Exhibit 10(b)(1)

 

                                             

 

2005 PERFORMANCE SHARE AWARD LETTER

FOR SENIOR OFFICERS

 

The Compensation and Management Succession Committee of the Company’s Board of
Directors (the “Committee”) has awarded you the following:

 

            Performance Shares

Award Period:  January 1, 2005 – December 31, 2008

Grant Date:  March 4, 2005

 

The Performance Shares were awarded pursuant to the Company’s Long-Term
Incentive Plan (the “Plan”), and are subject to the terms and conditions
contained in the Plan and in the Provisions for 2005 Performance Shares for
Senior Officers set forth in Appendix A to this Award Letter.

 

This Award is intended to fulfill the Plan’s purpose of furthering the long-term
growth in profitability of the Company by offering long-term incentives to key
executives, officers and employees who will be largely responsible for such
growth.  Since these Awards have been granted to only a select group of Company
employees, I request that you keep the terms of this Award confidential.

 

 

 

 

H. Corbin Day, Chairman,

Compensation and Management Succession Committee

of the Board of Directors

of Protective Life Corporation

 

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APPENDIX A

 

PROVISIONS FOR

2005 PERFORMANCE SHARES

FOR SENIOR OFFICERS

MARCH 4, 2005

 

On March 4, 2005, Protective Life Corporation (the “Company”) granted
performance shares (“Performance Shares”) under its Long-Term Incentive Plan
(the “Plan”).  Each senior officer who was granted Performance Shares received a
2005 Performance Share Award Letter for Senior Officers (the “Award Letter”). 
The terms of your Award are contained in these Provisions for 2005 Performance
Shares for Senior Officers (“Performance Share Provisions”), which refer to and
incorporate information contained in the Award Letter.  This Award is also
subject to the terms and conditions set forth in the Plan and any rules and
regulations adopted by the Compensation and Management Succession Committee of
the Board of Directors (the “Committee”).  Any terms used in these Performance
Share Provisions and not defined herein have the meanings set forth in the Plan.

 

These Performance Share Provisions and the Award Letter constitute part of a
prospectus covering securities that have been registered under the Securities
Act of 1933.  The date of this part of the prospectus is March 4, 2005.

 

1.                                      General Provisions.  The number of
Performance Shares that you have been awarded, the Award Period of the
Performance Shares, and the Grant Date of the Performance Shares are set forth
in your Award Letter.

 

2.                                      Earn-Out of Performance Shares.

 

(a)                                  General.  Payment of the Performance Share
Award will be based upon a comparison of the Company’s “average return on
average equity” (as defined below) for the Award Period to that of a “comparison
group” (as defined below).  If the Company’s average return on average equity
for the Award Period ranks below the 40th percentile of such measure for the
comparison group, no payment will be made; if it is at the 40th percentile, a
33% payment will be made; if it is at the 50th percentile, a 50% payment will be
made; if it is at the 75th percentile, a 125% payment will be made; and if it is
at the 90th percentile, a 170% payment will be made.  There will be
interpolation between the 40th and 50th percentiles to determine the exact
percentage to be paid between 33% and 50%, interpolation between the 50th and
75th percentiles to determine the exact percentage to be paid between 50% and
125%, and interpolation between the 75th and 90th percentiles to determine the
exact percentage to be paid between 125% and 170%.

 

(b)                                 Definitions.  “Return on average equity” for
a calendar year is generally defined as net income per share divided by average
stockholders’ equity (excluding accumulated comprehensive income) per share,
capped at a maximum of 25% per calendar year.  “Average stockholders’ equity”
for a calendar year is the average of the stockholders’ equity on the last
business day of each calendar quarter during such calendar year and of the
stockholders’ equity on the last business day of the preceding calendar year.
 “Average return on average equity” for the Award Period is the average of the
returns on average equity for the calendar years during the Award Period. 
Unless the Committee determines otherwise, any one-time, special or
non-recurring charge against the Company’s earnings shall be taken into account
only in the Award Period ending in the year in which such charge is

 

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taken, and not in other Award Periods.  The “comparison group” is generally
comprised of the Company and the 40 largest public held stock life and multiline
insurance companies (as measured by net worth).  The companies in the comparison
group are listed in Appendix B.  If any comparison group company’s net income
per share or stockholders’ equity per share shall cease to be publicly available
(due to a business combination, receivership, bankruptcy, or other event) or if
any such company is no longer publicly held or becomes a downstream affiliate of
any other company in the comparison group on or before January 1 following the
end of the Award Period, or substantially exits the insurance industry (due to a
divestiture of its insurance business, or other events), its average return on
average equity shall be ranked below that of the Company.  The Committee may
adjust the performance criteria to recognize special or non-recurring situations
or circumstances with respect to the Company or any other company in the
comparison group for any year during the Award Period.

