<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PROTECTIVE LIFE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
March 27, 1997
To the Stockholders of Protective Life Corporation:
You are invited to attend the 1997 Annual Meeting of Stockholders of
Protective Life Corporation, which will be held at the principal office of
the Company, 2801 Highway 280 South, Birmingham, Alabama, on Monday, May 5,
1997 at 10:00 a.m., CDT. Formal notice of the Annual Meeting, a Proxy
Statement, and a form of proxy accompany this letter.
Also enclosed is the Company's 1996 Annual Report to Stockholders.
At the Annual Meeting, stockholders will elect directors for the forthcoming
year and will consider and vote upon the Company's 1997 Performance Share
Plan, Annual Incentive Plan, and 1996 Stock Incentive Plan, which are being
submitted for approval to qualify certain compensation payable thereunder for
deductibility by the Company for Federal income tax purposes. Please
carefully consider the enclosed Proxy Statement and execute and return your
proxy so that the Company may be assured of the presence of a quorum at the
Annual Meeting. A postage prepaid envelope is enclosed for your convenience
in replying. The prompt return of your proxy will be of great assistance in
reducing the expense of subsequent mailings. If you attend the Annual
Meeting, and so elect, you may withdraw your proxy and vote in person.
Sincerely yours,
Drayton Nabers, Jr.
Chairman of the Board and
Chief Executive Officer
<PAGE>
TABLE OF CONTENTS
Page
Letter from the Chairman of the Board and Chief Executive Officer. . . 1
Notice of 1997 Annual Meeting of Stockholders. . . . . . . . . . . . . 2
Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Voting Securities and Record Date . . . . . . . . . . . . . . . . . . 4
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . . 5
* Election of Directors. . . . . . . . . . . . . . . . . . . . . . . . . 8
Election of Directors and Information about Nominees . . . . . . . . . 8
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Certain Information Concerning the Board of Directors
and Its Committees . . . . . . . . . . . . . . . . . . . . . . . . . 11
Director's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 16(a) Beneficial Ownership Reporting Compliance. . . . . . . . 12
Compensation Committee Interlocks and Insider Participation. . . . . . 12
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 13
Pension Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Employment Continuation Agreements. . . . . . . . . . . . . . . . . . . 16
Compensation and Management Succession Committee's Report on
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . 16
Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Annual Incentive Awards. . . . . . . . . . . . . . . . . . . . . . . . 17
Stock Incentive Awards . . . . . . . . . . . . . . . . . . . . . . . . 18
Performance Share Awards. . . . . . . . . . . . . . . . . . . . . . . 18
Stock Appreciation Rights and Stock Bonus Award . . . . . . . . . . . 19
$1 Million Limit on Executive Compensation . . . . . . . . . . . . . . 19
Performance Comparison. . . . . . . . . . . . . . . . . . . . . . . . . 20
Certain Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . 22
* Proposals to Approve Compensation Plans. . . . . . . . . . . . . . . . 22
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Independent Public Accountants . . . . . . . . . . . . . . . . . . . . 31
Annual Reports Available . . . . . . . . . . . . . . . . . . . . . . . 32
Stockholder Proposals. . . . . . . . . . . . . . . . . . . . . . . . . 32
*To be voted on at the Annual Meeting of Stockholders<PAGE>
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 1997
TO THE STOCKHOLDERS OF PROTECTIVE LIFE CORPORATION:
Notice is hereby given that the Annual Meeting of Stockholders of
Protective Life Corporation will be held at the principal office of the
Company, 2801 Highway 280 South, Birmingham, Alabama, on Monday, May 5, 1997
at 10:00 a.m., CDT, for the following purposes:
(a) to elect 13 directors to serve for the ensuing year,
(b) to consider and vote upon the Company's 1997 Performance Share Plan
to qualify certain compensation payable thereunder for deductibility
by the Company for Federal income tax purposes,
(c) to consider and vote upon the Company's Annual Incentive Plan to
qualify certain compensation payable thereunder for deductibility
by the Company for Federal income tax purposes,
(d) to consider and vote upon the Company's 1996 Stock Incentive Plan to
qualify certain compensation payable thereunder for deductibility by
the Company for Federal income tax purposes, and
(e) to transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The close of business on Friday, March 7, 1997 has been fixed by the Board
of Directors as the record date for determination of stockholders of the
Company entitled to notice of and to vote at the Annual Meeting of
Stockholders. The stock transfer books of the Company will not be closed.
The Annual Meeting may be adjourned from time to time without notice other
than announcement at the meeting, or any adjournment thereof, and any
business for which notice is hereby given may be transacted at any such
adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
DEBORAH J. LONG, SECRETARY
March 27, 1997
2
<PAGE>
PROTECTIVE LIFE CORPORATION
P. O. BOX 2606
BIRMINGHAM, ALABAMA 35202
PROXY STATEMENT DATED MARCH 27, 1997
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 5, 1997
GENERAL INFORMATION
This Proxy Statement is furnished to the stockholders of Protective Life
Corporation, a Delaware corporation ("Company"), in connection with the
solicitation of proxies on behalf of Management to be used in voting at the
Annual Meeting of Stockholders ("Annual Meeting") to be held Monday, May 5,
1997. If the enclosed form of proxy is properly executed and received by the
Company before or at the Annual Meeting, shares represented thereby will be
voted as specified thereon. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES AS DIRECTORS AND FOR THE APPROVAL OF
THE COMPANY'S 1997 PERFORMANCE SHARE PLAN, ANNUAL INCENTIVE PLAN, AND 1996
STOCK INCENTIVE PLAN, AS RECOMMENDED BY THE BOARD OF DIRECTORS AND DESCRIBED
HEREIN. This Proxy Statement and the accompanying proxy card are first being
sent to stockholders on or about March 27, 1997.
The enclosed form of proxy provides a method for stockholders to withhold
authority or abstain from voting. If a stockholder makes such a direction,
his shares will not be voted either for or against a proposal but would be
counted for the purposes of determining that a quorum of the stockholders
would be present at the meeting. While there may be instances in which a
stockholder may consider abstaining, the Board of Directors encourages all
stockholders to vote their shares in their best judgment and to participate
in the voting process to the fullest extent possible.
A stockholder may revoke his proxy at any time before such proxy is voted
by giving a proxy bearing a later date or written notice of such revocation
(in either case delivered to the Secretary of the Company at its principal
office prior to the time of taking the vote) or by voting in person at the
Annual Meeting. Attendance at the Annual Meeting will not in and of itself
constitute the revocation of a proxy.
A quorum of stockholders (stockholders owning a majority of the
outstanding shares of the Company entitled to vote) must be present, in
person or by proxy, to conduct business at the Annual Meeting of
Stockholders, and a majority vote of those shares issued and outstanding is
required to vote "for" a proposal in order for such proposal to be adopted.
Both abstentions and broker non-votes are included in determining the number
of stockholders present for quorum purposes. Broker non-votes exist where a
broker proxy indicates that the broker is not authorized to vote on some
proposals. As required by Delaware law, abstentions (but not broker
non-votes) are counted in calculating the number of shares voting on a
particular proposal. In counting votes on a particular proposal, only those
votes clearly indicated as voting "for" a proposal are counted as such.
Abstentions are recorded and counted separately and have the effect of votes
against the proposal being voted upon.
3
<PAGE>
As votes are received they are compared with the list of stockholders as
of March 7, 1997 to ensure that the stockholders are entitled to vote and are
voting their authorized number of shares. Votes for each proposal are tallied
by the Internal Audit Department of the Company. All proxies, work papers,
and summaries of results are then reviewed by an independent panel of proxy
judges.
The Company will bear all costs in connection with this solicitation. In
addition to the use of the mails, proxies may be solicited in person or by
telephone, by officers or employees of the Company or its subsidiaries, who
will not be separately compensated therefor. The Company has entered into a
contract with McCormick & Pryor, Ltd., to provide proxy solicitation services
with respect to the Company's institutional stockholders at an anticipated
cost of $3,500. Brokerage houses, nominees, fiduciaries, and other
custodians have been requested to forward soliciting material to the
beneficial owners of Company Common Stock held of record by them and will be
reimbursed for their reasonable expenses in connection with such mailing or
other communication with the beneficial owners.
The Management of the Company does not know of any matters that may be
brought before the Annual Meeting other than the matters described in the
accompanying Notice of Annual Meeting. If any other matters should properly
be brought before the Annual Meeting or any adjournment thereof, THE ENCLOSED
PROXY WILL BE VOTED IN ACCORDANCE WITH THE JUDGMENT OF THE PERSON OR PERSONS
VOTING IT, UNLESS "AUTHORIZATION WITHHELD" IS INDICATED IN THE APPROPRIATE
BOX OF THE PROXY.
THIS SOLICITATION IS MADE BY MANAGEMENT OF THE COMPANY.
VOTING SECURITIES AND RECORD DATE
Shares of common stock ("Common Stock"), $0.50 par value per share, are
the only voting securities of the Company and each share is entitled to one
vote. Only holders of record of Common Stock at the close of business on
March 7, 1997 will be entitled to vote at the Annual Meeting. As of that
date, there were 33,336,462 shares of Common Stock of the Company issued, of
which 2,528,936 shares were held as treasury shares, leaving 30,807,526
shares issued, outstanding and entitled to vote at the Annual Meeting.
4
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning beneficial ownership
of the Company's Common Stock as of March 7, 1997 with respect to (i) persons
the Company believes to be the beneficial owners of 5% or more of the
Company's Common Stock, (ii) each current director, the nominee, and each of
the executive officers named in the Summary Compensation Table contained
herein, and (iii) all directors and executive officers of the Company and
such nominee for election as a director, as a group:
Amount and Nature
of Beneficial Ownership(1) Percent
Name of ---------------------------------- of
Beneficial Owner Sole Power Shared Power(2) Class(1)
- ---------------------- --------------- ---------------- --------
William J. Rushton III 641,352(3) 11,094(4) 2.1%
John W. Woods 6,434 -0- *
William J. Cabaniss, Jr. 95,389 76,976 *
H. G. Pattillo 8,000 20,000 *
Drayton Nabers, Jr. 124,664(5) 10,677 *
John J. McMahon, Jr. 12,908(6) 18,000 *
A. W. Dahlberg 2,564 -0- *
John W. Rouse, Jr. 2,941 -0- *
Robert T. David 4,153 -0- *
Ronald L. Kuehn, Jr. 2,050 -0- *
Herbert A. Sklenar 1,692 1,542 *
James S. M. French 500 4,900(7) *
Robert A. Yellowlees 2,424 -0- *
John D. Johns 14,775(8) 2,100 *
R. Stephen Briggs 64,726(9) -0- *
Jim E. Massengale 57,378(10) 350 *
A. S. Williams III 45,605(11) -0- *
All current directors, the
nominee, and executive
officers as a group
(26 individuals) 1,230,586(12)(13) 145,639 4.5%
AmSouth Bank of Alabama
in various fiduciary
capacities -0- 3,132,377(14) 10.2%(14)
Nicholas Company, Inc. 2,166,120(15) -0- 7.0%(15)
Firstar Corporation 1,941,625(16) 387,050(16) 7.6%(16)
Janus Capital Corporation -0- 2,150,175(17) 7.0%(17)
- ----------------------------
*less than one percent
(1) The number of shares reflected are shares which under applicable
regulations of the Securities and Exchange Commission are deemed to be
beneficially owned. Shares deemed to be beneficially owned, under such
regulations, include shares as to which, directly or indirectly, through
any contract, relationship, arrangement, understanding or otherwise,
either voting power or investment power is held or shared. The total
number of shares beneficially owned is subdivided, where applicable, into
two categories: shares as to which voting/investment power is held solely
and shares as to which voting/investment power is shared. Unless
otherwise indicated in the following notes, if a beneficial owner has
sole power, he has sole voting and investment power, and if a beneficial
owner has shared power, he has shared voting and investment power. The
percentage calculation is based on the aggregate number of shares
beneficially owned.
(2) This column may include shares held in the name of a spouse, minor
children, or certain other relatives sharing the same home as the
director or officer, or held by the director or officer, or the spouse
of the director or officer, as a trustee or as a custodian for children,
as to all of which beneficial ownership is disclaimed by the respective
directors and officers except as otherwise noted below.
5
<PAGE>
(3) Includes 31,593 shares held in the Company's 401(k) and Stock Ownership
Plan for which Mr. Rushton has sole voting power.
(4) Shares owned by the wife of Mr. Rushton.
(5) Includes 6,085 shares held in the Company's 401(k) and Stock Ownership
Plan for which Mr. Nabers has sole voting power. Also, includes 78,103
share equivalents allocated to Mr. Nabers' deferred compensation account
pursuant to the terms of the Company's Deferred Compensation Plan for
Officers. Upon distribution, share equivalents will be distributed in
shares of Company Common Stock. Such shares will be issued directly to
Mr. Nabers who will have sole voting power over the shares at that time.
Does not include 150,000 stock appreciation rights awarded under the
Company's 1996 Stock Incentive Plan.
(6) Includes 3,764 share equivalents allocated to Mr. McMahon's deferred
compensation account pursuant to the terms of the Company's Deferred
Compensation Plan for Directors Who Are Not Employees of the Company.
Upon distribution, share equivalents will be distributed in shares of
Company Common Stock. Such shares will be issued directly to Mr. McMahon
who will have sole voting power over the shares at that time.
(7) Includes 4,000 shares of Company Common Stock owned by Dunn Investment
Company, of which Mr. French is Chairman, President, and Chief Executive
Officer.
(8) Includes 1,184 shares held in the Company's 401(k) and Stock Ownership
Plan for which Mr. Johns has sole voting power. Also, includes 11,391
share equivalents allocated to Mr. Johns' deferred compensation account
pursuant to the terms of the Company's Deferred Compensation Plan for
Officers. Upon distribution, share equivalents will be distributed in
shares of Company Common Stock. Such shares will be issued directly to
Mr. Johns who will have sole voting power over the shares at that time.
Does not include 75,000 stock appreciation rights awarded under the
Company's 1996 Stock Incentive Plan.
(9) Includes 12,937 shares held in the Company's 401(k) and Stock Ownership
Plan for which Mr. Briggs has sole voting power. Also, includes 27,832
share equivalents allocated to Mr. Briggs' deferred compensation account
pursuant to the terms of the Company's Deferred Compensation Plan for
Officers. Upon distribution, share equivalents will be distributed in
shares of Company Common Stock. Such shares will be issued directly to
Mr. Briggs who will have sole voting power over the shares at that time.
Does not include 20,000 stock appreciation rights awarded under the
Company's 1996 Stock Incentive Plan.
(10) Includes 14,808 shares held in the Company's 401(k) and Stock Ownership
Plan for which Mr. Massengale has sole voting power. Also, includes
16,440 share equivalents allocated to Mr. Massengale's deferred
compensation account pursuant to the terms of the Company's Deferred
Compensation Plan for Officers. Upon distribution, share equivalents
will be distributed in shares of Company Common Stock. Such shares will
be issued directly to Mr. Massengale who will have sole voting power over
the shares at that time. Does not include 20,000 stock appreciation
rights awarded under the Company's 1996 Stock Incentive Plan.
(11) Includes 12,588 shares held in the Company's 401(k) and Stock Ownership
Plan for which Mr. Williams has sole voting power. Also, includes 30,277
share equivalents allocated to Mr. Williams' deferred compensation
account pursuant to the terms of the Company's Deferred Compensation Plan
for Officers. Upon distribution, share equivalents will be distributed
in shares of Company Common Stock. Such shares will be issued directly
to Mr. Williams who will have sole voting power over the shares at that
time. Does not include 20,000 stock appreciation rights awarded under
the Company's 1996 Stock Incentive Plan.
(12) No officer or director owns any stock of any affiliate of the Company.
(13) Included are the interests of the persons as of December 31, 1996 in
104,165 shares held in the Company's 401(k) and Stock Ownership Plan,
which owned a total of 1,312,410 shares on such date. Each 401(k) and
Stock Ownership Plan participant has sole voting power with respect to
the shares held in the participant's accounts. The 693,120 shares held
in the Company's 401(k) and Stock Ownership Plan Trust which have not
been allocated to participants will be voted by the Trustees in
accordance with the majority of the vote of all participants. Also,
includes 253,120 share equivalents allocated to the deferred compensation
accounts of participating directors and executive officers as a group
pursuant to the Company's Deferred Compensation
6
<PAGE>
Plan for Directors Who Are Not Employees of the Company and the Company's
Deferred Compensation Plan for Officers.
