<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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 Permit-
ted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PROTECTIVE LIFE CORPORATION
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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 transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
<PAGE>
/ / 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>
[Letterhead]
March 27, 1998
To the Stockholders of Protective Life Corporation:
You are invited to attend the 1998 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, April 27, 1998
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 1997 Annual Report to Stockholders.
At the Annual Meeting, stockholders will elect directors for the
forthcoming year and will consider and vote upon (i) a proposed amendment to the
Company's 1985 Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock of the Company from 80,000,000 shares of the
par value of $0.50 per share to 160,000,000 shares of the par value of $0.50 per
share; (ii) a proposed amendment to the Company's 1997 Performance Share Plan;
and (iii) the ratification of the appointment of the Company's independent
auditors.
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.
[GRAPHIC OMITTED]
Sincerely yours,
/s/ Drayton Nabers, Jr.
-------------------------------
Drayton Nabers, Jr.
Chairman of the Board and
Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 27, 1998
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, April 27, 1998 at 10:00
a.m., CDT, for the following purposes:
(a) to elect 12 directors to serve for the ensuing year,
(b) to consider and vote upon the proposed amendment to the 1985
Restated Certificate of Incorporation, recommended by the
Board of Directors and described in the accompanying Proxy
Statement, to increase the number of shares of authorized
Common Stock of the Company from 80,000,000 shares of the par
value of $0.50 per share to 160,000,000 shares of the par
value of $0.50 per share,
(c) to consider and vote upon the proposed amendment to the
Protective Life Corporation 1997 Performance Share Plan,
recommended by the Board of Directors and described in the
accompanying Proxy Statement,
(d) to consider and vote upon the ratification of the appointment
of the Company's independent auditors, recommended by the
Board of Directors and described in the accompanying Proxy
Statement, 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 6, 1998 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.
[GRAPHIC OMITTED] BY ORDER OF THE BOARD OF DIRECTORS
/s/ DEBORAH J. LONG
----------------------------------
DEBORAH J. LONG, SECRETARY
March 27, 1998
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman of the Board and Chief Executive Officer
Notice of 1998 Annual Meeting of Stockholders
<TABLE>
<CAPTION>
Page
----
<S> <C>
Proxy Statement ...................................................................... 1
General Information .................................................................. 1
Voting Securities and Record Date ................................................ 2
Principal Stockholders ........................................................... 3
* Election of Directors .............................................................. 6
Election of Directors and Information about Nominees ............................. 6
Vote Required .................................................................... 8
Certain Information Concerning the Board of Directors and Its Committees ......... 9
Director's Fees .................................................................. 9
Section 16(a) Beneficial Ownership Reporting Compliance .......................... 10
Compensation Committee Interlocks and Insider Participation ...................... 10
Executive Compensation ............................................................... 11
Pension Plan ......................................................................... 13
Employment Continuation Agreements ................................................... 14
Compensation and Management Succession Committee's Report on Executive Compensation... 14
Salary .......................................................................... 15
Annual Incentive Awards ......................................................... 15
Stock Incentive Awards .......................................................... 16
Performance Share Awards ...................................................... 16
$1 Million Limit on Executive Compensation ...................................... 17
Performance Comparison ............................................................... 18
Certain Transactions ................................................................. 20
*Proposal to Amend the 1985 Restated Certificate of Incorporation .................... 20
*Proposal to Amend the Protective Life Corporation 1997 Performance Share Plan ....... 21
*Proposal to Ratify Appointment of the Company's Independent Auditors ................ 28
Other Information ................................................................. 29
Annual Reports Available ........................................................ 29
Stockholder Proposals ........................................................... 29
</TABLE>
- -----------------------------
*To be voted on at the Annual Meeting of Stockholders
<PAGE>
PROTECTIVE LIFE CORPORATION
P. O. BOX 2606
BIRMINGHAM, ALABAMA 35202
PROXY STATEMENT DATED MARCH 27, 1998
For Annual Meeting of Stockholders
To Be Held on April 27, 1998
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, April 27,
1998. 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, FOR THE APPROVAL OF AN
AMENDMENT TO THE COMPANY'S 1985 RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE COMPANY'S AUTHORIZED COMMON STOCK, FOR THE APPROVAL OF AN AMENDMENT
TO THE COMPANY'S 1997 PERFORMANCE SHARE PLAN, AND FOR THE RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT AUDITORS,
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, 1998.
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, except as stated
below, a majority vote of those shares present or represented by proxy at the
Annual Meeting and entitled to vote is required "for" a proposal in order for
such proposal to be adopted. In order to approve the proposal to amend the
Company's Certificate of Incorporation to increase the Company's authorized
common stock, a majority vote of the shares issued, outstanding and entitled to
vote is required to vote "for" the proposal. 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
<PAGE>
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.
As votes are received they are compared with the list of stockholders as of
March 6, 1998 to ensure that the stockholders are entitled to vote and are
voting their authorized number of shares. Votes for each proposal are tallied by
AmSouth Bank, as transfer agent for the Company. All proxies, work papers, and
summaries of results are then reviewed by an independent panel of proxy
inspectors.
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 Morrow & Co., Inc. to provide proxy solicitation services with respect to
the Company's institutional stockholders at an anticipated cost of $4,000.
Brokerage houses, nominees, fiduciaries, and other custodians have been
requested to forward soliciting material to the beneficial owners of the
Company's 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 the Company's common stock, $0.50 par value per share ("Common
Stock"), 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 6, 1998 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 2,457,330 shares were held as treasury shares, leaving 30,879,132
shares issued, outstanding and entitled to vote at the Annual Meeting.
THE NUMBERS OF SHARES OF COMMON STOCK REPORTED IN THIS PROXY STATEMENT,
WHETHER SIGNIFYING THOSE THAT ARE AUTHORIZED, ISSUED AND OUTSTANDING, HELD IN
TREASURY, OR HELD BY DIRECTORS, OFFICERS OR BENEFICIAL OWNERS OF FIVE PERCENT OR
MORE OF THE COMMON STOCK, ARE REPORTED AS OF A DATE PRIOR TO, AND HAVE NOT BEEN
ADJUSTED TO ACCOUNT FOR, THE COMPANY'S RECENTLY ANNOUNCED TWO-FOR-ONE STOCK
SPLIT EFFECTIVE ON APRIL 1, 1998.
2
<PAGE>
Principal Stockholders
The following table sets forth information concerning beneficial ownership
of the Common Stock as of March 6, 1998 (unless otherwise noted) with respect to
(i) persons the Company believes to be the beneficial owners of 5% or more of
the Common Stock, (ii) each current director and each of the executive officers
named in the Summary Compensation Table contained herein, and (iii) all
directors and executive officers of the Company, as a group:
<TABLE>
<CAPTION>
Amount and Nature Percent
Name of of Beneficial Ownership(1) of
Beneficial Owner Sole Power Shared Power(2) Class(1)
---------------- ---------- --------------- --------
<S> <C> <C> <C>
William J. Rushton III ........ 624,684 11,094(3) 2.1%
John W. Woods ................. 6,484 -0- *
William J. Cabaniss, Jr ....... 95,439 76,976 *
Drayton Nabers, Jr ............ 140,662(4) 10,815 *
John J. McMahon, Jr ........... 13,827(5) 18,000 *
A. W. Dahlberg ................ 2,614 -0- *
John W. Rouse, Jr ............. 3,405 -0- *
Robert T. David ............... 4,203 -0- *
Ronald L. Kuehn, Jr ........... 2,963(6) -0- *
Herbert A. Sklenar ............ 2,500(7) 1,542 *
James S. M. French ............ 550 4,900(8) *
Robert A. Yellowlees .......... 3,558(9) -0- *
John D. Johns ................. 20,541(10) 2,100 *
Elaine L. Chao ................ 1,209(11) -0- *
Donald M. James ............... 940(12) -0- *
R. Stephen Briggs ............. 72,000(13) -0- *
Jim E. Massengale ............. 62,726(14) 350 *
A. S. Williams III ............ 50,427(15) -0- *
All current directors,
and executive
officers as a group
(26 individuals) ........... 1,220,115(16)(17) 146,190 4.4%
AmSouth Bank of Alabama in
various fiduciary capacities -0- 3,589,392(18) 11.6%(18)
Nicholas Company, Inc. ........ 2,040,520(19) -0- 6.6%(19)
Firstar Corporation ........... 2,172,050(20) 419,397(20) 8.4%(20)
</TABLE>
- ------------------------
*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 or she has sole voting and
investment power, and if a beneficial owner has shared power, he or she
has shared voting and investment power. The percentage calculation is
based on the aggregate number of shares beneficially owned.
3
<PAGE>
(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.
(3) Shares owned by the wife of Mr. Rushton.
(4) Includes 6,095 shares held in the Company's 401(k) and Stock Ownership
Plan as of January 31, 1998 for which Mr. Nabers has sole voting power.
Also, includes 98,664 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 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.
(5) Includes 4,683 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
Common Stock. Such shares will be issued directly to Mr. McMahon who
will have sole voting power over the shares at that time.
(6) Includes 1,033 share equivalents allocated to Mr. Kuehn'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
Common Stock. Such shares will be issued directly to Mr. Kuehn who will
have sole voting power over the shares at that time.
(7) Includes 957 share equivalents allocated to Mr. Sklenar'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
Common Stock. Such shares will be issued directly to Mr. Sklenar who
will have sole voting power over the shares at that time.
(8) Includes 4,000 shares of Common Stock owned by Dunn Investment Company,
of which Mr. French is Chairman of the Board, President, and Chief
Executive Officer.
(9) Includes 2,058 share equivalents allocated to Mr. Yellowlees' 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
Common Stock. Such shares will be issued directly to Mr. Yellowlees who
will have sole voting power over the shares at that time.
(10) Includes 1,423 shares held in the Company's 401(k) and Stock Ownership
Plan as of January 31, 1998 for which Mr. Johns has sole voting power.
Also, includes 16,918 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 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.
(11) Includes 616 share equivalents allocated to Ms. Chao'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
Common Stock. Such shares will be issued directly to Ms. Chao who will
have sole voting power over the shares at that time.
(12) Includes 440 share equivalents allocated to Mr. James' 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
Common Stock. Such shares will be issued directly to Mr. James who will
have sole voting power over the shares at that time.
4
<PAGE>
(13) Includes 13,249 shares held in the Company's 401(k) and Stock Ownership
Plan as of January 31, 1998 for which Mr. Briggs has sole voting power.
Also, includes 34,504 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 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.
(14) Includes 14,850 shares held in the Company's 401(k) and Stock Ownership
Plan as of January 31, 1998 for which Mr. Massengale has sole voting
power. Also, includes 22,546 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 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.
