Compensation and Incentives
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 Or 15(d) Of The Securities Exchange Act of
1934
BRISTOL
WEST HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Date
of
Report (Date of Earliest Event Reported): February
21, 2006
Commission
File No. 001-31984
|
Delaware
|
001-31984
|
13-3994449
|
|
(State
or other jurisdiction
of
incorporation)
|
(Commission
File No.)
|
(I.R.S.
Employer
Identification
No.)
|
|
5701
Stirling Road, Davie, Florida
|
33314
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
Registrant’s
telephone number, including area code: (954)
316-5200
|
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
|
|
Item
1.01.
|
Entry
Into a Material Definitive
Agreement
|
Executive
Compensation Awards
On
February 21, 2006, the Compensation Committee (the “Compensation
Committee”)
of the
Board of Directors (the
“Board”) of
Bristol West Holdings, Inc. (“Bristol
West”)
took
the actions described below:
Base
Salaries.
The
Compensation Committee approved the following annual base salaries of Bristol
West’s named executive officers, effective February 26, 2006: James R. Fisher,
Chairman of the Board and Chief Executive Officer ($700,000); Jeffrey J. Dailey,
President and Chief Operating Officer ($425,000); Simon J. Noonan, Executive
Vice President ($325,000); Craig E. Eisenacher, Senior Vice President-Chief
Financial Officer ($295,000); and James J. Sclafani, Jr., Senior Vice
President-Claims ($300,000). Mr. Fisher’s annual base salary was not increased
from the level established in 2004 in his employment agreement dated as of
January 1, 2004. The annual base salaries of the other named executive officers
were increased from their 2005 levels by approximately 2.2% to 10.3%. The
Compensation Committee also approved a further increase in Mr. Dailey’s annual
base salary to $525,000 effective July 1, 2006 when he succeeds Mr. Fisher
to
become Bristol West’s Chief Executive Officer and a further increase in Mr.
Noonan’s annual base salary to $350,000 when he succeeds Mr. Dailey to
become Bristol West’s Chief Operating Officer, as discussed in Item 5.02
below. At that time, Mr. Fisher’s annual base salary will decrease to $350,000.
These annual base salaries are subject to change from time to time as determined
by the Compensation Committee.
Annual
Incentive Compensation Earned in 2005.
The
Compensation Committee approved annual incentive bonus awards earned during
2005
that will be paid in 2006 to the named executive officers under Bristol West’s
previously disclosed annual Incentive Compensation Program (which we refer
to as
the “ICP”).
The
executive officers who received ICP bonus awards earned the awards based upon
the executive’s position and responsibilities, Bristol West’s performance
relative to its earnings goals and other strategic objectives and the
executive’s individual performance. In assessing Bristol West’s performance in
2005 for the purpose of making ICP awards to Bristol West’s named executive
officers, the Compensation Committee considered Bristol West’s return on equity,
net income, gross written premium and combined ratio relative to its business
plan objectives in light of a very competitive market. The Compensation
Committee approved the payment of these bonus awards 75% in cash and 25% in
restricted stock. Effective with fiscal 2006, the ICP will be replaced by the
Bristol West Holdings, Inc. Executive Officer Incentive Plan and the Bristol
West Holdings, Inc. Management Incentive Plan, as described below.
Messrs.
Fisher and Dailey recommended that they receive no ICP bonus awards for 2005.
The Compensation Committee believed that both men had earned an ICP bonus award,
but, after discussion, concurred with their recommendation despite their
successful management of Bristol West in a very competitive market. The amounts
of the ICP bonus awards paid with respect to 2005 to the other named executive
officers are as follows: Mr. Noonan ($56,250 in cash; $18,750 in restricted
stock); Mr. Eisenacher ($57,750 in cash; $19,250 in restricted stock);
Mr. Sclafani ($48,750 in cash; $16,250 in restricted stock). These ICP
restricted stock awards will cliff vest on February 21, 2008 and will be
forfeited if the executive officer’s employment with Bristol West terminates
prior to the vesting date, except for death and disability. The vesting of
these
ICP restricted stock awards is accelerated in full for certain mergers, sales
or
other business combinations and for death or disability.
