjustments to any form of compensation paid under arrangements for
executive officers will be made where the prior payment was related to financial
results of the Company that are subsequently restated. As this
situation has not previously been experienced, the Compensation Committee
believes that such an issue is best addressed at the time it occurs and all
facts and circumstances surrounding the restatement are known.
Tax and Accounting Treatment
of Compensation
Section
162(m) of the Internal Revenue Code generally disallows a tax deduction to
public corporations for non-performance based compensation over $1 million paid
in any one year to each of the individuals who were, at the end of the year, the
corporation’s chief executive officer and the four other most highly compensated
executive officers. Except for the Chairman and Chief Executive
Officer of the Company, the levels of non-performance based salary, bonus, and
other compensation paid do not typically exceed this level.
The
Compensation Committee reserves the right to award compensation to executive
officers that may not qualify under Section 162(m) as deductible compensation,
however, it will continue to consider all elements of cost to the Company of
providing such compensation, including the potential impact, if any, of Section
162(m).
The
Company accounts for long-term incentive compensation in the form of stock
options and SARs to executive officers under GAAP guidance which requires the
Company to estimate and expense each award of equity compensation over the
service period of the award. Other accounting guidance requires that
cash compensation be recorded as an expense at the time the obligation is
accrued.
Compensation
Committee Report
The
Compensation Committee has reviewed each element of executive officer
compensation and believes that the compensation philosophy and practices are
designed to serve the best interests of the Company and its stockholders. The
Compensation Committee also believes that the compensation of the Company’s
executive officers is both appropriate and consistent with the objectives set by
this committee.
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis set forth with the Company’s management. Based on its
reviews and discussions, the Compensation Committee approved and recommended to
the Company’s Board of Directors that the Compensation Discussion and Analysis
be included in this Proxy Statement on Schedule 14A.
Members
of the Compensation Committee
|
|
E.
J. Pederson (Chairman)
|
Stephen
E. Glasgow
|
Louis
E. Pauls
|
Summary
Compensation Table
The
following table sets forth all of the compensation awarded to, earned by, or
paid to the Company’s principal executive officer, principal financial officer,
and the three other highest paid executive officers for the years ended December
31, 2009, 2008, and 2007.
|
|
|
|
|
|
|
|
|
|
|
Change
in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Value
and
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Deferred
|
|
All
Other
|
|
|
Name
and
|
|
|
|
|
|
Option/SAR
|
|
Compen-
|
|
|
Compensation
|
|
Compen-
|
|
|
Principal
Position
|
|
Year
|
|
Salary
(a)
|
|
Awards
(b)
|
|
sation
|
|
|
Earnings
(e)
|
|
sation
(f)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
L. Moody
|
|
2009
|
$
|
1,692,703
|
$
|
*
|
$
|
552,393
|
(c)
|
$
|
(367,985)
|
$
|
693,056
|
$
|
3,067,579
|
Chairman
of the Board
|
|
2008
|
|
1,648,582
|
|
(579,747)
|
|
263,757
|
|
|
1,100,754
|
|
703,007
|
|
3,136,353
|
and
Chief Executive
|
|
2007
|
|
1,588,653
|
|
-
|
|
495,251
|
|
|
2,733,499
|
|
686,181
|
|
5,503,584
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ross
R. Moody
|
|
2009
|
|
605,888
|
|
*
|
|
189,678
|
(c)
|
|
113,121
|
|
71,053
|
|
1,227,734
|
President
and Chief
|
|
2008
|
|
588,956
|
|
(360,998)
|
|
90,490
|
|
|
123,587
|
|
60,630
|
|
502,665
|
Operating
Officer
|
|
2007
|
|
565,534
|
|
-
|
|
160,520
|
|
|
126,568
|
|
121,963
|
|
974,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
M. Pribyl
|
|
2009
|
|
269,283
|
|
*
|
|
40,655
|
(d)
|
|
22,190
|
|
25,640
|
|
390,695
|
Senior
Vice President,
|
|
2008
|
|
253,165
|
|
16,678
|
|
41,863
|
|
|
4,580
|
|
34,937
|
|
351,223
|
Chief
Financial Officer
|
|
2007
|
|
252,665
|
|
-
|
|
74,695
|
|
|
15,239
|
|
36,405
|
|
379,004
|
and
Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
D. Milos
|
|
2009
|
|
258,728
|
|
*
|
|
34,145
|
(d)
|
|
218,201
|
|
56,941
|
|
662,826
|
Senior
Vice President,
|
|
2008
|
|
249,130
|
|
(341,443)
|
|
-
|
|
|
88,350
|
|
44,980
|
|
41,017
|
Mortgage
Loans and
|
|
2007
|
|
239,569
|
|
-
|
|
-
|
|
|
81,780
|
|
50,598
|
|
371,947
|
Real
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
E. Arendale
|
|
2009
|
|
160,102
|
|
*
|
|
137,044
|
(d)
|
|
44,796
|
|
14,445
|
|
383,658
|
Senior
Vice President,
|
|
2008
|
|
158,878
|
|
(8,878)
|
|
321,700
|
|
|
15,271
|
|
20,403
|
|
507,374
|
International
Marketing
|
|
2007
|
|
150,050
|
|
-
|
|
178,101
|
|
|
33,595
|
|
17,570
|
|
379,316
|
Note:
Columns with no data have been omitted.
*Due to a
change in the Company’s accounting software system these numbers are still being
calculated and will be presented in the Company’s definitive proxy
statement.
(a)
|
The
2009 amounts in this column include Company and subsidiary Board of
Director fees of $30,700 for Mr. Robert L. Moody, $3,250 for Mr. Pribyl,
$33,950 for Mr. Ross R. Moody, and $33,700 for Mr.
Milos.
|
(b)
|
The
amounts in this column represent the fair value on grant date of option
awards received during the year.
|
(c)
|
The
amounts for Mr. Robert L. Moody, Mr. Ross R. Moody represent bonuses
earned under the 2009 Executive Officer Bonus Program. Also
included in Mr. Robert L. Moody’s amount is $29,761 representing the bonus
earned under the NWLIC Retirement Bonus Program.
|
(d)
|
The
amount for Mr. Pribyl and Mr. Milos represents the bonus earned under the
2009 Senior Vice President Bonus Program. The amount for Mr.
Arendale represents the bonus earned under the 2009 International
Marketing Officer Bonus Program.
|
(e)
|
The
amounts in this column represent the change in the accumulated pension
benefit under the Company’s qualified defined benefit plan for Messrs.
Pribyl and Arendale and the change in the accumulated pension benefit
under the Company’s qualified and non-qualified defined benefit plans for
Messrs. Robert L. Moody and Ross R. Moody. For a discussion of the
assumptions made in the calculation of these amounts, refer to the Notes
to Consolidated Financial Statements section of this Annual Report on Form
10-K.
|
(f)
|
The
amounts in this column include the items summarized in the following
table:
|
All
Other Compensation
|
|
|
|
Company
|
|
Excess
|
|
Company
|
|
Company
|
|
|
|
|
|
Total
|
|
|
|
|
Paid
|
|
Benefit
|
|
Contributions
|
|
Paid
|
|
|
|
|
|
All
Other
|
Name
and
|
|
|
|
Benefit
|
|
Claims
|
|
To
Savings
|
|
Taxes/
|
|
|
Other
|
|
|
Compen-
|
Principal
Position
|
|
Year
|
|
Premiums
(1)
|
|
Paid
(2)
|
|
Plans
(3)
|
|
Insurance
|
|
|
Perquisites
|
|
|
Sation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
L. Moody
|
|
2009
|
$
|
3,466
|
$
|
37,708
|
$
|
2,450
|
$
|
617,143
|
(4)
|
$
|
32,289
|
(5)
|
$
|
693,056
|
Chairman
of the
|
|
2008
|
|
5,264
|
|
8,613
|
|
2,300
|
|
670,684
|
|
|
16,146
|
|
|
703,007
|
Board
and Chief
|
|
2007
|
|
4,995
|
|
2,021
|
|
4,500
|
|
669,135
|
|
|
5,530
|
|
|
686,181
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ross
R. Moody
|
|
2009
|
|
2,742
|
|
27,315
|
|
33,837
|
|
-
|
|
|
7,159
|
(6)
|
|
71,053
|
President
and Chief
|
|
2008
|
|
4,284
|
|
7,296
|
|
32,557
|
|
-
|
|
|
16,493
|
|
|
60,630
|
Operating
Officer
|
|
2007
|
|
3,884
|
|
64,032
|
|
34,057
|
|
-
|
|
|
19,990
|
|
|
121,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
M. Pribyl
|
|
2009
|
|
5,656
|
|
5,433
|
|
13,851
|
|
|
|
|
700
|
(7)
|
|
25,640
|
Senior
Vice President,
|
|
2008
|
|
8,540
|
|
9,638
|
|
13,854
|
|
-
|
|
|
2,905
|
|
|
34,937
|
Chief
Financial
|
|
2007
|
|
8,040
|
|
10,499
|
|
15,435
|
|
-
|
|
|
2,431
|
|
|
36,405
|
Officer
and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
D. Milos
|
|
2009
|
|
5,656
|
|
27,128
|
|
15,561
|
|
-
|
|
|
8,596
|
(8)
|
|
56,941
|
Senior
Vice President,
|
|
2008
|
|
8,670
|
|
21,496
|
|
13,043
|
|
-
|
|
|
1,771
|
|
|
44,980
|
Mortgage
Loans and
|
|
2007
|
|
8,170
|
|
26,116
|
|
14,346
|
|
-
|
|
|
1,966
|
|
|
50,598
|
Real
Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
E. Arendale
|
|
2009
|
|
3,475
|
|
-
|
|
8,179
|
|
-
|
|
|
2,791
|
(9)
|
|
14,445
|
Senior
Vice President,
|
|
2008
|
|
5,305
|
|
3,065
|
|
8,286
|
|
-
|
|
|
3,747
|
|
|
20,403
|
International
|
|
2007
|
|
4,943
|
|
-
|
|
9,297
|
|
-
|
|
|
3,330
|
|
|
17,570
|
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
Company provides its officers additional compensation equivalent to the
premiums for health, dental and accidental death and dismemberment
coverage offered to all employees.
|
(2)
|
The
amounts in this column represent claims paid under the Company’s Group
Excess Benefit Program.
|
(3)
|
The
amounts in this column represent Company contributions to the Company’s
qualified and non-qualified savings plans. The Company’s 401(k) plan is
available to all employees with the same contribution
criteria.
|
(4)
|
Mr.