(14) AmSouth Bank of Alabama, 1400 AmSouth/Sonat Tower, Birmingham, Alabama
35203, has advised the Company that the bank, in its capacity as
fiduciary of various trusts and estates, may be deemed the beneficial
owner, as of December 31, 1996, of 3,782,781 shares of Common Stock of
the Company, for which the bank has no sole voting or investment power,
but has shared voting power with respect to 3,132,377 shares and shared
investment power with respect to 2,615,825 shares. AmSouth Bank of
Alabama has further advised the Company that none of the separate trusts
and estates of which it is fiduciary holds as much as 5% of the
outstanding shares of the Company. AmSouth Bank of Alabama reported its
beneficial ownership as of December 31, 1996 as 12.3%. The table shows
the percentage based on 30,807,526 shares of Common Stock outstanding on
March 7, 1997.
(15) Nicholas Company, Inc., 700 North Water Street, Milwaukee, Wisconsin
53202, has advised the Company that it, in its capacity as an investment
adviser, may be deemed the beneficial owner, as of December 31, 1996, of
2,166,120 shares of Common Stock of the Company, for which Nicholas
Company, Inc. has no shared investment power and no voting power, but has
sole investment power with respect to 2,166,120 shares. Nicholas
Company, Inc. has further advised the Company that none of its separate
clients holds as much as 5% of the outstanding shares of the Company.
Nicholas Fund, Inc. has advised the Company that it, in its capacity as
an investment adviser, may be deemed the beneficial owner, as of December
31, 1996, of 1,468,500 shares of Common Stock of the Company included
within the shares reported by Nicholas Company, Inc. Nicholas Fund, Inc.
has sole voting power with respect to 1,468,500 shares, but has no
investment power and no shared voting power. Nicholas Company, Inc.
reported its beneficial ownership as of December 31, 1996 as 7.0%. The
table shows the percentage based on 30,807,526 shares of Common Stock
outstanding on March 7, 1997.
(16) Firstar Corporation, 777 E. Wisconsin Avenue, Milwaukee, Wisconsin
53202, has advised the Company that it, in its capacity as a holding
company, may be deemed the beneficial owner, as of December 31, 1996, of
2,336,650 shares of Common Stock of the Company. Firstar Corporation has
sole voting power with respect to 1,828,925 shares, sole investment power
with respect to 1,941,625 shares, shared voting power with respect to
386,050 shares, and shared investment power with respect to 387,050
shares. A subsidiary of Firstar Corporation, Firstar Investment Research
& Management Company, 777 E. Wisconsin Avenue, Milwaukee, Wisconsin
53202, has advised the Company that it, in its capacity as an investment
adviser, may be deemed the beneficial owner, as of December 31, 1996, of
2,336,650 shares of Common Stock of the Company. Firstar Investment
Research & Management Company has sole voting power with respect to
734,400 shares, sole investment power with respect to 847,100 shares,
shared voting power with respect to 1,448,140 shares, and shared
investment power with respect to 1,489,550 shares. Firstar Corporation
reported its beneficial ownership as of December 31, 1996 as 7.6%, which
it has advised the Company includes beneficial ownership by its
subsidiary. The table shows the percentage based on 30,807,526 shares of
Common Stock outstanding on March 7, 1997.
(17) Janus Capital Corporation, 100 Fillmore Street, Suite 400, Denver,
Colorado 80206, has advised the Company that it, in its capacity as an
investment adviser, may be deemed the beneficial owner, as of December
31, 1996, of 2,150,175 shares of Common Stock of the Company. Janus
Capital Corporation has no sole voting or investment power, but has
shared voting power with respect to 2,150,175 shares and shared
investment power with respect to 2,150,175 shares. Janus Capital
Corporation reported its beneficial ownership as of December 31, 1996 as
7.0%. The table shows the percentage based on 30,807,526 shares of Common
Stock outstanding on March 7, 1997.
7
<PAGE>
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS AND INFORMATION ABOUT NOMINEES
Unless "Withhold Authority" is specified in the proxy as to all or some of
the nominees, the persons named in the accompanying proxy intend to vote the
shares represented by such proxy, if properly dated and signed, for the
election as directors of the 13 nominees listed herein, all of whom are now
directors of the Company except for Mr. Johns, who was nominated by the Board
of Directors on March 3, 1997.
Mr. John D. Johns is President and Chief Operating Officer of the Company.
If elected, each of the 13 nominees shall serve as a director of the
Company until the 1998 Annual Meeting of Stockholders and thereafter until
his successor shall have been elected and shall qualify, except as otherwise
provided in the By-laws. Should one or more of such nominees become
unavailable or ineligible to serve, it is intended that the shares
represented by the proxy will be voted for the election of the other nominees
and may be voted, unless authorization is withheld, for any substitute
nominee or nominees as Management may designate. Management has no reason to
believe that any nominee will be unable or unwilling to serve as a director
if elected.
Mr. H. G. Pattillo will retire as a director at the Annual Meeting of
Stockholders having reached the retirement age fixed in the Company's By-laws.
The information in the following table and the notes thereto with respect
to each nominee for election as a director with regard to his age, principal
occupation or employment for the last five years, and certain other
directorships of the nominee has been furnished to the Company by the
respective nominees. No nominee, other than Messrs. Nabers and Johns, has
any position or office with the Company or any subsidiary. The table and
notes also indicate the nominees' present committee memberships.
<TABLE>
<CAPTION>
Company
Principal Occupation Director
Name Age and Directorships Since
- ----- --- ------------------------------------------------------ --------
<S> <C> <C> <C>
William J. Rushton III 67 Chairman Emeritus of the Company and, formerly, its
Chairman of the Board, its Chairman of the Board and
Chief Executive Officer, and its President; Director,
Alabama Power Company and The Southern Company.
(a)(d) 1956(f)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Company
Principal Occupation Director
Name Age and Directorships Since
- ----- --- ------------------------------------------------------ --------
<S> <C> <C> <C>
John W. Woods 65 Retired Chairman of the Board of AmSouth
Bancorporation (bank holding company) and, formerly, its
Chairman of the Board and Chief Executive Officer and its
President; retired Chairman of the Board of AmSouth
Bank of Alabama and, formerly, its Chairman of the Board
and Chief Executive Officer and its President; Director,
Alabama Power Company and McWane, Inc. (a)(b) 1970
William J. Cabaniss, Jr. 58 President of Precision Grinding, Inc. (machine grinding);
Director, Precision Grinding, Inc., AmSouth Bank of
Alabama, and Birmingham Steel Corporation. (c)(d) 1974(g)
Drayton Nabers, Jr. 56 Chairman of the Board and Chief Executive Officer of
the Company and, formerly, its Chairman of the Board,
President and Chief Executive Officer and, its President
and Chief Executive Officer and its President and Chief
Operating Officer; Director, Energen Corporation,
National Bank of Commerce of Birmingham, and Alabama
National Bancorporation. (a)(d)(e) 1982
John J. McMahon, Jr. 54 Chairman of the Board of McWane, Inc. (pipe and valve
manufacturing) and, formerly, its President; Director,
National Bank of Commerce of Birmingham and John H.
Harland Company. (a)(b) 1987
A. W. Dahlberg 56 Chairman of the Board, President and Chief Executive
Officer of The Southern Company (electric utilities) and,
formerly, its President; formerly, President and Chief
Executive Officer, Georgia Power Company; Director,
Georgia Power Company, Southern Company Services,
Inc., Alabama Power Company, Southern Energy, Inc.,
Southern Nuclear Operating Company, SunTrust Banks,
Inc., SunTrust Bank, Atlanta, SunTrust Banks of
Georgia, Inc., and Equifax, Inc. (a)(b) 1987
John W. Rouse, Jr. 59 President Emeritus, Southern Research Institute
(scientific research); Director, Alabama Power
Company. (c)(d) 1988
Robert T. David 58 Principal, Southeast Capital Partners, and President,
Polatomic, Inc.; formerly, Garrett Professor of Business
Administration, Berry College; formerly, Vice President
and Dean, School of Business, Samford University;
Director, Stockham Valves and Fittings, Inc., Polatomic,
Inc., and Triad Guaranty Inc. (c)(d) 1988
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Company
Principal Occupation Director
Name Age and Directorships Since
- ----- --- ------------------------------------------------------ --------
<S> <C> <C> <C>
Ronald L. Kuehn, Jr. 61 Chairman of the Board, President and Chief Executive
Officer, Sonat Inc. (energy and natural resources);
Director, AmSouth Bancorporation, Southern Natural Gas
Company, Union Carbide Corporation, Praxair, Inc.,
Transocean Offshore, Inc., Dun & Bradstreet Corporation.
(a)(b) 1990
Herbert A. Sklenar 65 Chairman of the Board of Vulcan Materials Company
(construction materials and chemicals) and, formerly, its
Chairman and Chief Executive Officer and its President
and Chief Executive Officer; Director, AmSouth
Bancorporation and Temple-Inland, Inc. (b)(c) 1992
James S. M. French 56 Chairman of the Board, President, and Chief Executive
Officer of Dunn Investment Company (materials,
construction, and investment holding company); Director,
Energen Corporation, Regions Financial Corporation, and
Hilb, Rogal and Hamilton Company. (a)(c) 1996
Robert A. Yellowlees 58 Chairman of the Board, President, and Chief Executive
Officer of National Data Corporation (information
processing company) and, formerly, its President, Chief
Executive Officer, and Chief Operating Officer; Director,
John H. Harland Company. (a)(c) 1996
John D. Johns 45 President and Chief Operating Officer of the Company
and, formerly, its Executive Vice President and Chief
Financial Officer; formerly, Vice President and General
Counsel of Sonat Inc.; Director, National Bank of
Commerce of Birmingham and Alabama National
Bancorporation. (e) --
</TABLE>
- ---------------------------------
(a) also a member of the Finance and Investments Committee
(b) also a member of the Compensation and Management Succession Committee
(c) also a member of the Audit Committee
(d) also a member of the Board Structure and Nominating Committee
(e) also a director and/or current officer of each principal Company subsidiary
(f) with the exception of the period 1958-1962
(g) with the exception of the period November 1988 - February 1992
10
<PAGE>
VOTE REQUIRED
To approve the election of the nominees as directors, the affirmative vote
of the holders of a majority of the shares issued, outstanding and entitled
to vote is required.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
THE NOMINEES AS DIRECTORS AS SET FORTH IN THIS PROXY STATEMENT.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
To assist in carrying out its duties and responsibilities, the Board of
Directors has a Finance and Investments Committee, an Audit Committee, a
Compensation and Management Succession Committee, and a Board Structure and
Nominating Committee, each composed of members of the Board. The members of
each committee are identified by appropriate notes in the table on pages 8-10.
The Finance and Investments Committee has responsibility for reviewing and
acting upon financial and investment matters, including borrowing and lending
transactions entered into by the Company and its subsidiaries. The Finance
and Investments Committee met seven times in 1996.
The Audit Committee reviews internal controls, systems and procedures,
accounting policies, and other significant aspects of the financial
management of the Company, including the Company's internal audit functions.
It also reviews with the Company's independent public accountants their audit
procedures, management letters, and other significant aspects of the annual
audit made by the independent public accountants. The Audit Committee met
three times in 1996.
The Compensation and Management Succession Committee has oversight and
ultimate charge and control of the compensation paid officers and employees
of the Company and its subsidiaries, whether by salary or under any of the
Company's compensation plans. This committee is also vested with the
responsibility of recommending to the Company's Board of Directors a
successor to the Chief Executive Officer whenever the need to name such a
successor may arise. The Compensation and Management Succession Committee met
three times in 1996.
The Board Structure and Nominating Committee is charged with the broad
responsibility of reviewing and advising the Board of Directors on the
functions and procedures of the Board and its committees, the compensation of
the directors for service on the Board and its committees, and the selection
and tenure of directors. No formal procedures whereby individual
stockholders can submit recommendations of persons to be considered for
nomination as a director of the Company have been instituted. However, the
committee would consider any such recommendations made to it in writing on a
timely basis. The Board Structure and Nominating Committee met one time in
1996.
Each of the committees reports its actions taken to the Board of Directors.
The Board of Directors met six times in 1996. Messrs. Rushton and
Yellowlees each attended fewer than 75% of the total number of meetings of
the Board and the committees of which he was a member during 1996.
11
<PAGE>
DIRECTOR'S FEES
Directors who are employees of the Company do not receive director's fees.
Other directors receive an annual director's fee of $20,000 and 50 shares of
Common Stock. For each board meeting attended, the directors who reside in
Birmingham receive $1,200 and the directors who do not reside in Birmingham
("non-Birmingham directors") receive $2,100 and reimbursement of their travel
expenses. For each Finance and Investments Committee, Audit Committee,
Compensation and Management Succession Committee, or Board Structure and
Nominating Committee meeting attended, the directors who reside in Birmingham
receive $1,200 and the non-Birmingham directors receive $1,300.
Non-Birmingham directors receive an additional fee of $500 and reimbursement
of their travel expenses for attendance at Audit Committee, Compensation and
Management Succession Committee, or Board Structure and Nominating Committee
meetings when travel to Birmingham is for the special purpose of attending
the meeting. The current non-Birmingham directors are Messrs. Dahlberg,
Pattillo, and Yellowlees.
The Company has established a Deferred Compensation Plan for Directors Who
Are Not Employees of the Company (the "Directors' Plan") whereby eligible
directors may voluntarily elect to defer to a specified date receipt of all
or any portion of their director's fees. Director's fees so deferred are
credited to the directors in cash or Company stock equivalents or a
combination thereof. The cash portion earns interest at approximately the
Company's short-term borrowing rate. The stock equivalent portion is credited
with dividends in the form of additional stock equivalents. Deferred
director's fees will be distributed in stock or cash as specified by the
directors in accordance with the Directors' Plan unless distribution is
accelerated under certain provisions, including upon a change in control of
the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors and executive officers of the Company are required to report
changes in their beneficial ownership of the Company's Common Stock to the
Securities and Exchange Commission. In 1996, all such reports were filed on
a timely basis.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Management Succession Committee
("Committee") are Messrs. McMahon (Chairman), Woods, Dahlberg, Kuehn, and
Sklenar. No member of the Committee was an officer or employee of the
Company or any of its subsidiaries at any time during 1996. Also, no member
of the Committee was formerly an officer of the Company or any of its
subsidiaries.
Mr. Dahlberg is the Chairman of the Board, President and Chief Executive
Officer of The Southern Company. The Company is a 25% member of a limited
liability company which acquired an office building adjacent to the Company's
home office from an affiliate of The Southern Company which continues to
lease portions of the building. During 1996, the limited liability company
received $1,913,930 in lease payments from affiliates of The Southern Company.
12
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation paid to the Chief Executive Officer and each of the four other
most highly compensated executive officers of the Company ("Named
Executives") during or with respect to the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
----------------------------------------------------------------------------
Awards Payouts
-------------------------------
Securities
Other Underlying All
Annual Options/ Long-Term Other
Compen- SARs Incentive Plan Compen-
Name and Principal Position Year Salary(1)(2) Bonus(1)(2)(3) sation (#) Payouts(1)(3)(4) sation(5)
(a) (b) (c) (d) (e) (g) (h) (i)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Drayton Nabers, Jr. 1996 $535,000 $691,063(6) $2,970 150,000 $757,492(8) $4,500
Chairman of the Board and 1995 499,167 459,000 2,970 694,733 4,500
Chief Executive Officer 1994 438,550 400,500 1,188 624,499 4,500
- --------------------------------------------------------------------------------------------------------------------------------
John D. Johns 1996 312,917 306,316(7) -0- 75,000 166,026(8) 4,500
President and Chief 1995 282,500 200,000 -0- 132,964 4,500
Operating Officer 1994 268,333 189,000 -0- 87,041 4,500
- --------------------------------------------------------------------------------------------------------------------------------
R. Stephen Briggs 1996 293,333 181,700 -0- 20,000 249,038(8) 4,500
Executive Vice President 1995 282,500 190,000 1,056 262,598 4,500
1994 268,333 153,900 3,168 243,706 4,500
- --------------------------------------------------------------------------------------------------------------------------------
A. S. Williams III 1996 273,333 442,500 5,742 20,000 280,168(8) 4,500
Executive Vice President, 1995 263,333 240,603 2,970 299,170 4,500
Investments and Treasurer 1994 252,500 153,000 2,970 263,283 4,500
- --------------------------------------------------------------------------------------------------------------------------------
Jim E. Massengale 1996 225,417 148,100 756 20,000 233,474(8) 4,500
Executive Vice President, 1995 203,333 123,000 753 252,639 4,500
Acquisitions 1994 193,550 117,000 728 235,020 4,500
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For further information, see the "Compensation and Management Succession
Committee's Report on Executive Compensation".
