<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PROVIDENT COMPANIES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 6321 62-1598430
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
1 FOUNTAIN SQUARE
CHATTANOOGA, TENNESSEE 37402
(423) 755-1011
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
SUSAN ROTH
1 FOUNTAIN SQUARE
CHATTANOOGA, TENNESSEE 37402
(423) 755-1011
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------------
COPIES TO:
------------------------
<TABLE>
<S> <C> <C> <C>
H. RODGIN COHEN F. DEAN COPELAND KEVIN J. TIERNEY ROBERT A. KINDLER
NEIL T. ANDERSON PROVIDENT COMPANIES, UNUM CORPORATION ROBERT I. TOWNSEND, III
SULLIVAN & CROMWELL INC. 2211 CONGRESS STREET CRAVATH, SWAINE & MOORE
125 BROAD STREET 1 FOUNTAIN SQUARE PORTLAND, MAINE 04122 WORLDWIDE PLAZA
NEW YORK, NEW YORK 10004 CHATTANOOGA, TENNESSEE (207) 770-2211 825 EIGHTH AVENUE
(212) 558-4000 37402 NEW YORK, NEW YORK 10019
(423) 755-1011 (212) 474-1000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /______
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /______
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED SHARE OF COMMON STOCK PRICE FEE
<S> <C> <C> <C> <C>
Common Stock, par value
$.10 per share..................... 150,285,223 (1) $53.75 $8,077,830,736.25(2) $2,245,636.94(3)
</TABLE>
(1) Represents the maximum number of shares of common stock, par value $.10 per
share, of Provident Companies, Inc. ("Provident Common Stock") estimated to
be issuable upon the consummation of the merger (the "Merger") of UNUM
Corporation ("UNUM"), a Delaware corporation, with and into Provident
Companies, Inc., a Delaware corporation, based on the exchange ratio of one
share of Provident Common Stock to be exchanged for each share of common
stock, par value $.10 per share, of UNUM ("UNUM Common Stock").
(2) Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act and solely
for the purpose of calculating the registration fee, the proposed maximum
aggregate offering price is equal to (x) the number of the shares of UNUM
Common Stock to be canceled in the Merger multiplied by (y) $53.75, the
average of the high and low sale prices per share of UNUM Common Stock on
the New York Stock Exchange Composite Tape on June 1, 1999.
(3) Pursuant to Rule 457(b) under the Securities Act the amount of the
registration fee has been reduced by $1,492,316.44, the amount paid to the
Securities and Exchange Commission on December 18, 1998 with respect to this
transaction. The difference of $753,320.50 is being paid herewith.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C>
[LOGO] [LOGO]
</TABLE>
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
Dear Fellow Stockholders:
The boards of directors of UNUM Corporation and Provident Companies, Inc.
have each called stockholders meetings for June 30, 1999, at which you will be
asked to consider and to vote upon a proposal to adopt a merger agreement
providing for a merger of our companies. The combined company, "UNUMProvident
Corporation," will be a leading provider of insurance products for people who
become disabled because of accidents, illness or sickness.
In the merger and related transactions, UNUM stockholders will receive one
share of UNUMProvident common stock for each share of UNUM common stock they own
and Provident stockholders will receive 0.73 of a share of UNUMProvident common
stock for each share of Provident common stock they own.
The merger is intended to be tax-free to both UNUM stockholders and
Provident stockholders, except for taxes due on cash received by Provident
stockholders for fractional shares.
YOUR VOTE IS VERY IMPORTANT. We cannot complete the merger unless the
stockholders of both our companies adopt the merger agreement at the
stockholders meetings.
The Provident stockholders meeting will also serve as the annual meeting of
Provident at which Provident stockholders will elect directors.
Whether or not you plan to attend your stockholders meeting, please take the
time to submit your proxy with voting instructions by mail, by telephone or
through the Internet in accordance with the instructions contained in this
document.
This document describes the stockholders meetings, the merger and other
related matters. Please read this entire document carefully.
<TABLE>
<S> <C>
/s/ James F. Orr III /s/ J. Harold Chandler
- ---------------------------------------- ----------------------------------------
James F. Orr III J. Harold Chandler
Chairman and Chief Executive Officer Chairman of the Board, President and
UNUM Corporation Chief Executive Officer
Provident Companies, Inc.
</TABLE>
PLEASE SEE PAGE 17 FOR RISK FACTORS RELATING TO THE MERGER WHICH YOU SHOULD
CONSIDER.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued under this
document or determined if this document is truthful or complete. Any
representation to the contrary is a criminal offense.