Robert L. Moody contributed a life interest in a trust estate to the
Company as a capital contribution in 1964. The Company, in
turn, issued term policies on the life of Mr. Moody in excess of the
amount of the asset contributed which excess was assigned to Mr.
Moody. The value of the excess amount of insurance was $392,194
in 2009 and represents additional compensation to Mr. Moody. In
addition, the Company reimburses Mr. Moody the applicable taxes associated
with this benefit which was $224,949 in
2009.
|
(5)
|
Mr.
Robert Moody’s amounts in this column include $30,889 for Office of the
Chairman expenses and $1,400 in gifts.
|
(6)
|
Mr.
Ross Moody’s amounts in this column include $3,154 for car expense, $855
in membership dues, $1,750 for personal tax return preparation and $1,400
in officer and director gifts.
|
(7)
|
Mr.
Pribyl’s amounts in this column include $700 in officer
gifts.
|
(8)
|
Mr.
Milos’s amounts in this column include $6,179 for guest travel on Company
business trips, $1,017 for car expense and $1,400 in officer and director
gifts.
|
(9)
|
Mr.
Arendale’s amounts in this column include $2,091 for guest travel on
Company business trips and $700 in officer
gifts.
|
Grants
of Plan-Based Awards
The
following table provides information regarding grants under the Company’s 2009
Executive Officer Bonus Program, Senior Vice President Bonus Program and
International Marketing Officer Bonus Program for the executive officers named
in the Summary Compensation Table.
|
|
Estimated
Future Payouts
|
|
|
Under
Non-Equity Incentive
|
|
|
Plan
Awards (a)
|
Name
|
|
Threshold
|
|
Target
|
|
Maximum
(b)
|
|
|
|
|
|
|
|
Robert
L. Moody
|
|
|
|
|
|
|
2009
Executive Officer Bonus Program:
|
|
|
|
|
|
|
International
life sales
|
$
|
50,218
|
$
|
83,696
|
$
|
117,174
|
Domestic
life sales
|
|
50,218
|
|
83,696
|
|
117,174
|
Annuities
sales
|
|
50,218
|
|
83,696
|
|
117,174
|
Expense
management
|
|
167,392
|
|
251,088
|
|
334,784
|
Company
profitability
|
|
167,392
|
|
334,784
|
|
502,175
|
|
|
|
|
|
|
|
Ross
R. Moody
|
|
|
|
|
|
|
2009
Executive Officer Bonus Program:
|
|
|
|
|
|
|
International
life sales
|
|
17,239
|
|
28,732
|
|
40,224
|
Domestic
life sales
|
|
17,239
|
|
28,732
|
|
40,224
|
Annuities
sales
|
|
17,239
|
|
28,732
|
|
40,224
|
Expense
management
|
|
57,463
|
|
86,195
|
|
114,926
|
Company
profitability
|
|
57,463
|
|
114,926
|
|
172,389
|
|
|
|
|
|
|
|
Brian
M. Pribyl
|
|
|
|
|
|
|
2009
Senior Vice President Bonus Program:
|
|
|
|
|
|
|
International
life sales
|
|
5,306
|
|
6,632
|
|
7,958
|
Domestic
life sales
|
|
5,306
|
|
6,632
|
|
7,958
|
Annuities
sales
|
|
5,306
|
|
6,632
|
|
7,958
|
Expense
management
|
|
14,590
|
|
19,896
|
|
25,202
|
Company
profitability
|
|
13,264
|
|
33,792
|
|
50,403
|
|
|
|
|
|
|
|
Scott
E. Arendale
|
|
|
|
|
|
|
2009
International Marketing Officer Bonus Program:
|
|
|
|
|
|
|
International
life sales
|
|
33,023
|
|
115,579
|
|
No
limit
|
International
life persistency
|
|
4,953
|
|
24,767
|
|
49,534
|
Expense
management
|
|
4,953
|
|
24,767
|
|
49,534
|
|
|
|
|
|
|
|
Charles
D. Milos
|
|
|
|
|
|
|
2009
Senior Vice President Bonus Program:
|
|
|
|
|
|
|
International
life sales
|
|
4,478
|
|
5,598
|
|
6,717
|
Domestic
life sales
|
|
4,478
|
|
5,598
|
|
6,717
|
Annuities
sales
|
|
4,478
|
|
5,598
|
|
6,717
|
Expense
management
|
|
12,315
|
|
16,793
|
|
21,271
|
Company
profitability
|
|
11,195
|
|
33,585
|
|
42,541
|
Note:
Columns with no data have been omitted.
(a)
|
Amounts
that have been or are expected to be paid in 2010 pertaining to the 2009
programs are reflected in the Summary Compensation Table. The 2009 program
bonus amounts are based upon the base salary reflected in the applicable
program addendums.
|
(b)
|
Although
the Executive Officer and Senior Vice President Bonus Programs have stated
maximums per program component, the aggregate bonus amount cannot exceed
50% and 30%, respectively, of base
salaries.
|
Outstanding
Equity Awards at December 31, 2009
The
following table provides information regarding outstanding stock options and
SARs held by the executive officers named in the Summary Compensation Table as
of December 31, 2009.
|
|
Option/SAR
Awards
|
|
|
|
|
Number
of
|
|
|
|
|
|
|
Number
of
|
|
Securities
|
|
|
|
|
|
|
Securities
|
|
Underlying
|
|
|
|
|
|
|
Underlying
|
|
Unexercised
|
|
Option
|
|
Option/SAR
|
|
|
Options/SARs
(#)
|
|
Options/SARs
(#)
|
|
Exercise/SAR
|
|
Expiration
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Price
|
|
Date
|
|
|
|
|
|
|
|
|
|
Robert
L. Moody Grants:
|
|
|
|
|
|
|
|
|
4/20/2001
|
|
2,300
|
(*)
|
-
|
$
|
92.13
|
|
4/20/2011
|
6/22/2001
|
|
1,000
|
(*)
|
-
|
|
95.00
|
|
6/22/2011
|
4/23/2004
|
|
12,000
|
|
8,000
|
|
150.00
|
|
4/23/2014
|
6/25/2004
(director)
|
|
1,000
|
|
-
|
|
150.00
|
|
6/25/2014
|
4/18/2008
|
|
-
|
|
7,500
|
|
255.13
|
|
4/18/2018
|
6/20/2008
(director)
|
|
200
|
|
800
|
|
208.05
|
|
6/20/2018
|
2/19/2009
(director)
|
|
-
|
|
1,000
|
|
114.64
|
|
2/19/2019
|
2/19/2009
|
|
-
|
|
7,500
|
|
114.64
|
|
2/19/2019
|
|
|
|
|
|
|
|
|
|
Ross
R. Moody Grants:
|
|
|
|
|
|
|
|
|
4/20/2001
|
|
5,000
|
(*)
|
-
|
|
92.13
|
|
4/20/2011
|
6/22/2001
|
|
1,000
|
(*)
|
-
|
|
95.00
|
|
6/22/2011
|
4/23/2004
|
|
6,000
|
|
4,000
|
|
150.00
|
|
4/23/2014
|
6/25/2004
(director)
|
|
1,000
|
|
-
|
|
150.00
|
|
6/25/2014
|
4/18/2008
|
|
-
|
|
5,518
|
|
255.13
|
|
4/18/2018
|
6/20/2008
(director)
|
|
200
|
|
800
|
|
208.05
|
|
6/20/2018
|
2/19/2009
(director)
|
|
-
|
|
1,000
|
|
114.64
|
|
2/19/2019
|
2/19/2009
|
|
-
|
|
5,518
|
|
114.64
|
|
2/19/2019
|
|
|
|
|
|
|
|
|
|
Brian
M. Pribyl Grants:
|
|
|
|
|
|
|
|
|
4/23/2004
|
|
400
|
|
800
|
|
150.00
|
|
4/23/2014
|
4/18/2008
|
|
-
|
|
1,000
|
|
255.13
|
|
4/18/2018
|
2/19/2009
|
|
-
|
|
1,000
|
|
114.64
|
|
2/19/2019
|
|
|
|
|
|
|
|
|
|
Scott
E. Arendale Grants:
|
|
|
|
|
|
|
|
|
4/20/2001
|
|
140
|
(*)
|
-
|
|
92.13
|
|
4/20/2011
|
4/23/2004
|
|
300
|
|
300
|
|
150.00
|
|
4/23/2014
|
4/18/2008
|
|
-
|
|
1,000
|
|
255.13
|
|
4/18/2018
|
2/19/2009
|
|
-
|
|
1,000
|
|
114.64
|
|
2/19/2019
|
|
|
|
|
|
|
|
|
|
Continued
on next page
|
|
Option/SAR
Awards
|
|
|
|
|
Number
of
|
|
|
|
|
|
|
Number
of
|
|
Securities
|
|
|
|
|
|
|
Securities
|
|
Underlying
|
|
|
|
|
|
|
Underlying
|
|
Unexercised
|
|
Option
|
|
Option/SAR
|
|
|
Options/SARs
(#)
|
|
Options/SARs
(#)
|
|
Exercise/SAR
|
|
Expiration
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Price
|
|
Date
|
|
|
|
|
|
|
|
|
|
Charles
D. Milos Grants:
|
|
|
|
|
|
|
|
|
4/20/2001
|
|
1,300
|
(*)
|
-
|
|
92.13
|
|
4/20/2011
|
6/22/2001
|
|
1,000
|
(*)
|
-
|
|
95.00
|
|
6/22/2011
|
4/23/2004
|
|
1,200
|
|
800
|
|
150.00
|
|
4/23/2014
|
6/25/2004
(director)
|
|
1,000
|
|
-
|
|
150.00
|
|
6/25/2014
|
4/18/2008
|
|
-
|
|
1,000
|
|
255.13
|
|
4/18/2018
|
6/20/2008
(director)
|
|
200
|
|
800
|
|
208.05
|
|
6/20/2018
|
2/19/2009
(director)
|
|
-
|
|
1,000
|
|
114.64
|
|
2/19/2019
|
2/19/2009
|
|
-
|
|
1,000
|
|
114.64
|
|
2/19/2019
|
Note:
Columns with no data have been omitted.