(2) Includes amounts that the Named Executives may have voluntarily elected to
contribute to the Company's 401(k) and Stock Ownership Plan.
(3) Includes amounts that the Named Executives may have voluntarily deferred
under the Company's Deferred Compensation Plan for Officers.
(4) For further information, see the "Long-Term Incentive Plan Awards In Last
Fiscal Year" table.
(5) Matching contributions to the Company's 401(k) and Stock Ownership Plan.
(6) Includes a one-time bonus award of $205,063 in shares of the Company's
Common Stock.
(7) Includes a one-time bonus award of $53,316 in shares of the Company's
Common Stock.
(8) 1996 long-term compensation is not yet determinable. The amount shown is
the best estimate available as of the date of this Proxy Statement.
The following table sets forth information regarding the stock
appreciation rights granted to Named Executives during 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Grant Date
Individual Grants Value
- -------------------------------------------------------------------------------------------------------------------------------
Percent of
Number of Total
Securities Options/
Underlying SARs Granted Exercise or Grant
Option/SARs(1) to Employees Base Price Date Expiration Grant Date
Name Granted (#) in Fiscal Year ($/Sh) Price Date Present Value $
(a) (b) (c) (d) ($/Sh) (e) (h)(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Drayton Nabers, Jr. 150,000 44.4% $34.875 $35.00 August 15, 2006 $1,332,750
- --------------------------------------------------------------------------------------------------------------------------------
John D. Johns 75,000 22.2 34.875 35.00 August 15, 2006 666,375
- --------------------------------------------------------------------------------------------------------------------------------
R. Stephen Briggs 20,000 5.9 34.875 35.00 August 15, 2006 177,700
- --------------------------------------------------------------------------------------------------------------------------------
A. S. Williams III 20,000 5.9 34.875 35.00 August 15, 2006 177,700
- --------------------------------------------------------------------------------------------------------------------------------
Jim E. Massengale 20,000 5.9 34.875 35.00 August 15, 2006 177,700
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The stock appreciation rights are exercisable after five years (earlier
upon the death, disability or retirement of the executive or, in certain
circumstances, upon a change in control of the Company). Unexercised
rights expire upon termination of employment, and rights exercised within
the one-year period prior to termination are recoverable by the Company if
the executive becomes employed by a competitor of the Company.
(2) The stock appreciation rights were valued using the Roll-Geske variation
of the Black-Scholes option pricing model. Expected volatility was assumed
to approximately equal that of the S&P Life Insurance Index or 15%. Other
assumptions include a risk-free rate of 6.35%, a dividend yield of 1.97%,
and an expected time of exercise of August 15, 2002.
13
<PAGE>
The following table sets forth the value of the stock appreciation rights
held by the Named Executives based upon the value of the Common Stock as of
December 31, 1996.
AGGREGATED FY-END OPTION/SAR VALUES
- --------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
(a) (d) (e)
- --------------------------------------------------------------------
Drayton Nabers, Jr. 0/150,000 $0/$750,000
- --------------------------------------------------------------------
John D. Johns 0/ 75,000 0/ 375,000
- --------------------------------------------------------------------
R. Stephen Briggs 0/ 20,000 0/ 100,000
- --------------------------------------------------------------------
A. S. Williams III 0/ 20,000 0/ 100,000
- --------------------------------------------------------------------
Jim E. Massengale 0/ 20,000 0/ 100,000
- --------------------------------------------------------------------
In 1996, the Compensation and Management Succession Committee awarded
performance shares under the 1992 Performance Share Plan, as indicated, to
the Named Executives in the table below, which are generally payable, if at
all, at the time the results of the comparison group of companies for the
four-year period ending December 31, 1999 are known.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Performance or Estimated Future Payouts Under
Number of Other Period Until Non-Stock Price-Based Plans (in shares)
Shares, Units or Maturation or ---------------------------------------
Name Other Rights (#)(1) Payout Threshold Target Maximum
(a) (b) (c) (d) (e) (f)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Drayton Nabers, Jr. 10,650 shares December 31, 1999 5,325 13,313 18,105
- ---------------------------------------------------------------------------------------------------------------
John D. Johns 3,880 shares December 31, 1999 1,940 4,850 6,596
- ---------------------------------------------------------------------------------------------------------------
R. Stephen Briggs 3,880 shares December 31, 1999 1,940 4,850 6,596
- ---------------------------------------------------------------------------------------------------------------
A. S. Williams III 2,980 shares December 31, 1999 1,490 3,725 5,066
- ---------------------------------------------------------------------------------------------------------------
Jim E. Massengale 2,300 shares December 31, 1999 1,150 2,875 3,910
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In the event of a change in control, payment will be made with respect to
all outstanding awards based upon performance at the target level (which,
for all outstanding awards, is deemed to be at the seventy-fifth percentile)
or, if greater, performance as of the December 31 preceding the change in
control.
With respect to 1996 awards awarded to the Named Executives, 125% of the
award is earned if the Company's average return on average equity for the
four-year period ranks at the top 25% of the comparison group. If the
Company ranks at the top 10% of the comparison group, 170% of the award is
earned. If the Company ranks at the median of the comparison group, 50% of
the award is earned and if the Company's results are below the median of the
comparison group, no portion of the award is earned. The Performance Share
Plan provides for interpolation between thresholds to determine the exact
percentage to be paid.
14
<PAGE>
PENSION PLAN
PENSION PLAN TABLE
- ------------------------------------------------------------------------------
Years of Service
----------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------------------------------------------------------------------------
$ 125,000 $ 27,802 $ 37,070 $ 46,337 $ 55,604 $ 64,872
150,000 33,802 45,070 56,337 67,604 78,872
175,000* 39,802 53,070 66,337 79,604 92,872
200,000* 45,802 61,070 76,337 91,604 106,872
225,000* 51,802 69,070 86,337 103,604 120,872
250,000* 57,802 77,070 96,337 115,604 134,872*
275,000* 63,802 85,070 106,337 127,604* 148,872*
300,000* 69,802 93,070 116,337 139,604* 162,872*
400,000* 93,802 125,070* 156,337* 187,604* 218,872*
500,000* 117,802 157,070* 196,337* 235,604* 274,872*
600,000* 141,802* 189,070* 236,337* 283,604* 330,872*
700,000* 165,802* 221,070* 276,337* 331,604* 386,872*
800,000* 189,802* 253,070* 316,337* 379,604* 442,872*
900,000* 213,802* 285,070* 356,337* 427,604* 498,872*
1,000,000* 237,802* 317,070* 396,337* 475,604* 554,872*
1,100,000* 261,802* 349,070* 436,337* 523,604* 610,872*
1,200,000* 285,802* 381,070* 476,337* 571,604* 666,872*
1,300,000* 309,802* 413,070* 516,337* 619,604* 722,872*
- ------------------------------------------------------------------------------
- -------------------
*Current pension law limits the maximum annual benefit payable at normal
retirement age under a defined benefit plan to $125,000 for 1997 and is
subject to increase in later years. In addition, in 1997, such a plan may
not take into account annual compensation in excess of $160,000, which
amount is similarly subject to increase in later years. The Company's
Excess Benefit Plan ("Excess Benefit Plan"), adopted effective September 1,
1984, and amended and restated as of January 1, 1989, provides for payment,
outside of the Protective Life Corporation Pension Plan ("Pension Plan"), of
the difference between (1) the fully accrued benefits which would be due
under the Pension Plan absent both of the aforesaid limitations and (2) the
amount actually payable under the Pension Plan as so limited.
The above table illustrates estimated gross annual benefits which would
be payable for life in a straight life annuity commencing at normal
retirement age under the Pension Plan and the Excess Benefit Plan for
employees with average compensation (remuneration under the table above) and
years of service. Benefits in the above table are not reduced by social
security or other offset amounts.
Compensation covered by the Pension Plan (for purposes of pension
benefits) excludes commissions and performance share awards and generally
corresponds to that shown under the heading "Annual Compensation" in the
Summary Compensation Table. Compensation is calculated based on the average
of the highest level of compensation paid during a period of 36 consecutive
whole months. Only three Annual Incentive Plan bonuses (whether paid or
deferred under a Deferred Compensation Plan maintained by the Company) may be
included in obtaining the average compensation.
The Named Executives and their estimated length of service as of
December 31, 1996 are provided in the following table.
15
<PAGE>
Name Years of Service
-------------------------------------------
Drayton Nabers, Jr. 18
John D. Johns 3
R. Stephen Briggs 25
A. S. Williams III 32
Jim E. Massengale 13
-------------------------------------------
EMPLOYMENT CONTINUATION AGREEMENTS
The Board of Directors has authorized the Company to enter into
Employment Continuation Agreements with each of the Named Executives which
provide for certain benefits in the event such executive's employment is
actually or constructively (by means of a reduction in duties or
compensation) terminated following certain events constituting a "change in
control". Such benefits include (i) a payment equal to three times the sum
of the annual base salary in effect at the time of the change in control and
the average annual incentive plan bonus for the three years preceding the
change in control; (ii) continuation (for twenty-four months) in the
Company's hospital, medical, accident, disability, and life insurance plans
as provided to the executive immediately prior to the date of his termination
of employment; (iii) delivery of an annuity to equal increased benefits under
the Pension Plan and the Excess Benefit Plan resulting from an additional
three years of credited service (subject to the Pension Plan's maximum on
crediting service); and (iv) an additional payment, if necessary, to
reimburse the executive for any additional tax (other than normal Federal,
state and local income taxes) incurred as a result of any benefits received
in connection with the change in control.
COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE'S
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Succession Committee ("Committee") has
oversight and ultimate control of the compensation paid to the Chief
Executive Officer and other officers and employees of the Company and its
subsidiaries, whether by salary or under the Company's compensation plans.
This Report on Executive Compensation ("Report") was prepared by the
Committee.
There were three primary types of compensation paid to executive
officers of the Company in 1996: (i) salary, (ii) annual incentive awards,
and (iii) stock incentive awards which are further described below. A
significant portion of the Chief Executive Officer's total compensation is
incentive compensation. As reflected in the Summary Compensation Table, for
1996, 73% of the Chief Executive Officer's total compensation was incentive
compensation.
SALARY
The Company utilizes an independent compensation consultant to provide
competitive compensation data for executive officers. Through the
consultant, the Company accesses multiple compensation survey sources to
review the pay practices of other life insurance companies, and to establish
salary ranges for executive officers. Some of the companies in the peer
group listed on page 21 are included in the compensation surveys.
16
<PAGE>
The Committee's compensation strategy for executive officers has
generally been to pay salaries at or near the median which, when supplemented
by an Annual Incentive Plan award, will produce total cash compensation
commensurate with the Company's performance as compared to a peer group of
companies. Growth in earnings per share and return on average equity are the
two principal measures of Company performance employed by the Committee.
Individual competence, length of time within a position, and comparisons
to salaries for similar positions in other companies (adjusted for size) help
determine where an officer's salary falls within the range. For the Chief
Executive Officer, Company performance was also considered by the Committee
in setting the appropriate base salary level. No specific weights are given
to any of the factors considered by the Committee. Based upon the above
factors, the Committee established the Chief Executive Officer's 1996 base
salary at $540,000.
ANNUAL INCENTIVE AWARDS
The Company has had an annual cash bonus plan since 1973. The Annual
Incentive Plan ("AIP") was established for the purpose of rewarding,
retaining, and providing incentive for outstanding performance for those
employees who contribute most to the operating progress of the Company. The
AIP is administered by the Committee. Employees are selected and individual
bonuses are allotted to them by the Company's executive officers with the
approval of the Chief Executive Officer. The Committee sets the total amount
of bonuses payable for each year and reviews the methodology used to
determine individual bonuses. The Committee specifically reviews and
approves the annual bonus paid to each of the executive officers, including
the Chief Executive Officer. Currently, there are 139 employees in the AIP,
including the Chief Executive Officer. Each employee is assigned a target
bonus percentage which ranges from 4% to 45% of salary. The Chief Executive
Officer's target bonus percentage is 45%. Bonus payments, when made, may
range from 33% to 200% of the target. The Committee is authorized to
determine the exact percentage of AIP bonuses earned and may direct that no
AIP bonuses be paid.
The AIP provides that the Committee may credit annually to an incentive
reserve for each fiscal year a provision which may not be more than 5% of the
Company's pretax income for that year. In 1996, $4.0 million, or 2.9% of the
Company's 1996 pretax income, was credited to the incentive reserve. In any
year the Committee may pay any part or all of the incentive reserve as
awards. Any part of the incentive reserve which is not paid in any year may
remain in the incentive reserve and be carried forward to the next year.
An individual's AIP bonus is based upon Company performance and, in
addition, may also be based upon divisional and/or individual performance
criteria specifically related to the officer's responsibilities which are
consistent with overall Company objectives. The Chief Executive Officer's
AIP bonus is based solely on the Company's achieved earnings per share
according to a range fixed for the year at the Committee's March meeting.
For the other executive officers, 40% to 100% of their respective AIP bonuses
is based upon Company performance, which, for 1996, was measured by the
Company's operating earnings per share.
Under the terms fixed by the Committee, Mr. Nabers would earn a target
AIP bonus of 45% of 1996 base salary if the Company's 1996 operating earnings
per share were $2.75. A maximum bonus, 200% of target or 90% of Mr. Nabers'
1996 base salary would be paid if the Company's operating earnings per share
were $2.90. The Company's 1996 operating earnings per share of $2.90
representing a 16.6% operating return on average equity resulted in Mr.
Nabers earning a maximum AIP bonus of 90% of his 1996 base salary, or
$486,000.
17
<PAGE>
The Committee believes that its administration of the AIP relates
bonuses paid to the Chief Executive Officer to Company performance.
STOCK INCENTIVE AWARDS
PERFORMANCE SHARE AWARDS
The Performance Share Plan was initially adopted in 1973 by stockholders
to motivate officers and key employees, including the Chief Executive
Officer, to focus on the Company's long-range earnings performance, to reward
them based on long-range results, and to provide a process by which officers
and key employees may increase stockholdings in the Company. Under the
Performance Share Plan, officers and key employees of the Company and its
subsidiaries, who are determined by the Committee to have a substantial
opportunity to influence the long-term growth in profitability of the
Company, are eligible to participate in the Performance Share Plan. Those
selected by the Committee are awarded performance shares on an annual basis,
each of which has a potential value equal to the market value of one share of
Company Common Stock at the date payment may be earned. If an award is
earned, unless deferment is elected under the Deferred Compensation Plan for
Officers, the employee receives payment (in cash approximately equal to the
income tax liability on the award and the balance in Common Stock) of all or
part of the award four years after the award date, based on the award
conditions determined by the Committee at the time of the award. With
respect to 1996 awards, the number of performance shares awarded was
determined by multiplying the employee's award percentage times such
employee's base salary plus target AIP bonus, divided by the average share
price of the Company's Common Stock. Each employee is assigned an award
percentage which ranges from 20% to 50%, to provide long-term compensation
which is competitive to that offered to persons performing similar functions
at insurance companies of comparable size. The Chief Executive Officer's
1996 award percentage was 50%. For 1996, a total of 52,290 shares were
awarded to 31 participants. For further information, see the "Long-Term
Incentive Plan Awards in Last Fiscal Year" table on page 14 and the
accompanying text for a description of how 1996 awards may be earned.
Under the Performance Share Plan, the criterion for payment of
performance share awards is made in accordance with the Company's average
return on average equity for an award period compared with that of a
comparison group of publicly held life insurance companies, multiline
insurers and insurance holding companies during the award period. The
comparison group of companies is generally comprised of the Company and the
40 largest publicly held stock life and multiline insurance companies as
listed in the National Underwriter, "Insurance Stock Results", each having
net worth in excess of $100 million, ranked according to net worth, excluding
downstream affiliates of any companies in the comparison group (see page 21).