This Joint Proxy Statement/Prospectus is dated June 2, 1999, and is first being
mailed to stockholders on or about June 2, 1999.
<PAGE>
[LOGO]
PROVIDENT COMPANIES, INC.
1 FOUNTAIN SQUARE
CHATTANOOGA, TENNESSEE 37402
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders of Provident Companies, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Provident
Companies, Inc., a Delaware corporation, will be held on June 30, 1999, at 8:30
a.m., local time, in the Atrium of the West Building of Provident's Home Office
at 1 Fountain Square, Chattanooga, Tennessee. The purpose of the Provident
meeting is to consider and to vote upon the following matters:
1. The election of 11 directors to the Provident board of directors.
2. A proposal to adopt the Agreement and Plan of Merger, dated as of
November 22, 1998, as amended as of May 25, 1999, between UNUM
Corporation and Provident, pursuant to which UNUM and Provident will
merge under the name "UNUMProvident Corporation." As a result of the
reclassification discussed in proposal number 3 below and the merger,
each outstanding share of UNUM common stock will be converted into one
share of UNUMProvident common stock and each outstanding share of
Provident common stock will be reclassified and converted into 0.73 of a
share of UNUMProvident common stock.
3. A proposal to approve an amendment (the "Provident Reclassification
Amendment") to the Amended and Restated Certificate of Incorporation of
Provident which provides that each share of Provident common stock
outstanding immediately prior to the effective time of the amendment will
be automatically reclassified and converted into 0.73 of a share of
Provident common stock. Provident stockholders will not receive
fractional shares in the reclassification. Instead, they will be entitled
to receive an amount in cash based on the market value of UNUM common
stock on the last trading day prior to the date on which the Provident
Reclassification Amendment becomes effective.
4. A proposal to approve amendments to the Provident Companies, Inc. Stock
Plan of 1999 to increase the number of shares of Provident common stock
authorized for issuance under such plan and to clarify the calculation of
the number of shares of Provident common stock available for awards under
such plan.
5. Such other business related to the foregoing proposals as may properly
come before the Provident meeting.
The effectiveness of the Provident Reclassification Amendment is a condition
to the merger and the merger will not be completed if the proposal to approve
the Provident Reclassification Amendment is not approved. The conditions to the
merger, other than the Provident Reclassification Amendment, are also conditions
to Provident's obligations to complete the reclassification, and the
reclassification will not be completed unless such conditions are satisfied or
waived.
The Provident board of directors has fixed the close of business on May 10,
1999, as the record date for the Provident meeting, and only Provident
stockholders of record at such time will be entitled to notice of, and to vote
at, the Provident meeting.
A form of proxy and a Joint Proxy Statement/Prospectus containing more
detailed information with respect to the matters to be considered at the
Provident meeting, including a copy of the merger agreement
<PAGE>
attached as Appendix A and a copy of the form of the Provident Reclassification
Amendment attached as Appendix G, accompany and form a part of this notice.
Whether or not you plan to attend the Provident meeting, please submit your
proxy with voting instructions. You may submit your proxy with voting
instructions by mail if you promptly complete, sign, date and return the
accompanying proxy card in the enclosed self-addressed, stamped envelope. You
may also submit your proxy with voting instructions by telephone or through the
Internet in accordance with the instructions on the accompanying proxy card. If
you attend the Provident meeting and desire to revoke your proxy in writing and
vote in person, you may do so. In any event, a proxy may be revoked in writing,
by telephone or through the Internet at any time before it is exercised.
THE PROVIDENT BOARD OF DIRECTORS HAS DECLARED ADVISABLE, AUTHORIZED AND
APPROVED THE MERGER AGREEMENT, THE PROVIDENT RECLASSIFICATION AMENDMENT AND
APPROVED THE AMENDMENTS TO THE STOCK PLAN.
THE PROVIDENT BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE MERGER AGREEMENT, THE APPROVAL OF EACH OF THE PROVIDENT
RECLASSIFICATION AMENDMENT AND THE AMENDMENTS TO THE STOCK PLAN, AND THE
ELECTION OF EACH OF THE 11 NOMINEES NOMINATED TO THE PROVIDENT BOARD OF
DIRECTORS.
