EXHIBIT 10.1
AMENDED AND RESTATED ANNUAL MANAGEMENT INCENTIVE COMPENSATION PLAN OF 1994
ARTICLE 1
Purpose
The purpose of this Amended and Restated Annual Management Incentive
Compensation Plan ("MICP") is to motivate the participants to perform in a way
that will enable Provident Companies, Inc. and its subsidiaries ("the
Company"), to reach its short-term and long-term goals.
ARTICLE 2
Administration of the Plan
The Compensation Committee of the Board of Directors ("the Committee"), will
administer, construe, and interpret the MICP. No member of the Committee, the
Board of Directors, or any delegatee as the case may be, shall be liable for
any act done in good faith. The construction and interpretation by the
Committee of any provision of the MICP shall be final and conclusive. The
Committee must approve, subject to the provisions of the MICP, the amount, if
any, due a participant. The Committee, may, in its discretion, delegate its
general administrative duties to an officer or employee or committee composed
of officers or employees of the Company, but may not delegate its authority to
construe and interpret the MICP or approve awards. The Committee, subject to
approval by the Board of Directors, may, at any time or from time to time
amend the MICP in any respect without restriction and without the consent of
any participant. However, any modification of the MICP which would increase
materially the benefits accruing to participants, modify materially the
requirements as to eligibility for participation, materially increase the cost
of the MICP to the Company, or permit any member of the Committee to receive
an award, must be approved by the stockholders of the Company.
ARTICLE 3
Elements of the MICP
The MICP consists of two subparts: (i) the Annual Incentive Plan, under
which annual incentive awards are based upon the achievement of one-year
goals; and (ii) the Performance Share Plan, pursuant to which participants are
granted deferred compensation units in the form of performance shares which
are payable in cash or shares of common stock upon a subsequent payment date.
Each of the subparts of the MICP is described below.
ARTICLE 4
Participation in the Plan
Participation in the MICP shall be based on recommendation by Company
management and subject to approval by the Committee. Participation in all
portions of the MICP except the Performance Share Plan (as described below)
will be limited to officers and other key employees of the Company and its
subsidiaries whose judgments, decisions and actions can have a discernible
impact on the profitability of the Company. The Committee will establish
participation criteria and make decisions on eligibility based on such
criteria.
ARTICLE 5
Stock To Be Awarded
Stock awards will be for shares of Company common stock. Stock subject to
the Plan may be unissued shares, reacquired shares or shares bought on the
open market for purposes of the Plan. The total number of shares of common
stock that may be awarded to all participants under the Plan may not exceed
1,500,000 shares. No more than 100,000 shares may be awarded to a participant
in a calendar year.
ARTICLE 6
Annual Incentive Plan
6.1 General. The Annual Incentive Plan portion of the MICP shall include the
Corporate Performance Subplan and the Individual Performance Subplan, as more
specifically described below. Awards under the Annual Incentive Plan will be
based entirely upon achievement of one-year goals. Each plan year runs from
January 1 to December 31.
6.2 Corporate Performance Subplan. The Corporate Performance Subplan will be
based solely on the achievement of objective corporate performance goals. The
awards under this Subplan may be determined on the basis of one or more of the
following measures of corporate performance, alone or in combination, for the
Company as a whole or for any division or business unit: (a) return on equity,
(b) overall or selected premium or sales growth, (c) stock performance, (d)
expense efficiency ratios (ratio of expenses to premium income), (e) earnings
per share, (f) market share, (g) revenue, (h) customer service measures or
indices (i) underwriting efficiency and/or quality, and (j) persistency
factors. Measurement of performance against such goals established by the
Committee shall be objectively determinable, and to the extent such goals are
expressed in standard accounting terms, performance shall be measured in
accordance with generally accepted accounting principles. The Committee shall
have the right for any reason to reduce or eliminate (but not increase) any
such award, notwithstanding the achievement of a specified goal. The maximum
annual award under the Corporate Performance Subplan to any participant will
be $2.5 million. At the beginning of each plan year, the Committee will
establish performance goals under the Corporate Performance Subplan based on
one or more of the above corporate performance criteria, and establish target
awards and any formula for payouts in excess of target based on the
achievement of measurable goals. Target awards under the Corporate Performance
Subplan are to be set by the Committee as percentages of base salary, which
percentages may differ from participant to participant and from year to year.