If the Company's four-year results are below the median of the comparison
group no portion of the award is earned. If a company in the comparison group
is acquired or exits the insurance industry during the award period, such
company is ranked below the Company for comparison purposes. The Committee
believes the operation of the Performance Share Plan relates long-term
incentive compensation to the Company's long-term performance.
Results for the award period ending in 1996 will not be known until the
1996 results for the individual companies included in the comparison group
are available. Based upon information available as of the date of this Proxy
Statement, it is anticipated that the Company's 1996 results will place the
Company in the top 10% of the comparison group which will entitle Mr. Nabers
to approximately $757,492 in shares of Company Common Stock and cash,
representing 130% of
18
<PAGE>
his 1993 performance share award. $486,866 of this payment, or 64%, would
represent appreciation in the market value of Company Common Stock since the
award date.
STOCK APPRECIATION RIGHTS AND STOCK BONUS AWARD
During 1996, the Committee requested the Company's compensation
consultants to prepare an analysis of executive compensation. Specifically,
the Committee was concerned that the Company's performance-based compensation
plans did not compensate senior executives consistent with the Committee's
compensation strategy when the Company's results are superior. Based upon
such analysis, the Committee decided to make a one-time award of stock
appreciation rights to 12 senior executive officers which would provide
additional long-term incentive compensation based solely on the performance
of the Company's Common Stock. In addition, a five-year cliff vesting
schedule was established (subject to acceleration in the event of death,
disability or retirement and, in certain circumstances, a change in control
of the Company) in order to maximize the retention value of such awards. Mr.
Nabers received an award of stock appreciation rights with respect to 150,000
shares of Common Stock. For further information, see the "Option/SAR Grants
in Last Fiscal Year" table on page 13. Additionally, the Committee decided
to make a one-time bonus award of $205,063 in shares of the Company's Common
Stock to Mr. Nabers and of $53,316 in shares of the Company's Common Stock to
Mr. Johns.
$1 MILLION LIMIT ON EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, states
that publicly held corporations may not take tax deductions for amounts
greater than $1 million that are paid annually to executives whose pay must
be disclosed separately in the Company's Proxy Statement, unless such
compensation is "qualified performance-based compensation" which meets
certain specific requirements. While Section 162(m) generally became
effective with respect to compensation payable after 1993, a special rule
provided an exemption for certain awards granted prior to the 1997 Annual
Meeting of Stockholders. Because of the special rule (and certain elective
deferrals by the Chief Executive Officer), the Company has paid no
compensation that is non-deductible by reason of Section 162(m). The Company
is currently seeking stockholder approval of certain compensation plans at
the Annual Meeting in order to qualify certain compensation payable
thereunder for deductibility by the Company for Federal income tax purposes.
For further information with respect to such proposals, see "Proposals To
Approve Compensation Plans" on page 22.
COMPENSATION AND MANAGEMENT
SUCCESSION COMMITTEE
John J. McMahon, Jr., Chairman
A. W. Dahlberg John W. Woods
Herbert A. Sklenar Ronald L. Kuehn, Jr.
19
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PERFORMANCE COMPARISON
The following graph compares total returns on the Company's Common Stock
over the last five fiscal years to the Standard & Poor's 500 Stock Index
("S&P 500") and to a peer comparison group ("Peer Group"). Total return
values were calculated based on cumulative total return values assuming
reinvestment of dividends. The shareholder return shown in the graph below
is not necessarily indicative of future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
AMONG PROTECTIVE LIFE CORPORATION, THE S&P 500, AND A PEER GROUP(2)
PERFORMANCE CHART
- ----------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
-----------------------------------------------
Protective Life Corporation $100 $165 $245 $277 $366 $476
-----------------------------------------------
S&P 500 100 108 118 120 165 203
-----------------------------------------------
Peer Group 100 123 140 133 200 252
- ----------------------------------------------------------------------------
(1) Assumes $100 invested on December 31, 1991 in Protective Life Corporation,
S&P 500, and Peer Group common stocks including reinvestment of dividends.
(2) Fiscal Year ending December 31.
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The companies included in the Peer Group index are generally identical to
those companies included in the Company's 1996 comparison group of companies
under the Performance Share Plan, which is generally comprised of the Company
and the 40 largest publicly held stock life and multiline insurance companies
as listed in the National Underwriter, "Insurance Stock Results", each having
net worth in excess of $100 million, ranked according to net worth at January
1, 1996, excluding downstream affiliates of any companies in the comparison
group. The Peer Group excludes First Colony Corporation, Independent
Insurance Group, Inc., and Life Partners Group, Inc. that are included in the
Company's 1996 Performance Share Plan comparison group because, although they
were among the 40 largest companies on January 1, 1996, they were not
publicly held on December 31, 1996. The Peer Group also excludes United
Companies Financial Corporation, a company in the 1996 Performance Share Plan
comparison group which sold its insurance operations during 1996. The index
weights individual company returns for stock market capitalization. The
companies included in the Peer Group index are:
Aetna Life & Casualty Company
AFLAC, Inc.
Alfa Corporation
American General Corporation
American Heritage Life Investment
Corporation
American International Group, Inc.
American National Insurance Company
Aon Corporation
CIGNA Corporation
CNA Financial Corporation
Conseco, Inc.
Delphi Financial Group, Inc.
The Equitable Companies Incorporated
Equitable of Iowa Companies
Home Beneficial Corporation
Jefferson-Pilot Corporation
John Alden Financial Corporation
Kansas City Life Insurance Company
The Liberty Corporation
Lincoln National Corporation
National Western Life Insurance Company
Old Republic International
Paul Revere Corporation
Presidential Life Corporation
Protective Life Corporation
Provident Life & Accident Insurance
Company of America
Providian Corporation
ReliaStar Financial Corporation
Security-Connecticut Corporation
Sun America, Inc.
Torchmark Corporation
Travelers Corporation
United Insurance Companies, Inc.
Unitrin Incorporated
UNUM Corporation
USLIFE Corporation
Washington National Corporation
The composition of the Peer Group has changed from that used in the
previous year's Proxy Statement. First Colony Corporation, Independent
Insurance Group, Inc., and Life Partners Group, Inc. were deleted because
they were acquired by other companies. Paul Revere Corporation and Travelers
Corporation were added to the Peer Group index because they were among the 40
largest companies on January 1, 1996.
As disclosed in the "Compensation and Management Succession Committee's
Report on Executive Compensation", the Company's incentive compensation is
predominantly based upon comparisons of the Company's return on average
equity (rather than total return) to that of a comparison group of companies.
The following table sets forth the return on average equity and average
return on average equity for the Company and the median for the applicable
comparison group of companies.
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- -----------------------------------------------------------------------
Protective Life Corporation Comparison Group Median(1)
-------------------------------------------------------------
Year ROE(2) Average ROE(3) ROE(2) Average ROE(3)
- -----------------------------------------------------------------------
1996 16.6% 18.3% 11.7%(4) 11.9%(4)
1995 17.7 18.0 11.6 11.5
1994 20.1 17.3 10.5 9.5
1993 18.6 15.6 12.4 9.7
1992 15.5 13.5 12.1 10.2
- -----------------------------------------------------------------------
(1) The median is the middle value in a distribution, above and below which
lie an equal number of values.
(2) Return on average equity for the year shown. Average equity excludes
net unrealized gains and losses on investments.
(3) Average return on average equity for the four-year award period ending
with the year shown.
(4) The 1996 comparison group median is not yet determinable. The percentage
shown is the best estimate available as of the date of this Proxy
Statement.
CERTAIN TRANSACTIONS
The Company is a 25% member of a limited liability company which acquired
an office building adjacent to the Company's home office from an affiliate of
The Southern Company which continues to lease portions of the building.
During 1996, the limited liability company received $1,913,930 in lease
payments from affiliates of The Southern Company. Mr. Dahlberg is the
Chairman of the Board, President and Chief Executive Officer of The Southern
Company.
PROPOSALS TO APPROVE COMPENSATION PLANS
As set forth in the following proposals, the Company is currently seeking
approval of the Company's (i) 1997 Performance Share Plan, (ii) Annual
Incentive Plan, and (iii) 1996 Stock Incentive Plan in order to qualify
certain compensation payable thereunder for deductibility by the Company for
Federal income tax purposes.
The Board of Directors has adopted the Protective Life Corporation 1997
Performance Share Plan to assure that any awards made to the Company's
executive officers which will vest, if at all, upon the attainment of
performance objectives will continue to qualify as "other performance-based
compensation" under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). In addition, the Board of Directors has adopted the
Protective Life Corporation Annual Incentive Plan which will permit the
Company to award similarly qualified annual cash bonuses to the Company's
executive officers based on a determination by the Compensation and
Management Succession Committee (the "Committee") that performance objectives
established by the Committee and based on those criteria set forth in the
Annual Incentive Plan have been attained in whole or in part. Finally, the
Board has adopted the Protective Life Corporation 1996 Stock Incentive Plan,
pursuant to which the Company may award stock appreciation rights to
executive officers, the value of which is dependent upon the performance of
the Company's Common Stock. Future awards to executive officers under each of
these plans will be dependent on the approval of the plans by the Company's
stockholders.
Under Section 162(m) of the Code, no deduction is allowed in any taxable
year of the Company for compensation in excess of $1 million paid to each of
its Chief Executive Officer and
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its four most highly paid other executive officers who are serving in such
capacities as of the last day of such taxable year. An exception to this
rule applies to certain performance-based compensation that is paid pursuant
to a plan or program approved by the Company's stockholders and that
specifies the performance objectives to be obtained, the class of employees
eligible to receive awards and the maximum amount that can be paid to
eligible employees under such plan or program. Stock appreciation rights, as
authorized under the 1996 Stock Incentive Plan, are inherently
performance-based, since they provide value to employees only if the stock
price appreciates. For other awards to qualify for the exception available
for performance-based compensation, stockholders must approve the performance
objectives to which such awards relate. While Section 162(m) generally became
effective with respect to compensation payable after 1993, a special rule
stated that awards granted under the predecessor of the 1997 Performance
Share Plan prior to the 1997 Annual Meeting of Stockholders would be treated
as performance-based compensation without stockholder approval of the
otherwise required per person award limits or the performance objectives.
Because of this special rule (and certain elective deferrals by the Chief
Executive Officer) the Company has paid no compensation that is nondeductible
by reason of Section 162(m).
On March 7, 1997, the closing price of the Company's Common Stock on the
New York Stock Exchange was $43.25 per share.
PROPOSAL TO APPROVE THE
1997 PERFORMANCE SHARE PLAN
INTRODUCTION
The Board of Directors has adopted and is seeking approval of the
Protective Life Corporation 1997 Performance Share Plan (the "Performance
Plan"). The purpose of the Performance Plan is to further the long-term
growth in profitability of the Company by offering long-term incentives in
addition to current compensation to key employees of the Company who will be
largely responsible for such growth.
The Performance Plan authorizes the award of performance shares to a
select group of executive officers and key employees which will vest based on
the attainment of certain preestablished levels of performance with respect
to certain objective measurements of performance set forth in the Performance
Plan.
The following summary of the Performance Plan is qualified by reference
to the complete text of the plan, which was filed with the Securities and
Exchange Commission as an appendix to this Proxy Statement and may be
obtained through the Internet from the "EDGAR Database of Corporate
Information" on the Securities and Exchange Commission's World Wide Web site
(http://www.sec.gov). The existence of the Performance Plan shall not
preclude the Company from making any additional payments outside the
Performance Plan to participants therein or to other employees.
23
<PAGE>
VOTE REQUIRED
To approve the Company's 1997 Performance Share Plan, the affirmative
vote of the holders of a majority of the shares issued, outstanding and
entitled to vote is required.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE APPROVAL OF THE PROTECTIVE LIFE CORPORATION 1997 PERFORMANCE SHARE PLAN.
PERFORMANCE SHARE PLAN
ELIGIBILITY. The Performance Plan authorizes the Committee to make
awards of performance shares representing shares of the Company's Common
Stock (the "Performance Shares") to officers and other key employees of the
Company and its subsidiaries, including all of the Company's Named
Executives. The number of eligible participants in the Performance Plan will
vary from year to year at the discretion of the Committee. During
1996, approximately 31 employees (including all of the Company's Named
Executives) were eligible to receive awards under the predecessor to the
Performance Plan and it is expected that approximately the same number of
employees will be eligible for awards under the Performance Plan in 1997.
ADMINISTRATION. The Performance Plan is administered by the
Committee which shall at all times consist of at least two directors each of
whom is an "outside director" for purposes of Section 162(m) and a
"non-employee" director within the meaning of Rule 16b-3 ("Rule 16b-3"), as
promulgated under Section 16 of the Securities Exchange Act of 1934, as
amended. The Committee has the authority to determine (i) which eligible
employees will be participants, (ii) the performance objectives with respect
to any awards made thereunder, (iii) subject to the limitations set forth in
the Performance Plan, the terms and conditions of all awards made thereunder,
and (iv) subject to the maximum limitations set forth in the Performance
Plan, the amount of compensation that may be payable to any participant upon
the attainment of the applicable performance objectives.
PERFORMANCE CRITERIA. The Committee will award a number of
Performance Shares with respect to a multi-year performance period (the
"Performance Period") and pursuant to performance objectives (the
"Performance Objectives") it shall establish. The Performance Objectives may
be based upon any of the following areas: (i) income per share, (ii) return
on equity, (iii) economic value added, (iv) total return, (v) sales or
revenues, or (vi) other reasonable bases, PROVIDED THAT unless the Committee
otherwise determines at the time of the grant of Performance Shares to an
executive officer, the Performance Objectives with respect to the award shall
be related to at least one of the criteria established in (i) through (v),
which may be determined solely by reference to the performance of the
Company, a subsidiary or division or based on comparative performance
relative to other companies. The Performance Objectives selected by the
Committee for each Performance Period will be established prior to the
beginning of such Performance Period (or at such later time as may be
permitted under Section 162(m) of the Code). A determination of whether the
applicable Performance Objectives have been attained, in whole or in part,
will be made by the Committee following the end of the relevant Performance
Period. Subject to the discretion of the Committee to reduce the amount
payable, a participant will earn all of the Performance Shares related to a
Performance Period upon achievement of the target level of performance
applicable to any one Performance Objective.
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<PAGE>
PAYMENT. If the Committee determines that the Performance
Objectives for a Performance Period have been attained, a participant will be
entitled to receive, as soon as practicable after such determination has been
made, a payment equal to the value of one share of the Company's Common Stock
for each Performance Share earned with respect to such Performance Period.
The Performance Plan provides that payment of awards shall 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 taxes required to be
withheld as a result of such award. The maximum number of Performance Shares
which may be earned under the Performance Plan shall not exceed an aggregate
of 2,000,000 subject to adjustment to reflect a change in the Company's
Common Stock. No participant may earn more than 50% of the Performance
Shares available under the Performance Plan.
TERMINATION OF EMPLOYMENT. If a participant's 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, after any Performance Shares have been awarded, such participant
will receive a pro-rata payment with respect to any outstanding Performance
Shares based on the period of employment during the applicable Performance
Period and determined by reference to the performance achieved as of the end
of the fiscal year immediately preceding the termination date. If a
participant's employment is terminated by reason of (i) retirement prior to
normal retirement age at the request of the participant and approved in
writing by the Company, (ii) the divestiture of a business segment or a
significant portion of the assets of the Company, or (iii) a significant
reduction by the Company in its work force, the determination of whether any
payment with respect to any unvested portion of an award shall be at the
discretion of the Committee. If a participant's employment is terminated for
any other reason, any unvested portion of a participant's Performance Share
award will be forfeited.
PLAN TERMINATION. In the event the Board of Directors terminates
the Performance Plan, participants will receive a pro-rata payment with
respect to any outstanding Performance Shares based on the elapsed portion of
each Performance Period and determined by reference to the performance
achieved as of the end of the fiscal year immediately preceding the
termination date.
AMENDMENT AND TERMINATION. The Board of Directors of the Company
may amend, suspend or terminate the Performance Plan at any time, provided
that no amendment may, without stockholder approval, change the definition of
Performance Share under the Performance Plan. Notwithstanding anything else
in the Performance Plan to the contrary, no awards may be made to
participants under the Performance Plan after December 31, 2006.