(15) Includes 12,201 shares held in the Company's 401(k) and Stock Ownership
Plan as of January 31, 1998 for which Mr. Williams has sole voting
power. Also, includes 30,744 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 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.
(16) No officer or director owns any stock of any affiliate of the Company.
(17) Included are the interests of the persons as of January 31, 1998 in
144,430 shares of Common Stock held in the Company's 401(k) and Stock
Ownership Plan, which owned a total of 1,289,516 shares of Common Stock
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
account. The 693,346 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 286,017 share equivalents allocated to
the deferred compensation accounts of participating directors and
executive officers as a group pursuant to the Company's Deferred
Compensation Plan for Directors Who Are Not Employees of the Company
and the Company's Deferred Compensation Plan for Officers. Does not
include outstanding stock appreciation rights awarded under the
Company's 1996 Stock Incentive Plan.
(18) AmSouth Bank, 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, 1997, of 3,589,392 shares of Common Stock, for which the
bank has no sole voting or investment power, but has shared voting
power with respect to 2,942,478 shares and shared investment power with
respect to 2,434,764 shares. AmSouth Bank 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 Common
Stock. AmSouth Bank reported its beneficial ownership as of December
31, 1997 as 11.7%. The table shows the percentage based on 30,879,132
shares of Common Stock outstanding on March 6, 1998.
(19) Nicholas Company, Inc., 700 North Water Street, Milwaukee, Wisconsin
53202, has advised the Company that, in its capacity as an investment
adviser, it may be deemed the beneficial owner, as of December 31,
1997, of 2,040,520 shares of Common Stock, for which Nicholas Company,
Inc. has sole investment power but no voting power. Nicholas Company,
Inc. has further advised the Company that none of its separate clients
holds as much as 5% of the outstanding shares of Common Stock. Nicholas
Company, Inc. reported its beneficial ownership as of December 31, 1997
as 6.62%. The table shows the percentage based on 30,879,132 shares of
Common Stock outstanding on March 6, 1998.
5
<PAGE>
(20) Firstar Corporation, 777 E. Wisconsin Avenue, Milwaukee, Wisconsin
53202, has advised the Company that, in its capacity as a holding
company, it may be deemed the beneficial owner, as of December 31,
1997, of 2,592,447 shares of Common Stock. Firstar Corporation has sole
voting power with respect to 1,997,950 shares, sole investment power
with respect to 2,172,050 shares, shared voting power with respect to
419,397 shares, and shared investment power with respect to 416,925
shares. A subsidiary of Firstar Corporation, Firstar Investment
Research & Management Company, LLC, 777 E. Wisconsin Avenue, Milwaukee,
Wisconsin 53202, has advised the Company that, in its capacity as an
investment adviser, it may be deemed the beneficial owner, as of
December 31, 1997, of 2,588,975 shares of Common Stock. Firstar
Investment Research & Management Company has sole voting power with
respect to 905,675 shares, sole investment power with respect to
1,079,775 shares, shared voting power with respect to 1,468,340 shares,
and shared investment power with respect to 1,509,200 shares. Firstar
Corporation reported its beneficial ownership as of December 31, 1997
as 8.4%, which it has advised the Company includes beneficial ownership
by its subsidiary. The table shows the percentage based on 30,879,132
shares of Common Stock outstanding on March 6, 1998.
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 12 nominees listed herein, all of whom are now directors of
the Company.
If elected, each of the 12 nominees shall serve as a director of the
Company until the 1999 Annual Meeting of Stockholders and thereafter until his
or her 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.
Messrs. John W. Woods, John W. Rouse, Jr. and Robert T. David will retire
from the Board of Directors at the Annual Meeting of Stockholders.
The information in the following table and the notes thereto with respect
to each nominee for election as a director with regard to his or her age,
principal occupation or employment for the last five years, and certain other
directorships 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.
6
<PAGE>
<TABLE>
<CAPTION>
Company
Principal Occupation Director
Name Age and Directorships Since
- ---- --- --------------------- --------
<S> <C> <C> <C>
William J. Rushton III 68 Chairman Emeritus of the Company and, formerly, its 1956(f)
Chairman of the Board, its Chairman of the Board
and Chief Executive Officer, and its President; Director,
Alabama Power Company and Southern Company. (a)(d)
William J. Cabaniss, Jr. 59 President of Precision Grinding, Inc. (machine 1974(g)
grinding); Director, Precision Grinding, Inc. and
Birmingham Steel Corporation. (c)(d)
Drayton Nabers, Jr. 57 Chairman of the Board and Chief Executive Officer of 1982
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)
John J. McMahon, Jr. 55 Chairman of the Board of McWane, Inc. (pipe and 1987
valve manufacturing) and, formerly, its President;
Director, Alabama National Bancorporation, National
Bank of Commerce of Birmingham and John H. Harland
Company. (a)(b)
A. W. Dahlberg 57 Chairman of the Board, President and Chief Executive Officer 1987
of Southern Company (electric utilities) and, formerly, its
President; formerly, President and Chief Executive Officer,
Georgia Power Company; Director, Southern Company, 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)(d)
Ronald L. Kuehn, Jr. 62 Chairman of the Board, President and Chief Executive Officer, 1990
Sonat Inc. (energy and natural resources); Director, Sonat Inc.,
AmSouth Bancorporation, Southern Natural Gas Company, Union
Carbide Corporation, Praxair, Inc., Transocean Offshore, Inc.,
and Dun & Bradstreet Corporation. (a)(b)
Herbert A. Sklenar 66 Chairman Emeritus of the Board of Vulcan Materials Company 1992
(construction materials and chemicals) and, formerly, its
Chairman of the Board, its Chairman and Chief Executive
Officer, and its President and Chief Executive Officer;
Director, Vulcan Materials Company, AmSouth Bancorporation
and Temple-Inland, Inc. (b)(c)
James S. M. French 57 Chairman of the Board, President, and Chief Executive Officer 1996
of Dunn Investment Company (materials, construction, and
investment holding company); Director, Energen Corporation,
Regions Financial Corporation, and Hilb, Rogal and Hamilton
Company. (a)(d)
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Company
Principal Occupation Director
Name Age and Directorships Since
- ---- --- --------------------- --------
<S> <C> <C> <C>
Robert A. Yellowlees 59 Chairman of the Board, President, and Chief Executive Officer 1996
of National Data Corporation (information services company)
and, formerly, its President, Chief Executive Officer, and
Chief Operating Officer; Director, National Data Corporation
and John H. Harland Company. (a)(c)
John D. Johns 46 President and Chief Operating Officer of the Company and, 1997
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. (a)(e)
Elaine L. Chao 45 Distinguished Fellow of The Heritage Foundation, Washington, 1997
D.C. (policy research); formerly, President and Chief
Executive Officer, United Way of America; formerly Director
of Peace Corps; formerly secretary of U.S. Department of
Transportation; formerly Vice President - Syndications,
BankAmerica Capital Markets Group; Director, Dole Food
Company, Inc., NASD, Inc. and Vencor, Inc. (a)(c)
Donald M. James 49 Chairman of the Board, Chief Executive Officer and Director, 1997
Vulcan Materials Company (construction materials and
chemicals), and, formerly, its President, Chief Executive
Officer and Director. (a)(c)
</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
Vote Required
To approve the election of the nominees as directors, the affirmative vote
of the holders of a majority of the shares present or represented by proxy at
the Annual Meeting 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.
8
<PAGE>
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 of Directors. The
members of each committee are identified by appropriate notes in the table on
pages 7-8.
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 1997.
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 1997.
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 one time in
1997.
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 of Directors and its committees, the compensation of
the directors for service on the Board of Directors 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 three times in
1997.
Each of the committees reports its actions to the Board of Directors.
The Board of Directors met nine times in 1997. No director attended fewer
than 75% of the total number of meetings of the Board of Directors and the
committees of which he or she was a member during 1997.
Director's Fees
Directors who are employees of the Company do not receive any
compensation for service as a director. During 1997, directors received an
annual director's fee of $20,000 and 50 shares of Common Stock. At the
recommendation of the Board Structure and Nominating Committee that it is in the
best interest of the Company for a greater percentage of director compensation
to be payable in the form of Common Stock, the Board of Directors has determined
that commencing April 27, 1998, directors will receive an annual director's fee
of $13,000 in cash and 200 shares
9
<PAGE>
of Common Stock. For each board meeting attended, the directors who reside in
Birmingham receive $1,500 (increased from $1,200 in March 1998) and the
directors who do not reside in Birmingham ("non-Birmingham directors") receive
$2,600 (increased from $2,100 in March 1998) 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 $1,200 (decreased from
$1,300 in March 1998). Non-Birmingham directors receive an additional fee of
$500 and reimbursement of their travel expenses for attendance at committee
meetings when travel to Birmingham is for the special purpose of attending the
meeting. The current non-Birmingham directors are Ms. Chao and Messrs. Dahlberg
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, 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 Common Stock to the Securities and
Exchange Commission. In 1997, all such reports were filed on a timely basis.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation and Management Succession Committee are
Messrs. McMahon (Chairman), Woods, Dahlberg, Kuehn, and Sklenar. None of these
individuals has ever been an officer or employee of the Company or any of its
subsidiaries.
Mr. Dahlberg is the Chairman of the Board, President and Chief Executive
Officer of 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 Southern Company in 1994. Since that time, the seller has
continued to lease portions of the building. During 1997, the limited liability
company received a total of $138,410 in lease payments from affiliates of
Southern Company. This lease expired at the end of 1997.
10
<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 (collectively, the "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 Long-Term
Annual Options/ Incentive All
Compen- SARs Plan Other
Name and Principal Position Year Salary(1)(2) Bonus(1)(2)(3) sation (#) Payouts(1)(3)(4) Compensation(5)
(a) (b) (c) (d) (e) (g) (h) (i)
- --------------------------- ---- ------------ -------------- -------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Drayton Nabers, Jr ............ 1997 $552,500 $499,500 $ 372 -0- $1,551,046 (8) $ 4,800
Chairman of the Board and ... 1996 535,000 691,063 (6) 2,970 150,000 807,362 4,500
Chief Executive Officer ..... 1995 499,167 459,000 2,970 -0- 694,733 4,500
John D. Johns ................. 1997 347,500 280,000 -0- -0- 646,075 (8) 4,800
President and Chief Operating 1996 312,917 306,316 (7) -0- 75,000 176,956 4,500
Officer ..................... 1995 282,500 200,000 -0- -0- 132,964 4,500
R. Stephen Briggs ............. 1997 295,000 172,400 -0- -0- 646,075 (8) 4,800
Executive Vice President .... 1996 293,333 181,700 -0- 20,000 265,434 4,500
1995 282,500 190,000 1,056 -0- 262,598 4,500
Jim E. Massengale ............. 1997 247,500 210,000 1,890 -0- 382,514 (8) 4,800
Executive Vice President, ... 1996 225,417 148,100 756 20,000 248,844 4,500
Acquisitions ................ 1995 203,333 123,000 753 -0- 252,639 4,500
A. S. Williams III ............ 1997 283,333 282,833 5,742 -0- 492,136 (8) 4,800
Executive Vice President, ... 1996 273,333 442,500 5,742 20,000 298,613 4,500
Investments and Treasurer ... 1995 263,333 240,603 2,970 -0- 299,170 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 Common Stock.