6.3 Individual Performance Subplan. Awards under the Individual Performance
Subplan will be based on an individual's contribution to the business of the
Company, as determined by the Committee. This contribution may be assessed on
nonobjective as well as objective measures. The Committee will establish
target awards under the Individual Performance Subplan and limits on payouts
in excess of targets, if any. Target awards under the Individual Performance
Subplan are set at percentages of base salary to be established by the
Committee which may differ from participant to participant and from year to
year. Awards under the Individual Performance Subplan will not be contingent
on the failure to attain the performance goals under the Corporate Performance
Subplan.
6.4 Form and Payment of Awards. Awards under the Annual Incentive Plan will
be approved by the Committee after the end of each plan year. No awards will
be payable to any employee under any measure if thresholds established by the
Committee are not reached. Awards will be paid partly in cash and partly in
Performance Shares, as described below under Article 7.
6.5 Vesting. Any award under the Annual Incentive Plan will be vested
(considered the participant's property) at the time the Committee approves the
award; except that, if a participant dies or becomes disabled after the close
of the plan year for which the award was earned and prior to approval of the
award, the award will be vested as of the date of death or disability.
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6.6 Change in Control. In the event of a Change in Control, the Committee
will determine the Annual Incentive Plan awards for each participant that
would have been earned if the plan year had ended on the date of the Change in
Control, based on actual performance through the date of the Change in Control
(the "Vested Awards"). Thereafter:
(a) Each participant who is in active employment at the end of the plan
year shall be entitled to the greater of his or her Vested Award and an
award based on actual performance for the entire plan year.
(b) If the MICP is terminated during a plan year after the date a Change
in Control occurs, each participant who is in active employment at the time
of such termination shall be entitled to the greater of his or her Vested
Award and an award based on actual performance through the date of
termination of the plan.
(c) If a participant's employment is terminated without Cause by the
Company during a plan year after the Change in Control occurs, such
participant shall be entitled to the greater of his or her Vested Award and
an award based on actual performance through the date of termination of
employment.
6.7 Definitions. For purposes of the MICP, the following terms have the
following meanings.
(a) "Cause" shall mean the occurrence of one of the following :
(1) A conviction of the participant of (x) a felony or (y) any lesser
crime or offense involving the property of the Company or one of its
subsidiaries.
(2) The willful engaging by the participant in conduct which has
caused demonstrable and serious injury to the Company, monetary or
otherwise, as evidenced by a determination in a binding and final
judgment, order or decree of a court or administrative agency of
competent jurisdiction, in effect after exhaustion or lapse of all
rights of appeal, in an action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(3) Willful gross dereliction of duty or other willful grave
misconduct by the participant and failure to cure such situation within
thirty (30) days after receipt of notice thereof from the Chairman of
the Committee.
No act or failure to act on the part of the participant shall be deemed
willful if done, or omitted to be done, by the participant in good faith and
with a reasonable belief that his action or omission was in the best interests
of the Company or a subsidiary. The participant shall not be deemed to have
been terminated for "Cause" unless and until there shall have been delivered
to the participant a copy of a resolution duly adopted by the Committee (or
another committee of the Board hereafter succeeding the responsibilities
performed on the effective date of the MICP by the Committee) finding that in
the good faith opinion of the Committee the participant has committed an act
set forth in clause (1), (2) or (3) of this definition and specifying the
particulars thereof in detail.