CHANGE IN CONTROL. In the event of a Change in Control (as defined
in the Performance Plan), the Performance Plan will automatically terminate
and each participant shall be deemed to have earned Performance Shares with
respect to all outstanding awards based upon performance as of the December
31st preceding the date of such Change in Control, provided that, in no event
shall the number of Performance Shares earned be less than the aggregate
number of Performance Shares at the target performance level with respect to
all such outstanding awards. Each Performance Share so earned shall be
canceled in exchange for a payment in cash of an amount equal to the greater
of the value of the Common Stock immediately preceding such Change in Control
or the value as determined in connection with such Change in Control.
25
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Payments made under the Performance Plan will be taxable to the
recipients thereof when paid, and the Company or the subsidiary of the
Company which employs or employed the recipient will generally be entitled to
a Federal income tax deduction in the calendar year for which the amount is
paid. To the extent that payment is made in the form of Common Stock, the
amount of taxable income to the participant and the deduction to the Company
will be equal to the fair market value of the Common Stock on the date of
payment.
NEW PLAN BENEFITS TABLE
Because payment of any award will be contingent on the attainment of
Performance Objectives established for such Performance Period by the
Committee, the amounts payable to eligible participants under the Performance
Plan for any calendar year during which the Performance Plan is in effect
cannot be determined. The table set forth below illustrates the estimated
amounts that were payable for 1996 under the predecessor to the Performance
Plan to each of the individuals and each of the groups listed below.
Non-employee directors do not participate in the Performance Plan.
NEW PLAN BENEFITS
NAME AND POSITION DOLLAR VALUE ($)
Drayton Nabers, Jr.
Chairman of the Board
and Chief Executive Officer $ 757,492
John D. Johns
President and
Chief Operating Officer 166,026
R. Stephen Briggs
Executive Vice President 249,038
A. S. Williams III
Executive Vice President,
Investments and Treasurer 280,168
Jim E. Massengale
Executive Vice President,
Acquisitions 233,474
All Executive Officers
as a group (11 persons) 2,578,585
All other employees as a
group (8 persons) 762,680
26
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PROPOSAL TO APPROVE THE
PROTECTIVE LIFE CORPORATION ANNUAL INCENTIVE PLAN
INTRODUCTION
To further its policy of providing the Company's key employees the
opportunity to earn competitive levels of incentive compensation based
primarily on the performance of the Company, the Board of Directors has
adopted the Protective Life Corporation Annual Incentive Plan (the "Incentive
Plan"), effective January 1, 1997.
The principal features of the Incentive Plan are summarized below.
The description is subject to the terms of the Incentive Plan, which was
filed with the Securities and Exchange Commission as an appendix to this
Proxy Statement and may be obtained through the Internet from the "EDGAR
Database of Corporate Information" on the Securities and Exchange
Commission's World Wide Web site (http://www.sec.gov). The existence of the
Incentive Plan shall not preclude the Company from making additional payments
outside the Incentive Plan to participants therein or to other employees.
VOTE REQUIRED
To approve the Company's Annual Incentive Plan, the affirmative vote
of the holders of a majority of the shares issued, outstanding and entitled
to vote is required.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE APPROVAL OF THE PROTECTIVE LIFE CORPORATION ANNUAL INCENTIVE PLAN.
ANNUAL INCENTIVE PLAN
ELIGIBILITY. The Incentive Plan authorizes the Committee to award
annual incentive compensation to officers and other key employees of the
Company and its subsidiaries, including all of the Company's Named
Executives. The number of eligible participants in the Incentive Plan will
vary from year to year at the discretion of the Committee. During 1996,
approximately 139 employees (including all of the Company's Named Executives)
were eligible to receive incentive compensation under the predecessor to the
Incentive Plan and it is expected that approximately the same number of
employees will be eligible for the Incentive Plan in 1997.
PERFORMANCE CRITERIA. On or before April 1 of each year (or such
other date as may be required or permitted under Section 162(m)), the
Committee will establish performance objectives that must be attained in
order for the Company to pay bonuses under the Incentive Plan. The
performance objectives will be based upon one or more of the following
criteria: (i) the Company's net income; (ii) the Company's operating income;
(iii) the Company's income per share; (iv) the Company's economic value
added; (v) the Company's return on equity; (vi) total return to the Company's
stockholders; (vii) division or subsidiary income; (viii) division or
subsidiary sales or revenues; (ix) division or subsidiary economic value
added; or (x) other reasonable bases PROVIDED THAT, to the extent required by
Section 162(m), all awards made to certain executive officers of the Company
will be based upon the criteria in (i) through (ix) above.
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<PAGE>
PAYMENT OF ANNUAL AWARDS. If any of the performance objectives
established by the Committee is satisfied, the Committee may award an annual
bonus to an eligible participant in an amount equal to 150% of such
participant's base salary up to a maximum of $1,000,000. The Committee has
the discretion to pay amounts which are less than the maximum amount payable
under the Incentive Plan based on individual performance or such other
criteria as the Committee shall deem relevant and may establish annually
rules or procedures that will limit the amounts payable to each participant
to a level which is below the maximum amount authorized.
Notwithstanding anything else in the Incentive Plan to the contrary,
the Committee shall also have the authority, in its discretion, (i) to pay
annual bonuses for any calendar year to eligible participants whose
compensation is not subject to the restrictions of Section 162(m) for that
calendar year and (ii) to provide for a minimum bonus amount for any calendar
year in connection with the hiring of any person who is or becomes subject to
the restrictions of Section 162(m).
ADMINISTRATION. The Committee, which shall at all times be
comprised of at least two directors each of whom is an "outside director" for
purposes of Section 162(m), shall administer and interpret the Incentive Plan
in all events. The Incentive Plan shall be interpreted in a manner which is
consistent with the requirements to qualify the payments made thereunder as
performance-based compensation under Section 162(m). Prior to making any
payment to any executive officer pursuant to the Incentive Plan, the
Committee shall be required to certify that the performance objectives have
been attained and the amount payable to such executive officer.
AMENDMENT AND TERMINATION. The Board or the Committee may at any
time amend, terminate or suspend the Incentive Plan, except that (i) no such
action shall, without the consent of such participant, adversely affect the
rights of any participant with respect to any award for any calendar year
which has already commenced, and (ii) no such action shall be effective
without approval by the stockholders of the Company to the extent that such
approval is required to continue to qualify the payments under the Incentive
Plan for treatment as performance-based compensation under Section 162(m).
Notwithstanding anything else in the Incentive Plan to the contrary, the
Incentive Plan will not be effective with respect to calendar years ending
after December 31, 2006, unless otherwise extended by action of the Board.
FEDERAL INCOME TAX CONSEQUENCES
Payments made under the Incentive Plan will be taxable to the
recipients thereof when paid, and the Company or the subsidiary of the
Company which employs or employed the recipient will generally be entitled to
a Federal income tax deduction in the calendar year for which the amount is
paid.
NEW PLAN AWARD TABLE
Because payment of any award will be contingent on the attainment of
performance objectives established for such year by the Committee, the
amounts payable to eligible participants under the Incentive Plan for any
calendar year during which the Incentive Plan is in effect cannot be
determined. The table set forth below illustrates the amounts that were
payable for 1996 under the predecessor to the Incentive Plan to each of the
individuals and each of the groups listed below. Non-employee directors do
not participate in the Incentive Plan.
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NEW PLAN BENEFITS
Name and Position Dollar Value ($)
Drayton Nabers, Jr.
Chairman of the Board
and Chief Executive Officer $ 486,000
John D. Johns
President and
Chief Operating Officer 253,000
R. Stephen Briggs
Executive Vice President 181,700
A. S. Williams III
Executive Vice President,
Investments and Treasurer 192,500
Jim E. Massengale
Executive Vice President,
Acquisitions 148,100
All Executive Officers
as a group (14 persons) 2,058,200
All other employees as a
group (125 persons) 2,263,600
PROPOSAL TO APPROVE THE
1996 STOCK INCENTIVE PLAN
INTRODUCTION
The Protective Life Corporation 1996 Stock Incentive Plan (the
"Stock Incentive Plan") is intended to foster and promote the long-term
financial success of the Company and materially increase stockholder value by
(i) motivating superior performance by means of performance-related
incentives, (ii) encouraging and providing for the acquisition of an
ownership interest in the Company by employees, and (iii) enabling the
Company to attract and retain the services of an outstanding management team
upon whose judgment, interest, and special effort the successful conduct of
its operations is largely dependent.
The following summary of the Stock Incentive Plan is subject to the
terms of the plan which was filed with the Securities and Exchange Commission
as an appendix to this Proxy Statement and may be obtained through the
Internet from the "EDGAR Database of Corporate Information" on the Securities
and Exchange Commission's World Wide Web site (http://www.sec.gov). The
existence of the Stock Incentive Plan shall not preclude the Company from
making any additional payments outside the Stock Incentive Plan to
participants therein or to other employees.
29
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VOTE REQUIRED
To approve the Company's 1996 Stock Incentive Plan, the affirmative
vote of the holders of a majority of the shares issued, outstanding and
entitled to vote is required.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE APPROVAL OF THE PROTECTIVE LIFE CORPORATION 1996 STOCK INCENTIVE PLAN.
STOCK INCENTIVE PLAN
ELIGIBILITY. The Stock Incentive Plan authorizes the Committee to
make awards to officers and other key employees of the Company and its
subsidiaries, including all of the Company's Named Executives. During 1996,
12 senior executive officers (including all of the Company's Named
Executives) received awards under the Stock Incentive Plan (see "Option/SAR
Grants in Last Fiscal Year").
AWARDS. The Committee may grant stock appreciation rights ("SARs")
to any eligible employee, provided that the number of shares of the Company's
Common Stock with respect to which such awards may be payable to an eligible
employee shall not exceed 200,000 (subject to adjustment to reflect changes
in the Common Stock). The Committee shall establish the terms of each such
award, including the applicable vesting schedule. The aggregate number of
shares of Common Stock subject to SARs under the Stock Incentive Plan may not
exceed 500,000 (subject to adjustment to reflect changes in the Common
Stock). Any shares of Common Stock subject to a SAR which is canceled,
terminated or otherwise settled without the issuance of Common Stock shall
again be available under the Stock Incentive Plan. Unless otherwise provided
by the Committee, SARs granted under the Stock Incentive Plan will become
exercisable on the fifth anniversary of the date of grant, provided that the
participant continues to be employed with the Company. SARs awarded under
the Stock Incentive Plan shall have a maximum term of ten years from the date
of grant.
TERMINATION OF EMPLOYMENT. Unless the Committee otherwise
determines, in the event a participant's employment terminates by reason of
death, disability or retirement, any SARs held by such participant (whether
or not currently exercisable) may be exercised by the participant or
designated beneficiary prior to the earlier of the expiration date of the
term of the SAR or three years following the participant's termination of
employment. Unless otherwise determined by the Committee, in the event a
participant's employment is terminated for any other reason, any unexercised
SARs shall be canceled as of the date of such termination.
PAYMENT. Upon exercise, each SAR shall entitle the holder to
receive an amount (payable in Common Stock) equal to the excess of the fair
market value of the Company's Common Stock on the date of exercise over the
base price for such SAR (generally the fair market value of the Company's
Common Stock on the date the SAR is granted).
CHANGE IN CONTROL. In the event of a Change in Control (as defined
in the Stock Incentive Plan) each SAR (whether or not currently exercisable)
shall be canceled in exchange for a payment in cash of an amount equal to the
excess of the value of the Common Stock determined in connection with such
Change in Control over the base price for such SAR, PROVIDED THAT such
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payment shall not be made in the event the Committee determines that new
rights (meeting certain conditions) will be substituted for such SARs or such
SARs will be honored or assumed immediately following the Change in Control.
ADMINISTRATION. The Committee, which shall at all times be
comprised of at least two directors each of whom is an "outside director" for
purposes of Section 162(m) and a "non-employee director" within the meaning
of Rule 16b-3, shall administer and interpret the Stock Incentive Plan.
AMENDMENT AND TERMINATION. The Board may terminate or suspend the
Stock Incentive Plan and the Board or the Committee may amend the Stock
Incentive Plan at any time, provided that such amendment, suspension, or
termination shall not adversely affect any SAR previously awarded under the
Stock Incentive Plan without the participant's consent.
FEDERAL INCOME TAX CONSEQUENCES
Payments made under the Stock Incentive Plan will be taxable to the
recipients thereof when paid, and the Company or the subsidiary of the
Company which employs or employed the recipient will generally be entitled to
a Federal income tax deduction in the calendar year for which the amount is
paid. To the extent that payment is made in the form of Common Stock, the
amount of taxable income to the participant and the deduction to the Company
will be equal to the fair market value of the Common Stock on the date of
payment.
NEW PLAN BENEFITS
Because grants made under the Stock Incentive Plan will be in the
discretion of the Committee, future awards to eligible participants for any
calendar year during which the Stock Incentive Plan is in effect cannot be
determined.
OTHER INFORMATION
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. was selected as the principal
independent public accountants for the Company and its subsidiaries for 1996.
It is anticipated that Coopers & Lybrand L.L.P. will be selected again in
1997 as the Company's principal independent public accountants. This firm has
served as independent public accountants for the Company and its predecessor
since 1974. Representatives of Coopers & Lybrand L.L.P. are expected to
attend the Annual Meeting of Stockholders and will have an opportunity to
make a statement if they so desire and to respond to appropriate questions.
In evaluating the selection of Coopers & Lybrand L.L.P. as principal
independent public accountants for the Company and its subsidiaries, the
Audit Committee of the Board of Directors has considered generally the
non-audit professional services that Coopers & Lybrand L.L.P. will likely be
asked to provide for the Company during 1997, and the effect which performing
such
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services might have on audit independence. It has reviewed the non-audit
services which were performed in 1996 and determined that they were
consistent with Company policy.
ANNUAL REPORTS AVAILABLE
A COPY OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K TO THE SECURITIES
AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER
WHO REQUESTS SUCH REPORT FROM THE COMPANY. REQUESTS FOR COPIES SHOULD BE
DIRECTED TO: STOCKHOLDER RELATIONS, PROTECTIVE LIFE CORPORATION, P. O. BOX
2606, BIRMINGHAM, ALABAMA 35202, TELEPHONE (205) 868-3573, FAX (205)
868-3541.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K IS ALSO ELECTRONICALLY
ACCESSIBLE THROUGH THE INTERNET FROM THE "EDGAR DATABASE OF CORPORATE
INFORMATION" ON THE SECURITIES AND EXCHANGE COMMISSION'S WORLD WIDE WEB SITE
(HTTP://WWW.SEC.GOV).
STOCKHOLDER PROPOSALS
In order to be included in the proxy materials for the Company's 1998
Annual Meeting of Stockholders, any proposals of stockholders intended to be
presented at the 1998 Annual Meeting of Stockholders must be received in
written form by the Company's Secretary at the principal office of the
Company on or before November 27, 1997.
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[This Page Intentionally Left Blank]
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[LOGO]
PROTECTIVE LIFE CORPORATION
Post Office Box 2606
Birmingham, Alabama 35202
PROXY
The undersigned hereby appoints Drayton Nabers, Jr., John D. Johns, and
Deborah J. Long, and each of them, with power of substitution, as proxies to
represent and vote on behalf of the undersigned all shares of Common Stock of
Protective Life Corporation which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held at the principal office of the
Company, 2801 Highway 280 South, Birmingham, Alabama 35223 on Monday, May 5,
1997 at 10:00 a.m., CDT, and at any adjournments thereof, hereby revoking all
proxies heretofore given with respect to such shares, upon the following
proposals more fully described in the notice of, and Proxy Statement dated March
27, 1997 for, said meeting (receipt whereof is hereby acknowledged).
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, AND 4.
1. ELECTION OF DIRECTORS / / FOR all nominees listed below (except as marked
to the contrary below) / / WITHHOLD AUTHORITY to vote for all nominees
listed below
WILLIAM J. RUSHTON III
JOHN W. WOODS
WILLIAM J. CABANISS, JR.
DRAYTON NABERS, JR.
JOHN J. MCMAHON, JR.
A. W. DAHLBERG
JOHN W. ROUSE, JR.
ROBERT T. DAVID
RONALD L. KUEHN, JR.