(7) Includes a one-time bonus award of $53,316 in shares of Common Stock.
(8) 1997 long-term compensation is not yet determinable. The amount shown
is the best estimate available as of the date of this Proxy Statement.
11
<PAGE>
The following table sets forth the value of the stock appreciation rights
held by the Named Executives based upon the value of the Common Stock as of
December 31, 1997. No stock appreciation rights were granted to the Named
Executives during 1997.
AGGREGATED FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Unexercised Value of Unexercised In-the-Money
Options/SARs at FY-End (#) Options/SARs at FY-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
(a) (d) (e)
- ----------------------------- ------------------------------------------- ----------------------------------
<S> <C> <C>
Drayton Nabers, Jr .......... 0/150,000 $0/$3,731,250
John D. Johns ............... 0/ 75,000 0/1,865,625
R. Stephen Briggs ........... 0/ 20,000 0/497,500
Jim E. Massengale ........... 0/ 20,000 0/497,500
A. S. Williams III .......... 0/ 20,000 0/497,500
</TABLE>
In 1997, the Compensation and Management Succession Committee awarded
performance shares under the Company's 1997 Performance Share Plan to the Named
Executives as indicated in the table below. These awards 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, 2000 are known.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Performance or Estimated Future Payouts Under
Number of Other Period Non-Stock Price-Based Plans (in shares)
Shares, Units or Until Maturation ---------------------------------------
Name Other Rights (#)(1) or Payout Threshold Target Maximum
(a) (b) (c) (d) (e) (f)
----- ------------------- ---------------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
Drayton Nabers, Jr .... 9,590 shares December 31, 2000 4,795 11,988 16,303
John D. Johns ......... 4,600 shares December 31, 2000 2,300 5,750 7,820
R. Stephen Briggs ..... 3,410 shares December 31, 2000 1,705 4,263 5,797
Jim E. Massengale ..... 2,720 shares December 31, 2000 1,360 3,400 4,624
A. S. Williams III .... 3,180 shares December 31, 2000 1,590 3,975 5,406
</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 awards made to the Named Executives in 1997, 125% of the
award is earned if either the Company's average return on average equity or
total rate of return 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.
12
<PAGE>
PENSION PLAN
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
Remuneration ------------------------------------------------------------------
15 20 25 30 35
- ------------ ------------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 27,665 $ 36,887 $ 46,109 $ 55,331 $ 64,553
150,000 33,665 44,887 56,109 67,331 78,553
175,000* 39,665 52,887 66,109 79,331 92,553
200,000* 45,665 60,887 76,109 91,331 106,553
225,000* 51,665 68,887 86,109 103,331 120,553
250,000* 57,665 76,887 96,109 115,331 134,553*
275,000* 63,665 84,887 106,109 127,331 148,553*
300,000* 69,665 92,887 116,109 139,331* 162,553*
400,000* 93,665 124,887 156,109* 187,331* 218,553*
500,000* 117,665 156,887* 196,109* 235,331* 274,553*
600,000* 141,665* 188,887* 236,109* 283,331* 330,553*
700,000* 165,665* 220,887* 276,109* 331,331* 386,553*
800,000* 189,665* 252,887* 316,109* 379,331* 442,553*
900,000* 213,665* 284,887* 356,109* 427,331* 498,553*
1,000,000* 237,665* 316,887* 396,109* 475,331* 554,553*
1,100,000* 261,665* 348,887* 436,109* 523,331* 610,553*
1,200,000* 285,665* 380,887* 476,109* 571,331* 666,553*
1,300,000* 309,665* 412,887* 516,109* 619,331* 722,553*
</TABLE>
- --------------------------
*Current pension law limits the maximum annual benefit payable at normal
retirement age under a defined benefit plan to $130,000 for 1998 and is subject
to increase in later years. In addition, in 1998, 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.
13
<PAGE>
The Named Executives and their estimated length of service as of December
31, 1997 are provided in the following table.
<TABLE>
<CAPTION>
Name Years of Service
------------------- ----------------
<S> <C>
Drayton Nabers, Jr. ............. 19
John D. Johns ................... 4
R. Stephen Briggs ............... 26
Jim E. Massengale ............... 14
A. S. Williams III .............. 33
</TABLE>
EMPLOYMENT CONTINUATION AGREEMENTS
The Company has entered 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 up to 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 1997: (i) salary, (ii) annual incentive awards, and (iii)
stock incentive awards which are further described below. As reflected in the
Summary Compensation Table, 79% of the Chief Executive Officer's total
compensation for 1997 was incentive compensation.
14
<PAGE>
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 19
are included in the compensation surveys.
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 1997 base salary at
$555,000, effective March 1, 1997.
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 163 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 1997, $6.8 million, or 3.8% of the
Company's 1997 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,
15
<PAGE>
40% to 100% of their respective AIP bonuses is based upon Company performance,
which, for 1997, 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 1997 base salary if the Company's 1997 operating earnings per
share were $3.30. A maximum bonus, 200% of target or 90% of Mr. Nabers' 1997
base salary, would be paid if the Company's operating earnings per share were
$3.50. The Company's 1997 operating earnings per share of $3.58, representing a
17.1% operating return on average equity, resulted in Mr. Nabers earning a
maximum AIP bonus of 90% of his 1997 base salary, or $449,500.
The Committee believes that its administration of the AIP relates bonuses
paid to the Chief Executive Officer to Company performance.
Stock Incentive Awards
The Company's 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 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 1997 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 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 1997 award percentage was 50%.
For 1997, a total of 49,390 shares were awarded to 30 participants. For further
information, see the table entitled "Long-Term Incentive Plan--Awards in Last
Fiscal Year" on page 12 and the accompanying text for a description of how 1997
awards may be earned.
The criterion for payment of performance share awards has historically been
a comparison of the Company's average return on average equity for an award
period to that of a comparison group of publicly held life insurance companies,
multiline insurers and insurance holding companies during the award period. In
March of 1998, the Committee modified the performance criteria of all
outstanding awards to provide for payment in the event the Company achieved its
comparison levels with respect to either average return on average equity or
total rate of return in order to more closely align the Company's growth
strategy with stockholder returns. 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 19). In the event that the Company's four-year
results are below the median of the comparison group, no portion of the award is
earned. If the Company's four-year results are at the median,
16
<PAGE>
50% of the award is earned. Company results at the top 25% and 10% of the
comparison group would result in up to 125% and 170% of the award (175% for the
1994 award) being earned, respectively, for each executive officer. Mr. Nabers'
awards earn out at 125% and 170% (175% for the 1994 award) at these comparison
levels, respectively. 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 1997 will not be known until the
1997 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 1997 results will place the
Company in the top 10% of the comparison group which will entitle Mr. Nabers to
approximately $1,551,046 in shares of Common Stock and cash, representing 175%
of his 1994 performance share award. $1,035,737 of this payment, or 67%, would
represent appreciation in the market value of Common Stock since the award date.
Information currently available to the Company would indicate that this level of
award would have been achieved based solely on the criteria as originally
established.
$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. Each of the Company's executive compensation plans have been
approved by stockholders and are designed to comply with these specific
requirements. In 1997, as in all prior years, the Company paid no compensation
that was non-deductible by reason of Section 162(m). The Company is currently
seeking stockholder approval of certain amendments to the 1997 Performance Share
Plan, in order to preserve the deductibility of awards made thereunder for
Federal income tax purposes. For further information regarding this proposal,
see "Proposal to Amend the Protective Life Corporation 1997 Performance Share
Plan" on page 21.
COMPENSATION AND MANAGEMENT
SUCCESSION COMMITTEE
John J. McMahon, Jr., Chairman
A. W. Dahlberg John W. Woods
Herbert A. Sklenar Ronald L. Kuehn, Jr.
17
<PAGE>
PERFORMANCE COMPARISON
The following graph compares total returns on the 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)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Protective Life Corporation $100 $148 $168 $221 $288 $438
S&P 500 ................... 100 110 112 153 189 252
Peer Group ................ 100 113 109 166 208 306
</TABLE>
(1) Assumes $100 invested on December 31, 1992 in Protective Life
Corporation, S&P 500, and Peer Group common stocks including
reinvestment of dividends.
(2) Fiscal Year ending December 31.
18
<PAGE>
The companies included in the Peer Group index are generally identical to
those companies included in the Company's 1997 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,
1997, excluding downstream affiliates of any companies in the comparison group.
The Peer Group excludes AmVestors Financial Corporation, Equitable of Iowa
Companies, Home Beneficial Corporation, Paul Revere Corporation,
Security-Connecticut Corporation, USLIFE Corporation, and Washington National
Corporation that are included in the Company's 1997 Performance Share Plan
comparison group because, although they were among the 40 largest companies on
January 1, 1997, they were not publicly held on December 31, 1997. The Peer
Group also excludes Providian Corporation, a company in the 1997 Performance
Share Plan comparison group which sold its insurance operations during 1997. The
index weights individual company returns for stock market capitalization. The
companies included in the Peer Group index are:
<TABLE>
<CAPTION>
<S> <C>
Aetna Life & Casualty Company Kansas City Life Insurance Company
AFLAC, Inc. The Liberty Corporation
Alfa Corporation Liberty Financial Companies
Allmerica Financial Corporation Lincoln National Corporation
American General Corporation National Western Life Insurance Company
American Heritage Life Investment Corporation Old Republic International
American International Group, Inc. Presidential Life Corporation
American National Insurance Company Protective Life Corporation
Aon Corporation Provident Life & Accident Insurance Company of
CIGNA Corporation America
CNA Financial Corporation ReliaStar Financial Corporation
Conseco, Inc. Sun America, Inc.
Delphi Financial Group, Inc. Torchmark Corporation
The Equitable Companies Incorporated Travelers Group, Inc.
Hartford Financial Services Group, Inc. United Insurance Companies, Inc.
Jefferson-PilotCorporation Unitrin Incorporated
John Alden Financial Corporation UNUM Corporation
</TABLE>
The composition of the Peer Group has changed from that used in the
previous year's Proxy Statement. Equitable of Iowa Companies, Home Beneficial
Corporation, Paul Revere Corporation, Providian Corporation,
Security-Connecticut Corporation, USLIFE Corporation, and Washington National
Corporation were deleted because they were acquired by other companies.