(b) "Change in Control" shall be deemed to have occurred if at any time
or from time to time after the effective date of the MICP:
(1) any "person" or "group" (as those terms are used in Sections
13(d) and 14(d), respectively, of the Securities Exchange Act of 1934
("Exchange Act")), other than the Maclellan family or a trustee or
other fiduciary holding securities under an employee benefit plan of
the Company, or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company, is or becomes the "beneficial
owner," (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing thirty percent
(30%) or more of the combined voting power of the Company's then
outstanding securities and (ii) the "group" comprised of the Maclellan
family does not then
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beneficially own, directly or indirectly, securities of the Company
representing more than thirty percent (30%) of the combined voting
power of the Company's then outstanding securities; or
(2) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets.
ARTICLE 7
Performance Share Plan
7.1 General. A Performance Share Plan is also included in the MICP, the
specific terms and conditions of which shall be set forth in one or more
separate subplan documents approved and amended from time to time by the
Committee consistent with the terms of the MICP. One such subplan
("Performance Share Plan I") shall be applicable to senior officers, and
producers of insurance business for the benefit of the Company or its
subsidiaries, selected by the Committee upon the recommendation of the Chief
Executive Officer ("CEO"), who are in a position to contribute materially to
the Company's continued growth and development and to its long term financial
success. For purposes of this Plan, producers shall be deemed to be
consultants of the Company or its subsidiaries. Another such subplan
("Performance Share Plan II") is for all persons who receive MICP annual
incentive awards who are not otherwise participating in such year in
Performance Share Plan I.
7.2 Performance Share Plan I. Participants in Performance Share Plan I are
the CEO, President, Vice Chairman, Executive Vice Presidents and such other
senior officers selected by the Committee upon the recommendation of the CEO
to participate in Performance Share Plan I for a given year. Producers for the
Company who achieve certain performance sales goals may also be selected to
participate in Performance Share Plan I as described below. Approximately 15-
35 officers may participate in any one year. The officers, all of whom have
company stock ownership requirements, are required to receive a portion of
their MICP annual incentive awards in "Performance Shares" based on the
following table:
MICP INCENTIVE EARNED PERCENT PAID IN PERFORMANCE SHARES
--------------------- ----------------------------------
Less than $100,000........................ 25.0%
$100,000--$249,999........................ 37.5%
$250,000 or more.......................... 50.0%
Participants in Performance Share Plan I may elect to receive any portion of
their MICP awards above the required percentage in Performance Shares.
A "Performance Share" is a unit of deferred compensation, equal in value to
one share of Company common stock. The number of Performance Shares to be
awarded to any participant in Performance Share Plan I is determined by:
(1) Dividing the amount of MICP award being paid in Performance Shares
(both mandatory and voluntary) by the market price for a share of Company
common stock on the date the amount of the MICP award is determined, and
(2) "Grossing-up" the number of Performance Shares on a 30% basis, to
reflect the increased risk of the volatility of stock price, particularly
during the deferral period, as well as lack of liquidity and marketability.
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Performance Shares granted under Performance Share Plan I are subject to the
following:
(1) The shares attributable to the "gross-up" factor are subject to
forfeiture during a three-year period following the award. The remaining
Performance Shares are not subject to forfeiture.
(2) Participants may elect to extend the deferral period for payment of
Performance Shares beyond the required period of three years, but not
beyond the earliest of retirement, death, or disability. Any such election
must be made prior to the date such shares are credited to the participant.
(3) Generally, Performance Shares will be paid in Company common stock;
however, the Committee has the authority to direct that the value of such
shares be paid in part or entirely in cash.
(4) Participant accounts under Performance Share Plan I will be credited
with dividend equivalents in an amount equal to the cash dividends paid on
Company common stock during the period of deferral. The dividend may be
paid in cash or applied to accumulate additional Performance Shares, at the
election of the participant.