HERBERT A. SKLENAR
JAMES S. M. FRENCH
ROBERT A. YELLOWLEES
JOHN D. JOHNS
INSTRUCTION: TO WITHHOLD AUTHORITY to vote for any individual nominee,
write that nominee's name here:
2. Approval of the Company's 1997 Performance Share Plan to qualify certain
compensation for deductibility for Federal income tax
purposes. / / FOR / / AGAINST / / ABSTAIN
3. Approval of the Company's Annual Incentive Plan to qualify certain
compensation for deductibility for Federal income tax
purposes. / / FOR / / AGAINST / / ABSTAIN
4. Approval of the Company's 1996 Stock Incentive Plan to qualify certain
compensation for deductibility for Federal income tax
purposes. / / FOR / / AGAINST / / ABSTAIN
5. UNLESS "AUTHORIZATION WITHHELD" IS MARKED BELOW, THE PERSONS NAMED ABOVE
AS PROXIES ARE AUTHORIZED TO VOTE IN ACCORDANCE WITH THEIR OWN JUDGMENT
UPON SUCH
OTHER MATTER OR MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING. / / AUTHORIZATION WITHHELD
THIS PROXY WHEN PROPERLY EXECUTED WILL
BE VOTED IN THE MANNER SPECIFIED ABOVE
BY THE UNDERSIGNED. IF NO DIRECTION IS
MADE WITH RESPECT TO A PROPOSAL, THIS
PROXY WILL BE VOTED "FOR" SUCH PROPOSAL.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS.
Dated , 1997
Signature
Signature
Please sign exactly as your name appears
hereon, date, and return promptly in the
enclosed postage prepaid envelope.
<PAGE>
PROTECTIVE LIFE CORPORATION
1996 STOCK INCENTIVE PLAN
SECTION 1
PURPOSE
The purpose of the Plan is to foster and promote the long-term financial
success of the Company and materially increase stockholder value by (a)
motivating superior performance by means of performance-related incentives,
(b) encouraging and providing for the acquisition of an ownership interest in
the Company by Employees, and (c) enabling the Company to attract and retain
the services of an outstanding management team upon whose judgment, interest,
and special effort the successful conduct of its operations is largely
dependent.
SECTION 2
DEFINITIONS
2.1 DEFINITIONS. Whenever used herein, the following terms shall have
the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means (i) the willful failure by the Participant to perform
substantially his duties as an Employee of the Company (other than
due to physical or mental illness) after reasonable notice to the
Participant of such failure, (ii) the Participant's engaging in
serious misconduct that is injurious to the Company or any
Subsidiary, (iii) the Participant's having been convicted of, or
entered a plea of nolo contendere to, a crime that constitutes a
felony or (iv) the breach by the Participant of any written
covenant or agreement with the Company or any Subsidiary not to
disclose any information pertaining to the Company or any
Subsidiary or not to compete or interfere with the Company or any
Subsidiary.
(d) "Change in Control" is (i) transaction or acquisition as identified
in the Company's Rights Agreement, as in effect from time to time,
(ii) the consummation of (A) any consolidation, merger or similar
transaction or purchase of securities of the Company pursuant to
which (x) the members of the Board of Directors of the Company
immediately prior to such transaction, do not, immediately after
the transaction, constitute a majority of the Board of Directors
of the surviving entity or (y) the stockholders of the Company
immediately preceding the transaction, do not, immediately after
the transaction, own at least 50% of the combined voting power of
the outstanding securities of the surviving entity, or (iii) any
sale, lease, exchange or
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other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Company, including, without limitation, any sale, lease, exchange
or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of
Protective Life Insurance Company.
(e) "Change in Control Price" means the highest price per share of
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).
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Compensation and Management Succession
Committee of the Board (or such other committee of the Board that
the Board shall designate from time to time), which shall consist
of two or more members, each of whom shall be a "non-employee
director" within the meaning of Rule 16b-3, as promulgated under
Section 16 of the Act and an "outside director" within the meaning
of Section 162(m).
(h) "Company" means Protective Life Corporation, a Delaware corporation,
and any successor thereto.
(i) "Disability" means total disability as determined in accordance
with the terms of the long-term disability plan of the Company or
any of its Subsidiaries in which the Participant is eligible to
participate.
(j) "Employee" means any officer or other key executive and management
employee of the Company or any of its Subsidiaries.
(k) "Fair Market Value" means, on any date, the average of the average
of the highest and lowest sales price for a share of Stock reported
for such day on a national exchange or the average of the highest
and lowest bid and asked prices for a share of Stock on such date
on a nationally recognized system of price quotation. In the event
that there are no Stock transactions reported on such exchange or
system on such date, Fair Market Value shall mean the closing price
on the immediately pre-ceding date on which Stock transactions were
so reported.
(l) "Participant" means any Employee designated by the Committee to
participate in the Plan.
(m) "Plan" means the Protective Life Corporation 1996 Stock Incentive
Plan, as in effect from time to time.
(n) "Retirement" means retirement at the age at which the Participant
may retire and immediately thereafter commence receipt of any
benefits due under the Company's defined benefit pension plan.
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(o) "Section 162(m)" means Section 162(m) of the Internal Revenue Code
of 1986, as amended, and any regulations promulgated thereunder.
(p) "Stock" means the common stock of the Company, par value $0.50 per
share.
(q) "Stock Appreciation Right" shall mean a contractual right granted
under Section 6 to receive Stock.
(r) "Subsidiary" means any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock of such corporation
or of the capital interest or profits interest of such partnership.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include
the singular.
SECTION 3
ELIGIBILITY AND PARTICIPATION
Participants in the Plan shall be those Employees selected by the
Committee to participate in the Plan.
SECTION 4
POWERS OF THE COMMITTEE
4.1 POWER TO GRANT. The Committee shall determine the Participants to
whom Stock Appreciation Rights shall be granted and the terms and conditions
of any and all such Stock Appreciation Rights. The Chairman of the Board may
suggest to the Committee the Participants who should receive Stock
Appreciation Rights under the Plan, PROVIDED THAT the number of shares of the
Company's Common Stock with respect to which awards may be made to any
participant shall not exceed 200,000. The terms and conditions of each Stock
Appreciation Right shall be determined by the Committee at the time of grant,
and such terms and conditions shall not be subsequently changed in a manner
which would be adverse to participants without the consent of the Participant
to whom such Stock Appreciation Right has been granted. The Committee may
es-tablish different terms and conditions for different Participants
receiving Stock Appreciation Rights and for the same Participant for each
Stock Appreciation Right such Participant may receive, whether or not granted
at different times.
4.2 SUBSTITUTE STOCK APPRECIATION RIGHTS. The Committee shall have the
right to grant Stock Appreciation Rights in substitution for or upon the
cancellation of Stock Appreciation Rights previously granted and such new
Stock Appreciation Rights may contain terms more favorable to the
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recipient than the Stock Appreciation Rights they replace, including, without
limitation, a lower exercise price.
4.3 ADMINISTRATION. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to prescribe, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions deemed necessary or advisable to protect
the interests of the Company, and to make all other determinations necessary
or advisable for the administration and interpretation of the Plan in order
to carry out its provisions and purposes. Determinations, interpretations, or
other actions made or taken by the Committee pursuant to the provisions of
the Plan shall be final, binding, and conclusive for all purposes and upon
all persons.
SECTION 5
STOCK SUBJECT TO PLAN
5.1 NUMBER. Subject to the provisions of Section 5.3, the number of
shares of Stock subject to Stock Appreciation Rights under the Plan may not
exceed 500,000 shares of Stock. The shares to be delivered under the Plan
will consist of either newly issued shares of Stock or treasury Stock.
5.2 CANCELED, TERMINATED, OR FORFEITED STOCK APPRECIATION RIGHTS. Any
shares of Stock subject to a Stock Appreciation Right which for any reason is
canceled, terminated or otherwise settled without the issuance of any Stock
shall again be available under the Plan.
5.3 ADJUSTMENT IN CAPITALIZATION. In the event of any Stock dividend
or Stock split, recapitalization (including, without limitation, the payment
of an extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to stockholders, exchange of shares, or other similar
corporate change, the aggregate number of shares of Stock available for Stock
Appreciation Rights under Section 5.1 or subject to outstanding Stock
Appreciation Rights and the respective base prices and/or performance
criteria applicable to outstanding Stock Appreciation Rights may be
appropriately adjusted by the Committee, whose determination shall be
conclusive.
SECTION 6
STOCK APPRECIATION RIGHTS
6.1 GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may
be granted to Participants at such time or times as shall be determined by
the Committee. The Committee shall have complete discretion in determining
the number of Stock Appreciation Rights, if any, to be granted to a
Participant. Each Stock Appreciation Right shall be evidenced by a letter to
each Participant that shall specify the base price, the duration of the Stock
Appreciation Rights, the number of shares of Stock to which the Stock
Appreciation Rights pertain, and such other terms and conditions not
inconsistent with the Plan as the Committee shall determine.
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6.2 BASE PRICE. Unless otherwise determined by the Committee, a Stock
Appreciation Right granted pursuant to the Plan shall have a base price which
is not less than the Fair Market Value of the Stock on the date the Stock
Appreciation Right is granted.
6.3 EXERCISE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
awarded under the Plan shall entitle a Participant to receive from the
Company an amount in Stock equal to the excess of the Fair Market Value of a
share of Stock on the date of exercise of the Stock Appreciation Right over
the base price thereof. Except as otherwise provided in the Plan and subject
to the Committee's right to accelerate the exercisability of such Stock
Appreciation Rights in its discretion, the Stock Appreciation Rights shall
become exercisable, subject to the restrictions and conditions hereof, on the
fifth anniversary of the Grant Date (the "Grant Date"), provided that such
Stock Appreciation Rights shall also become exercisable under the
circumstances described in Section 7 and/or Section 9.1. Notwithstanding the
foregoing, no Stock Appreciation Right shall be exercisable for more than 10
years after the date on which it is granted.
6.4 PAYMENT. The Committee shall establish procedures governing the
exercise of Stock Appreciation Rights, which shall require that written
notice of exercise be given. The number of shares of Stock payable pursuant
to the exercise of Stock Appreciation Rights shall be equal to the (x) the
excess of (i) the Fair Market Value of a share of Stock on the date of
exercise multiplied by the number of Stock Appreciation Rights exercised over
(ii) the sum of the base price for all Stock Appreciation Rights exercised
divided by (y) the Fair Market Value of a share of Stock on the date of
exercise. As soon as practicable after receipt of a written exercise notice,
the Company shall deliver to the Participant a certificate or certificates
representing the acquired shares of Stock. In the event that the Committee
shall determine that any certificates issued hereunder must bear a legend
restricting the transfer of such Stock, such certificates shall have the
appropriate legend.
6.5 LIMITATIONS ON AND DEFERRAL OF PAYMENT. (a) Deferrals.
Notwithstanding anything in the Plan to the contrary, the Committee may defer
all or any portion of any distribution of Common Stock to be made hereunder
to the extent such distribution, when added to all other payments to be made
to a Participant in a calendar year, would not be deductible compensation
paid by the Company for federal income tax purposes within the meaning of
Section 162. In the event that a distribution or distributions of Stock to a
Participant is deferred, the Company will establish for each such Participant
a book-entry account (the "Account") representing all such deferred awards.
(b) DIVIDENDS ON DEFERRED AWARDS. In the event that dividends are paid
by the Company during the deferral period, each Participant's Account
shall be credited with the amount of any dividends which would otherwise
have been payable to such Participant if the number of shares
represented by such Account had been owned directly, and such amount
shall be deemed to be reinvested in additional shares of Stock.
(c) PAYMENT. The Stock represented by each Participant's Account shall
be paid to such Participant (or, in the event of his or her death, to
his or her designated beneficiary or, if none, to his or her estate) in
a lump sum, or in installments, if necessary to preserve the
deductibility of such payment, as of the earliest date that the payment
of the Account balance, or portion thereof, when added to all other
payments to be made to a Participant in a calendar year,
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would be deductible by the Company for federal income tax purposes
within the meaning of Section 162 (including Section 162(m)) of the
Code.
SECTION 7
TERMINATION OF EMPLOYMENT
7.1 TERMINATION OF EMPLOYMENT DUE TO DEATH. DISABILITY OR RETIREMENT.
Unless otherwise determined by the Committee at the time of grant, in the
event a Participant's employment terminates by reason of death, Disability or
Retirement, any Stock Appreciation Rights granted to such Participant which
are then outstanding (whether or not exercisable prior to the date of such
termination) may be exercised by the Participant or the Participant's
designated beneficiary, and if none is named, in accordance with Section
11.2, at any time prior to the expiration date of the term of the Stock
Appreciation Rights or within three (3) years (or such other period as the
Committee shall determine at the time of grant) following the Participant's
termination of employment, whichever period is shorter.
7.2 TERMINATION OF EMPLOYMENT FOR ANY OTHER REASON. Unless otherwise
determined by the Committee at or after the time of grant, in the event the
employment of the Participant shall terminate for any reason other than one
described in Section 7.1, any unexercised Stock Appreciation Rights (whether
or not exercisable prior to the date of termination) shall terminate and be
canceled immediately upon such termination of employment.
SECTION 8
FORFEITURE OF STOCK APPRECIATION RIGHTS
8.1 FORFEITURE AND PAY-BACK OF SAR AMOUNT. If within one year after
the exercise of all or a portion of the Stock Appreciation Rights awarded
under this Agreement, the Participant voluntarily terminates his or her
employment with the Company and the Participant becomes employed by a
competitor of the Company in the financial services industry (which includes,
but is not limited to, working in the insurance, mutual fund, broker-dealer,
financial institution, or investment company industries), the Participant
agrees to pay the Company within 30 days of commencing such employment an
amount, in cash or the equivalent value in shares of Stock, equal to the
aggregate of all SAR Amounts attributable to Stock Appreciation Rights
exercised within the one year period prior to the date of such termination.
8.2 FORFEITURE OF STOCK APPRECIATION RIGHTS. If, after the
Participant's termination of employment, the Committee determines that,
either during or after the Participant's employment by the Company or one of
its Subsidiaries, the Participant engaged in conduct that (i) would have
permitted the Company or any of its Subsidiaries to terminate the
Participant's employment for Cause had he or she still been employed or (ii)
otherwise results in damage to the business or reputation of the Company or
any of its Subsidiaries, all of the Stock Appreciation Rights that are still
outstanding at the time of such determination shall immediately terminate and
be canceled immediately upon such determination by the Committee. Upon such
a determination by the Committee, the Company may
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disregard any attempted exercise of the Stock Appreciation Rights by notice
delivered prior to such determination, if, at such time, the Company had not
completed the steps necessary to effect such exercise.
SECTION 9
CHANGE IN CONTROL
9.1 ACCELERATED VESTING AND PAYMENT. Subject to the provisions of
Section 9.2 below, in the event of a Change in Control, each Stock
Appreciation Right (regardless of whether such SARs are at such time
otherwise exercisable) shall be canceled in exchange for a payment in cash of
an amount equal to the excess, if any, of the Change in Control Price over
the base price for such Stock Appreciation Right.
9.2 ALTERNATIVE AWARDS. Notwithstanding Section 9.1, no cancellation,
acceleration of exercisability or vesting or cash settlement or other payment
shall occur with respect to any Stock Appreciation Rights if the Committee
reasonably determines in good faith prior to the occurrence of a Change in
Control that such Stock Appreciation Rights shall be honored or assumed, or
new rights substituted therefor (such honored, assumed or substituted award
hereinafter called an "Alternative Award"), by a Participant's employer (or
the parent or a subsidiary of such employer) immediately following the Change
in Control, provided that any such Alternative Award must:
(i) be based on stock which is traded on an established securities
market, or which will be so traded within 60 days of the Change in
Control;
(ii) provide such Participant (or each Participant in a class of
Participants) with rights and entitlements substantially equivalent to
or better than the rights, terms and conditions applicable under such
Award, including, but not limited to, an identical or better exercise or
vesting schedule and identical or better timing and methods of payment;
(iii) have substantially equivalent economic value to such
Award (determined at the time of the Change in Control);
(iv) have terms and conditions which provide that in the event that
the Participant's employment is involuntarily terminated or
constructively terminated, any conditions on a Participant's rights
under, or any restrictions on transfer or exercisability applicable to,
each such Alternative Award shall be waived or shall lapse, as the case
may be.
For this purpose, a constructive termination shall mean a termination by a
Participant following a material reduction in the Participant's compensation
or a material reduction in the Participant's responsibilities, in each case
without the Participant's written consent.