Allmerica Financial Corporation, Hartford Financial Services Group, Inc., and
Liberty Financial Companies were added to the Peer Group index because they were
among the 40 largest companies on January 1, 1997.
As disclosed in the "Compensation and Management Succession Committee's
Report on Executive Compensation," the Company's long-term incentive
compensation is based upon comparisons of the Company's return on average equity
(in addition to 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.
19
<PAGE>
<TABLE>
<CAPTION>
Protective Life Corporation Comparison Group Median(1)
--------------------------- --------------------------
Year ROE(2) Average ROE(3) ROE(2) Average ROE(3)
- ------------- ------ -------------- --------- --------------
<S> <C> <C> <C> <C>
1997 ........ 17.2% 17.9% 12.6%(4) 10.2%(4)
1996 ........ 16.6 18.3 11.8 11.7
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
</TABLE>
(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 1997 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
Southern Company in 1994. Since that time, the seller has continued to lease
portions of the building. During 1997, the limited liability company received a
total of $138,410 in lease payments from affiliates of Southern Company. This
lease expired at the end of 1997. Mr. Dahlberg is the Chairman of the Board,
President and Chief Executive Officer of Southern Company.
PROPOSAL TO AMEND
THE 1985 RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has adopted a resolution approving, and recommends
that the stockholders approve, an amendment to the 1985 Restated Certificate of
Incorporation of the Company, which would increase the number of shares of
authorized Common Stock of the Company from 80,000,000 shares of the par value
of $0.50 per share to 160,000,000 shares of the par value of $0.50 per share.
The text of the amendment, as submitted to the stockholders, is as follows:
The first sentence of Section 4.1 of Article IV is hereby deleted in its
entirety and the following is inserted in lieu thereof: "The total number of
shares of all classes of capital stock which the Corporation shall have
authority to issue is one hundred sixty-four million (164,000,000), of which one
hundred sixty million (160,000,000) shares of the par value of $0.50 per share
are to be of a class designated 'Common Stock' and four million (4,000,000)
shares of the par value of $1.00 per share are to be of a class designated
'Preferred Stock'."
20
<PAGE>
Reason for the Increase in Authorized Shares
The primary purpose of the proposed increase in the number of authorized
shares of Common Stock is to provide additional shares for use in connection
with possible future equity offerings, possible future acquisitions, and
possible future stock splits. If the proposed increase in the number of
authorized shares is approved by stockholders, the Company will have increased
flexibility to effect equity offerings, acquisitions, or stock splits as
opportunities arise or circumstances change. Issuance of stock in connection
with such possible future transactions would be subject to approval by the Board
of Directors.
Vote Required
To approve the amendment, 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 PROPOSAL TO AMEND
THE COMPANY'S 1985 RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF SHARES OF AUTHORIZED COMMON STOCK.
PROPOSAL TO AMEND THE
PROTECTIVE LIFE CORPORATION
1997 PERFORMANCE SHARE PLAN
Introduction
The Board of Directors has adopted and is seeking stockholder approval of
an amendment to the Protective Life Corporation 1997 Performance Share Plan (the
"1997 Plan") to provide the Company with the flexibility to grant other types of
equity incentive awards in addition to the previously authorized performance
shares. The Company is not seeking authorization for any additional shares of
Common Stock. If the proposal to amend the 1997 Plan is approved by
stockholders, the 1997 Plan as so amended will be renamed the 1997 Long-Term
Incentive Plan (the "Amended Plan").
The purpose of the 1997 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 1997 Plan currently authorizes the award of performance shares to a
select group of executive officers and key employees. The proposed amendment
would enhance the purpose of this Plan by providing the Company with the
flexibility to grant different types of equity awards in addition to performance
shares.
The Amended Plan has been designed to preserve the tax deductibility of
certain kinds of awards made to certain executive officers, even if such
executives' compensation exceeds $1,000,000 in any year. Under amendments
adopted in 1993 to the Internal Revenue Code of 1986 (the "Code"), publicly
traded corporations will not be entitled to deduct for Federal income
21
<PAGE>
tax purposes compensation paid to certain executive officers to the extent that
payments to such officer for any year exceed $1,000,000 unless the payments
qualify for an exception to the deductibility limit. One such exception is for
compensation paid under a performance-based compensation plan which has been
approved by the stockholders. Since the 1997 Plan was previously approved by
stockholders, performance shares awarded thereunder should qualify as
performance-based compensation. In addition, the Company believes that, if the
proposed amendment is approved, shares received upon the exercise of stock
options or stock appreciation rights under the Amended Plan will also qualify as
performance-based compensation.
If stockholders approve the amendment to the 1997 Plan, shares remaining
under the predecessor plan (the "1992 Plan") will no longer be available for
future awards. However, in the event the stockholders do not approve the
amendment to the 1997 Plan, both the 1997 Plan and the 1992 Plan will remain in
their current form, as previously authorized by stockholders.
The following summary of the Amended 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 Amended Plan shall not preclude the Company from making any
additional payments outside the Amended Plan to participants therein or to other
employees.
On March 6, 1998, the closing price of the Company's Common Stock on the
New York Stock Exchange was $69.94 per share.
Vote Required
To approve the amendment to the Company's 1997 Performance Share Plan, the
affirmative vote of the holders of a majority of the shares present or
represented by proxy at the Annual Meeting and entitled to vote is required.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE PROTECTIVE LIFE CORPORATION 1997 PERFORMANCE
SHARE PLAN.
Material Terms of the Amended Plan
Eligibility. The Amended Plan authorizes the Compensation and Management
Succession Committee (the "Committee") to make awards representing shares of
Common Stock 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 Amended Plan will vary from year to year at the
discretion of the Committee. During 1997, approximately 30 employees (including
all of the Named Executives) were eligible to receive awards under the 1997 Plan
and it is expected that approximately the same number of employees will be
eligible for awards under the Amended Plan in 1998.
22
<PAGE>
Shares Available. Of the maximum of 2,000,000 shares previously authorized
by stockholders for issuance under the 1997 Plan, 1,921,645 are currently
available for future awards. No participant may be granted awards in any
12-month period for more than 200,000 shares and no more than one-fifth (1/5) of
the aggregate number of shares available may be awarded as restricted stock,
restricted units or deferred stock. The shares may be unissued shares or
treasury shares. If there is a stock split, stock dividend, recapitalization,
or other relevant change affecting the Common Stock, appropriate adjustments
will be made in the number of shares that may be issued in the future and in the
number of shares and price under all outstanding grants made before the event.
If shares under a grant are not issued, those shares will again be available for
inclusion in future grants. Payment of cash in lieu of shares generally will not
be considered an issuance of shares of Common Stock, except in the case of the
exercise of a stock appreciation right granted in tandem with a stock option.
The Committee has not granted any awards, other than pursuant to the existing
terms of the 1997 Plan, prior to the date of this Proxy Statement.
Administration. The Amended 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 Amended Plan, the terms and conditions of
all awards made thereunder, and (iv) subject to the maximum limitations set
forth in the Amended Plan, the amount of compensation that may be payable to any
participant upon the attainment of the applicable performance objectives.
Awards. In addition to the performance shares previously authorized for
issuance under the 1997 Plan, the Committee has the authority to grant the
following types of awards under the Amended Plan: (i) stock options; (ii) stock
appreciation rights ("SARs"); (iii) restricted stock; (iv) restricted units; and
(v) deferred stock. Each of these awards may be granted alone, in conjunction
with, or in tandem with other awards under the Amended Plan.
Performance Shares. As previously authorized, the Committee may
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.
23
<PAGE>
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 Common Stock for each performance
share earned with respect to such Performance Period. The Amended 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. In the event the Board of Directors terminates the Amended 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.
Stock Options. The Committee may grant non-qualified options and
options qualifying as incentive stock options under the Code. Incentive stock
options ("ISOs") and non-qualified stock options may be granted for such
number of shares as the Committee shall determine. The option price of either
a non-qualified stock option or an ISO will not be less than the fair market
value of the underlying Common Stock on the date of grant. To exercise an
option, the grantee may pay the option price in cash or, if permitted by the
Committee, by delivering other shares of Common Stock.
The term of each option will be fixed by the Committee but may not
exceed ten years from the date of grant. Unless otherwise determined by the
Committee, options will become exercisable in three equal installments on
each of the first three anniversaries of the date of grant. The
exercisability of options may be accelerated by the Committee.
Stock Appreciation Rights. The Committee may grant a SAR in
conjunction with an option granted under the Amended Plan or independent of
any option. The Committee will determine the time or times at which a SAR may
be exercised. SARs may be exercised in installments, and the exercisability
of SARs may be accelerated by the Committee. Unless otherwise determined by
the Committee, SARs will become exercisable in three equal installments on
each of the first three anniversaries of the date of grant. The Committee may
grant SARs which become exercisable only in the event of a change in control
of the Company and may provide that such are cashed out on the basis of the
change in control price, as such terms are defined in the Amended Plan. If a
grantee exercises a SAR, the grantee will generally receive a payment equal
to the excess of the fair market value of the shares with respect to which
the SAR is being exercised at the time of exercise over the price of such
shares as fixed by the Committee at the time the SAR was granted. Payment may
be made in cash, in shares, or in a combination of cash and shares as the
Committee determines.
Restricted Stock Grants. The Committee may also award shares of
Common Stock under a restricted stock grant. The grant will set forth a
restriction period (including, without limitation, a specified period of time
and a period related to the attainment of performance goals) during which the
shares of restricted stock granted will remain subject to forfeiture. Unless
otherwise determined by the Committee, restricted stock awards shall become
vested in five equal installments on each of the first five anniversaries of
the date of grant, provided, however, that no restricted stock awards shall
vest any earlier than the first anniversary of the date of grant other than
in the event of a change in control. The grantee cannot dispose of the shares
prior to the expiration of the restriction period. During this period, the
grantee will generally have all the rights of a stockholder, including the
right to vote the shares and receive dividends. Each certificate will bear a
legend giving notice of the restrictions in the grant.
24
<PAGE>
Restricted Unit Grants. The Committee may grant awards of
restricted units and set forth the terms of a restriction period in the same
manner as those applicable to the grant of restricted stock. With respect to
restricted units, no shares of Common Stock will actually be issued to a
participant at the time a restricted unit award is made. Rather, the Company
will establish a separate account for the participant and will record in such
account the number of restricted units awarded to the participant. The
account of each recipient of a restricted unit award will be credited with
amounts equal to any dividends paid by the Company with respect to the
corresponding number of shares of Common Stock ("dividend equivalents"). Such
dividend equivalents will be credited as additional restricted units. The
participant will be entitled to receive on the termination of the restricted
period, one share of Common Stock for each restricted unit with respect to
which the restrictions have lapsed ("vested unit") then credited to the
recipient's account (or, at the discretion of the Committee, cash in lieu
thereof) plus any dividend equivalents with respect to such vested units.
