Exhibit 10(b)(1)
2005 PERFORMANCE SHARE AWARD
LETTER
FOR SENIOR
OFFICERS
The Compensation and Management
Succession Committee of the Company’s Board of Directors (the
“Committee”) has awarded you the following:
Performance Shares
Award Period: January 1,
2005 – December 31, 2008
Grant Date: March 4,
2005
The Performance Shares were awarded
pursuant to the Company’s Long-Term Incentive Plan (the
“Plan”), and are subject to the terms and conditions
contained in the Plan and in the Provisions for 2005 Performance
Shares for Senior Officers set forth in Appendix A to this Award
Letter.
This Award is intended to fulfill
the Plan’s purpose of furthering the long-term growth in
profitability of the Company by offering long-term incentives to
key executives, officers and employees who will be largely
responsible for such growth. Since these Awards have been
granted to only a select group of Company employees, I request that
you keep the terms of this Award confidential.
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H. Corbin Day, Chairman,
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Compensation and Management
Succession Committee
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of the Board of Directors
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of Protective Life
Corporation
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1
APPENDIX A
PROVISIONS FOR
2005 PERFORMANCE
SHARES
FOR SENIOR
OFFICERS
MARCH 4, 2005
On March 4, 2005, Protective
Life Corporation (the “Company”) granted performance
shares (“Performance Shares”) under its Long-Term
Incentive Plan (the “Plan”). Each senior officer
who was granted Performance Shares received a 2005 Performance
Share Award Letter for Senior Officers (the “Award
Letter”). The terms of your Award are contained in
these Provisions for 2005 Performance Shares for Senior Officers
(“Performance Share Provisions”), which refer to and
incorporate information contained in the Award Letter. This
Award is also subject to the terms and conditions set forth in the
Plan and any rules and regulations adopted by the Compensation and
Management Succession Committee of the Board of Directors (the
“Committee”). Any terms used in these Performance
Share Provisions and not defined herein have the meanings set forth
in the Plan.
These Performance Share
Provisions and the Award Letter constitute part of a prospectus
covering securities that have been registered under the Securities
Act of 1933. The date of this part of the prospectus is
March 4, 2005.
1.
General Provisions
. The number of Performance
Shares that you have been awarded, the Award Period of the
Performance Shares, and the Grant Date of the Performance Shares
are set forth in your Award Letter.
2.
Earn-Out of Performance
Shares .
(a)
General . Payment of the Performance Share Award
will be based upon a comparison of the Company’s
“average return on average equity” (as defined below)
for the Award Period to that of a “comparison group”
(as defined below). If the Company’s average return on
average equity for the Award Period ranks below the 40
th percentile of such measure for the comparison group,
no payment will be made; if it is at the 40 th
percentile, a 33% payment will be made; if it is at the 50
th percentile, a 50% payment will be made; if it is at
the 75 th percentile, a 125% payment will be made; and
if it is at the 90 th percentile, a 170% payment will be
made. There will be interpolation between the 40
th and 50 th percentiles to determine the
exact percentage to be paid between 33% and 50%, interpolation
between the 50 th and 75 th percentiles to
determine the exact percentage to be paid between 50% and 125%, and
interpolation between the 75 th and 90 th
percentiles to determine the exact percentage to be paid between
125% and 170%.
(b)
Definitions
. “Return on average
equity” for a calendar year is generally defined as net
income per share divided by average stockholders’ equity
(excluding accumulated comprehensive income) per share, capped at a
maximum of 25% per calendar year. “Average
stockholders’ equity” for a calendar year is the
average of the stockholders’ equity on the last business day
of each calendar quarter during such calendar year and of the
stockholders’ equity on the last business day of the
preceding calendar year. “Average return on average
equity” for the Award Period is the average of the returns on
average equity for the calendar years during the Award
Period. Unless the Committee determines otherwise, any
one-time, special or non-recurring charge against the
Company’s earnings shall be taken into account only in the
Award Period ending in the year in which such charge is
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taken, and not in other Award
Periods. The “comparison group” is generally
comprised of the Company and the 40 largest public held stock life
and multiline insurance companies (as measured by net worth).