The
restricted stock portion of the ICP awards were made pursuant to the terms
of a
Restricted Stock Award Agreement with two-year cliff vesting, a form of which
is
filed as Exhibit 10.1 to this Report, and incorporated herein by reference,
and pursuant to Bristol West’s 2004 Stock Incentive Plan (which we refer to as
the “2004
Stock Incentive Plan”),
which
previously was filed as Exhibit 10.18 to Bristol West’s Registration Statement
(File No. 333-111259) on Form S-1.
Restricted
Stock Awards in 2006.
The
Compensation Committee also approved restricted stock grants to certain named
executive officers for the purpose of retaining these key employees over a
long-term period, providing them direct ownership in Bristol West common stock
with a view toward preserving shareholder value and encouraging decisions
related to increasing shareholder value in the future.
Mr.
Fisher recommended that no restricted stock be awarded to him, and the Committee
accepted his recommendation. The amounts of the restricted stock awards made
to
other named executive officers are as follows: Mr. Dailey ($350,000 in
restricted stock); Mr. Noonan ($325,000 in restricted stock); Mr. Eisenacher
($300,000 in restricted stock); Mr. Sclafani ($250,000 in restricted stock).
The
restricted stock awards will cliff vest on February 21, 2011 and will be
forfeited if the executive officer’s employment with Bristol West terminates
prior to the vesting date, except for death and disability. The vesting of
these
restricted stock awards is accelerated in full for certain mergers, sales or
other business combinations and for death or disability. These restricted stock
awards were made pursuant to the terms of a Restricted Stock Award Agreement
with five-year cliff vesting, a form of which is filed as Exhibit 10.2 to
this Report, and pursuant to the 2004 Stock Incentive Plan.
Executive
Officer Incentive Plan
On
February 21, 2006, the Compensation Committee and the Board of Bristol West
adopted the Bristol West Holdings, Inc. Executive Officer Incentive Plan
(“EIP”).
A
copy of the EIP as adopted by the Board is filed as Exhibit 10.3 to this
Report. The EIP is designed to preserve the income tax deductibility of
incentives paid under the EIP to Bristol West’s executive officers who are
subject to the limitations of Section 162(m) of the Internal Revenue Code of
1986, as amended, and related regulations and interpretations (the “Code”).
Accordingly, adoption of the EIP (and implementation of awards under the EIP)
is
subject to the approval of Bristol West’s stockholders pursuant to Code
Section 162(m).
Purpose.
The
purpose of the EIP is to establish and maintain for Bristol West’s executive
officers a result and profit oriented environment. The EIP aims to align
the
interests of the executive officers and Bristol West towards the completion
of
Bristol
West’s
strategic objectives, while providing incentives to constantly expand
Bristol
West’s
earning
power. The
EIP
will have direct ties to Bristol West’s business plan and encourage teamwork in
accomplishing Bristol West’s goals. The EIP replaces the ICP for Bristol West’s
executive officers.
Participation.
Subject
to the approval of the Compensation Committee, each of Bristol West’s executive
officers will participate in the EIP. At its meeting on February 21, 2006,
the
Compensation Committee selected the Chief Executive Officer and Bristol West’s
other executive officers to participate in the EIP.
Bonus
Targets and Performance Goals.
Annually, with respect to each EIP participant, the Compensation Committee
will
establish, for the applicable fiscal year, the participant’s individual bonus
target and the participant’s performance goal or goals (increased or decreased,
in each case in accordance with factors adopted by the Compensation Committee
with respect to the fiscal year that relate to unusual or extraordinary items).
The selection and adjustment of applicable EIP performance goals and individual
bonus targets for EIP participants will be made in compliance with Code Section
162(m). The EIP performance goal(s) may be based upon one or more factors with
respect to Bristol West including those performance goals specified in Section
2(i) of the EIP.