(*) –
Fully vested.
Officer
stock options and SARs vest 20% annually following three full years of service
to the Company from the date of grant. Stock options and SARs granted
to members of the Board of Directors vest 20% annually following one full year
of service to the Company from the date of grant. Accordingly, the
unexercisable options and SARs shown in the previous table are scheduled to vest
during the following years:
|
|
|
|
|
|
|
|
|
|
2014
|
|
Total
|
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
to
2016
|
|
Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
L. Moody
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants:
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/2004
|
|
4,000
|
|
4,000
|
|
-
|
|
-
|
|
-
|
|
8,000
|
4/18/2008
|
|
-
|
|
1,500
|
|
1,500
|
|
1,500
|
|
3,000
|
|
7,500
|
6/20/2008
(director)
|
|
200
|
|
200
|
|
200
|
|
200
|
|
-
|
|
800
|
2/19/2009
(director)
|
|
200
|
|
200
|
|
200
|
|
200
|
|
200
|
|
1,000
|
2/19/2009
|
|
-
|
|
-
|
|
1,500
|
|
1,500
|
|
4,500
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ross
R. Moody
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants:
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/2004
|
|
2,000
|
|
2,000
|
|
-
|
|
-
|
|
-
|
|
4,000
|
4/18/2008
|
|
-
|
|
1,103
|
|
1,104
|
|
1,104
|
|
2,207
|
|
5,518
|
6/20/2008
(director)
|
|
200
|
|
200
|
|
200
|
|
200
|
|
-
|
|
800
|
2/19/2009
(director)
|
|
200
|
|
200
|
|
200
|
|
200
|
|
200
|
|
1,000
|
2/19/2009
|
|
-
|
|
-
|
|
1,104
|
|
1,104
|
|
3,310
|
|
5,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
M. Pribyl
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants:
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/2004
|
|
400
|
|
400
|
|
-
|
|
-
|
|
-
|
|
800
|
4/18/2008
|
|
-
|
|
200
|
|
200
|
|
200
|
|
400
|
|
1,000
|
2/19/2009
|
|
-
|
|
-
|
|
200
|
|
200
|
|
600
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
E. Arendale
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants:
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/2004
|
|
150
|
|
150
|
|
-
|
|
-
|
|
-
|
|
300
|
4/13/2008
|
|
-
|
|
200
|
|
200
|
|
200
|
|
400
|
|
1,000
|
2/19/2009
|
|
-
|
|
-
|
|
200
|
|
200
|
|
600
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
D. Milos
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants:
|
|
|
|
|
|
|
|
|
|
|
|
|
4/23/2004
|
|
400
|
|
400
|
|
-
|
|
-
|
|
-
|
|
800
|
4/18/2008
|
|
-
|
|
200
|
|
200
|
|
200
|
|
400
|
|
1,000
|
6/20/2008
(director)
|
|
200
|
|
200
|
|
200
|
|
200
|
|
-
|
|
800
|
2/19/2009
(director)
|
|
200
|
|
200
|
|
200
|
|
200
|
|
200
|
|
1,000
|
2/19/2009
|
|
-
|
|
-
|
|
200
|
|
200
|
|
600
|
|
1,000
|
Option
Exercises and Stock Vested
There
were no option exercises by any of the executive officers named in the summary
compensation table for the year ended December 31, 2009. The Company
does not have stock award plans with stock awards subject to
vesting.
Pension
Benefits
The
following table provides information regarding benefits under the Company’s
Pension Plan, Non-Qualified Defined Benefit Plan, Non-qualified Defined Benefit
Plan for Robert L. Moody, and Non-Qualified Defined Benefit Plan for the
President of National Western Life Insurance Company (NWLIC).
|
|
|
|
Number
of
|
|
|
|
|
|
|
|
|
Years
of
|
|
Present
Value of
|
|
Payments
|
|
|
|
|
Credited
|
|
Accumulated
|
|
During
|
Name
|
|
Plan
Name
|
|
Service
|
|
Benefit
|
|
Last
Fiscal Year
|
|
|
|
|
|
|
|
|
|
Robert
L. Moody
|
|
NWLIC
Pension Plan
|
|
44
|
$
|
1,247,137
|
$
|
153,509
|
|
|
|
|
|
|
|
|
|
|
|
NWLIC
Grandfathered
|
|
|
|
|
|
|
|
|
Non-Qualified
|
|
|
|
|
|
|
|
|
Defined
Benefit Plan
|
|
45
|
|
5,257,959
|
|
713,258
|
|
|
|
|
|
|
|
|
|
|
|
NWLIC
Non-Qualified
|
|
|
|
|
|
|
|
|
Defined
Benefit Plan for
|
|
|
|
|
|
|
|
|
Robert
L. Moody
|
|
45
|
|
12,645,711
|
|
1,715,423
|
|
|
|
|
|
|
|
|
|
Ross
R. Moody
|
|
NWLIC
Pension Plan
|
|
17
|
|
189,750
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Non-Qualified
Defined
|
|
|
|
|
|
|
|
|
Benefit
Plan for the
|
|
|
|
|
|
|
|
|
President
of NWLIC
|
|
19
|
|
293,254
|
|
-
|
|
|
|
|
|
|
|
|
|
Brian
M. Pribyl
|
|
NWLIC
Pension Plan
|
|
7
|
|
98,668
|
|
-
|
|
|
|
|
|
|
|
|
|
Charles
D. Milos
|
|
NWLIC
Pension Plan
|
|
25
|
|
521,415
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
NWLIC
Grandfathered
|
|
|
|
|
|
|
|
|
Non-Qualified
|
|
27
|
|
238,316
|
|
-
|
|
|
Defined
Benefit Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NWLIC
Non-Qualified
|
|
|
|
|
|
|
|
|
Defined
Benefit Plan
|
|
27
|
|
203,622
|
|
-
|
|
|
|
|
|
|
|
|
|
Scott
E. Arendale
|
|
NWLIC
Pension Plan
|
|
14
|
|
264,967
|
|
-
|
|
|
|
|
|
|
|
|
|
Note:
Columns with no data have been omitted.
Pension Plan. The qualified
defined benefit plan covers substantially all employees and officers of the
Company and provides benefits based on the participant’s years of service and
compensation. The Company makes annual contributions to the plan that
complies with the minimum funding provisions of the Employee Retirement Income
Security Act. Annual pension benefits for those employees who became
eligible participants prior to January 1, 1991, are generally calculated as the
sum of the following:
(1) 50%
of the participant’s final 5-year average annual eligible compensation at
December 31, 1990, less 50% of their primary social security benefit determined
at December 31, 1990; this net amount is then prorated for less than 15 years of
benefit service at normal retirement date. This result is multiplied
by a fraction which is the participant’s years of benefit service at December
31, 1990, divided by the participant’s years of benefit service at normal
retirement date.
(2) 1.5%
of the participant’s eligible compensation earned during each year of benefit
service after December 31, 1990 and through December 31, 2007.
Annual
pension benefits for those employees who become eligible participants on or
subsequent to January 1, 1991, are generally calculated as 1.5% of their
compensation earned during each year of benefit service through December 31,
2007.
On
October 19, 2007, the Company’s Board of Directors approved an amendment to
freeze the Pension Plan as of December 31, 2007. The freeze ceased
future benefit accruals to all participants and closed the Plan to any new
participants. In addition, all participants became immediately 100%
vested in their accrued benefits as of that date. Accordingly future
pension expense is projected to be minimal.
Non-Qualified Defined Benefit
Plan. This plan covers officers of the Company who were in
the position of senior vice president or above prior to 1991. The
plan provides benefits based on the participant’s years of service and
compensation. No minimum funding standards are required.
The
benefit to be paid pursuant to this plan to a participant, other than the
Chairman of the Company, who retires at his normal retirement date shall be
equal to (a) minus (b) minus (c), but the benefit may not exceed (d) minus (b)
where:
(a) is
the benefit which would have been payable at the participant’s normal retirement
date under the terms of the Pension Plan as of December 31, 1990, as if that
plan had continued without change and without regard to Internal Revenue Code
Section 401(a) (17) and 415 limits, and,
(b) is
the benefit which actually becomes payable under the terms of the Pension Plan
at the participant’s normal retirement date, and,
(c) is
the actuarially equivalent life annuity which may be provided by an accumulation
of 2% of the participant’s compensation for each year of service on and after
January 1, 1991, accumulated at an assumed interest rate of 8.5% to the
participant’s normal retirement date, and,
(d) is
the benefit which would have been payable at the participant’s normal retirement
date under the terms of the Pension Plan as of December 31, 1990, as if that
plan had continued without change and without regard to Internal Revenue Code
Section 401(a)(17) and 415 limits, except that the proration over 15 years shall
instead be calculated over 30 years.
The
Chairman of the Company, Robert L. Moody, is currently receiving in-service
benefits from this plan. The benefit that Mr. Moody began receiving
as of his normal retirement date pursuant to the plan was equal to (a) minus (b)
minus (c) where:
(a) was
his years of service (up to 45), multiplied by 1.66667%, and then multiplied by
the excess of his eligible compensation over his primary social security benefit
under the terms of the Pension Plan as of December 31, 1990, as if that plan had
continued without change and without regard to Internal Revenue Code Section
401(a) (17) and 415 limits, and,
(b) was
the benefit payable to him under the terms of the Pension Plan,
and,
(c) was
the actuarially equivalent life annuity provided by an accumulation of 2% of his
compensation for each year of service on and after January 1, 1991, accumulated
at an assumed interest rate of 8.5% to his normal retirement
date.
This
benefit was increased for additional service and changes in eligible
compensation through December 31, 2004. The benefit was frozen as of
December 31, 2004 in connection with plan changes required by the American Jobs
Creation Act of 2004.