Deferred Stock Grants. The Committee may also make deferred stock
awards under the Amended Plan. These are non-transferable awards entitling
the recipient to receive shares of Common Stock without any payment in cash
or property in one or more installments at a future date or dates, as
determined by the Committee. Receipt of deferred stock may be conditioned on
such matters as the Committee shall determine, including continued employment
or attainment of performance goals. Any deferral restrictions under a
deferred stock award may be accelerated or waived by the Committee at any
time prior to termination of employment. The Committee may permit
participants to further defer receipt of a deferred stock award.
Termination of Employment. If, after any performance shares have been
awarded, 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, 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.
In the event of termination of employment by reason of retirement,
disability or death, any restrictions on restricted units or shares of
restricted or deferred stock shall lapse and any option or SAR may thereafter be
exercised in full in the case of retirement for a period of three years and in
the case of disability or death for a period of one year (or such shorter period
as the Committee shall determine at grant), subject in each case to the stated
term of the option. In the event the Company terminates a participant's
employment for cause, all outstanding options, SARs, restricted stock,
restricted units or deferred stock will be forfeited. In the event of
termination of employment for any reason other than retirement, disability or
death or for cause, any options and SARs will be exercisable, to the extent
exercisable at the date of termination, for a period of 90 days and any
restricted units or shares of restricted or deferred stock then outstanding as
to which the period of restriction has not lapsed will be forfeited.
25
<PAGE>
Change of Control Provisions. The Amended Plan provides that, except as
provided below, in the event of a "Change in Control" (as defined in the Amended
Plan), (i) all SARs will become immediately exercisable; (ii) the restrictions
and deferral limitations applicable to outstanding restricted unit, restricted
stock and deferred stock awards will lapse and the shares in question will fully
vest; and (iii) each option shall be canceled in exchange for cash in an amount
equal to the excess of the highest price paid (or offered) for Common Stock
during the preceding 60-day period over the exercise price for such option.
Notwithstanding the foregoing, if the Committee determines that the grantee of
such award will receive a new award (or have his prior award honored) in a
manner which preserves its value and eliminates the risk that the value of the
award will be forfeited due to involuntary termination, no acceleration of
exercisability or vesting, lapse of restriction or deferral limitations, or cash
settlement will occur as a result of a Change in Control. In the event of a
Change in Control, 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.
Amendment and Termination. The Board of Directors may terminate or suspend
the Amended Plan at any time, but such termination or suspension shall not
affect any performance shares, stock options, SARs, or restricted unit,
restricted stock and deferred stock awards then outstanding under the Amended
Plan. Unless terminated earlier by action of the Board of Directors, the Amended
Plan will continue in effect until December 31, 2006, but awards granted prior
to such date shall continue in effect until they expire in accordance with their
terms. The Board of Directors may also amend the Amended Plan as it deems
advisable. The Board of Directors presently intends to submit all material
amendments to the Amended Plan to the stockholders for their approval to the
extent required by Section 162(m) of the Code. The Committee may amend the term
of any award or option theretofore granted, retroactively or prospectively, but
no such amen dment shall adversely affect any such award or option without the
holder's consent and no amendment may, without stockholder approval, change the
definition of a performance share.
Federal Income Tax Consequences. The following is a brief summary of the
Federal income tax consequences of awards made under the Amended Plan based upon
the Federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive and does not describe state or local tax consequences.
Performance Shares. Payments made under the Amended Plan will be
taxable to the recipients thereof when paid, and the Company 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.
Incentive Stock Options. No taxable income is realized by the
participant upon the grant or exercise of an ISO. If a participant does not
sell the stock received upon the exercise of an ISO ("ISO Shares") for at
least two years from the date of grant and within one year from the date of
exercise, when the shares are sold any gain (loss) realized will be long-term
capital gain (loss). In such circumstances, no deduction will be allowed to
the Company for Federal income tax purposes.
26
<PAGE>
If ISO Shares are disposed of prior to the expiration of the
holding periods described above, the participant generally will realize
ordinary income at that time equal to the excess, if any, of the fair market
value of the shares at exercise (or, if less, the amount realized on the
disposition of the shares) over the price paid for such ISO Shares. The
Company will be entitled to deduct any such recognized amount. Any further
gain or loss realized by the participant will be taxed as short-term or
long-term capital gain or loss. Subject to certain exceptions for disability
or death, if an ISO is exercised more than three months following the
termination of the participant's employment, the option will generally be
taxed as a non-qualified stock option.
Non-Qualified Stock Options. No income will be realized by the
participant at the time a non-qualified stock option is granted. Generally
upon exercise of a non-qualified stock option, the participant will realize
ordinary income in an amount equal to the difference between the price paid
for the shares and the fair market value of the shares on the date of
exercise. The Company will be entitled to a tax deduction in the same amount.
Any appreciation (or depreciation) after the date of exercise will be either
short-term or long-term capital gain or loss, depending upon the length of
time that the participant has held the shares.
Stock Appreciation Rights. No income will be realized by a
participant in connection with the grant of a SAR. When the SAR is exercised,
the participant will generally be required to include as taxable ordinary
income in the year of exercise, an amount equal to the amount of cash and the
fair market value of any shares received. The Company will be entitled to a
deduction at the time and in the amount included in the participant's income
by reason of the exercise. If the participant receives Common Stock upon
exercise of a SAR, the post-exercise appreciation or depreciation will be
treated in the same manner discussed above under Non-Qualified Stock Options.
Restricted Stock. A participant receiving restricted stock
generally will recognize ordinary income in the amount of the fair market
value of the restricted stock at the time the stock is no longer subject to
forfeiture, less any consideration paid for the stock. The Company will be
entitled to a deduction at the same time and in the same amount. The holding
period to determine whether the participant has long-term or short-term
capital gain or loss on a subsequent sale generally begins when the
restriction period expires, and the participant's tax basis for such shares
will generally equal the fair market value of such shares on such date.
However, a participant may elect, under Section 83(b) of the Code,
within 30 days of the grant of the stock, to recognize taxable ordinary
income on the date of grant equal to the excess of the fair market value of
the shares of restricted stock (determined without regard to the
restrictions) over the purchase price of the restricted stock. By reason of
such an election, the participant's holding period will commence on the date
of grant and the participant's tax basis will be equal to the fair market
value of the shares on that date (determined without regard to restrictions).
Likewise, the Company generally will be entitled to a deduction at that time
in the amount that is taxable as ordinary income to the participant. If
shares are forfeited after making such an election, the participant will be
entitled to a deduction, refund, or loss for tax purposes only in an amount
equal to the purchase price of the forfeited shares regardless of whether the
participant made a Section 83(b) election.
Restricted Units. A participant receiving a restricted unit award
will not have taxable income when the restricted units or the dividend
equivalents are credited to the participant's account. The participant will
recognize ordinary income equal to the fair market value of the Common Stock
delivered (or the amount of cash paid in lieu of such shares) as a dividend
when the shares and/or
27
<PAGE>
cash are delivered or paid in accordance with the Amended Plan. The Company will
generally be entitled to a deduction for the year and to the extent the
participant has ordinary income, provided that, in the case of payment in shares
or other property, the Company complies with applicable withholding
requirements.
Deferred Stock. The participant receiving deferred stock generally
will be subject to tax at ordinary income rates on the fair market value of
the deferred stock on the date that the stock is distributed to the
participant, and the capital gain or loss holding period for such stock will
also commence on that date. The Company generally will be entitled to a
deduction in the amount that is taxable as ordinary income to the participant.
New Plan Benefits
Because the awards to individual participants may vary from year to year at
the discretion of the Committee and any payment of any performance share awards
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 Amended Plan for any calendar year during which the
Amended Plan is in effect cannot be determined. The Long-Term Incentive Plan
Payouts column of the Summary Compensation Table contains the estimated amounts
that were payable for 1997 under the predecessor to the 1997 Plan to each of the
Named Executives. Payouts for all executive officers (11 persons) and all other
employees as a group (9 persons) are estimated to be $5,004,064 and $1,008,397,
respectively. Non-employee directors do not participate in the Amended Plan.
PROPOSAL TO RATIFY APPOINTMENT
OF THE COMPANY'S INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, which is composed of directors
who are not officers of the Company, the Board of Directors has appointed
Coopers & Lybrand L.L.P., a firm of independent public accountants, as
independent auditors for the Company and its subsidiaries for 1998. 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 1998, and the effect which performing such
services might have on audit independence. It has reviewed the non-audit
services which were performed in 1997 and determined that they were consistent
with Company policy.
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<PAGE>
Vote Required
To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors, the affirmative vote of the holders of a majority of the
shares present or represented by proxy at the Annual Meeting and entitled to
vote is required.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE RATIFICATION OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S
INDEPENDENT AUDITORS.
OTHER INFORMATION
Annual Reports Available
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as filed with 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 1999
Annual Meeting of Stockholders, any proposals of stockholders intended to be
presented at the 1999 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, 1998.
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PROTECTIVE LIFE CORPORATION
1997 LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of the Protective Life Corporation 1997 Long-Term
Incentive Plan (formerly known as the 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. DEFINITIONS.
"AWARD" shall mean any grant or award under the Plan.
"AWARD PERIOD" means the period of calendar years fixed by the Committee
with respect to all Performance Share 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.
"BOARD" shall mean the Board of Directors of the Company.
"CAUSE" shall mean (i) the willful failure by the Participant to perform
substantially the Participant's 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 not to compete with the Company or any
Subsidiary.
"CHANGE IN CONTROL" shall mean the occurrence of any of the following
events: (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, (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, or (iv) any other event or
transaction that is declared by resolution of the Board to constitute a
Change in Control for purposes of the Plan.
"CHANGE IN CONTROL PRICE" shall mean 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
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(as determined in good faith by the Committee if any part of the offered
price is payable other than in cash), EXCEPT THAT, in the case of Incentive
Stock Options and Stock Appreciation Rights relating to Incentive Stock
Options such price shall be the Fair Market Value on the date on which the
cash out described in Section 11 occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"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) of the Code and a "non-employee director" within the meaning
of Rule 16b-3, as promulgated under Section 16 of the Exchange Act.
"COMMON STOCK" shall mean the common stock, par value $0.50 per share, of
the Company.
"COMPANY" shall mean Protective Life Corporation, a Delaware corporation.
"DATE OF GRANT" with respect to a Performance Share Award shall mean as of
January 1 of any year in which such an Award is made.
"DEFERRED STOCK" shall mean a contractual right to receive a share of
Common Stock at the time and subject to the conditions set forth in Section
10 hereof.
"DISABILITY" shall mean long-term disability as defined under the terms of
the Company's qualified pension plan.