 

3.                                      Time and Form of Payment.  As soon as
practicable after the end of the Award Period, the Committee will determine the
extent to which the Performance Share Award has been earned.  The amount of the
total payment shall be based on the Fair Market Value of the Common Stock. 
Unless the Committee determines otherwise, payment will be made partly in shares
of Common Stock and partly in cash, with the cash portion being approximately
equal to the federal, state and local income tax withholding obligation with
respect to such payment.

 

4.                                      Termination of Employment.

 

(a)                                  Death, Disability or Retirement.  If your
employment is terminated by death, disability or by retirement on or after
normal retirement age or prior to normal retirement age at the request of the
Company, you will receive a pro rata payment with respect to the Performance
Shares based on the period of employment during the Award Period and determined
by reference to the performance achieved as of the end of the fiscal year
immediately preceding your termination date (or, if your employment terminates
in 2005, by reference to performance as of December 31, 2004).

 

(b)                                 Special Termination.  If your employment is
terminated by reason of (1) retirement prior to normal retirement age at your
request and approved in writing by the Company, (2) the divestiture of a
business segment or a significant portion of the assets of the Company, or (3) a
significant reduction by the Company in its salaried work force, the
determination of whether any payment shall be made with respect to any unvested
portion of your Performance Share Award shall be at the discretion of the
Committee.  Any such payment, if made, will not exceed the number of Performance
Shares determined as set forth in paragraph 4(a).

 

(c)                                  Retirement in Calendar Year of Grant.  Any
provision of these Performance Share Provisions to the contrary notwithstanding,
if (i) this Award is intended, at the time of grant, to be “performance-based
compensation” within the meaning of Section 162(m)(4)(c) of the Internal Revenue
Code (the “Code”), to the extent required to so qualify any Award thereunder,
and (ii) your employment is terminated before January 1, 2006 by retirement on
or after normal retirement age or prior to normal retirement age at the request
of the Company, you will receive a pro rata payment with respect to the
Performance Shares based on the period of employment during the Award Period and
determined by reference to the performance achieved as of December 31, 2005.

 

(d)                                 Other Termination.  If your employment is
terminated for any reason not set forth in paragraphs 4(a), (b) or (c), any
unvested portion of your Performance Share Award will be forfeited.

 

5.                                      Change in Control.  In the event of a
Change in Control, you shall be deemed to have earned Performance Shares with
respect to your Award based upon performance as of the December 31 preceding the
date of the Change in Control, provided that the number of Performance Shares
earned shall

 

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never be less than the aggregate number of Performance Shares at the 75th
percentile (as described in paragraph 2(a)) with respect to the Award.  Each
Performance Share so earned shall be canceled in exchange for a payment in cash
of an amount equal to the greater of (a) the price per share of Common Stock
immediately preceding any transaction resulting in a Change in Control or (b)
the highest price per share of Common Stock offered in conjunction with any
transaction resulting in a Change in Control (as determined in good faith by the
Committee if any part of the offered price is payable other than in cash).

 

6.                                      Federal Income Tax Consequences.

 

(a)                                  General.  The following description of the
federal income tax consequences of the Performance Shares is based on currently
applicable provisions of the Code and related regulations, and is intended to be
only a general summary.  The summary does not discuss state and local tax laws,
which may differ from the federal tax law, or federal estate, gift and
employment tax laws.  For these reasons, you are urged to consult with your own
tax advisor regarding the application of the tax laws to your particular
situation.

 

(b)                                 Grant of Performance Shares.  This grant of
Performance Shares will not cause you to be subject to federal income tax.

 

(c)                                  Payment of Performance Shares.  You will
recognize ordinary income for federal income tax purposes on the date the
Performance Shares are earned and paid (the “payment date”), unless you have
made an effective election under the Company’s Deferred Compensation Plan for
Officers (“Deferred Compensation Plan”), as discussed in paragraph 6(e).  The
amount of income recognized will be equal to the aggregate of the amount of cash
and the fair market value (as of the payment date) of the shares of Common Stock
paid.