Non-Qualified Defined Benefit Plan
for Robert L. Moody. This plan covers the current Chairman of
the Company, Robert L. Moody, and is intended to provide for post-2004 benefit
accruals that mirror and supplement the pre-2005 benefit accruals under the
previously discussed Non-Qualified Defined Benefit Plan, while complying with
the American Jobs Creation Act of 2004. No minimum funding standards
are required. The annual benefit paid to the Chairman of the Company
on an in-service basis effective July 1, 2005 was equal to (a) minus (b) minus
(c) where:
(a) was
his years of service on his normal retirement date, multiplied by 1.66667%, and
then multiplied by the excess of his eligible compensation over his primary
social security benefit under the terms of the Pension Plan as of December 31,
1990, as if that plan had continued without change and without regard to
Internal Revenue Code Section 401(a) (17) and 415 limits, less the actuarially
equivalent life annuity which may be provided by an accumulation of 2% of his
compensation for each year of service on and after January 1, 1991, accumulated
at an assumed interest rate of 8.5% to his normal retirement date, and,
multiplied by the ratio of his years of service on July 1, 2005 to his years of
service on his normal retirement date, multiplied by the ratio of his eligible
compensation as of July 1, 2005 to his eligible compensation as of his normal
retirement date, and,
(b) was
the benefit payable to him under the terms of the Pension Plan as of July 1,
2005, and,
(c) was
the benefit payable to him under the terms of the Non-Qualified Defined Benefit
Plan as of December 31, 2004.
Subsequent
to July 1, 2005, the annual benefit was increased monthly for additional service
and changes in eligible compensation.
Non-Qualified Defined Benefit Plan
for the President of National Western Life Insurance Company.
This plan covers the President of the Company and is intended to provide benefit
accruals that comply with the American Jobs Creation Act of 2004. No
minimum funding standards are required.
The
annual benefit to be paid to the President of the Company who retires at his
normal retirement date shall be equal to (a) minus (b) minus (c)
where:
(a)
equals his years of service (up to 45), multiplied by 1.66667%, and then
multiplied by the excess of his eligible compensation over his primary social
security benefit under the terms of the Pension Plan as of December 31, 1990, as
if that plan had continued without change and without regard to Internal Revenue
Code Section 401(a) (17) and 415 limits, and,
(b)
equals the actuarially equivalent life annuity provided by an accumulation of 2%
of his compensation for each year of service on and after his date of hire,
accumulated at an assumed interest rate of 8.5% to his normal retirement date,
and,
(c)
equals the benefit actually payable to him under the terms of the Pension
Plan.
The plan
provides for a monthly in-service benefit if the President of the Company
continues employment after his normal retirement date.
Non-Qualified
Deferred Compensation
The
following table provides information regarding the Company’s non-qualified
deferred compensation plan for the executive officers named in the Summary
Compensation Table as of December 31, 2009.
|
|
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Executive
|
|
Registrant
|
|
Aggregate
|
|
|
|
Balance
|
|
|
Contributions
|
|
Contributions
|
|
Earnings
|
|
Aggregate
|
|
at
Last
|
|
|
in
Last
|
|
in
Last
|
|
in
Last
|
|
Withdrawals/
|
|
Fiscal
|
Name
|
|
Fiscal
Year
|
|
Fiscal
Year (a)
|
|
Fiscal
Year (b)
|
|
Distributions
|
|
Year-End
(c)
|
|
|
|
|
|
|
|
|
|
|
|
Robert
L. Moody
|
$
|
-
|
$
|
-
|
$
|
2,620
|
$
|
40,816
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Ross
R. Moody
|
|
34,164
|
|
26,487
|
|
124,022
|
|
-
|
|
620,533
|
|
|
|
|
|
|
|
|
|
|
|
Brian
M. Pribyl
|
|
10,885
|
|
6,501
|
|
13,753
|
|
-
|
|
191,748
|
|
|
|
|
|
|
|
|
|
|
|
Charles
D. Milos
|
|
11,520
|
|
8,211
|
|
93,325
|
|
-
|
|
407,827
|
|
|
|
|
|
|
|
|
|
|
|
Scott
E. Arendale
|
|
6,523
|
|
3,272
|
|
4,409
|
|
-
|
|
51,240
|
Note:
Columns with no data have been omitted.
(a)
|
Registrant
contributions are reflected in the “All Other Compensation” column in the
Summary Compensation Table and are not additional earned
compensation.
|
(b)
|
The
investment options under the plan consist of a selection of mutual funds
identical to those available to all employees through the 401(k)
plan.
|
(c)
|
Balances
in the plan are settled in cash upon the termination event selected by the
officer and distributed either in a lump sum or in annual installments.
Deferred amounts represent unsecured obligations of the
Company.
|
Potential
Payments Upon Termination or Change in Control
Other
than the Company’s 1995 Stock Option and Incentive Plan and 2008 Incentive Plan,
the Company has no contract, agreement, plan, or arrangement, written or
unwritten, that provides for payment to any officer at, following, or in
connection with any termination, severance, retirement or a constructive
termination, or a change in control of the Company or a change in any officer’s
responsibilities.
The 1995
Stock Option and Incentive Plan governs certain of the stock option grants held
by our executive officers. Our executive officers are not entitled to
any benefits under our 1995 Stock Option and Incentive Plan that are not
available to other participants. The 1995 Stock Option and Incentive
Plan includes the following change in control provisions, which would result in
the accelerated vesting of outstanding option grants: In the event of
a Change of Control, all outstanding Awards shall immediately vest and become
exercisable or satisfiable, as applicable. The Committee, in its
discretion, may determine that upon the occurrence of a Change in Control, each
Award outstanding hereunder shall terminate within a specified number of days
after notice to the Holder, and such Holder shall receive, with respect to each
share of Common Stock subject to such Award, cash in an amount equal to the
excess of (i) the higher of (x) the Fair Market Value of such share of Common
Stock immediately prior to the occurrence of such Change of Control or (y) the
value of the consideration to be received in connection with such Change of
Control for one share of Common Stock over (ii) the exercise price per share, if
applicable, of Common Stock set forth in such Award. The provisions
contained in the preceding sentence shall be inapplicable to an Award granted
within six (6) months before the occurrence of a Change of Control if the Holder
of such Award is subject to the reporting requirements of Section 16(a) of the
1934 Act. If the consideration offered to shareholders of the Company
in any transaction described in this paragraph consists of anything other than
cash, the Committee shall determine the fair cash equivalent of the portion of
the consideration offered which is other than cash. The provisions
contained in this paragraph shall not terminate any rights of the Holder to
further payments pursuant to any other agreement with the Company following a
Change of Control.
The 2008
Incentive Plan governs certain of the stock option grants and/or SARs held by
our executive officers and provides for the acceleration of vesting of all
awards upon a change in control of the Company. The 2008 Incentive Plan includes
the following change in control provisions, which would result in the
accelerated vesting of outstanding award grants: The Committee may
provide in an option agreement and/or Stock Appreciation Rights agreement that
in the event of a Change in Control of the Company, (i) all or a portion of the
stock options and/or any Stock Appreciation Rights awarded under such agreement
shall become fully vested and immediately exercisable and/or (ii) the vesting of
all performance-based stock options shall be determined as if the performance
period or cycle applicable to such stock options had ended immediately upon such
Change in Control.
Our
executive officers hold option grants under both the 1995 Stock Option and
Incentive Plan and the 2008 Incentive Plan. Option Grants under the 1995
Stock Option and Incentive Plan and the 2008 Incentive Plan will immediately
vest upon a change in control. The following table depicts potential
benefits for our executive officers as a result of a change in
control. Such termination is assumed to occur on January 1,
2010.
|
|
Intrinsic
Value of
|
Named
Executive Officer
|
|
Accelerated
Equity (1)($)
|
|
|
|
Robert
L. Moody
|
$
|
690,290.00
|
|
|
|
Ross
R. Moody
|
|
478,911.64
|
|
|
|
Brian
M. Pribyl
|
|
77,876.00
|
|
|
|
Charles
D. Milos
|
|
136,856.00
|
|
|
|
Scott
E. Arendale
|
|
66,066.00
|
(1) Value
is based upon the closing selling price per share of our Class A common
stock on the NASDAQ Global Select Market on December 31, 2009, which
was $173.62.
Director
Compensation
The
following table sets forth the compensation for 2009 for those individuals who
served as members of the Company’s Board of Directors during 2009 (excluding
named executive officers whose director compensation is included in the Summary
Compensation Table).
|
|
Fees
Earned or
|
|
Option
|
|
All
Other
|
|
|
Name
|
|
Paid
in Cash
|
|
Awards
(a)
|
|
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Stephen
E. Glasgow
|
$
|
36,900
|
$
|
*
|
$
|
45,812
|
(b)
|
$
|
133,366
|
|
|
|
|
|
|
|
|
|
|
E.
Douglas McLeod
|
|
26,400
|
|
*
|
|
952
|
(c)
|
|
86,607
|
|
|
|
|
|
|
|
|
|
|
Russell
S. Moody
|
|
26,400
|
|
*
|
|
20,499
|
(d)
|
|
106,154
|
|
|
|
|
|
|
|
|
|
|
Frances
A. Moody-Dahlberg
|
|
26,400
|
|
*
|
|
29,687
|
(e)
|
|
111,362
|
|
|
|
|
|
|
|
|
|
|
Louis
E. Pauls Jr.
|
|
32,500
|
|
*
|
|
8,860
|
(f)
|
|
100,615
|
|
|
|
|
|
|
|
|
|
|
E.
J. Pederson
|
|
32,000
|
|
*
|
|
952
|
(c)
|
|
88,227
|
Note:
Columns with no data have been omitted.
* Due to
a change in the Company’s accounting software system these numbers are still
being calculated and will be presented in the Company’s definitive proxy
statement.
(a)
|
The
amounts in this column represent the fair value on grant date of option
awards received during the year.
|
(b)
|
The
amount shown for Mr. Glasgow includes $38,461 value of the Company’s Group
and Excess Benefit Plans, $252 for the taxable value of supplemental life
coverage, $6,399 in guest travel and $700 in gifts.
|
(c)
|
The
amounts shown for Messrs. McLeod and Pederson represent $252 for the
taxable value of supplemental life coverage and $700 in
gifts.
|
(d)
|
The
amount shown for Mr. Moody is $252 for the taxable value of supplemental
life coverage, $19,547 in guest travel and $700 in
gifts.
|
(e)
|
The
amount shown for Ms. Moody-Dahlberg is $28,874 value of the Company’s
Excess Benefit Plans, $113 in guest travel and $700 in
gifts.
|
(f)
|
The
amount shown for Mr. Pauls includes $6,046 value of the Company’s Group
Benefit Plans, $20 for the taxable value of supplemental life coverage,
$2,094 in guest travel and $700 in
gifts.
|
All
directors of the Company currently receive $24,000 a year and $600 for each
board meeting attended. They are also reimbursed for actual travel expenses
incurred in performing services as directors. An additional $600 is
paid for each committee meeting attended. However, a director
attending multiple meetings on the same day receives only one meeting
fee. The amounts paid pursuant to these arrangements are included in
the Summary Compensation Table of this Item. The directors and their
dependents are also eligible to participate in the Company’s group insurance
program.