The companies in the comparison group are listed in Appendix
B. If any comparison group company’s net income per
share or stockholders’ equity per share shall cease to be
publicly available (due to a business combination, receivership,
bankruptcy, or other event) or if any such company is no longer
publicly held or becomes a downstream affiliate of any other
company in the comparison group on or before January 1
following the end of the Award Period, or substantially exits the
insurance industry (due to a divestiture of its insurance business,
or other events), its average return on average equity shall be
ranked below that of the Company. The Committee may adjust
the performance criteria to recognize special or non-recurring
situations or circumstances with respect to the Company or any
other company in the comparison group for any year during the Award
Period.
3.
Time and Form of
Payment . As soon
as practicable after the end of the Award Period, the Committee
will determine the extent to which the Performance Share Award has
been earned. The amount of the total payment shall be based
on the Fair Market Value of the Common Stock. Unless the
Committee determines otherwise, payment will be made partly in
shares of Common Stock and partly in cash, with the cash portion
being approximately equal to the federal, state and local income
tax withholding obligation with respect to such payment.
4.
Termination of
Employment .
(a)
Death, Disability or
Retirement . If
your employment is terminated by death, disability or by retirement
on or after normal retirement age or prior to normal retirement age
at the request of the Company, you will receive a pro rata
payment with respect to the Performance Shares based on the period
of employment during the Award Period and determined by reference
to the performance achieved as of the end of the fiscal year
immediately preceding your termination date (or, if your employment
terminates in 2005, by reference to performance as of
December 31, 2004).
(b)
Special Termination
. If your employment is
terminated by reason of (1) retirement prior to normal retirement
age at your request and approved in writing by the Company, (2) the
divestiture of a business segment or a significant portion of the
assets of the Company, or (3) a significant reduction by the
Company in its salaried work force, the determination of whether
any payment shall be made with respect to any unvested portion of
your Performance Share Award shall be at the discretion of the
Committee. Any such payment, if made, will not exceed the
number of Performance Shares determined as set forth in paragraph
4(a).
(c)
Retirement in Calendar Year of
Grant . Any
provision of these Performance Share Provisions to the contrary
notwithstanding, if (i) this Award is intended, at the time of
grant, to be “performance-based compensation” within
the meaning of Section 162(m)(4)(c) of the Internal Revenue
Code (the “Code”), to the extent required to so qualify
any Award thereunder, and (ii) your employment is terminated before
January 1, 2006 by retirement on or after normal retirement
age or prior to normal retirement age at the request of the
Company, you will receive a pro rata payment with respect to
the Performance Shares based on the period of employment during the
Award Period and determined by reference to the performance
achieved as of December 31, 2005.
(d)
Other Termination
. If your employment is
terminated for any reason not set forth in paragraphs 4(a), (b) or
(c), any unvested portion of your Performance Share Award will be
forfeited.
5.
Change in Control
. In the event of a Change in
Control, you shall be deemed to have earned Performance Shares with
respect to your Award based upon performance as of the
December 31 preceding the date of the Change in Control,
provided that the number of Performance Shares earned
shall
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never be less than the aggregate
number of Performance Shares at the 75 th percentile (as
described in paragraph 2(a)) with respect to the Award. Each
Performance Share so earned shall be canceled in exchange for a
payment in cash of an amount equal to the greater of (a) the price
per share of Common Stock immediately preceding any transaction
resulting in a Change in Control or (b) the highest price per share
of Common Stock offered in conjunction with any transaction
resulting in a Change in Control (as determined in good faith by
the Committee if any part of the offered price is payable other
than in cash).
6.
Federal Income Tax
Consequences .
(a)
General . The following description of the federal
income tax consequences of the Performance Shares is based on
currently applicable provisions of the Code and related
regulations, and is intended to be only a general summary.
The summary does not discuss state and local tax laws, which may
differ from the federal tax law, or federal estate, gift and
employment tax laws. For these reasons, you are urged to
consult with your own tax advisor regarding the application of the
tax laws to your particular situation.
(b)
Grant of Performance
Shares . This grant
of Performance Shares will not cause you to be subject to federal
income tax.
(c)
Payment of Performance
Shares . You will
recognize ordinary income for federal income tax purposes on the
date the Performance Shares are earned and paid (the “payment
date”), unless you have made an effective election under the
Company’s Deferred Compensation Plan for Officers
(“Deferred Compensation Plan”), as d