 

(d)                                 Sale of Performance Shares.  Your tax basis
in the shares of Common Stock acquired upon payment of Performance Shares will
be equal to the fair market value of the shares on the payment date (unless you
have made an effective election under the Deferred Compensation Plan, as
discussed in paragraph 6(e)).

 

You will recognize capital gain or loss on the sale or exchange of the acquired
shares to the extent of any difference between the amount realized and the tax
basis in the shares.  The tax treatment of the capital gain or loss will depend
upon the period of time between the payment date and the date of the sale or
exchange, your adjusted gross income, and other factors.

 

(e)                                  Deferred Compensation Plan.  You may be
able to defer payment of Performance Shares, and the recognition of taxable
income with respect to such payment, by making deferral elections under the
Deferred Compensation Plan.  If you make effective deferral elections, you will
recognize ordinary income on your Performance Shares as of the date the
Performance Shares are paid from the Deferred Compensation Plan, in an amount
equal to the amount of cash and the fair market value (on such date) of the
shares of Common Stock paid.  Similarly, your holding period for capital gains
purposes will begin as of the date of payment from the Deferred Compensation
Plan, and the tax basis in the shares of Common Stock acquired will equal the
fair market value of the shares on such date.

 

You will be provided with more information about this deferral opportunity, and
the Deferred Compensation Plan, before your Performance Shares become payable.

 

(f)                                    Company Deductions.  As a general rule,
the Company or one of its subsidiaries will be entitled to a deduction for
federal income tax purposes at the same time and in the same amount that a
Performance Share holder recognizes ordinary income, to the extent that such
income is considered

 

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reasonable compensation under the Code.  Neither the Company nor any subsidiary
will be entitled to a deduction with respect to payments that constitute “excess
parachute payments” pursuant to Section 280G of the Code and that do not qualify
as reasonable compensation pursuant to that section.  Such payments will also
subject the recipients to a 20% excise tax.

 

(g)                                 ERISA.  The Plan is not qualified under
Section 401(a) of the Code and is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974.

 

7.                                      Deferral of Payment by the Company.  The
Committee may defer the payment of cash and the issuance or delivery of Common
Stock to prevent the Company or its subsidiaries from being denied a federal
income tax deduction with respect to any payment of Performance Shares.  If a
cash payment or distribution of Common Stock to a Participant is deferred, the
Company will establish for the Participant a book-entry account (the “Account”)
representing all such deferrals.  If dividends are paid by the Company during
the deferral period, the Participant’s Account shall be credited with the amount
of any dividends which would otherwise have been payable to the Participant if
the number of shares represented by such Account had been owned directly, and
such amount shall be deemed to be reinvested in additional shares of Common
Stock.

 

8.                                      Income Tax Withholding.  The Company
will withhold, from your Performance Share payment (or your payment from the
Deferred Compensation Plan, if you have made deferral elections under such
Plan), an amount in cash sufficient to satisfy any applicable federal, state or
local tax withholding obligation.

 

The amount of withholding tax retained by the Company will be paid to the
appropriate federal, state and local tax authorities in satisfaction of the
withholding obligations under the tax laws.  The total amount of income you
recognize by reason of the payment of Performance Shares will be reported on
Form W-2 in the year in which you recognize income with respect to the payment. 
Whether you owe additional tax will depend on your overall taxable income for
the applicable year and the total tax remitted for that year through withholding
or by estimated payments.

 

9.                                      Non-transferability of Performance
Shares.  Your Performance Shares may not be assigned, pledged, or otherwise
transferred, except upon your death by the laws of intestacy or descent and
distribution.

 

10.                               Beneficiary Designations.  You may name a
beneficiary or beneficiaries (who must be members of your family and who may be
named contingently or successively) with respect to your rights under the Plan
(including the right to receive payment of Performance Shares after your death)
by submitting a written beneficiary designation in a form acceptable to the
Company.  Any such designation will be effective only when filed with the
Company’s Chief Accounting Officer (or such other person as the Company may
designate) before your date of death, and will (unless specifically set forth
therein) revoke all prior designations.  If there is no beneficiary designation
in effect on the date of your death, your beneficiary will be your surviving
spouse or, if you have no surviving spouse, your estate.