Directors
of the Company are eligible for restricted stock awards, incentive awards, and
performance awards under the National Western Life Insurance Company 1995 Stock
Option and Incentive Plan and 2008 Incentive Plan. Company directors,
including members of the Compensation and Stock Option Committee, are eligible
for nondiscretionary stock options.
Directors
of the Company’s subsidiary, NWL Investments, Inc., receive $250
annually. Directors of the Company’s subsidiary, NWLSM, Inc., receive
$1,000 per board meeting attended. Nonemployee directors of the
Company’s subsidiary, NWL Services, Inc., receive $1,000 per board meeting
attended. Directors of the Company’s downstream subsidiaries, Regent
Care General Partner, Inc., and Regent Care Operations General Partner, Inc.,
receive $250 per board meeting attended. Directors of the Company’s
downstream subsidiary, Regent Care Limited Partner, Inc., receive $500 per board
meeting attended.
PROPOSAL
2: APPROVAL OF THE EXECUTIVE OFFICER BONUS
PROGRAM
The
National Western Life Insurance Company Executive Officer Bonus Program was
created to attract and retain the best available executive officers to be
responsible for the management, growth, and success of the Company’s business
and to provide an incentive for such individuals to exert their best efforts on
behalf of the Company and its shareholders. Accordingly, the Board
and the Compensation Committee adopted the Executive Officer Bonus Program in
December 2009, subject to shareholder approval, as the successor to the 2009
Executive Officer Bonus Program. The Executive Officer Bonus Program
will permit incentive compensation bonus awards to be structured to qualify as
“performance-based compensation” under Section 162(m) of the Internal Revenue
Code of 1986, as amended, or the Code.
Background
Section 162(m)
of the Code disallows a deduction to the Company for any compensation paid to a
“covered employee” in excess of $1 million per year, subject to certain
exceptions. In general, “covered employees” include the chief
executive officer and the other most highly compensated executive officers of
the Company who are in the employ of the Company and are officers at the end of
any particular fiscal year. Among other exceptions, the deduction
limit does not apply to compensation that meets the specified requirements for
“performance-based compensation.” In general, those requirements
include the establishment of objective performance goals for the payment of such
compensation by a committee of the Board composed solely of two or more outside
directors, shareholder approval of the material terms of such compensation prior
to payment, and certification by the committee that the performance goals for
the payment of such compensation have been achieved. In addition,
when a committee retains the flexibility to develop compensation formulas from
among shareholder-approved performance goals, Section 162(m) of the Code
requires that those performance goals must be re-approved by shareholders every
five years.
Description
of the Executive Officer Bonus Program
The
Executive Officer Bonus Program will be administered by the Compensation and
Stock Option Committee, which is a committee of the Board of Directors composed
solely of two or more outside directors. The Compensation and Stock
Option Committee, in its sole discretion, has the authority to select the
officers (including officers who are directors) to participate in the Executive
Officer Bonus Program, to establish the performance goals, and to determine the
amounts of incentive compensation bonus payable to any participant.
Awards
shall be payable to a participant as a result of the satisfaction of performance
goals in respect of the performance period selected by the Compensation and
Stock Option Committee (a “Performance Period”). A Performance Period
may consist of one or more fiscal years designated by the Compensation and Stock
Option Committee in which a performance goal must be satisfied in order for the
award or a portion thereof to be payable. Prior to each Performance
Period, the Compensation Committee will establish a performance goal or goals
for each participant and the payout formula for purposes of determining the
award payable to such participant upon the attainment of the performance
goal. At the time the performance goals are established by the
Compensation and Stock Option Committee, their outcome must be substantially
uncertain. Neither the performance goals nor the payout formula may
be changed following their establishment, except that the Compensation and Stock
Option Committee has the authority to adjust such goals and formulae during a
Performance Period for such reasons as it deems equitable to the extent
permitted while still satisfying the requirements for qualified performance
based compensation under Section 162(m) of the Code.
The
performance goals selected by the Compensation and Stock Option Committee shall
be limited to the following measures that are set forth in the Executive Officer
Bonus Program: sales; net sales; expense management; GAAP profitability;
persistency; earnings; earnings per share; pre-tax earnings; net earnings;
operating income; operating income before taxes; EBIT; EBITDA; gross margin;
revenues; revenue growth; market value added; economic value added; return on
equity; return on investments; return on assets; return on net assets; return on
capital; return on invested capital; total stockholder return; profit; economic
profit; operating profit; capitalized economic profit; net operating profit
after tax; net profit before taxes; pre-tax profit; cash flow measures; cash
flow return; comparable division or product sales; stock price; market share
and/or market penetration; expenses; cost per policy; strategic milestones; or
goals related to acquisitions or divestitures, all whether applicable to the
Company or one or more subsidiaries or business units or divisions, or any
combination thereof as the Compensation and Stock Option Committee may deem
appropriate. The goals established by the Compensation and Stock
Option Committee for any Performance Period may be expressed in terms of
attaining a specified level of the performance measures or the attainment of a
percentage increase or decrease in the particular performance measure, and may
involve comparisons with respect to historical results of the Company and its
subsidiaries and/or operating groups or segments thereof, all as the
Compensation and Stock Option Committee deems appropriate. The goals
established by the Compensation and Stock Option Committee for any Performance
Period may be applied to the performance of the Company relative to a market
index, a peer group of other companies, or a combination thereof, all as
determined by the Compensation and Stock Option Committee for such Performance
Period.
After the
end of each Performance Period, the Compensation and Stock Option Committee
shall determine the extent to which the performance goal has been achieved or
exceeded and the award for each participant for the Performance Period, and the
Compensation and Stock Option Committee shall certify such determination in
writing. The award for each participant shall be determined by
applying the payout formula to the level of actual performance which has been
certified by the Committee. The Committee, in its sole discretion,
may eliminate or reduce the award payable to any participant below that which
otherwise would be payable under the payout formula. Under no
circumstances, however, may the Compensation and Stock Option Committee increase
the amount of the award otherwise payable to a participant beyond the amount
originally established, waive the attainment of the performance goals
established by the Compensation and Stock Option Committee, or otherwise
exercise its discretion so as to cause any award not to qualify as
“performance-based compensation” under Section 162(m) of the
Code. Each award under the Executive Officer Bonus Program is
intended to qualify as short-term deferrals under Section 409A of the Code
and shall be made after the close of the Performance Period, but not later than
March 15th immediately following the close of the Performance
Period.
Other Terms. The
Executive Officer Bonus Program does not limit the authority of the Company to
establish any other annual or other incentive compensation plan or to pay cash
bonuses or other additional incentive compensation to employees of the
Company. The total amount of all awards payable to any single
participant with respect to a single Performance Period may not exceed 1% of the
Company’s “pre-tax income” for such Performance Period. Awards paid
pursuant to the Executive Officer Bonus Program will be paid in
cash. The Compensation and Stock Option Committee, without the
consent of any participant, may amend or terminate the Executive Officer Bonus
Program at any time. However, no amendment with respect to, or affecting, awards
that would require the consent of the stockholders pursuant to
Section 162(m) of the Code shall be effective without such
consent.
A copy of
the Executive Officer Bonus Program is set forth in Exhibit A to
this proxy statement. The foregoing description is a summary of some, but not
all, of the essential provisions of the Executive Officer Bonus Program, and is
qualified by reference to the full text of the Executive Officer Bonus Program,
which is incorporated by reference herein.
New
Plan Benefits
Any
awards under the Executive Officer Bonus Program will be at the discretion of
the Compensation and Stock Option Committee. Therefore, it is not
possible at present to determine the amount or form of any award that will be
granted to any individual during the term of the Executive Officer Bonus Program
or that would have been granted during 2009 had the Executive Officer Bonus
Program been in effect. For information regarding awards made in 2009
to our Named Executive Officers, see the Summary Compensation Table on
page 24. For Robert L. Moody and Ross R. Moody the aggregate
amount of awards made under the 2009 Executive Officer Bonus Program was
$552,392.95 and $189,628.25, respectively. No other non-executive
officers or other employees were awarded amounts under the 2009 Executive
Officer Bonus Program in 2009. Directors of the Company who are not
officers of the Company are not eligible to receive awards under the Executive
Officer Bonus Program.
Shareholder
Approval of the Executive Officer Bonus Program
An
affirmative vote of a majority of the shares of common stock present in person
or represented by proxy and entitled to vote at the Annual Meeting is required
to approve the Executive Officer Bonus Program. Shares that are voted
against the approval of the Executive Officer Bonus Program, shares the holders
of which abstain from voting for the approval of the Executive Officer Bonus
Program, and broker non-votes will not be counted in the total number of shares
voted for the approval of the Executive Officer Bonus
Program. Abstentions and broker non-votes will be counted as present
at the meeting for quorum purposes.
In the
event the Executive Officer Bonus Program is not approved by shareholders of the
Company, the Compensation and Stock Option Committee will consider the
establishment of another annual or other incentive compensation
plan.
Recommendation
of the Board of Directors
The
Board of Directors recommends a vote FOR approval of the Executive Officer Bonus
Program. All proxies executed and returned will be voted “FOR” the
Executive Officer Bonus Program unless the proxy specifies
otherwise.
PROPOSAL
3: RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING
FIRM
KPMG LLP,
an independent registered public accounting firm, has served as our independent
auditors since 2005 and audited our consolidated financial statements for the
year ended December 31, 2009. The audit committee is directly
responsible for the appointment of our independent registered public accounting
firm and has appointed KPMG LLP to audit our financial statements for the year
ending December 31, 2010. Stockholder ratification of the appointment
of KPMG LLP as our independent registered public accounting firm is not required
by our Amended and Restated Bylaws or other applicable legal
requirement. However, the appointment of KPMG LLP is being submitted
to the stockholders for ratification. If the stockholders do not
ratify the appointment of KPMG LLP, the audit committee will evaluate the
stockholder vote when considering the selection of an independent registered
public accounting firm for the 2010 fiscal year and reconsider whether or not to
retain the firm. Even if the appointment is ratified, the audit
committee, at its discretion, may direct the appointment of a different
independent registered public accounting firm at any time during the year if it
determines that such a change would be appropriate.