(5) Performance Shares will be counted in the calculation of
participants' total ownership of Company stock for purposes of determining
the extent to which stock ownership requirements have been met.
(6) In the event of death, normal retirement, termination without cause,
or Change in Control of the Company, any shares attributable to the "gross-
up" factor, which otherwise would be subject to forfeiture during a three
year period, will automatically cease to be subject to such forfeiture. In
the event of termination for Cause or voluntary resignation, any shares
subject to the "gross-up" factor will be forfeited. The Committee has the
authority to review such forfeiture on a case by case basis.
Certain producers who achieve performance sales goals may also be selected
to participate Performance Share Plan I. The goals required and the terms of
the producers' participation will be approved by the Committee. However, there
is no "gross-up" of the number of shares to be awarded under Performance Share
Plan I to the producers, and the terms of such participation would be no more
favorable than those applicable to the officers. Management estimates that
approximately ten to thirty-five producers would participate in Performance
Share Plan I each year.
7.3 Performance Share Plan II. Each person who receives an annual incentive
award under the MICP and is not otherwise participating in such year in
Performance Share Plan I, shall automatically be a participant in Performance
Share Plan II. Participants in Performance Share Plan II are required to
receive a portion of the MICP annual incentive awards in "Performance Shares"
based on the following table:
MICP INCENTIVE EARNED PERCENT PAID IN PERFORMANCE SHARES
--------------------- ----------------------------------
Less than $20,000......................... 15.0% (minimum of 50 shares)
$20,000 or more........................... 25.0%
The number of Performance Shares to be awarded to any participant in
Performance Share Plan II is determined by dividing the amount of MICP award
being paid in Performance Shares by the market price for a share of Company
common stock on the date the amount of the MICP award is determined.
Performance Shares granted under Performance Share Plan II are subject to
the following:
(1) Participants may elect to extend the deferral period for payment of
Performance Shares for up to two years beyond the required period of three
years, but not beyond the earliest of retirement, death, or disability. Any
such election must be made prior to the date such shares are credited to
the participant.
(2) Generally, Performance Shares will be paid in Company common stock;
however, the Committee has the authority to direct that the value of such
Performance Shares be paid in part or entirely in cash.
Participant accounts under Performance Share Plan II will be credited with
dividend equivalents in an amount equal to the cash dividends paid on Company
common stock during the period of deferral. The dividend will be applied to
accumulate additional Performance Shares in the participant's account.
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Performance Shares will be counted in the calculation of participants' total
ownership of Company stock for purposes of determining the extent to which any
stock ownership requirements have been met.
ARTICLE 8
General Provisions
8.1 Non-Assignability. No grants or awards under the MICP shall be subject
in any manner to alienation, anticipation, sale, transfer, assignment, pledge
or encumbrance.
8.2 No Right to Continued Employment. Participation in the MICP shall not
give any employee any right to remain in the employ of the Company. The MICP
is not to be construed as a contract of employment for any period and does not
alter the at-will status of any participant.
8.3 Source of Benefits. Awards under the MICP will not be prefunded but will
be paid by the Company as and when they become due as provided herein, and the
participant's interest in the award shall be only that of an unsecured
creditor of the Company.
8.4 Withholding. The Company may deduct or withhold, or require a
participant to remit to the Company, an amount sufficient to satisfy federal,
state and local taxes (including the participant's FICA obligation) required
by law to be withheld with respect to any taxable event arising as a result of
the MICP.
8.5 Governing Law. This MICP, and the rights and obligations of the parties
thereunder, will be construed in accordance with the laws of the State of
Tennessee.
The foregoing is hereby acknowledged as being the Provident Companies, Inc.,
Amended and Restated Annual Management Incentive Compensation Plan of 1994 as
adopted by the Board of Directors of the Company on March 26, 1998, and
approved by the Stockholders of the Company on May 6, 1998.
PROVIDENT COMPANIES, INC.
By:__________________________________
Its:_________________________________
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