9.3 STOCK APPRECIATION RIGHTS GRANTED WITHIN SIX MONTHS OF THE CHANGE
OF CONTROL. If any Stock Appreciation Rights granted within six months of the
date on which a Change in Control occurs (i) is held by a person subject to
the reporting requirements of Section 16(a) of the Act and
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(ii) is to be cashed out pursuant to Section 9.1, such cash out shall not
occur until the later of (i) the date which is six months and one day after
the date the Stock Appreciation Right was granted or (ii) the first date on
which, in the opinion of the Company's counsel, such cash out could occur
without such reporting person being potentially subject to liability under
Section 16(b) of the Act by reason of such cash out.
SECTION 10
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
The Board may at any time terminate or suspend the Plan, and from time
to time either the Board or the Committee may amend or modify the Plan. No
amendment, modification, or termination of the Plan shall in any manner
adversely affect any Stock Appreciation Right there-tofore granted under the
Plan, without the consent of the Participant.
SECTION 11
MISCELLANEOUS PROVISIONS
11.1 NONTRANSFERABILITY OF STOCK APPRECIATION RIGHTS. No Stock
Appreciation Right granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by
the laws of descent and distribution. All rights with respect to Stock
Appreciation Rights granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant.
11.2 BENEFICIARY DESIGNATION. Benefits remaining unpaid at the
Participant's death shall be paid to or exercised by the Participant's
surviving spouse, if any, or otherwise to or by the Participant's estate. If
the Participant desires to name another beneficiary or beneficiaries (who may
be named contingently or successively) to whom any benefit under the Plan is
to be paid or by whom any right under the Plan is to be exercised in case of
the Participant's death, the Participant may do so by filing a form
prescribed by the Committee. Such designation will be effective only when
filed by the Participant, in writing with the Chief Accounting Officer of the
Company, during the Participant's lifetime. Such designation will revoke all
prior designations made by the Participant.
11.3 NO GUARANTEE OF EMPLOYMENT OR PARTICIPATION. Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or
any Subsidiary or affiliate. No Employee shall have a right to be selected
as a Participant, or, having been so selected, to receive any future Stock
Appreciation Rights.
11.4 TAX WITHHOLDING. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to
satisfy Federal, state, and local withholding tax requirements on any Stock
Appreciation Rights under the Plan, and the Company may defer issuance of
Stock until such requirements are satisfied.
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11.5 NO LIMITATION ON COMPENSATION. Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to
pay compensation to its employees in cash or property, in a manner which is
not expressly authorized under the Plan.
11.6 REQUIREMENTS OF LAW. The granting of Stock Appreciation Rights
and the issuance of shares of Stock shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
11.7 TERM OF PLAN. The Plan shall be effective on August 15, 1996.
The Plan shall continue in effect, unless sooner terminated pursuant to
Section 9, until the tenth anniversary of the Grant Date.
11.8 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
Delaware.
11.9 NO IMPACT ON BENEFITS. Stock Appreciation Rights granted under
the Plan are not compensation for purposes of calculating an Employee's
rights under any employee benefit plan.
11.10 NO VOTING RIGHTS. The Participant shall have no right, in
respect of Stock Appreciation Rights granted, to vote on any matter submitted
to the Company's stockholders until such time as shares of Stock issuable
upon exercise of such Stock Appreciation Rights have been so issued.
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PROTECTIVE LIFE CORPORATION
1997 PERFORMANCE SHARE PLAN
1. PURPOSE. The purpose of the Protective Life Corporation 1997 Performance
Share Plan is to further the long-term growth in profitability of Protective
Life Corporation by offering long-term incentives in addition to current
compensation to those key executives who will be largely responsible for such
growth.
2. CERTAIN DEFINITIONS.
(a) "AWARD" means the award of Performance Shares to a Participant
pursuant to the terms of the Plan.
(b) "AWARD PERIOD" means the period of calendar years fixed by the
Committee with respect to all Awards with the same Date of Grant (but no more
than five years) commencing with each Date of Grant, except that the Award
Period for a recently hired Employee may be for such lesser period as
determined by the Committee.
(c) "CHANGE IN CONTROL" is (i) a transaction or acquisition as identified
in the Company's Rights Agreement, as in effect from time to time, (ii) the
consummation of (A) any consolidation, merger or similar transaction or
purchase of securities of the Company pursuant to which (x) the members of
the Board of Directors of the Company immediately prior to such transaction,
do not, immediately after the transaction, constitute a majority of the Board
of Directors of the surviving entity or (y) the stockholders of the Company
immediately preceding the transaction, do not, immediately after the
transaction, own at least 50% of the combined voting power of the outstanding
securities of the surviving entity, or (iii) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of
all or substantially all of the assets of the Company, including, without
limitation, any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the
assets of Protective Life Insurance Company.
(d) "CHANGE IN CONTROL PRICE" means the greater of (i) the price per
share of Common Stock immediately preceding any transaction resulting in a
Change in Control or (ii) 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).
(e) "COMMITTEE" means the Compensation and Management Succession
Committee of the Board (or such other committee of the Board that the Board
shall designate from time to time) or any subcommittee thereof comprised of
two or more directors each of whom is an "outside director" within the
meaning of Section 162(m) and a "non-employee director" within the meaning of
Rule 16b-3, as promulgated under Section 16 of the Exchange Act.
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(f) "COMMON STOCK" means the common stock, par value $0.50 per share, of
the Company.
(g) "COMPANY" means Protective Life Corporation, a Delaware corporation.
(h) "DATE OF GRANT" means as of January 1 of any year in which an Award
is made.
(i) "EMPLOYEE" means any person (including any officer) employed by the
Company or any subsidiary on a full-time salaried basis.
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "EXECUTIVE OFFICER" shall mean those persons who are officers of
the Company within the meaning of Rule 16a-1(f) of the Exchange Act.
(l) "FAIR MARKET VALUE" of the Common Stock means the average of the
daily closing prices for a share of the Common Stock for the twenty trading
days prior to the date of payment of Performance Shares for an Award Period
or an Interim Period, as the case may be, on the Composite Tape for New York
Stock Exchange -Listed Stocks, or, if the Common Stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on
which the Common Stock is listed, or, if the Common Stock is not listed on
any such Exchange, the average of the daily closing bid quotations with
respect to a share of the Common Stock for such twenty trading days on the
National Association of Securities Dealers, Inc., Automated Quotations System
or any system then in use.
(m) "INTERIM PERIOD" means a period of calendar years chosen by the
Committee commencing with any Date of Grant, which period is less than the
Award Period commencing on the Date of Grant.
(n) "PARTICIPANT" means an Employee who is selected by the Committee to
receive an Award under the Plan.
(o) "PERFORMANCE SHARE" means the equivalent of one share of Common
Stock.
(p) "PLAN" means the Protective Life Corporation 1997 Performance Share
Plan as set forth herein and as may be amended from time to time.
(q) "SECTION 162(M)" means Section 162(m) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee which, subject to the provisions of the Plan, shall have the
authority to select the Employees who are to participate in the Plan, to
determine the Award to be made to each Employee selected to participate in
the Plan, and to determine the conditions subject to which Awards will become
payable under the Plan.
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The Committee shall have full power to administer and interpret the Plan
and to adopt such rules and regulations consistent with the terms of the Plan
as the Committee deems necessary or advisable in order to carry out the
provisions of the Plan. Except as otherwise provided in the Plan, the
Committee s interpretation and construction of the Plan and its determination
of any conditions applicable to Performance Share Awards or the reasons for
any terminations of Participants shall be conclusive and binding on all
Participants.
In connection with its determination as to the payment of Performance
Shares, the Committee has full discretion to adjust performance criteria to
recognize special or nonrecurring situations or circumstances for the
Company, or any other corporation, for any year.
The Committee may employ such legal counsel, consultants and agents
(including counsel or agents who are employees of the Company or a
Subsidiary) as it may deem desirable for the administration of the Plan and
may rely upon any opinion received from any such counsel or consultant or
agent and any computation received from such consultant or agent. All
expenses incurred in the administration of the Plan, including, without
limitation, for the engagement of any counsel, consultant or agent, shall be
paid by the Company. No member or former member of the Board or the Committee
shall be liable for any act, omission, interpretation, construction or
determination made in connection with the Plan other than as a result of such
individual's willful misconduct.
The Plan shall be unfunded. Benefits under the Plan shall be paid from
the general assets of the Company.
4. PARTICIPATION. Participants in the Plan shall be selected by the
Committee from those Employees who, in the estimation of the Committee, have
a substantial opportunity to influence the long-term profitability of the
Company.
5. PERFORMANCE SHARE AWARDS.
(a) After appropriate approval of the Plan, and thereafter from time to
time, the Committee shall select Employees to receive Awards in any year as
of the Date of Grant. Any Employee may be granted more than one Award under
the Plan, but no Employee may earn, in the aggregate, more than 50% of the
Performance Shares which are the subject of this Plan. Awards of Performance
Shares hereunder shall not be made unless any such Award is in compliance
with all applicable law.
(b) No Participant shall be entitled to receive any dividends or
dividend equivalents on Performance Shares; with respect to any Performance
Shares, no Participant shall have any voting or any other rights of a Company
stockholder; and no Participant shall have any interest in or right to
receive any shares of Common Stock prior to the time when the Committee
determines the form of payment of Performance Shares pursuant to Section 6.
(c) Payment of the Award to any Participant shall be made in accordance
with Section 6 and shall be subject to such conditions for payment as the
Committee may prescribe. The Committee may prescribe different conditions
for different Participants. Such conditions may be expressed in terms
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of income per share, return on equity, economic value added, total return,
sales or revenues, or on other reasonable bases. Unless the Committee
otherwise determines at the time of grant of Performance Shares to an
Executive Officer, the performance objectives with respect to such Award
shall be related to at least one of the following criteria, which may be
determined solely by reference to the performance of the Company or a
division or subsidiary or based on comparative performance relative to other
companies: (i) income per share, (ii) return on equity, (iii) economic value
added, (iv) total return, (v) sales or revenues, or (vi) other reasonable
bases; PROVIDED THAT to the extent the Committee determines that it is
necessary to qualify compensation under Section 162(m), the performance
criteria shall be based on one or more of the criteria listed in (i) through
(v) above. The Committee may prescribe conditions such that payment of an
Award may be made with respect to a number of shares of Common Stock that is
greater than the number of Performance Shares awarded. Except to the extent
otherwise expressly provided herein, the Committee may, at any time and from
time to time, change the performance objectives applicable with respect to
any Performance Shares to reflect such factors, including, without
limitation, changes in a Participant's duties or responsibilities or changes
in business objectives (e.g., from corporate to subsidiary or division
performance or vice versa), as the Committee shall deem necessary or
appropriate. In making any such adjustment, the Committee shall adjust the
number of Performance Shares or take other appropriate actions to prevent any
enlargement or diminution of the Participant's rights related to service
rendered and performance attained prior to the effective date of such
adjustment.
(d) Each Award shall be made in writing and shall set forth the terms
and conditions set by the Committee for payment of such Award including,
without limitation, the length of the Award Period and whether there will be
an Interim Period with respect to the Award and if so, the length of the
Interim Period.
6. PAYMENT OF PERFORMANCE SHARE AWARDS. Each Participant granted an Award
shall be entitled to payment of the Award as of the close of the Award Period
applicable to such Award, but only if and after the Committee has determined
that the conditions for payment of the Award set by the Committee have been
satisfied. At the time of grant of each Award, the Committee shall decide
whether there will be an Interim Period. If the Committee determines that
there shall be an Interim Period for the Award to any Participant, each such
Participant granted an Award with an Interim Period shall be entitled to
partial payment on account thereof as of the close of the Interim Period, but
only if and after the Committee has determined that the conditions for
partial payment of the Award set by the Committee have been satisfied.
Performance Shares paid to a Participant for an Interim Period may be
retained by the Participant and shall not be repaid to the Company,
notwithstanding that based on the conditions set for payment at the end of
the Award Period such Participant would not have been entitled to payment of
some or any of his Award. Any Performance Shares paid to a Participant for
the Interim Period during an Award Period shall be deducted from the
Performance Shares to which such Participant is entitled at the end of the
Award Period.
Unless otherwise directed by the Committee, payment of Awards shall be
made, as promptly as possible, by the Company after the determination by the
Committee that payment has been earned. Unless otherwise directed by the
Committee, all payments of Awards to Participants shall be made partly in
shares of Common Stock and partly in cash, with the cash portion being
approximately equal to the amount of federal, state, and local taxes which
the Participant's employer is required to
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withhold on account of said payment. The Committee, in its discretion, may
provide for payment of cash and distribution of shares of Common Stock in
such other proportions as the Committee deems appropriate, except and
provided that the Committee must pay in cash an amount equal to the federal,
state, and local taxes which the Participant's employer is required to
withhold on account of said payment. There shall be deducted from the cash
portion of all Awards all taxes to be withheld with respect to such Awards.
For payment of each Award, the number of shares of Common Stock to be
distributed to Participants shall equal the Fair Market Value of the total
Performance Shares determined by the Committee to have been earned by the
Participant less the portion of the Award that was paid in cash divided by
the Fair Market Value of a Performance Share. To the extent that shares of
Common Stock are available in the treasury of the Company on the date payment
is to be made, such shares may be issued in payment of Awards.
7. DEATH OR DISABILITY. If, prior to the close of an Award Period, a
Participant's employment terminates by reason of his death, or his total and
permanent disability (as determined under the Company's Pension Plan),
payment of his outstanding Award or Awards shall be made as promptly as
possible after death or the date of the determination of total and permanent
disability, and the number of Performance Shares to be paid shall be computed
as follows: First, determine (based on the conditions set by the Committee
for payment of Awards for the subject Award Period) the number of Performance
Shares that would have been paid if each subject Award Period had ended on
the December 31st immediately preceding the date of death or the date of
determination of total and permanent disability. Then, multiply each
above-determined number by a fraction, the numerator of which is the number
of months during the subject Award Period that the Participant was an active
Employee, and the denominator of which is the number of months in the Award
Period. This product shall be reduced by any Performance Shares for which
payment has been made with respect to any Interim Period during each Award
Period. In this instance, the Fair Market Value of the Common Stock shall be
based on the twenty days immediately preceding the date of death or the date
of the determination of total and permanent disability. Except as provided
in Section 23, payments for Awards awarded in the year employment terminates
shall be paid at the same percentage as the Award awarded in the year
immediately preceding the year of death or disability.
8. RETIREMENT PRIOR TO CLOSE OF AWARD PERIOD. Unless otherwise determined
by the Committee, if, prior to the close of an Award Period, a Participant's
employment terminates by reason of his retirement on or after his normal
retirement date (as determined under the Company's Pension Plan) or prior to
his normal retirement date if such retirement was at the request of his
employer, payment of the Participant's outstanding Award or Awards will be
made as promptly as possible after such retirement and such payment shall be
computed in the same manner as in Section 7, using the effective date of
retirement in place of the date of death or determination of total and
permanent disability.
9. TERMINATION UNDER CERTAIN CIRCUMSTANCES. If, prior to the close of an
Award Period, a Participant's employment terminates by reason of (i) his
retirement prior to his normal retirement date (as determined under the
Company's Pension Plan) and such retirement was at the request of the
Participant and approved by his employer, (ii) the divestiture by the Company
of one or more of its
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business segments or a significant portion of the assets of a business
segment, or (iii) a significant reduction by the Company in its salaried work
force, the determination of whether such Participant shall receive payment of
his outstanding Award or Awards shall be within the exclusive discretion of
the Committee. Payment, if any, of his Award or Awards to such Participant
shall be made as promptly as possible after one of the events described in
subsections (i), (ii), and (iii) of this Section 9 occurs and the amount of
such payment shall be computed in the same manner as in Section 7, using the
effective date that such event occurs in place of the date or determination
of total and permanent disability.
10. VOLUNTARY TERMINATION OR DISCHARGE. If, prior to the close of an Award
Period, a Participant's status as an Employee terminates and there is no
payment due under the terms of Sections 7, 8, 9, 20, or 21, all of such
Participant's outstanding Performance Shares shall forthwith and
automatically be cancelled and all rights of the former holder of such
cancelled Performance Shares in respect to such cancelled Performance Shares
shall forthwith terminate.