On
February 21, 2006, the Compensation Committee determined that there will be
one
EIP performance goal that will apply to each EIP participant for 2006. The
2006
EIP performance goal will be based on Bristol West’s Adjusted Pre-Tax
Underwriting Income (as defined below) measured against the pre-tax underwriting
income estimate set forth in Bristol West’s 2006 business plan. For purposes of
the EIP in 2006, “Adjusted
Pre-Tax Underwriting Income”
will
mean an amount equal to the following measured for the 2006 fiscal year:
(1) pre-tax income, plus (2) interest expense, less
(3) investment income, less (4) realized gains on investments, plus
(5) realized losses on investments, less (6) the effect of unusual or
extraordinary items determined to be appropriate by the Compensation Committee
consistent with the requirements of Code Section 162(m)(4)(C). Based on
individual bonus targets set by the Compensation Committee for each named
executive officer and the Adjusted Pre-Tax Underwriting Income performance
goal
criteria, the EIP award for each named executive officer with respect to 2006
can vary as follows: Mr. Fisher (0% to 120% of his 2006 base salary); Mr. Dailey
(0% to 120% of his 2006 base salary); Mr. Noonan (0% to 84% of his 2006
base salary); Mr. Eisenacher (0% to 84% of his 2006 base salary); Mr. Sclafani
(0% to 60% of his 2006 base salary).
Awards.
Annually, with respect to each EIP participant, the Compensation Committee
will
also determine whether the terms and conditions underlying the payment of the
participant’s EIP award have been satisfied. The maximum amount of any EIP
awards that can be paid to any EIP participant during any fiscal year is
$1,000,000. The Committee may, in its sole discretion, reduce or eliminate
the
amount of an EIP award otherwise payable to an EIP participant with respect
to any fiscal year. The determination of EIP awards for EIP participants will
be
made in compliance with Code Section 162(m). Each EIP award will be paid 75%
in
cash and 25% in restricted stock that cliff vests in two years, which will
be
issued pursuant to the terms of a Restricted Stock Award Agreement with two-year
cliff vesting, a form of which is filed as Exhibit 10.1 to this Report, and
pursuant to the 2004 Stock Incentive Plan. The EIP restricted stock awards
will
be forfeited if the participant’s employment with Bristol West terminates prior
to the vesting date, except for death and disability. The vesting of the EIP
restricted stock awards is accelerated in full for certain mergers, sales or
other business combinations and for death or disability.
Management
Incentive Plan
On
February 21, 2006, the Compensation Committee and the Board also adopted the
Bristol West Holdings, Inc. Management Incentive Plan (“MIP”).
A
copy of the MIP as adopted by the Board is filed as Exhibit 10.4 to this
Report.
Purpose.
The
purpose of the MIP is to establish and maintain for Bristol West’s executive
officers and other key employees a result and profit oriented environment.
The
MIP aims to align
the
interests of the MIP participants and Bristol West towards the completion
of Bristol
West’s
strategic objectives, while providing incentives to constantly expand
Bristol
West’s
earning
power. The
MIP
will have direct ties to Bristol West’s business plan and encourage teamwork in
accomplishing Bristol West’s goals. The MIP replaces the ICP for Bristol West’s
executive officers and other key employees.
Administration.
For
purposes of the MIP, “Administrator”
means,
with respect to Bristol West’s executive officers, the Compensation Committee,
and with respect to all other participants, the Compensation Committee and/or
the Chief Executive Officer with assistance from our Chief Operating
Officer.
Participation.
With
respect to an MIP Individual Goal Award (as defined below), the Committee shall
have the right to designate as a participant any Bristol West executive
officer.
The
Administrator may designate as a participant any employee whom they deem to
be a
key employee, provided that the employee is not a Bristol West executive
officer. Participants in the EIP with respect to a fiscal year will not be
eligible to participate in the Performance Goal Award (as defined below) portion
of the MIP award with respect to that fiscal year.
Bonus
Targets.
Annually, with respect to each MIP participant, the Compensation Committee
will
establish, for the applicable fiscal year, the participant’s individual bonus
target.
Performance
Goals.