"ELIGIBLE EMPLOYEE" shall mean any person (including any officer) employed
by the Company or any Subsidiary on a full-time salaried basis.
"EMPLOYMENT" shall mean, for purposes of Sections
[6(c) through (f), 7(d), 8(c), 9(b) and 10(c)] continuous and regular
salaried employment with the Company or a subsidiary, which shall include
(unless the Committee shall otherwise determine) any period of vacation, any
approved leave of absence or any salary continuation or severance pay period
and, at the discretion of the Committee, may include service with any former
subsidiary of the Company.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" shall mean those persons who are officers of the
Company within the meaning of Rule 16a-1(f) of the Exchange Act.
"FAIR MARKET VALUE" of the Common Stock shall mean (i) with respect to
Performance Shares, 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
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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 or (ii) with respect to other Awards, on any date, the closing price of a
share of Common Stock, as reported for such day on a national exchange, or
the mean between the closing bid and asked prices for a share of Common Stock
on such date, as reported on a nationally recognized system of price
quotation, PROVIDED THAT, in the event that there are no Common Stock
transactions reported on such exchange or system on such date, Fair Market
Value shall mean the closing price on the immediately preceding date on which
Common Stock transactions were so reported.
"INCENTIVE STOCK OPTION" shall mean an Option which is intended to meet the
requirements of Section 422 of the Code.
"INTERIM PERIOD" shall mean 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.
"NONSTATUTORY STOCK OPTION" shall mean an Option which is not intended to
be an Incentive Stock Option.
"NORMAL RETIREMENT" shall mean retirement at or after the earliest age at
which the Participant may retire and receive a retirement benefit without an
actuarial reduction for early commencement of benefits under any defined
benefit pension plan maintained by the Company or any of its Subsidiaries in
which such Participant participates.
"OPTION" shall mean the right to purchase the number of shares of Common
Stock specified by the Committee, at a price and for the term fixed by the
Committee in accordance with the Plan and subject to any other limitations
and restrictions as this Plan and the Committee shall impose.
"PARTICIPANT" shall mean an Eligible Employee who is selected by the
Committee to receive an Award under the Plan.
"PERFORMANCE SHARE" shall mean the equivalent of one share of Common Stock
granted under Section 6 which becomes vested and nonforfeitable upon the
attainment, in whole or in part, of performance objectives determined by the
Committee.
"PLAN" shall mean the Protective Life Corporation 1997 Long-Term Incentive
Plan as set forth herein and as may be amended from time to time.
"RESTRICTED PERIOD" shall mean the period during which a grant of
Restricted Stock or Restricted Units is subject to forfeiture.
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"RESTRICTED STOCK" shall mean any Award of Common Stock granted under
Section 9 which becomes vested and nonforfeitable, in whole or in part, upon
the completion of such period of service as shall be determined by the
Committee.
"RESTRICTED UNIT" shall mean any Award of a contractual right granted under
Section 9 to receive Common Stock (or, at the discretion of the Committee,
cash based on the Fair Market Value of the Common Stock) which becomes vested
and nonforfeitable, in whole or in part, upon the completion of such period
of service as shall be determined by the Committee.
"SECTION 162(m)" shall mean Section 162(m) of the Code and any regulations
promulgated thereunder.
"STOCK APPRECIATION RIGHT" shall mean a contractual right granted under
Section 8 to receive cash, Common Stock or a combination thereof.
"SUBSIDIARY" shall mean any corporation of which the Company possesses
directly or indirectly fifty percent (50%) or more of the total combined
voting power of all classes of stock of such corporation and any other
business organization, regardless of form, in which the Company possesses
directly or indirectly fifty percent (50%) or more of the total combined
equity interests in such organization.
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.
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 Awards or the granting of Awards to specific
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
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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. MAXIMUM AMOUNT OF SHARES AVAILABLE FOR AWARDS.
(a) MAXIMUM NUMBER OF SHARES. The maximum number of shares of Stock
in respect of which Awards may be made under the Plan shall be a total of
2,000,000 shares of Common Stock. Without limiting the generality of the
foregoing, whenever shares are received by the Company in connection with the
exercise of or payment for any Award granted under the Plan, only the net
number of shares actually issued shall be counted against the foregoing
limit. Notwithstanding the foregoing, but subject to the provisions of
Section 4(c), in no event shall (i) the number of shares of Common Stock
issued under the Plan with respect to Restricted Stock, Restricted Units or
Deferred Stock exceed 400,000 shares of Common Stock and (ii) any Participant
receive Awards in any 12-month period for more than 200,000 shares of Common
Stock.
(b) SHARES AVAILABLE FOR ISSUANCE. Shares of Common Stock may be made
available from the authorized but unissued shares of the Company or from
shares held in the Company's treasury and not reserved for some other
purpose. In the event that any Award is payable solely in cash, no shares
shall be deducted from the number of shares available for issuance under
Section 4(a) by reason of such Award except in the case of the exercise of a
Stock Appreciation Right granted in tandem with an Option. In addition, if
any Award in respect of shares is canceled or forfeited for any reason
without delivery of shares of Common Stock, the shares subject to such Award
shall thereafter again be available for award pursuant to the Plan.
(c) ADJUSTMENT FOR CORPORATE TRANSACTIONS. In the event that the
Committee shall determine that any stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, warrants or rights offering to
purchase Common Stock at a price substantially below fair market value, or
other similar event affects the Common Stock such that an adjustment is
required to preserve, or to prevent enlargement of, the benefits or potential
benefits made available under this Plan, then the Committee may, in such
manner as the Committee may deem equitable, adjust any or all of (i) the
number and kind of shares which thereafter may be awarded or optioned and
sold or made the subject of Stock Appreciation Rights under the Plan, (ii)
the number and kinds of shares subject to outstanding Options and other
Awards and (iii) the grant, exercise or conversion price with respect to any
of the foregoing. Additionally, the Committee may make provisions for a cash
payment to a Participant or a person who has an outstanding Option or other
Award. However, the number of shares subject to any Option or other Award
shall always be a whole number.
5. PARTICIPATION. Participants in the Plan shall be selected by the
Committee from those Eligible Employees who, in the estimation of the
Committee, have a substantial opportunity to influence the long-term
profitability of the Company.
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6. PERFORMANCE SHARES.
(a) PERFORMANCE SHARE AWARDS.
(1) After appropriate approval of the Plan, and thereafter from time
to time, the Committee shall select Employees to receive Performance Share
Awards in any year as of the Date of Grant. Any Employee may be granted more
than one Performance Share 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.
(2) 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 this
Section 6.
(3) Payment of the Performance Share Award to any Participant shall
be made in accordance with this 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 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.
(4) Each Performance Share 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.
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(b) PAYMENT OF PERFORMANCE SHARE AWARDS. Each Participant granted a
Performance Share 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 Performance
Share 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 a Performance
Share 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 Performance Share
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 Performance Share 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 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 Performance Share Awards all taxes to be withheld with respect
to such Awards.
For payment of each Performance Share 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.
(c) DEATH OR DISABILITY. If, prior to the close of an Award Period, a
Participant's Employment terminates by reason of his or her death or
Disability, payment of his or her outstanding Performance Share Award or
Awards shall be made as promptly as possible after death or the date of the
determination of 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 Performance Share 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 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
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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
Disability. Except as provided in Section 6(g), 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.
(d) 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 or her Normal Retirement date or prior to his or her Normal Retirement
date if such retirement was at the request of his employer, payment of the
Participant's outstanding Performance Share 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 6(c), using the effective date of retirement
in place of the date of death or determination of Disability.
(e) TERMINATION UNDER CERTAIN CIRCUMSTANCES. If, prior to the close of an
Award Period, a Participant's Employment terminates by reason of (i) his or
her retirement prior to his or her Normal Retirement date and such retirement
was at the request of the Participant and approved by his of her employer,
(ii) the divestiture by the Company of one or more of its 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 or her
outstanding Performance Share Award or Awards shall be within the exclusive
discretion of the Committee. Payment, if any, of his or her Performance
Share 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 6(c), using the effective date that
such event occurs in place of the date or determination of Disability.
(f) VOLUNTARY TERMINATION OR DISCHARGE. If, prior to the close of an
Award Period, a Participant's Employment terminates and there is no payment
due under the terms of Sections 6(c), (d) or (h) or 11, 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.
(g) 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 or her retirement on or
after his or her Normal Retirement date or prior to his or her 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
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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.
(h) PAYMENT UPON PLAN TERMINATION. Payment of all Performance Share
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 6(c) using the effective date of Plan
Termination in place of the date of death or the date of the determination of
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.
7. STOCK OPTIONS.
(a) GRANT. Subject to the provisions of the Plan, the Committee shall
have the authority to grant Options to an Eligible Employee and to determine
(i) the number of shares to be covered by each Option, (ii) the exercise
price therefor and (iii) the conditions and limitations applicable to the
exercise of the Option. The Committee shall have the authority to grant
Incentive Stock Options or Nonstatutory Stock Options; PROVIDED THAT
Incentive Stock Options may not be granted to any Participant who is not an
employee of the Company or one of its Subsidiaries at the time of grant. In
the case of Incentive Stock Options, the terms and conditions of such grants
shall be subject to and comply with Section 422 of the Code and the
regulations thereunder.
(b) OPTION PRICE. The Committee shall establish the exercise price at
the time each Option is granted, which price shall not be less than 100% of
the Fair Market Value of the Common Stock at the date of grant, except that,
for purposes of satisfying the foregoing requirement with respect to a
Nonstatutory Stock Option, the Committee may elect to credit against the
exercise price payable by a Participant the value of any compensation
otherwise payable to the Participant under the terms of the Company's
compensation practices and programs which is surrendered, foregone or
exchanged pursuant to such rules or procedures as the Committee shall
establish from time to time.
(c) EXERCISE. Each Option shall be exercised at such times and subject
to such terms and conditions as the Committee may specify in the applicable
Award or thereafter; provided, however, that if the Committee does not
establish a different exercise schedule at or after the date of grant of an
Option, such Option shall become exercisable in three (3) equal installments
on each of the first three anniversaries of the date the Option is granted.
The Committee may impose such conditions with respect to the exercise of
Options as it shall deem appropriate, including without limitation, any
conditions relating to the application of federal or state securities laws.
No shares shall be delivered pursuant to any exercise of an Option unless
arrangements satisfactory to the Committee have been made to assure full
payment of the option price therefor. Without limiting the generality of the
foregoing, payment of the option price may be made in cash or its equivalent
or, if and to the extent permitted by the Committee, by exchanging shares of
Common Stock owned by the optionee (which are not the subject of any pledge
or other security interest), or by a combination of the foregoing, provided
that the combined value of all cash and cash equivalents and the Fair Market
Value of any
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such Common Stock so tendered to the Company, valued as of the date of such
tender, is at least equal to such option price. The Committee may permit a
Participant to elect to pay the exercise price upon the exercise of an Option
by authorizing a third party to sell shares of Common Stock (or a sufficient
portion of the shares) acquired upon the exercise of the Option and remit to
the Company a sufficient portion of the sale proceeds to pay the entire
exercise price and any tax withholding resulting from such exercise.