Representatives
of KPMG LLP are expected to be present at the Annual Meeting, will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
Audit
Fees
KPMG LLP
has billed National Western and its subsidiaries the aggregate fees set forth in
the table below for 2009 and 2008:
|
|
2009
|
|
2008
|
|
|
(In
thousands)
|
|
|
|
|
|
Audit
Fees (1)
|
$
|
600
|
|
678
|
Audit
Related Fees (2)
|
|
25
|
|
18
|
Tax
Fees
|
|
-
|
|
-
|
All
Other Fees (3)
|
|
-
|
|
7
|
|
|
|
|
|
Total
|
$
|
625
|
|
703
|
(1) These
represent the aggregate fees billed for professional services rendered by KPMG
LLP for the audit of the Company’s consolidated annual financial statements for
the years ended December 31, 2009 and 2008 and reviews of the condensed
consolidated financial statements included in the Company quarterly reports on
Form 10-Q for the years then ended and the audit of internal control over
financial reporting as of December 31, 2009 and 2008.
(2) KPMG
LLP billed $25,000 for the year ended December 31, 2009 pertaining to actuarial
services rendered as part of their audit involving the Company’s implementation
of a new reserving system. For the year ended December 31, 2008, KPMG
LLP billed $17,500 for actuarial services pertaining to the Company’s
implementation of a new reserving system.
(3) During
the year ended December 31, 2008, KPMG LLP billed $7,000 for consent fees
associated with the Company’s S-8 filing with the SEC.
The Audit
Committee has adopted a formal policy concerning approval of audit and non-audit
services to be provided by the independent auditor of the
Company. The policy requires that all services the Company’s
independent auditor may provide to the Company, including audit services and
permitted audit-related and non-auditor services, be pre-approved by the
Committee. The Committee approved all audit and non-audit services
provided by KPMG LLP during 2009.
The
Board of Directors recommends that you vote “FOR” the ratification of the
appointment of KPMG LLP as our independent registered public accounting firm for
the fiscal year ending December 31, 2010. All proxies executed
and returned will be voted “FOR” the ratification of the appointment of KPMG LLP
as our independent registered public accounting firm for the fiscal year ending
December 31, 2010 unless the proxy specifies otherwise.
AUDIT
COMMITTEE REPORT
The Board
of Directors maintains an Audit Committee comprised of three of the Company’s
outside directors. The Audit Committee of the Board is responsible
for the appointment and compensation of the independent auditors for the
Company, reviewing the activities and independence of the independent auditors,
including the plan and scope of the audit and audit fees, monitoring the
adequacy of the reporting and internal controls, oversight of any internal audit
function, meeting periodically with management and the independent auditors and
resolving any disagreements between management and the independent
auditors. Under the NASDAQ Listing Rules and federal securities laws,
all of the members of the Audit Committee are independent.
KPMG LLP,
Dallas, Texas, was the Company’s independent registered public accounting firm
with respect to the Company’s consolidated financial statements for the year
ended December 31, 2009. Audit services performed by KPMG consist of
the audit of the statutory and consolidated GAAP basis financial statements of
the Company and its subsidiaries for such year, preparation of various reports
based thereon, and services related to the filings with the Securities and
Exchange Commission. In addition, KPMG audits the design and
operating effectiveness of the Company’s internal controls over financial
reporting. The Audit Committee has received periodic reports as to
the Company’s own testing and evaluation of its internal controls, as well as
that of KPMG.
The
Disclosure Committee is a committee of senior officers of the Company that
reports directly to the Audit Committee. It is responsible for
evaluating disclosure controls and procedures and for gathering, analyzing, and
disclosing information as required to be disclosed under the securities
laws. It assists the CEO and CFO with their responsibilities of
making the required certifications under the securities laws regarding the
Company’s disclosure controls and procedures. It ensures that
material financial information is properly communicated up the Company’s
hierarchy to the appropriate person(s) and that all disclosures are made in a
timely fashion. The Disclosure Committee meets on a monthly
basis.
In
discharging its oversight responsibility to the audit process, the Audit
Committee discussed with the auditors the matters required by Statement on
Auditing Standards No. 61, as amended, and obtained from the independent
auditors a formal written statement describing all relationships between the
auditors and the Company that bear on the auditors’ independence, consistent
with Independence Standards Board Standard No. 1, “Independence Discussions with
Audit Committees,” and discussed with the auditors and satisfied itself as to
the auditors’ independence.
The
Committee reviewed the audited consolidated financial statements of National
Western Life Insurance Company as of and for the year ended December 31, 2009,
with management and the independent auditors. Management has the
responsibility for the preparation of National Western’s consolidated financial
statements, and the independent auditors have the responsibility for the
examination of those statements.
Based on
these reviews and discussions with management and the independent auditors, the
Audit Committee recommended to the Board of Directors that National Western’s
audited consolidated financial statements be included in its Annual Report on
Form 10-K for the year ending December 31, 2009, for filing with the Securities
and Exchange Commission.
The
Audit Committee
E. J.
Pederson, Chairman
Stephen
E. Glasgow
Louis E.
Pauls, Jr.
This
Audit Committee Report shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act or under the Exchange Act, except to the extent
that National Western specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such acts.
ANNUAL
REPORT TO SHAREHOLDERS
A copy of
the 2009 Annual Report to Shareholders of National Western Life Insurance
Company for the year ended December 31, 2009 has been mailed concurrently with
this Proxy Statement to all stockholders entitled to notice of and to vote at
the Annual Meeting. The Annual Report to Shareholders is not
incorporated by reference into this Proxy Statement and is not considered proxy
solicitation material.
The Form
10-K for the year ended December 31, 2009, as filed with the SEC, including
any financial statements but without exhibits, is available at www.nationalwesternlife.com
or may be viewed at the United States Securities and Exchange Commission (“SEC”)
Public Reference Room in Washington, D.C. or at the SEC’s Internet site at www.sec.gov; and may
also be obtained without charge by written request to the Secretary, National
Western Life Insurance Company, 850 East Anderson Lane, Austin, Texas
78752-1602.
Pursuant
to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals
for inclusion in our proxy statement and form of proxy and for consideration at
our next annual meeting of stockholders. In order for a stockholder
proposal to be eligible for inclusion in the proxy statement and form of proxy
for next year’s annual meeting pursuant to Rule 14a-8(e) of the Exchange Act,
the proposal must be received by the Secretary of National Western at 850 East
Anderson Lane, Austin, Texas 78752-1602 not later than January 14, 2011, the
date that is at least 120 days prior to May 14, 2011, the anniversary date of
this Proxy Statement. Such proposals must meet all of the
requirements of applicable Colorado law and the rules and regulations
promulgated by the SEC (including the requirements of Rule 14a-8) to be
eligible for inclusion in our 2011 proxy materials. While the Board
of Directors will consider stockholder proposals, we reserve the right to omit
from our proxy statement and form of proxy stockholder proposals that we are not
required to include under the Exchange Act, including Rule 14a-8.
Stockholders
may contact the Secretary at our principal executive office in Austin, Texas for
a copy of the relevant amended and restated bylaw provisions regarding the
requirements for making stockholder proposals.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our executive officers and directors and
persons who own more than 10% of a registered class of our equity securities
(collectively, “Reporting Persons”) to file reports of ownership and changes in
ownership on Forms 3, 4, and 5 with the SEC and the NASDAQ Global
Market. The Reporting Persons are required by SEC regulation to
furnish us with copies of all Forms 3, 4, and 5 and any amendments thereto that
they file. Based solely on our review of the copies of such forms
that we have received and, where applicable, any written representations by any
of them that no Form 5 was required, we believe that with respect to the year
ended December 31, 2009, all the Reporting Persons complied with the applicable
filing requirements on a timely basis.
OTHER
BUSINESS
Management
does not intend to present and does not have any reason to believe that others
will present at the Annual Meeting any item of business other than those set
forth herein. However, if other matters are properly presented for a
vote, the proxies will be voted upon such matters at the discretion and in
accordance with the judgment of the person acting under the proxy.
IT
IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO COMPLETE, SIGN,
DATE, AND RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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By
Order of the Board of Directors
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/S/James
P. Payne
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James
P. Payne
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Senior
Vice President and Secretary
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Austin,
Texas
May 14,
2010
EXHIBIT
A
National
Western Life Insurance Company
Executive
Officer Bonus Program
SECTION
1
OBJECTIVE
The
objective of this National Western Life Insurance Company Executive Officer
Bonus Program (the “Plan”) is to attract and retain the best available executive
officers to be responsible for the management, growth, and success of the
business, and to provide an incentive for such individuals to exert their best
efforts on behalf of the Company and its shareholders. The Company
intends that all Awards payable or provided for under this Plan be considered
“qualified performance-based compensation” within the meaning of Code
section 162(m), and this Plan shall be interpreted
accordingly.
SECTION
2
DEFINITIONS
The
following words and phrases, when used herein, shall have the following meanings
unless a different meaning is plainly required by the context:
2.1 “Award” means, as to any
Performance Period, the actual award (if any) payable to a Participant for the
Performance Period. The actual award is determined by the Payout
Formula for the Performance Period, subject to the Committee’s authority under
Section 3.3 to reduce or eliminate the award otherwise determined by the
Payout Formula.
2.2 “Board” means the Board of
Directors of the Company.
2.3 "Change
in Control"
shall mean, after the effective date of the Plan, the occurrence of any
one or more of the events described below:
(a) Any
"person," as such term is used in sections 13(d) and 14(d) of the Exchange Act
(other than the Company, any trustee or other fiduciary holding securities under
any employee benefit plan of the Company, or any company owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then outstanding
securities;
(b) During
any period of two (2)-consecutive years, individuals who at the beginning of
such period constitute the Board cease for any reason to constitute at least a
majority thereof, unless the election by the Board or the nomination for
election by the Shareholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the beginning
of the two (2)-year period or whose election or nomination for election was
previously so approved;
(c) The
shareholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation that would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities of the
surviving entity outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to implement a
reorganization, recapitalization, or similar transaction in which no "person"
acquires more than twenty percent (20%) of the combined voting power of the
Company's then outstanding securities shall not constitute a Change in Control
of the Company; or
(d) The
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
2.4 “Code” means the Internal Revenue
Code of 1986, as amended, including the valid regulations promulgated pursuant
thereto.