Eighty
percent (80%) of each participant’s individual bonus target will be based on
achievement of performance goal(s) (the “Performance
Goal Target”).
The
MIP performance goal(s) may be based upon one or more factors with respect
to
Bristol West including those performance goals specified in Section 2(h) of
the MIP. Annually, with respect to each MIP participant, the Administrator
will
establish, for the applicable fiscal year, the participant’s performance goal(s)
(increased or decreased, in each case in accordance with factors adopted by
the
Administrator with respect to the fiscal year that relate to unusual or
extraordinary items). After the end of each fiscal year, the Administrator
will
assess the achievement of the performance goal(s) by each participant and
determine the amount of this portion of the MIP award for each participant
(the
“Performance
Goal Award”).
The
Administrator reserves the right, in its sole discretion, to reduce or eliminate
the amount of the Performance Goal Award otherwise payable to a MIP participant
with respect to any fiscal year. Participants in the EIP with respect to a
fiscal year will not be eligible to participate in the Performance Goal Award
portion of the MIP award with respect to that fiscal year.
On
February 21, 2006, the Compensation Committee determined that there will be
one
MIP performance goal that will apply to each MIP participant for 2006. The
2006
MIP performance goal will be based on Bristol West’s Adjusted Pre-Tax
Underwriting Income (as defined below) measured against the pre-tax underwriting
income estimate set forth in Bristol West’s 2006 business plan. For purposes of
the MIP in 2006, “Adjusted
Pre-Tax Underwriting Income”
will
mean an amount equal to the following measured for the 2006 fiscal year:
(1) pre-tax income, plus (2) interest expense, less
(3) investment income, less (4) realized gains on investments, plus
(5) realized losses on investments, less (6) the effect of unusual or
extraordinary items determined to be appropriate by the Compensation Committee.
Individual
Goals.
Twenty
percent (20%) of the individual bonus target will be based upon a
MIP participant’s individual performance, as measured by the participant’s
achievement of performance objectives and contributions to Bristol West’s
success at achieving its strategic objectives. After the end of each fiscal
year, the Administrator will assess the achievement of this portion of the
individual bonus target by each MIP participant and determine the amount of
this
portion of the total MIP award for each participant (the “Individual
Goal Award”).
Awards.
Each
MIP award will be paid 75% in cash and 25% in restricted stock that cliff vests
in two years, which will be issued pursuant to the terms of a Restricted Stock
Award Agreement with two-year cliff vesting, a form of which is filed as
Exhibit 10.1 to this Report, and pursuant to the 2004 Stock Incentive Plan.
The MIP restricted stock awards will be forfeited if the participant’s
employment with Bristol West terminates prior to the vesting date, except for
death and disability. The vesting of these restricted stock awards is
accelerated in full for certain mergers, sales or other business combinations
and for death or disability.
Director
Compensation
On
February 21, 2006, the Compensation Committee and the Board approved the
following schedule for non-employee director compensation, subject to change
from time to time as determined by the Compensation Committee and the
Board:
|
·
|
Fees
in 2006:
Bristol West’s directors will receive the following fees payable quarterly
in arrears during 2006:
|
| |
o
|
Annual
Cash Retainer:
The directors, other than Mr. James R. Fisher, will each receive
annual
directors’ fees of $40,000.
|
| |
o
|
Audit
Committee Retainers:
|
| |
§
|
Committee
Chair Retainer:
The Chairperson of the Audit Committee will receive an additional
annual
fee of $15,000.
|
| |
§
|
Committee
Member Retainer:
The other members of the Audit Committee will each receive an additional
annual fee of $7,500.
|
| |
o
|
Compensation
Committee Chair Retainer:
The Chairperson of the Compensation Committee will receive an additional
annual fee of $7,500.
|
| |
o
|
Corporate
Governance and Nominating Committee Chair Retainer:
The Chairperson of the Corporate Governance and Nominating Committee
will
receive an additional annual fee of
$7,500.