 

11.                               Adjustment in Certain Events.  In the event of
specified changes in the Company’s capital structure, the Committee may make
appropriate adjustment in the number and kind of shares authorized by the Plan,
and the number and kind of shares covered by outstanding Awards.  These
Performance Share Provisions will continue to apply to your Award as so
adjusted.

 

12.                               Administration of the Plan.  The Plan is
administered by the Committee, which consists of at least two directors, none of
whom is an employee of the Company.  The members of the Committee are appointed
annually by the Board of Directors and may be removed by the Board of
Directors.  To the

 

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Company’s best knowledge, there is no other material relationship between any
member of the Committee and the Company or its affiliates or employees.

 

The Committee designates the eligible employees to be granted awards and the
type and amount of awards to be granted.  The Committee also has authority to
interpret the Plan, to adopt rules for administering the Plan, to decide all
questions of fact arising under the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan.  Committee
determinations need not be uniform, whether or not the Participants are
similarly situated.  All decisions and acts of the Committee are final and
binding on all affected Participants.

 

13.                               Stock Purchase Rights.  Pursuant to a Rights
Agreement, on August 18, 1995, the Company paid a dividend of one right (a
“Right”) on each share of Common Stock then outstanding.  Each Right entitles
the holder to purchase one one-hundredth of a share of Series A Junior
Participating Cumulative Preferred Stock.  The Rights Agreement provides that
the Company will issue one Right together with each share of Common Stock issued
by it in the future.

 

The Rights are currently represented by certificates for the Common Stock and
can only be transferred together with the Common Stock.   However, upon the
occurrence of certain events the Rights will become exercisable and at that time
may be transferred separately from the Common Stock.  Unless and until such
Rights become exercisable they are expected to have no value independent of the
Common Stock

 

Upon payment of your Performance Shares, you will receive one Right with respect
to each share of Common Stock received.  If the Rights become exercisable, the
Company will provide more detailed information about how they affect Awards
under the Plan.

 

14.                               Amendment.  The Committee may from time to
time amend the terms of this Award in accordance with the terms of the Plan in
effect at the time of such amendment, but no amendment which is unfavorable to
you can be made without your written consent.  The Plan will terminate on
December 31, 2012; however, such termination will not affect an Award previously
granted.  The Company may amend, terminate or discontinue the Plan at any time,
but no amendment, termination or discontinuance of the Plan will unfavorably
affect any Award previously granted.

 

15.                               Section 16(b) Considerations.  If you are
deemed to be an officer of the Company for purposes of Section 16(b) of the
Securities Exchange Act of 1934 (“Section 16(b)”), you will be required to
return to the Company any “profit” realized from the “purchase” and “sale”, or
“sale” and “purchase”, of Common Stock within any six-month period.  The grant
of Performance Shares and the receipt of shares upon payment of Performance
Shares under the Plan are not purchases for purposes of Section 16(b).  The
withholding of shares to satisfy your tax liability in connection with the
payment of Performance Shares (as described in paragraph 8) will also be exempt
from Section 16(b).

 

Reporting requirements apply with respect to the payment of Performance Shares,
the deferral of payment under the Deferred Compensation Plan, and the ultimate
distribution of shares from the Deferred Compensation Plan.  If you are subject
to Section 16(b), you should consult the Company’s Legal Department with respect
to these provisions.

 

16.                               Restrictions on Resale.  There are no
restrictions imposed by the Plan on the resale of Common Stock acquired under
the Plan.  However, under the provisions of the Securities Act of 1933 (the
“Securities Act”) and the rules and regulations of the Securities and Exchange
Commission (the “SEC”), resales of stock acquired under the Plan by certain
officers and directors of the Company who may be deemed to be “affiliates” of
the Company must be made pursuant to an appropriate effective

 

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registration statement filed with the SEC, pursuant to the provisions of Rule
144 issued under the Securities Act, or pursuant to another exemption from
registration provided in the Securities Act.  At the present time, the Company
does not have a currently effective registration statement pursuant to which
such resales may be made by affiliates.  In addition, the Company’s directors,
officers and employees are subject to the Company’s policies and procedures
regarding the purchase and sale of Common Stock (including its Code of Business
Conduct, Statement of Policy on Purchase or Sale of Protective Life Corporation
Stock, and Stock Ownership Guidelines).

 

17.                               Effect on Employment and Other Benefits. 
Receipt of an Award under the Plan does not confer any right to receive Awards
in the future or to continue in the employ of the Company and its subsidiaries,
and Award recipients are subject to discipline and discharge in the same manner
as any other employee.  Income recognized as a result of payment of Performance
Shares will not be included in the formula for calculating your benefits under
the Company’s Pension, 401(k) and Stock Ownership, and Disability Plans.