11. LIMITATION ON AWARDS AND PAYMENTS. The maximum number of Performance
Shares which may be earned under the Plan shall not exceed an aggregate of
2,000,000 (except as adjusted in accordance with Section 18). If any
Performance Shares awarded under the Plan are not paid because of death,
total and permanent disability, retirement, voluntary termination, discharge,
or cancellation or because they lapse when conditions to their payment are
not met, they shall thereupon become available again for award under the
Plan.
12. TERM OF PLAN. This Plan shall be effective January 1, 1997, subject to
the approval of this Plan by stockholders of the Company at the Annual
Meeting of Stockholders to be held May 5, 1997 or any adjournment thereof.
The Board of Directors of the Company may terminate the Plan at any time. If
not sooner terminated, the Plan will expire on the date on which all of the
Performance Shares subject to award under the Plan have been paid, but no
grant of Awards may be made after December 31, 2006. Termination or
expiration shall not adversely affect any right or obligation with respect to
an Award theretofore made.
13. CANCELLATION OF PERFORMANCE SHARES. With the written consent of a
Participant holding Performance Shares granted to him under the Plan, the
Committee may cancel such Performance Shares. In the event of any such
cancellation, all rights of the former holder of such cancelled Performance
Shares in respect to such cancelled Performance Shares shall forthwith
terminate.
14. NO ASSIGNMENT OF INTEREST. The interest of any Participant in the Plan
shall not be assignable, either by voluntary assignment or by operation of
law, and any assignment of such interest, whether voluntary or by operation
of law, shall render the Award void, except that cash or shares of Common
Stock payable under the Plan shall be transferable by testamentary will or by
the laws of descent and distribution. All shares of Common Stock paid
pursuant to this Plan are to be taken subject to an investment representation
by the Participant or other recipient that any such shares are acquired for
investment and not with a view to distribution and that such shares shall not
be transferred or sold until registered in compliance with the Securities Act
of 1933 or unless an exemption therefrom is available in the opinion of the
General Counsel for the Company.
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<PAGE>
15. DESIGNATION OF BENEFICIARY. Each Participant may designate a
beneficiary or beneficiaries (which beneficiary may be an entity other than a
natural person) to receive any payments which may be made following the
Participant's death. Such designation may be changed or canceled at any time
without the consent of any such beneficiary. Any such designation, change or
cancellation must be made in a form approved by the Committee and shall not
be effective until received by the Committee. If no beneficiary has been
named, or the designated beneficiary or beneficiaries shall have predeceased
the Participant, the beneficiary shall be the Participant's spouse or, if no
spouse survives the Participant, the Participant's estate. If a Participant
designates more than one beneficiary, the rights of such beneficiaries shall
be payable in equal shares, unless the Participant has designated otherwise.
16. EMPLOYMENT RIGHTS. An Award made under the Plan shall not confer any
right on the Participant to continue in the employ of the Company or any
subsidiary or limit in any way the right of his employer to terminate his
employment at any time.
17. EXPENSES. The expenses of administrating the Plan shall be borne by the
Company.
18. DILUTION, RECAPITALIZATION, AND OTHER ADJUSTMENTS. In case the Company
shall at any time issue any shares of Common Stock (i) in a stock split or
other increase of outstanding shares of Common Stock, by reclassification or
otherwise, whereby the par value of shares is reduced, or (ii) in payment of
a stock dividend, the number of Performance Shares which have been awarded
but not paid and the maximum number of Performance Shares which may be earned
under the Plan (see Section 11) shall be increased proportionately; and in
like manner, in case of any combination of shares of Common Stock, by a
reverse stock split, reclassification or otherwise, the number of Performance
Shares which have been awarded but not paid, and the maximum number of
Performance Shares which may be earned under the Plan, shall be reduced
proportionately.
19. AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors of the
Company may amend, suspend or terminate the Plan at any time; provided,
however, that no amendment may, without stockholder approval, change the
definition of Performance Share.
20. PLAN TERMINATION. The Board of Directors may terminate the Plan at any
time in their discretion and in such event no Awards shall be made after the
date of such Plan Termination.
Payment of all Awards outstanding at the date of Plan Termination shall
be made as promptly as possible after such date and payment of each such
Award shall be computed in the same manner as in Section 7 using the
effective date of Plan Termination in place of the date of death or the date
of the determination of total and permanent disability, except that the
Common Stock will be priced at Fair Market Value based on the twenty trading
days immediately preceding the date of Plan Termination.
21. CHANGE IN CONTROL. In the event of a Change of Control, the Plan will
automatically terminate and each participant shall be deemed to have earned
Performance Shares with respect to each of his Awards outstanding at the date
of such Change in Control. The number of Performance Shares so earned shall
be computed by determining (based on the conditions set by the Committee for
payment
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<PAGE>
of Awards for the subject Award Period) the number of Performance Shares that
would have been paid if each subject Award Period had ended on the December
31st immediately preceding the Change of Control provided that in no event
shall the number of Performance Shares earned be less than the aggregate
number of Performance Shares at the target performance level (as identified
in the applicable award letter) with respect to all such Awards. Awards
granted in the year of the Change of Control shall be earned at the same
percentage as Awards granted in the year preceding the year of the Change of
Control. Each Performance Share so earned shall be canceled in exchange for
an immediate payment in cash of an amount equal to the Change in Control
Price.
22. CONSTRUCTION. The use of the masculine gender herein shall be deemed to
refer to the feminine as well. All headings are included for convenience of
reference and shall not be deemed a part of this Plan.
23. INTERPRETATION. Notwithstanding anything else contained in this Plan to
the contrary, if any award of Performance Shares is intended, at the time of
grant, to be other performance-based compensation within the meaning of
Section 162(m)(4)(C) of the Code, to the extent required to so qualify any
Award hereunder, (i) the Committee shall not be entitled to exercise any
discretion otherwise authorized under this Plan with respect to such award if
the ability to exercise such discretion (as opposed to the exercise of such
discretion) would cause such award to fail to qualify as other
performance-based compensation and (ii) in the event that an Executive
Officer's employment terminates by reason of his retirement on or after his
normal retirement date or prior to his normal retirement date if such
retirement was at the request of his employer, the payment, if any, with
respect to any Performance Shares awarded since the December 31st immediately
preceding the date of termination shall be made as promptly as possible
after the end of the year in which such termination occurs and the number of
Performance Shares to be paid shall be equal to that percentage, if any, of
such Award that would have been earned if, based on the conditions set by the
Committee for payment of Awards for the subject Award Period, the subject
Award Period had ended as of December 31 of the year in which the termination
occurred, times a fraction, the numerator of which is the number of months
during the subject Award Period that the Participant was an active Employee,
and the denominator of which is the number of months in the Award Period.
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PROTECTIVE LIFE CORPORATION
ANNUAL INCENTIVE PLAN
(Effective as of January 1, 1997)
1. PURPOSE.
The purposes of the Plan are to enable the Company and its Subsidiaries
to attract, retain, motivate and reward qualified executive officers and key
employees by providing them with the opportunity to earn competitive
compensation directly linked to the Company's performance. The Plan is
designed to assure that amounts paid to certain executive officers of the
Company will not fail to be deductible by the Company for Federal income tax
purposes because of the limitations imposed by Section 162(m).
2. DEFINITIONS.
Unless the context requires otherwise, the following words as used in
the Plan shall have the meanings ascribed to each below, it being understood
that masculine, feminine and neuter pronouns are used interchangeably and
that each comprehends the others.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the Compensation and Management Succession
Committee of the Board (or such other committee of the Board that the Board
shall designate from time to time) or any subcommittee thereof comprised of
two or more directors each of whom is an "outside director" within the
meaning of Section 162(m).
(c) "Company" shall mean Protective Life Corporation.
(d) "Covered Employee" shall have the meaning set forth in Section
162(m).
(f) "Participant" shall mean (i) each executive officer of the Company
and (ii) each other key employee of the Company or a Subsidiary who the
Committee designates as a participant under the Plan.
(g) "Plan" shall mean the Protective Life Corporation Annual Incentive
Plan, as set forth herein and as may be amended from time to time.
(h) "Section 162(m)" shall mean Section 162(m) of the Internal Revenue
Code of 1986, as amended, and any regulations promulgated thereunder.
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3. ADMINISTRATION.
The Committee shall administer and interpret the Plan, provided that, in
no event, shall the Plan be interpreted in a manner which would cause any
amount payable under the Plan to any Covered Employee to fail to qualify as
performance-based compensation under Section 162(m). The Committee shall
establish the performance objectives for any calendar year in accordance with
Section 4 and certify whether such performance objectives have been obtained.
Any determination made by the Committee under the Plan shall be final and
conclusive. The Committee may employ such legal counsel, consultants and
agents (including counsel or agents who are employees of the Company or a
Subsidiary) as it may deem desirable for the administration of the Plan and
may rely upon any opinion received from any such counsel or consultant or
agent and any computation received from such consultant or agent. All
expenses incurred in the administration of the Plan, including, without
limitation, for the engagement of any counsel, consultant or agent, shall be
paid by the Company. No member or former member of the Board or the
Committee shall be liable for any act, omission, interpretation, construction
or determination made in connection with the Plan other than as a result of
such individual's willful misconduct.
4. BONUSES.
(a) PERFORMANCE CRITERIA. On or before April 1 of each year (or such
other date as may be required or permitted under Section 162(m)), the
Committee shall establish the performance objective or objectives that must
be satisfied in order for a Participant to receive a bonus for such year.
Any such performance objectives will be based upon the relative or
comparative achievement of one or more of the following criteria, as
determined by the Committee: (i) net income; (ii) operating income; (iii)
income per share; (iv) economic value added; (v) return on equity; (vi) total
return; (vii) division or subsidiary income; (viii) division or subsidiary
sales or revenues; (ix) division or subsidiary economic value added; or (x)
other reasonable bases provided that to the extent required to qualify
compensation paid to certain executive officers under the Plan the
performance criteria shall be based on one or more of the criteria listed in
(i) through (ix) above.
(b) MAXIMUM AMOUNT PAYABLE. If the Committee certifies that any of the
performance objectives established for the relevant year under Section 4(a)
has been satisfied, each Participant who is employed by the Company or one of
its Subsidiaries on the last day of the calendar year for which the bonus is
payable shall be entitled (subject to the provisions of Section 4(c) hereof)
to receive an annual bonus equal to 150% of such Participant's base salary up
to a maximum of $1,000,000. Unless the Committee shall otherwise determine,
if a Participant's employment terminates for any reason (including, without
limitation, his death, disability or retirement under the terms of any
retirement plan maintained by the Company or a Subsidiary) prior to the last
day of the calendar year for which the bonus is payable, such Participant
shall receive an annual bonus equal to the amount the Participant would have
received as an annual bonus award if such Participant had remained an
employee through the end of the year multiplied by a fraction, the numerator
of which is the number of days that elapsed during the calendar year in which
the termination occurs prior to and including the date of the Participant's
termination of employment and the denominator of which is 365.
(c) Negative Discretion. Notwithstanding anything else contained in
Section 4(b) to the contrary, the Committee shall have the right, in its
absolute discretion, (i) to reduce or eliminate the
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<PAGE>
amount otherwise payable to any Participant under Section 4(b) based on
individual performance or any other factors that the Committee, in its
discretion, shall deem appropriate and (ii) to establish rules or procedures
that have the effect of limiting the amount payable to each Participant to an
amount that is less than the maximum amount otherwise authorized under
Section 4(b).
(d) AFFIRMATIVE DISCRETION. Notwithstanding any other provision in the
Plan to the contrary, (i) the Committee shall have the right, in its
discretion, to pay to any Participant who is not a Covered Employee an annual
bonus for such year in an amount up to the maximum bonus payable under
Section 4(b), based on individual performance or any other criteria that the
Committee deems appropriate and (ii) in connection with the hiring of any
person who is or becomes a Covered Employee, the Committee may provide for a
minimum bonus amount in any calendar year, regardless of whether performance
objectives are attained.
5. PAYMENT.
Except as may be determined pursuant to the terms of Section 4(e) or as
otherwise provided hereunder, payment of any bonus amount determined under
Section 4 shall be made to each Participant as soon as practicable after the
Committee certifies that one or more of the applicable performance objectives
have been attained (or, in the case of any bonus payable under the provisions
of Section 4(d), after the Committee determines the amount of any such
bonus).
6. GENERAL PROVISIONS.
(a) EFFECTIVENESS OF THE PLAN. Subject to the approval by the holders
of the Common Stock at the 1997 Annual Meeting of Stockholders, the Plan
shall be effective with respect to calendar years beginning on or after
January 1, 1997, and ending on or before December 31, 2006, unless the term
hereof is extended by action of the Board.
(b) AMENDMENT AND TERMINATION. Notwithstanding Section 6(a), the Board
or the Committee may at any time amend, suspend, discontinue or terminate the
Plan; provided, however, that no such amendment, suspension, discontinuance
or termination shall adversely affect the rights of any Participant in
respect of any calendar year which has already commenced and no such action
shall be effective without approval by the stockholders of the Company to the
extent necessary to continue to qualify the amounts payable hereunder to
Covered Employees as performance-based compensation under Section 162(m).
(c) DESIGNATION OF BENEFICIARY. Each Participant may designate a
beneficiary or beneficiaries (which beneficiary may be an entity other than a
natural person) to receive any payments which may be made following the
Participant's death. Such designation may be changed or canceled at any time
without the consent of any such beneficiary. Any such designation, change or
cancellation must be made in a form approved by the Committee and shall not
be effective until received by the Committee. If no beneficiary has been
named, or the designated beneficiary or beneficiaries shall have predeceased
the Participant, the beneficiary shall be the Participant's spouse or, if no
spouse survives the Participant, the Participant's estate. If a Participant
designates more than one beneficiary, the rights of such beneficiaries shall
be payable in equal shares, unless the Participant has designated otherwise.
<PAGE>
(d) NO RIGHT OF CONTINUED EMPLOYMENT. Nothing in this Plan shall be
construed as conferring upon any Participant any right to continue in the
employment of the Company or any of its Subsidiaries.
(e) INTERPRETATION. Notwithstanding anything else contained in this
Plan to the contrary, to the extent required to so qualify any award as other
performance based compensation within the meaning of Section 162(m) (4) (C)
of the Code, the Committee shall not be entitled to exercise any discretion
otherwise authorized under this Plan (such as the right to accelerate vesting
without regard to the achievement of the relevant performance objectives)
with respect to such award if the ability to exercise such discretion (as
opposed to the exercise of such discretion) would cause such award to fail to
qualify as other performance based compensation.
(f) NO LIMITATION TO CORPORATION ACTION. Nothing in this Plan shall
preclude the Committee or the Board, as each or either shall deem necessary
or appropriate, from authorizing the payment to the eligible employees of
compensation outside the parameters of the Plan, including, without
limitation, base salaries, awards under any other plan of the Company and/or
its Subsidiaries (whether or not approved by stockholders), any other bonuses
(whether or not based on the attainment of performance objectives) and
retention or other special payments, provided that, if the stockholders of
the Company do not approve the Plan at the first annual meeting of
stockholders following the adoption of the Plan, the Plan set forth herein
shall not be implemented.
(g) NONALIENATION OF BENEFITS. Except as expressly provided herein, no
Participant or beneficiary shall have the power or right to transfer,
anticipate, or otherwise encumber the Participant's interest under the Plan.
The Company's obligations under this Plan are not assignable or transferable
except to (i) a corporation which acquires all or substantially all of the
Company's assets or (ii) any corporation into which the Company may be merged
or consolidated. The provisions of the Plan shall inure to the benefit of
each Participant and the Participant's beneficiaries, heirs, executors,
administrators or successors in interest.
(h) WITHHOLDING. Any amount payable to a Participant or a beneficiary
under this Plan shall be subject to any applicable Federal, state and local
income and employment taxes and any other amounts that the Company or a
Subsidiary is required at law to deduct and withhold from such payment.
(i) SEVERABILITY. If any provision of this Plan is held unenforceable,
the remainder of the Plan shall continue in full force and effect without
regard to such unenforceable provision and shall be applied as though the
unenforceable provision were not contained in the Plan.
(j) GOVERNING LAW. The Plan shall be construed in accordance with and
governed by the laws of the State of Delaware, without reference to the
principles of conflict of laws.
(k) HEADINGS. Headings are inserted in this Plan for convenience of
reference only and are to be ignored in a construction of the provisions of
the Plan.
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