2.5 “Committee” means the Compensation and
Stock Option Committee of the Board, which shall consist of two or more
qualified members of the Board. The members of the Committee shall be
“non-employee directors” within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended; shall be “outside directors” within
the meaning of Code section 162(m); and, to the extent required to satisfy
applicable requirements of the Listing Standards, shall satisfy the independence
requirements of such Listing Standards. Notwithstanding the
foregoing, the failure of a Committee member to qualify as a “non-employee
director” or “outside director” or to satisfy such Listing Standards shall not
invalidate the payment of any Award under the Plan.
2.6 “Company” means National Western Life
Insurance Company, a Colorado corporation, and any successor
thereto.
2.7 “Covered
Employee” means
a person designated by the Committee as likely to be a “covered employee” (as
such term is defined under Code section 162(m)) with respect to a given
fiscal year of the Company for which or in which an Award is
payable. An employee of the Company may be designated as a Covered
Employee hereunder even if the employee is in fact not a “covered employee” for
purposes of Code section 162(m).
2.8 “Determination
Date” means as
to any Performance Period, (a) the first day of the Performance Period or
(b) if later, the latest date possible that will not jeopardize any Awards
for that Performance Period from constituting qualified performance-based
compensation under Code section 162(m).
2.9 “Disability” means an inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or to be of long-continued and indefinite duration, as determined by the
Committee in its discretion.
2.10 “Exchange
Act” means the
Securities Exchange Act of 1934, as amended.
2.11 “Listing
Standards” shall
mean the applicable listing standards of the NASDAQ Stock Market (“NASDAQ”) or,
if the stock of the Company is not listed on the NASDAQ, of any exchange or
self-regulatory organization on which such stock is then listed.
2.12 “Participant” means, as to any
Performance Period, a Covered Employee who has been selected by the Committee
for participation in the Plan for that Performance Period.
2.13 “Payout
Formula” means,
as to any Performance Period, the objective formula, standard, or payout matrix
established by the Committee pursuant to Section 3.2(a)(ii) for purposes of
determining the amount of the Awards (if any) to be paid to Participants based
solely upon the attainment of the designated Performance Goal(s) for such
period. The formula, standard, or matrix may differ from Participant
to Participant, but must be sufficiently objective so that a third party with
knowledge of the relevant performance results could calculate the amount of the
Award with respect to each Participant.
2.14 “Performance
Goal” means the
level of attainment by the Participant(s) of the performance measure(s)
designated by the Committee for a Performance Period pursuant to Section
3.2(a)(i). Unless amended with any required shareholder approval in
accordance with Section 7.1, performance measures which may serve as
determinants of Performance Goals shall be limited to the following measures
(which may relate to the Company and/or one or more business units, divisions or
subsidiaries and which may be adjusted in accordance with Section
3.2(c)):
(a) sales
(net placed annualized target premium for life business and total placed premium
for annuity business);
(b) net
sales;
(c) expense
management (ratio of actual Company expenses (excluding bonuses and, for
Participants who are domestic marketing officers, excluding agent health claims,
agent reserve balance changes, and sales conference expenses and, for
Participants who are international marketing officers, excluding sales
conference expenses) to a sales unit of production);
(d) GAAP
profitability (the Company’s GAAP operating earnings (net of federal income
taxes and excluding realized gains and losses on investments) for the
Performance Period as a percentage of the Company’s beginning GAAP stockholders’
equity for such period);
(e) persistency
(for a designated period, the ratio of actual persistency to expected (pricing)
persistency);
(f) earnings;
(g) earnings
per share;
(h) pre-tax
earnings;
(i)
net earnings;
(j)
operating income;
(k)
operating income before taxes;
(l)
EBIT (earnings before interest and taxes);
(m) EBITDA
(earnings before interest, taxes, depreciation and amortization);
(n) gross
margin;
(o) revenues;
(p) revenue
growth;
(q) market
value added;
(r) economic
value added;
(s) return
on equity;
(t)
return on investments;
(u)
return on assets;
(v) return
on net assets;
(w) return
on capital;
(x)
return on invested capital;
(y) total
stockholder return;
(z)
profit;
(aa) economic
profit;
(bb) operating
profit;
(cc) capitalized
economic profit;
(dd) net
operating profit after tax;
(ee) net
profit before taxes;
(ff)
pre-tax profit;
(gg) cash
flow measures;
(hh) cash
flow return;
(ii)
comparable division or product sales;
(jj)
stock price (and stock price appreciation, either in absolute terms or in
relationship to the appreciation among members of a peer group determined by the
Committee);
(kk) market
share and/or market penetration;
(ll)
expenses;
(mm) cost
per policy;
(nn) strategic
milestones; or
(oo) goals
related to acquisitions or divestitures.
The
Performance Goals established by the Committee for any Performance Period may be
expressed in terms of attaining a specified level of the performance measures or
the attainment of a percentage increase or decrease in the particular
performance measure, and may involve comparisons with respect to historical
results of the Company and its subsidiaries and/or operating groups or segments
thereof, all as the Committee deems appropriate. The Performance
Goals established by the Committee for any Performance Period may be applied to
the performance of the Company relative to a market index, a peer group of other
companies or a combination thereof, all as determined by the Committee for such
Performance Period.
2.15 “Performance
Period” means
the period consisting of one or more fiscal years of the Company designated by
the Committee during which the Performance Goal must be satisfied in order for
an Award or a portion thereof to be payable. Performance Periods may
be overlapping.
SECTION
3
SELECTION
OF PARTICIPANTS AND DETERMINATIONS OF AWARDS
3.1 Selection
of Participants. On or prior to
the Determination Date for any Performance Period, the Committee, in its sole
discretion, shall select the Covered Employees who shall be Participants for the
Performance Period. In selecting Participants, the Committee shall
choose employees who are likely to have a significant impact on the performance
of the Company. Participation in the Plan is in the sole discretion
of the Committee on a Performance Period by Performance Period
basis. Accordingly, a Covered Employee who is a Participant for a
given Performance Period in no way is guaranteed or assured of being selected
for participation in any subsequent Performance Period or Performance
Periods.
3.2 Determination
of Performance Goals and Payout Formulae.
(a) On
or prior to the Determination Date for a Performance Period, the Committee, in
its sole discretion, shall establish in writing, with respect to each
Participant for the Performance Period:
(i) the
Performance Goal(s) for the Participant; and
(ii) the
Payout Formula or Payout Formulae for purposes of determining the Award (if any)
payable to such Participant upon the attainment of such Performance
Goal(s). Each Payout Formula shall be based on a comparison of actual
performance to the Performance Goal and shall provide for the payment of a
Participant’s Award only to the extent the Performance Goal for the Performance
Period is achieved.
(b) At
the time the Performance Goals are established by the Committee, their outcome
must be substantially uncertain.
(c) Performance
Goals and Payout Formulae shall not be changed following their establishment;
provided, however, that the Committee shall have the authority to adjust such
goals and formulae during a Performance Period for such reasons as it deems
equitable to the extent permitted while still satisfying the requirements for
qualified performance-based compensation under Code Section
162(m). Specifically, to the extent permitted under Code Section
162(m) and to the extent applicable, the Committee shall make the following
adjustments in determining the attainment of Performance Goals for a Performance
Period: (i) to exclude the dilutive effects of acquisitions or joint ventures;
(ii) to assume that any business divested by the Company achieved performance
objectives at targeted levels during the balance of a Performance Period
following such divestiture; (iii) to exclude restructuring and/or other
nonrecurring charges; (iv) to exclude exchange rate effects, as applicable, for
non-U.S. dollar denominated net sales and operating earnings; (v) to exclude the
cumulative effects of changes to generally accepted accounting principles (or
standards) required by the Financial Accounting Standards Board; (vi) to exclude
the effects to any statutory adjustments to corporate tax rates; (vii) to
exclude the impact of any “extraordinary items” as determined under generally
accepted accounting principles and as such items are specifically identified on
the Company’s audited financial statements; (viii) to exclude the effect of any
change in the outstanding shares of the Company by reason of any stock dividend
or split, stock repurchase, reorganization, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares or other similar
corporate change, or any distributions to common stockholders other than regular
cash dividends; and (ix) to exclude any other unusual, non-recurring gains or
losses as determined under generally accepted accounting principles and as such
items are specifically identified on the Company’s audited financial
statements.
3.3 Determination
of Awards. After the end of
each Performance Period, the Committee shall determine the extent to which the
Performance Goal has been achieved or exceeded and the Award for each
Participant for the Performance Period, and the Committee shall certify such
determination in writing. For this purpose, approved minutes of the
Committee meeting at which the certification is made shall be treated as a
written certification. The Award for each Participant shall be
determined by applying the Payout Formula to the level of actual performance
which has been certified by the Committee. Notwithstanding any
contrary provision of the Plan except for the immediately following sentence,
the Committee, in its sole discretion, may eliminate or reduce (but not
increase) the Award payable to any Participant below that which otherwise would
be payable under the Payout Formula. Notwithstanding anything herein
to the contrary, the Committee may not eliminate or reduce the Award payable to
any Participant for any Performance Period during which a Change in Control
occurs.
3.4 Termination
Prior to the Date the Award for the Performance Period is Paid. If a Participant
terminates employment with the Company for any reason after the end of the
applicable Performance Period but prior to the date the Award for such
Performance Period is paid, the Participant shall be entitled to the payment of
the Award for the Performance Period subject to reduction or elimination under
Section 3.3 based on the circumstances surrounding such termination of
employment.
3.5 Termination
Prior to End of the Performance Period for Reasons other than Death or
Disability. If a Participant
terminates employment with the Company prior to the end of the applicable
Performance Period for any reason other than death or Disability, the Committee
shall reduce the Participant’s Award (as determined by the Committee after the
end of the Performance Period pursuant to Section 3.3) proportionately based on
the date of termination (and subject to further reduction or elimination under
Section 3.3 based on the circumstances surrounding such termination of
employment).