|
| |
o
|
Form
of Awards:
The directors can elect to receive all such fees in the form of cash
or
stock issued pursuant to the 2004 Stock Incentive Plan and Bristol
West’s
Non-Employee Directors’ Deferred Compensation and Stock Award Plan, which
is filed as Exhibit 10.5 to this Report. The directors are also
entitled to defer receipt of all or some of these fees under Bristol
West’s Non-Employee Directors’ Deferred Compensation and Stock Award
Plan.
|
|
·
|
Restricted
Stock Awards. The
Compensation Committee awarded the following directors restricted
stock in
the amount of $40,000: R. Cary Blair, Richard T. Delaney, Inder-Jeet
S. Gujral, Mary R. Hennessy, Eileen Hilton, James N. Meehan and Arthur
J.
Rothkopf. These directors are non-employee directors who are not
affiliated with Kohlberg Kravis Roberts & Co. L.P. These restricted
stock awards will cliff vest on February 21, 2008 and will be forfeited
if
the director ceases to serve as a director prior to the vesting date,
except for death and disability. The vesting of these restricted
stock
awards is accelerated in full for certain mergers, sales or other
business
combinations and for death or disability. The restricted stock awards
were
made pursuant to the terms of a Restricted Stock Award Agreement
with
two-year cliff vesting, a form of which is filed as Exhibit 10.6 to
this Report and pursuant to the 2004 Stock Incentive Plan. The
Compensation Committee approved the making of such awards every other
year
on a regular basis.
|
|
Item
5.02.
|
Departure
of Directors or Principal Officers; Election of Directors; Appointment
of
Principal Officers.
|
(b) On
February 21, 2006, James R. Fisher, Bristol West’s Chief Executive Officer and
Chairman of the Board, notified our Board of Directors that, as part of Bristol
West’s ongoing management succession process, he would like to relinquish his
title as Chief Executive Officer effective as of July 1, 2006. Mr. Fisher
recommended the promotion of Jeffrey J. Dailey, Bristol West’s President and
Chief Operating Officer, to the position of Chief Executive Officer. The Board
accepted Mr. Fisher’s recommendations. Effective July 1, 2006, Mr. Fisher
will continue to serve as Executive Chairman of the Board. The Board also
accepted Mr. Fisher’s recommendation that, effective as of July 1, 2006,
Simon J. Noonan, Bristol West’s Executive Vice President, succeed Mr. Dailey to
the position of Chief Operating Officer.
|
Item
9.01.
|
Financial
Statements and Exhibits
|
| |
10.1
|
Form
of Restricted Stock Agreement for Executives with a two-year vesting
schedule
|
| |
10.2
|
Form
of Restricted Stock Agreement for Executives with a five-year vesting
schedule
|
| |
10.3
|
Bristol
West Holdings, Inc. Executive Officer Incentive
Plan
|
| |
10.4
|
Bristol
West Holdings, Inc. Management Incentive
Plan
|
| |
10.5
|
Non-Employee
Directors’ Deferred Compensation and Stock Award
Plan
|
| |
10.6
|
Form
of Restricted Stock Agreement for Directors with a two-year vesting
schedule
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
| |
BRISTOL
WEST HOLDINGS, INC.
|
| |
(Registrant)
|
| |
|
|
|
Date: February
27, 2006
|
By:
|
/s/
Craig E. Eisensacher
|
| |
Craig
E. Eisenacher
|
| |
Senior
Vice President-Chief Financial Officer
|
| |
(Principal
Financial Officer, Principal Accounting Officer and duly authorized
officer)
|
INDEX
TO EXHIBITS
Exhibit Number
and Description
|
|
Form
of Restricted Stock Agreement for Executives with a two-year vesting
schedule
|
|
|
Form
of Restricted Stock Agreement for Executives with a five-year vesting
schedule
|
|
|
Bristol
West Holdings, Inc. Executive Officer Incentive
Plan
|
|
|
Bristol
West Holdings, Inc. Management Incentive
Plan
|
|
|
Non-Employee
Directors’ Deferred Compensation and Stock Award
Plan
|
|
|
Form
of Restricted Stock Agreement for Directors with a two-year vesting
schedule
|