(d) TERMINATION OF EMPLOYMENT. Unless the Committee shall otherwise
determine at or after grant, an Option shall be exercisable following the
termination of a Participant's Employment only to the extent provided in this
Section 7(d). If a Participant's Employment terminates due to the
Participant's (i) death, (ii) Disability, (iii) early retirement with the
consent of the Committee or (iv) Normal Retirement, the Participant (or, in
the event of the Participant's death or Disability during Employment or
during the period during which an Option is exercisable under this sentence,
the Participant's beneficiary or legal representative) may exercise any
Option held by the Participant at the time of such termination, regardless of
whether then exercisable, for a period of three years in the case of Normal
Retirement or early retirement with consent and one year in the case of death
or Disability (or such greater or lesser period as the Committee shall
determine at or after grant), but in no event after the date the Option
otherwise expires. If a Participant's Employment is terminated for Cause
(or, if after the Participant's termination of Employment, the Committee
determines that the Participant's Employment could have been terminated for
Cause had the Participant still been employed or has otherwise engaged in
conduct that is detrimental to the interests of the Company, as determined by
the Committee in its sole discretion), all Options held by the Participant
shall immediately terminate, regardless of whether then exercisable. In the
event of a Participant's termination of Employment for any reason not
described in the preceding two sentences, the Participant (or, in the event
of the Participant's death or Disability during the period during which an
Option is exercisable under this sentence, the Participant's beneficiary or
legal representative) may exercise any Option which was exercisable at the
time of such termination for 90 days (or such greater or lesser period as the
Committee shall specify at or after the grant of such Option) following the
date of such termination, but in no event after the date the Option otherwise
expires.
8. STOCK APPRECIATION RIGHTS.
(a) GRANT OF STOCK APPRECIATION RIGHTS. The Committee shall have the
authority to grant Stock Appreciation Rights in tandem with an Option, in
addition to an Option, or freestanding and unrelated to an Option. Stock
Appreciation Rights granted in tandem or in addition to an Option may be
granted either at the same time as the Option or at a later time. Stock
Appreciation Rights shall not be exercisable after the expiration of ten
years from the date of grant and shall have a base price determined in the
same manner as, and subject to the same conditions as apply with respect to,
a Nonstatutory Stock Option under Section 7(b).
(b) EXERCISE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
shall entitle the Participant to receive from the Company an amount equal to
the excess of the Fair Market Value of a share of Common Stock on the date of
exercise of the Stock Appreciation Right over the base price thereof. The
Committee shall determine the time or times at which or the event or events
(including, without limitation, a Change of Control) upon which a Stock
Appreciation Right may be exercised
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in whole or in part, the method of exercise and whether such Stock
Appreciation Right shall be settled in cash, shares of Common Stock or a
combination of cash and shares of Common Stock; provided, however, that
unless otherwise specified by the Committee at or after grant, a Stock
Appreciation Right granted in tandem with an Option shall be exercisable only
at the same time or times as the related Option is exercisable. Unless the
Committee shall establish a different exercise schedule at or after the date
of grant, each Stock Appreciation Right shall become exercisable in three (3)
equal installments on each of the first three anniversaries of the date of
grant.
(c) TERMINATION OF EMPLOYMENT. Unless the Committee shall otherwise
determine at or after grant, a Stock Appreciation Right shall be exercisable
following the termination of a Participant's Employment only to the extent
provided in this Section 8(c). If a Participant's Employment terminates due
to the Participant's (i) death, (ii) Disability, (iii) early retirement with
the consent of the Committee or (iv) Normal Retirement, the Participant (or,
in the event of the Participant's death or Disability during Employment or
during the period during which a Stock Appreciation Right is exercisable
under this sentence, the Participant's beneficiary or legal representative)
may exercise any Stock Appreciation Right held by the Participant at the time
of such termination, regardless of whether then exercisable, for a period of
three years in the case of Normal Retirement or early retirement with consent
and one year in the case of death or Disability (or such greater or lesser
period as the Committee shall determine at or after grant), but in no event
after the date the Stock Appreciation Right otherwise expires. If a
Participant's Employment is terminated for Cause (or, if after the
Participant's termination of Employment, the Committee determines that the
Participant's Employment could have been terminated for Cause had the
Participant still been employed or has otherwise engaged in conduct that is
detrimental to the interests of the Company, as determined by the Committee
in its sole discretion), all Stock Appreciation Rights held by the
Participant shall immediately terminate, regardless of whether then
exercisable. In the event of a Participant's termination of Employment for
any reason not described in the preceding two sentences, the Participant (or,
in the event of the Participant's death or Disability during the period
during which a Stock Appreciation Right is exercisable under this sentence,
the Participant's beneficiary or legal representative) may exercise any Stock
Appreciation Right which was exercisable at the time of such termination for
90 days (or such greater or lesser period as the Committee shall specify at
or after the grant of such Stock Appreciation Right) following the date of
such termination, but in no event after the date the Stock Appreciation Right
otherwise expires.
9. RESTRICTED STOCK AND RESTRICTED UNITS.
(a) GRANT OF RESTRICTED STOCK OR RESTRICTED UNITS. The Committee may
grant Awards of Restricted Stock or Restricted Units to Participants at such
times and in such amounts, and subject to such other terms and conditions not
inconsistent with the Plan, as it shall determine. Each grant of Restricted
Stock or Restricted Units shall be evidenced by an Award Agreement. Unless
the Committee provides otherwise at or after the date of grant, stock
certificates evidencing any shares of Restricted Stock so granted shall be
held in the custody of the Secretary of the Company until the Restricted
Period lapses, and, as a condition to the grant of any Award of shares of
Restricted Stock, the Participant shall have delivered to the Secretary of
the Company a certificate, endorsed in blank, relating to the shares of
Common Stock covered by such Award.
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<PAGE>
(b) TERMINATION OF EMPLOYMENT. Unless the Committee otherwise determines
at or after grant, the rights of a Participant with respect to an award of
Restricted Stock or Restricted Units outstanding at the time of the
Participant's termination of Employment shall be determined under this
Section 9(b). In the event that a Participant's Employment terminates due to
the Participant's (i) death, (ii) Disability, (iii) early retirement with the
consent of the Committee or (iv) Normal Retirement, any restrictions on an
award of Restricted Stock or Restricted Units shall lapse. Unless the
Committee otherwise determines, any portion of any Restricted Stock or
Restricted Unit Award as to which the Restricted Period has not lapsed at the
date of a Participant's termination of Employment shall be forfeited as of
such date.
(c) DELIVERY OF SHARES. Upon the expiration or termination of the
Restricted Period and the satisfaction (as determined by the Committee) of
any other conditions determined by the Committee, the restrictions applicable
to the Restricted Stock or Restricted Units shall lapse and a stock
certificate for the number of shares of Common Stock with respect to which
the restrictions have lapsed shall be delivered, free of all such
restrictions, except any that may be imposed by law, to the Participant or
the Participant's beneficiary or estate, as the case may be. No payment will
be required to be made by the Participant upon the delivery of such shares of
Common Stock and/or cash, except as otherwise provided in Section 12(a) of
the Plan. At or after the date of grant, the Committee may accelerate the
vesting of any award of Restricted Stock or Restricted Units or waive any
conditions to the vesting of any such award.
(d) RESTRICTED PERIOD; RESTRICTIONS ON TRANSFERABILITY DURING RESTRICTED
PERIOD. Unless otherwise determined by the Committee at or after the date of
grant, the Restricted Period applicable to any award of Restricted Stock or
Restricted Units shall lapse, and the shares related to such award shall
become freely transferable, as to an equal amount of shares of Restricted
Stock or Restricted Units on each of the first five (5) anniversaries of the
date of grant. Restricted Stock or Restricted Units may not be sold,
assigned, pledged or otherwise encumbered, except as herein provided, during
the Restricted Period. Any certificates issued in respect of Restricted
Stock shall be registered in the name of the Participant and deposited by
such Participant, together with a stock power endorsed in blank, with the
Company. At the expiration of the Restricted Period with respect to any
award of Restricted Stock, unless otherwise forfeited, the Company shall
deliver such certificates to the Participant or to the Participant's legal
representative. Payment for Restricted Stock Units shall be made by the
Company in shares of Common Stock, cash or in any combination thereof, as
determined by the Committee.
(e) RIGHTS AS A STOCKHOLDER; DIVIDEND EQUIVALENTS. Unless otherwise
determined by the Committee at or after the date of grant, Participants
granted shares of Restricted Stock shall be entitled to receive, either
currently or at a future date, as specified by the Committee, all dividends
and other distributions paid with respect to those shares, provided that if
any such dividends or distributions are paid in shares of Common Stock or
other property (other than cash), such shares and other property shall be
subject to the same forfeiture restrictions and restrictions on
transferability as apply to the shares of Restricted Stock with respect to
which they were paid. The Committee will determine whether and to what
extent to credit to the account of, or to pay currently to, each recipient of
Restricted Units, an amount equal to any dividends paid by the Company during
the Restricted Period with respect to the corresponding number of shares of
Common Stock ("Dividend
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<PAGE>
Equivalents"). To the extent provided by the Committee at or after the date
of grant, any Dividend Equivalents with respect to cash dividends on the
Common Stock credited to a Participant's account shall be deemed to have been
invested in shares of Common Stock on the record date established for the
related dividend and, accordingly, a number of additional Restricted Units
shall be credited to such Participant's account equal to the greatest whole
number which may be obtained by dividing (x) the value of such Dividend
Equivalent on the record date by (y) the Fair Market Value of a share of
Common Stock on such date.
10. DEFERRED STOCK.
(a) DEFERRED STOCK AWARDS. Subject to such terms and conditions as the
Committee shall determine, a Participant may be granted a Deferred Stock
Award, entitling the Participant to receive shares of Common Stock without
any payment in cash or property in one or more installments at a future date
or dates. Such Award shall be non-transferrable and may be conditioned on
such matters as the Committee shall determine, including continued employment
or attainment of performance goals. No shares of Common Stock will be issued
at the time an award of Deferred Stock is made and the Company shall not be
required to set aside a fund for the payment of any such award. The Company
will establish a separate account for the Participant and will record in such
account the number of Deferred Stock Units awarded to the Participant. Any
deferral restrictions under a Deferred Stock Award may be accelerated or
waived by the Committee at any time prior to termination of employment. The
Committee may permit Participants to further deter receipt of a Deferred
Stock Award.