 

18.                               Regulatory Compliance.  Under the Plan, the
Company is not required to deliver Common Stock for payment of Performance
Shares if such delivery would violate any applicable law, regulation or stock
exchange requirement.  If required by any federal or state securities law or
regulation, the Company may impose restrictions on a Performance Share holder’s
ability to transfer shares received under the Plan.

 

19.                               Company and Plan Documents.  Each year the
Company sends a copy of its Annual Report to Share Owners for its last fiscal
year to all share owners of the Company.  An additional copy of the Company’s
most recent Annual Report to Share Owners and all other communications
distributed by the Company to its shareholders may be obtained without charge,
by written or oral request to Investor Relations, Protection Life Corporation,
P. O. Box 2606, Birmingham, Alabama 35202 (telephone (205) 268-3573).

 

The following documents filed by the Company with the SEC under the Securities
Exchange Act of 1934 (the “Exchange Act”) are incorporated herein by reference:

 

(a)                                  The Company’s most recent Annual Report on
Form 10-K;

 

(b)                                 All other reports filed by the Company under
Section 13(a) or 15(d) of the Exchange Act after the end of the year covered by
its most recent Annual Report on Form 10-K; and

 

(c)                                  The description of the Common Stock and the
Rights contained in the registration statements therefore under the Exchange
Act, including any amendments filed for the purpose of updating such
descriptions.

 

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act after the date of this document and prior to the
filing of a post-effective amendment which indicates that all securities offered
under the Plan have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such documents.

 

A copy of any or all of the documents referred to above, as well as any
documents constituting part of a prospectus covering shares offered under the
Plan, may be obtained, without charge, by written or oral request to Investor
Relations, Protective Life Corporation, P. O. Box 2606, Birmingham, Alabama
35202 (telephone (205) 268-3573).

 

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Questions regarding this Award and requests for additional information about the
Plan or the Committee should be directed to Jason Hudson, Protective Life
Corporation, P. O. Box 2606, Birmingham, Alabama 35202 (telephone (205)
268-5279).  These Performance Share Provisions and your Award Letter contain the
formal terms and conditions of your Award, and should be retained for future
reference.

 

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APPENDIX B

 

2005 PERFORMANCE SHARE AWARDS

COMPARISON GROUP

 

The comparison group is comprised of the Company, Protective Life Corporation
(PL), and the following 40 stock life and multiline insurance companies.

 

Aetna Inc. (AET)

Jefferson-Pilot Corporation (JP)

AFLAC, Inc. (AFL)

Kansas City Life Insurance Company (KCLI)

Alfa Corporation (ALFA)

Lincoln National Corporation (LNC)

Allmerica Financial Corporation (AFC)

MetLife, Inc. (MET)

Allstate Corporation (ALL)

National Western Life Insurance Company (NWLIA)

American International Group, Inc. (AIG)

Nationwide Financial Services, Inc. (NFS)

AmerUS Group Co. (AMH)

Old Republic International Corporation (ORI)

Annuity and Life Re (Holdings), Ltd. (ANNRF.OB)

Penn Treaty American Corporation (PTA)

Aon Corporation (AOC)

The Phoenix Companies (PNX)

Assurant, Inc. (AIZ)

Presidential Life Corporation (PLFE)

CIGNA Corporation (CI)

Principal Financial Group, Inc. (PFG)

CNA Financial Corporation (CNA)

Prudential Financial, Inc. (PRU)

Conseco, Inc. (CNO)

Reinsurance Group of America, Inc. (RGA)

Delphi Financial Group, Inc. (DFG)

Scottish Annuity & Life Holdings, Ltd. (SCT)

Erie Family Life Insurance Company (ERIF)

StanCorp Financial Group, Inc. (SFG)

FBL Financial Group, Inc. (FFG)

Torchmark Corporation (TMK)

Great American Financial Resources, Inc. (GFR)

United Insurance Companies, Inc. (UCI)

Genworth Financial, Inc. (GNW)

Unitrin Incorporated (UTR)

The Hartford Financial Services Group, Inc. (HIG)

Universal American Financial Corporation (UHCO)

Independence Holding Company (INHO)

UNUMProvident Corporation (UNM)

 

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