3.6 Termination
Prior to the End of the Performance Period Due to Death or
Disability. If a Participant
terminates employment with the Company prior to the end of the applicable
Performance Period due to death or Disability, the Participant (or in the case
of the Participant’s death, the Participant’s estate) shall be entitled to the
payment of the Award for the Performance Period, subject to reduction or
elimination under Section 3.3.
3.7 Leave of
Absence. If a Participant
is on a leave of absence at any time during a Performance Period, the Committee
may reduce his or her Award proportionately based on the duration of the leave
of absence (and subject to further reduction or elimination under
Section 3.3).
3.8 Maximum
Benefit. Notwithstanding
anything herein to the contrary, the total amount of all Awards paid to any
single Participant with respect to a Performance Period shall not exceed one
percent (1%) of the Company’s “pre-tax income” for such Performance
Period. For this purpose, “pre-tax income” means the Company’s
earnings before income taxes as reported in the Company’s audited financial
statements, excluding (a) any losses from discontinued operations;
(b) extraordinary gains and losses, as such items are specifically
identified on such audited financial statements; and (c) the cumulative
effect of accounting changes during the fiscal year.
SECTION
4
PAYMENT
OF AWARDS
4.1 Right to
Receive Payment. Each Award that
may become payable under the Plan shall be paid solely from the general assets
of the Company. Nothing in this Plan shall be construed to create a
trust or to establish or evidence any Participant’s claim of any right other
than as an unsecured general creditor of the Company with respect to any payment
to which he or she may be entitled.
4.2 Timing
of Payment.
(a) Payments
under this Plan for a Performance Period are intended to qualify as short-term
deferrals under Code section 409A and shall be made after the close of the
Performance Period, but not later than March 15th immediately
following the close of the Performance Period.
(b) If
upon the date of a Participant’s “separation from service” (as defined for
purposes of Code sections 409A(a)(2)(A)(i) and 409A(a)(2)(B)(i)) with the
Company and its controlled subsidiaries and affiliates the Participant is a
“specified employee” within the meaning of Code section 409A (determined by
applying the default rules applicable under such Code section except to the
extent such rules are modified by a written resolution that is adopted by the
Committee and that applies for purposes of all deferred compensation plans of
the Company and its affiliates) and the deferral of any amounts otherwise
payable under Plan as a result of Participant’s separation from service is
necessary to prevent any accelerated or additional tax to the Participant under
Code section 409A, then the Company shall defer the payment of any such amounts
hereunder until the date that is six months following the date of the
Participant’s separation from service, at which time any such delayed amounts
shall be paid or provided to the Participant.
4.3 Form of
Payment. Each Award shall
be paid in cash in a single lump sum.
4.4 Payment
in the Event of Death. If a Participant
dies prior to the payment of an Award earned by him or her for a prior
Performance Period, the Award, if any, shall be paid to the Participant’s estate
at the time specified in Section 4.2.
SECTION
5
ADMINISTRATION
5.1 Committee. The Plan shall
be administered by the Committee.
5.2 Committee
Authority. The Committee
shall have all discretion and authority necessary or appropriate to administer
the Plan and to interpret the provisions of the Plan, consistent
with qualification of the Plan as providing for qualified performance-based
compensation under Code section 162(m).
5.3 Indemnification
Of Committee. No member of the
Committee nor any officer or employee of the Company acting with or on behalf of
the Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee, and each officer or employee of the Company acting
with it or on its behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.
5.4 Tax and
Other Withholding. The Company
shall withhold all applicable taxes and other amounts required by law to be
withheld from any payment, including any foreign, federal, state, and local
taxes.
5.5 Determinations. Any
determination, decision, or action of the Committee in connection with the
construction, interpretation, administration, or application of the Plan shall
be final, conclusive, and binding upon all persons, and shall be given the
maximum deference permitted by law.
SECTION
6
MISCELLANEOUS
PROVISIONS
6.1 Non-transferability. A Participant’s
rights under this Plan shall not be assignable, transferable, pledged, hedged or
in any manner alienated, whether by operation of law or
otherwise. Any assignment, transfer, pledge, or other disposition in
violation of the provisions of this Section shall be null and
void.
6.2 No
Guarantee of Employment or Participation. Nothing in the
Plan shall interfere with or limit in any way the right of the Company to
terminate any Participant’s employment at any time, nor confer upon any
Participant any right to continue in the employment of the Company.
6.3 No
Effect On Benefits. Awards will
constitute special discretionary incentive payments to the Participants and will
not be required to be taken into account in computing the amount of salary or
compensation of the Participants for the purpose of determining any
contributions to or any benefits under any pension, retirement, profit-sharing,
bonus, life insurance, severance or other benefit plan of the Company or under
any agreement with a Participant, unless the Company specifically provides
otherwise.
6.4 Governing
Law. The Plan and all
determinations made and actions taken pursuant hereto, to the extent not
otherwise governed by the Code, shall be governed by the law of the State of
Texas, without giving effect to conflict or choice of law provisions
thereof.
6.5 Unfunded
Plan. The Plan shall
be unfunded. The Company may maintain bookkeeping accounts with
respect to Participants who are entitled to awards under the Plan, but such
accounts shall be used merely for bookkeeping convenience. The
Company shall not be required to segregate any assets that may at any time be
represented by interests in awards nor shall the Plan be construed as providing
for any such segregation.
6.6 Binding
Effect. This Plan shall
be binding upon and inure to the benefit of the Company, its successors and
assigns, and the Participants, and their heirs, assigns, and personal
representatives.
6.7 Construction
of Plan. The captions
used in this Plan are for convenience only and shall not be construed in
interpreting the Plan. Whenever the context so requires, the
masculine shall include the feminine and neuter, and the singular shall also
include the plural, and conversely. The words "hereof,” "herein,”
"hereunder" and other similar compounds of the word "hereof" shall, unless
otherwise specifically stated, mean and refer to the entire Plan, not to any
particular provision or Section. The word “including” and words of
similar import when used in this Plan shall mean “including, without
limitation,” unless the context otherwise requires or unless otherwise
specified.
6.8 Integrated
Plan. This Plan
constitutes the final and complete expression of agreement with respect to the
subject matter hereof.
6.9 Severability. If any provision
of the Plan or any Award is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or as to any person or Award, or would
disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be construed or deemed amended without, in the
sole determination of the Committee, materially altering the intent of the Plan
or the Award, such provision shall be stricken as to such jurisdiction, person
or Award and the remainder of the Plan and any such Award shall remain in full
force and effect.
6.10 Waiver. Neither the
failure nor any delay on the part of the Company or the Committee to exercise
any right, power, or privilege hereunder shall operate as a waiver
thereof. No term, condition, or provision of the Plans shall be
deemed waived, and there shall be no estoppel against enforcing any provision of
the Plans, except through a writing of the party to be charged by the waiver or
estoppel. No such written waiver shall be deemed a continuing waiver
unless explicitly made so, and it shall operate only with regard to the specific
term or condition waived, and shall not be deemed to waive such term or
condition in the future, or as to any act other than as specifically
waived. No person other than as named or described by class in the
waiver shall be entitled to rely on the waiver for any purpose.
6.11 Right of
Offset. The Company will
have the right to offset against the obligation to pay an amount to any
Participant, any outstanding amounts (including, without limitation, travel and
entertainment or advance account balances, loans or amounts repayable to it
pursuant to housing, automobile or other employee programs) such Participant
then owes to the Company.
6.12 Application
of Code Section 409A. Notwithstanding
any other provision of this Plan to the contrary, the Committee, in its sole
discretion and without a Participant’s consent, may amend or modify the Plan in
any manner to provide for the application and effects of Code
section 409A. To the extent any provision of this Plan or any
omission from this Plan would (absent this Section) cause amounts to be
includable in income under Code section 409A(a)(1), this Plan shall be deemed
amended to the extent necessary to comply with the requirements of Code section
409A; provided,
however, that this Section shall not apply and shall not be construed to
amend any provision of this Plan to the extent this Section or any amendment
required thereby would itself cause any amounts to be includable in income under
Code section 409A(a)(1).
SECTION
7
AMENDMENT,
ADJUSTMENT AND TERMINATION
7.1 Amendment. Subject to the
last sentence of this Section, the Committee may amend the Plan at any time and
for any reason; provided, however, that any amendment of the Plan which would
(a) increase the maximum amount of compensation payable under Section 3.8, (b)
change the specified performance measures under Section 2.14 (as may be adjusted
pursuant to Section 3.2(c)), or (c) modify the requirements as to eligibility
for participation in the Plan shall not be effective with respect to any Awards
or Participants unless the shareholders of the Company approve such amendment in
accordance with section 162(m) of the Code. Notwithstanding the foregoing, if
applicable tax and/or securities laws change to permit Committee discretion to
change the specified performance measures without obtaining shareholder approval
of such changes and without any adverse tax or other consequence, the Committee
shall have sole discretion to make such changes without obtaining shareholder
approval. During any Performance Period in which a Change in Control
occurs, the Committee may not amend the Plan in a manner that adversely affects
a Participant without the consent of the Participant.
7.2 Code
Section 162(m) Compliance. In the event
that Code section 162(m) requires that any special terms, provisions or
conditions be included in the Plan in order for an Award to constitute
“qualified performance-based compensation,” within the meaning of Code
section 162(m), then such terms, provisions and conditions shall, to the
extent practicable, be deemed to be made a part of the Plan, and notwithstanding
any provision in the Plan to the contrary, the Plan, and if applicable, the
terms of any grant to a Participant under the Plan, shall be reformed in such
manner as the Committee determines is appropriate for an Award to constitute
“qualified performance-based compensation,” within the meaning of Code
section 162(m).
7.3 Termination. The Committee
may terminate the Plan at any time and for any reason. No Awards
shall be paid after the effective date of the termination of the
Plan.
SECTION
8
EFFECTIVE
DATE
Subject
to shareholder approval of the Plan, this Plan shall be effective for
Performance Periods beginning on or after January 1, 2010, and shall
continue thereafter until the Plan is terminated. The material terms
of this Plan shall be disclosed to the shareholders of the Company for approval
in accordance with Code section 162(m). Any Performance Goals
and Payout Formulae established prior to shareholder approval of the Plan shall
be contingent upon shareholder approval of the Plan.