EXHIBIT 10.5
TRANSAMERICA CORPORATION
1997 CORPORATE BONUS PLAN
Purpose: To provide a variable pay element that serves as an incentive
to achieve planned performance; and
To recognize individual contributions to annual operating
results and achievement of the Corporation's strategic goals.
To complement the Value Added Incentive Plan described in the
1994 proxy statement.
Eligibility and
Participation: Senior corporate and subsidiary executives selected by the
Chief Executive Officer and Corporate Vice Presidents are
eligible to participate in the Plan. Individuals will be
notified of their participation, target bonuses, the
percentage weighting of the components described below, and
applicable payout tables in a letter as soon as possible
after the Plan has been adopted.
Inclusion of any individual as a participant in the Plan will
not be a guarantee that any bonus will be paid to that person
or that the person's employment will be continued for any
period.
Individual
Bonuses: Individual target bonuses will be a predetermined percentage
of 1997 base salary. A percentage of each executive's target
bonus will be based on performance achieved in the following
areas as appropriate:
- The level of Value Added achieved. Value Added is
summarized on Exhibit I. Bonuses under this component
will be calculated in accordance with the Value Added
Incentive Plan, as adopted by stockholders in 1994, under
the terms applicable to the 1997 plan year.
- The level of Business Unit Financial Performance achieved.
Business Unit Financial Performance is described on
Exhibit II.
- Management's evaluation of accomplishment of Strategic
Goals or other management objectives.
Actual awards will be calculated after results are known and
will take into account performance in the above areas.
Bonuses may be further modified to reflect the individual's
personal performance.
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Approval of Plan
and Payouts: The Plan is established by, and may be modified or
terminated at any time by, the Management Development and
Compensation Committee of the Corporation's Board of
Directors (the "Compensation Committee"). Individual awards
under the Plan shall be subject to review and approval by the
Compensation Committee. The Compensation Committee reserves
the right to modify the formula for individual target bonuses
(both as to the components and the percentage mix) for
particular individuals and exclude non-recurring items as
appropriate.
Bonus Committee: The Plan will be administered by the Bonus Committee composed
of the Corporation's President and Chief Executive Officer,
Executive Vice President (Finn), Executive Vice President and
Chief Financial Officer and Director of Compensation. The
Bonus Committee is responsible for interpreting the Plan and
recommending methods to deal with unforeseen circumstances.
Payment of
Bonuses: Bonuses will be paid in cash as soon as possible after Value
Added and Business Unit Financial Performance for the
Corporation and each subsidiary have been determined and
bonus recommendations have been approved by the Compensation
Committee.
Participants must be continuously employed by the Corporation
or one of its subsidiaries from January 1 through December
31, 1997 to receive a payout under the Plan.
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EXHIBIT I
Value Added Component
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Value Added is calculated in the same manner as for the 1997 profit plan and
is defined as Adjusted Net Income minus a capital charge, expressed as a
percentage of the Corporation's Average Adjusted Equity. The capital charge
is determined by multiplying the Corporation's Average Adjusted Equity by the
Cost of Equity. Each of these terms is further defined for 1997 as follows:
- - "Adjusted Net Income" means the Corporation's net income, in accordance
with generally accepted accounting principles, as reported for the year,
adjusted for (i) cumulative effects of changes in accounting standards,
(ii) the economic amount of interest and depreciation (levelized over the
life of the equipment) and any economic gains and losses on the
disposition of equipment held for lease in lieu of reported interest,
depreciation and gains and losses, (iii) amortized bond, equity and other
portfolio gains and losses in lieu of realized gains and losses as
reported, and (iv) the exclusion of goodwill amortized during the year.
- - "Adjusted Equity" means the Corporation's reported shareholders' equity,
adjusted to exclude (i) preferred stock and (ii) net unrealized gains and
losses on marketable equity and debt securities and foreign currency
translation adjustments, and to include accumulated goodwill amortization
related to assets still owned by the Company.
- - "Average Adjusted Equity" means the "five-point" quarterly average of the
Adjusted Equity, the first point being the preceding year end.
- - "Cost of Equity" means the Corporation's imputed equity cost based on a
formula approved by the Bonus Committee prior to the start of the year.
For 1997, the cost of equity will be determined by adding (a) the
Corporation's risk premium (the long-term market growth in equity
securities over the risk-free rate multiplied by the Corporation's beta)
and (b) the trend risk-free rate.
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EXHIBIT II
Business Unit Financial Performance Component
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Bonuses under the Business Unit Financial Performance Component will be based
on either (i) Value Added or (ii) actual after-tax operating income, excluding
investment gains and losses, compared to the profit plan operating income for
the relevant subsidiary or group of subsidiaries.
The leverage for below-target and above-target performance will take into
account the expected degree of difficulty in achieving target performance
level and is not necessarily the same for each organization. The applicable
payout table will be communicated to participants as soon as possible after
the Plan has been adopted.
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