(b) RIGHTS AS A STOCKHOLDER; DIVIDEND EQUIVALENTS. A Participant shall
not have any right in respect of Deferred Stock awarded pursuant to the Plan
to vote on any matter submitted to the Company's stockholders until such time
as the shares of Common Stock attributable to such Deferred Stock have been
issued to such Participant or his beneficiary. The Committee will determine
whether and to what extent to credit to the account of, or to pay currently
to, each recipient of a Deferred Stock Award, any Dividend Equivalents. To
the extent provided by the Committee at or after the date of grant, any
Dividend Equivalents with respect to cash dividends on the Common Stock
credited to a Participant's account shall be deemed to have been invested in
shares of Common Stock on the record date established for the related
dividend and, accordingly, a number of Deferred Stock shall be credited to
such Participant's account equal to the greatest whole number which may be
obtained by dividing (x) the value of such Dividend Equivalent on the record
date by (y) the Fair Market Value of a share of Common Stock on such date.
(c) SETTLEMENT OF DEFERRED STOCK. Unless the Committee determines
otherwise at or after the date of grant, a Participant shall receive one
share of Common Stock for each Deferred Stock Unit (and related Dividend
Equivalents) that shall have become vested on or prior to the date of such
Participant's termination of Employment with the Company and the
Subsidiaries, other than any such termination for Cause, on the date of such
termination of Employment (or on such earlier date as the Committee shall
permit or such later date as may be elected by the Participant in accordance
with the rules and procedures of the Committee). In the event of the
termination of a Participant's Employment with the Company and the
Subsidiaries for Cause, the Participant shall immediately forfeit all rights
with respect to any Deferred Stock Units (and related Dividend Equivalents)
credited
13
<PAGE>
to his or her account. The Committee may provide in the Award Agreement
applicable to any Award of Deferred Stock that, in lieu of issuing shares of
Common Stock in settlement of the vested portion of such Deferred Stock, the
Committee may direct the Company to pay to the Participant the cash balance
of such Deferred Stock.
11. CHANGE IN CONTROL.
(a) ACCELERATED VESTING AND PAYMENT. Subject to the provisions of
Section 11(b) below, in the event of a Change in Control, each Option and
Stock Appreciation Right shall promptly be canceled in exchange for a payment
in cash of an amount equal to the excess of the Change of Control Price over
the exercise price for such Option or the base price for such Stock
Appreciation Right, whichever is applicable, the Restricted Period applicable
to all shares of Restricted Stock or Restricted Units shall expire and all
such shares shall become nonforfeitable and immediately transferable and all
Deferred Stock shall become fully vested and the shares of Common Stock with
respect thereto shall be immediately payable.
(b) ALTERNATIVE AWARDS. Notwithstanding Section 11(a), no
cancellation, acceleration of exercisability, vesting, cash settlement or
other payment shall occur with respect to any Award or any class of Awards if
the Committee reasonably determines in good faith prior to the occurrence of
a Change in Control that such Award or class of Awards 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 following 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 and entitlements applicable under such
Incentive 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 Incentive
Award (determined by the Committee as constituted immediately prior to
the Change in Control, in its sole discretion, promptly after the Change
in Control); and
(iv) have terms and conditions which provide that in the event that
the Participant's employment is involuntarily terminated or
constructively terminated (other than for Cause) upon or following such
Change in Control, 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, a material reduction in the Participant's responsibilities or
the relocation of the Participant's principal place of employment to another
location
14
<PAGE>
a material distance farther away from the Participant's home, in each case,
without the Participant's prior written consent.
(c) In the event of a Change in Control, each Participant shall be
deemed to have earned Performance Shares with respect to each of his or her
Performance Share 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 of Performance
Share 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.
Performance Share Awards granted in the year of the Change in Control shall
be earned at the same percentage as Awards granted in the year preceding the
year of the Change in 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.
12. GENERAL PROVISIONS.
(a) WITHHOLDING. The Company shall have the right to deduct from all
amounts paid to a Participant in cash (whether under this Plan or otherwise)
any taxes required by law to be withheld in respect of Awards under this
Plan. In the case of any Award satisfied in the form of Common Stock, no
shares shall be issued unless and until arrangements satisfactory to the
Committee shall have been made to satisfy any withholding tax obligations
applicable with respect to such Award. Without limiting the generality of
the foregoing and subject to such terms and conditions as the Committee may
impose, the Company shall have the right to retain, or the Committee may,
subject to such terms and conditions as it may establish from time to time,
permit Participants to elect to tender, Common Stock (including Common Stock
issuable in respect of an Award) to satisfy, in whole or in part, the amount
required to be withheld.
(b) AWARDS. Each Award hereunder shall be evidenced in writing. The
written agreement shall be delivered to the Participant and shall incorporate
the terms of the Plan by reference and specify the terms and conditions
thereof and any rules applicable thereto.
(c) 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.
(d) NO ASSIGNMENT OF INTEREST. Unless the Committee shall permit (on
such terms and conditions as it shall establish) an Award to be transferred
to a member of the Participant's immediate family or to a trust or similar
vehicle for the benefit of such immediate family members (collectively, the
"Permitted Transferees"), an Award or 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
15
<PAGE>
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. All rights with respect to Awards granted to a Participant under
the Plan shall be exercisable during his or her lifetime only by such
Participant, or, if applicable, the Permitted Transferees.
(e) 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.
(f) 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.
(g) EXPENSES. The expenses of administrating the Plan shall be borne
by the Company.
(h) NO RIGHTS TO AWARDS, NO SHAREHOLDER RIGHTS. No Participant or
Eligible Employee shall have any claim to be granted any Award under the
Plan, and there is no obligation of uniformity of treatment of Participants
and Eligible Employees. Subject to the provisions of the Plan and the
applicable Award, no person shall have any rights as a shareholder with
respect to any shares of Common Stock to be issued under the Plan prior to
the issuance thereof.
(i) CONSTRUCTION OF THE PLAN. The validity, construction,
interpretation, administration and effect of the Plan and of its rules and
regulations, and rights relating to the Plan, shall be determined solely in
accordance with the laws of the State of Delaware.
(j) LEGEND. To the extent any stock certificate is issued to a
Participant in respect of shares of Restricted Stock awarded under the Plan
prior to the expiration of the applicable Restricted Period, such certificate
shall be registered in the name of the Participant and shall bear the
following (or similar) legend:
"The shares of stock represented by this certificate are subject to
the terms and conditions contained in the Protective Life Corporation
1997 Long-Term Incentive Plan and the Award Agreement, dated as of
__________________________ , between the Company and the Participant,
and may not be sold, pledged, transferred, assigned, hypothecated or
otherwise encumbered in any manner (except as provided in the Plan or in
such Award Agreement) until _______________."
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Upon the lapse of the Restricted Period with respect to any such shares of
Restricted Stock, the Company shall issue or have issued new share
certificates without the legend described herein in exchange for those
previously issued.
(k) EFFECTIVE DATE. The Plan, as amended, shall be effective on the
date the Plan is approved by shareholders. No Awards may be granted under
the Plan after December 31, 2006.
(l) AMENDMENT OF PLAN. The Board or the Committee may amend, suspend
or terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without shareholder approval if such amendment would
(l) increase the number of shares of Common Stock subject to the
Plan, except pursuant to Section 4(c);
(2) change the price at which Options may be granted;
(3) change the definition of Performance Share; or
(4) remove the administration of the Plan from the Committee.
Without the written consent of an affected Participant, no termination,
suspension or modification of the Plan shall adversely affect any right of
such Participant under the terms of an Award granted before the date of such
termination, suspension or modification.
(m) APPLICATION OF PROCEEDS. The proceeds received by the Company from
the sale of its shares under the Plan will be used for general corporate
purposes.
(n) COMPLIANCE WITH LEGAL AND EXCHANGE REQUIREMENTS. The Plan, the
granting and exercising of Awards thereunder, and the other obligations of
the Company under the Plan, shall be subject to all applicable federal and
state laws, rules, and regulations, and to such approvals by any regulatory
or governmental agency as may be required. The Company, in its discretion,
may postpone the granting and exercising of Awards, the issuance or delivery
of Common Stock under any Award or any other action permitted under the Plan
to permit the Company, with reasonable diligence, to complete such stock
exchange listing or registration or qualification of such Common Stock or
other required action under any federal or state law, rule, or regulation and
may require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Common Stock in compliance with applicable laws, rules, and
regulations. The Company shall not be obligated by virtue of any provision
of the Plan to recognize the exercise of any Award or to otherwise sell or
issue Common Stock in violation of any such laws, rules, or regulations; and
any postponement of the exercise or settlement of any Award under this
provision shall not extend the term of such Awards, and neither the Company
nor its directors or officers shall have any obligation or liability to the
Participant with respect to any Award (or Common Stock issuable thereunder)
that shall lapse because of such postponement.
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(o) DEFERRALS. The Committee may postpone the exercising of Awards,
the issuance or delivery of Common Stock under any Award or any action
permitted under the Plan to prevent the Company or any of its Subsidiaries
from being denied a Federal income tax deduction with respect to any Award
other than an Incentive Stock Option.
(p) 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.
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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, April 27,
1998 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, 1998 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, and 4.
<TABLE>
<CAPTION>
<S> <C> <C>
1. ELECTION OF DIRECTORS / / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all
(except as marked to the contrary below) nominees listed below
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
WILLIAM J. RUSHTON III JOHN J. McMAHON, JR. HERBERT A. SKLENAR JOHN D. JOHNS
WILLIAM J. CABANISS, JR. A. W. DAHLBERG JAMES S. M. FRENCH ELAINE L. CHAO
DRAYTON NABERS, JR. RONALD L. KUEHN, JR. ROBERT A. YELLOWLEES DONALD M. JAMES
</TABLE>
INSTRUCTION: TO WITHHOLD AUTHORITY to vote for any individual nominee,
write that nominee's name here: ______________________________________
2. Approval of the amendment to the 1985 Restated Certificate of
Incorporation of Protective Life Corporation increasing the number of
shares of authorized Common Stock.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of the amendment to the Protective Life Corporation 1997
Performance Share Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. Ratification of the appointment of Coopers & Lybrand L.L.P. as the
Company's independent auditors.
/ / 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 _______________________________________________, 1998
____________________________________________________________
Signature
____________________________________________________________
Signature
Please sign exactly as your name appears hereon, date, and return promptly in
the enclosed postage prepaid envelope.
THE NUMBER OF SHARES REPRESENTED BY THIS PROXY DOES NOT REFLECT THE STOCK
SPLIT EFFECTIVE AFTER THE RECORD DATE FOR THE ANNUAL MEETING OF STOCKHOLDERS.