By Order of the Board of Directors,
/s/ Susan N. Roth
Secretary
Chattanooga, Tennessee
June 2, 1999
THE INFORMATION AGENT FOR THE MERGER IS:
GEORGESON & COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
CALL TOLL FREE (800) 223-2064
---------------------
Your vote is important. Please submit a proxy with your voting instructions by
telephone, through the Internet or by returning your signed and dated proxy by
mail.
2
<PAGE>
[LOGO]
UNUM CORPORATION
2211 CONGRESS STREET
PORTLAND, MAINE 04122
--------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
--------------------------
To the Stockholders of UNUM Corporation:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of UNUM
Corporation, a Delaware corporation, will be held on June 30, 1999, at 8:30
a.m., local time, at the Portland Marriott, 200 Sable Oaks Drive, South
Portland, Maine. The purpose of the UNUM special meeting is to consider and to
vote upon the following matters:
1. A proposal to adopt the Agreement and Plan of Merger, dated as of
November 22, 1998, as amended as of May 25, 1999, between UNUM and
Provident Companies, Inc., pursuant to which UNUM and Provident will
merge under the name "UNUMProvident Corporation." In connection with the
completion of the merger and related transactions, each outstanding share
of UNUM common stock will be converted into one share of UNUMProvident
common stock and each outstanding share of Provident common stock will be
reclassified and converted into 0.73 of a share of UNUMProvident common
stock.
2. Such other business related to the foregoing proposal as may properly
come before the UNUM special meeting.
The UNUM board of directors has fixed the close of business on May 10, 1999,
as the record date for the UNUM special meeting, and only UNUM stockholders of
record at such time will be entitled to notice of, and to vote at, the UNUM
special meeting. A complete list of the UNUM stockholders entitled to vote at
the UNUM special meeting will be open to the examination of any UNUM
stockholder, for any purpose germane to the UNUM special meeting, at UNUM's
offices at 2211 Congress Street, Portland, Maine 04122, during UNUM's ordinary
business hours, for a period of ten days prior to the UNUM special meeting.
A form of proxy and a Joint Proxy Statement/Prospectus containing more
detailed information with respect to the matters to be considered at the UNUM
special meeting, including a copy of the merger agreement attached as Appendix
A, accompany and form a part of this notice.
Whether or not you plan to attend the UNUM special meeting, please submit
your proxy with voting instructions. You may submit your proxy with voting
instructions by mail if you promptly complete, sign, date and return the
accompanying proxy card in the enclosed self-addressed, stamped envelope. You
may also submit your proxy with voting instructions by telephone or through the
Internet in accordance with the instructions on the accompanying proxy card. If
you attend the UNUM special meeting and desire to revoke your proxy in writing
and vote in person, you may do so. In any event, a proxy may be revoked in
writing, by telephone or through the Internet at any time before it is
exercised.
THE UNUM BOARD OF DIRECTORS HAS DECLARED ADVISABLE, AUTHORIZED AND APPROVED
THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT UNUM STOCKHOLDERS VOTE
"FOR" THE ADOPTION OF THE MERGER AGREEMENT.
By Order of the Board of Directors,
/s/ Kevin J. Tierney
Secretary
Portland, Maine
June 2, 1999
THE INFORMATION AGENT FOR THE MERGER IS:
GEORGESON & COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
CALL TOLL FREE (800)223-2064
--------------
Your vote is important. Please submit a proxy with your voting instructions by
telephone, through the Internet or by returning your signed and dated proxy by
mail.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Provident and UNUM from other documents that are not included in or
delivered with this document. This information is available to you without
charge upon your written or oral request. You can obtain documents incorporated
by reference in this document, other than certain exhibits to those documents,
by requesting them in writing or by telephone from the appropriate company at
the following addresses:
<TABLE>
<S> <C>
PROVIDENT COMPANIES, INC. UNUM CORPORATION
1 Fountain Square 2211 Congress Street
Chattanooga, Tennessee 37402 Portland, Maine 04122
(423) 755-1011 (207) 770-2211
Attention: Susan N. Roth Attention: Kevin J. Tierney
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY JUNE 23, 1999, IN
ORDER TO RECEIVE THEM BEFORE YOUR STOCKHOLDERS MEETING.
See "Where You Can Find More Information" on page 144.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
REFERENCES TO ADDITIONAL INFORMATION....................................................................... i
QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES FOR THE MERGER AND RELATED PROPOSALS......................... 1
SUMMARY.................................................................................................... 2
The Companies............................................................................................ 2
The Merger............................................................................................... 2
What You Will Receive.................................................................................... 3
The Reclassification..................................................................................... 3
Recommendations to Stockholders.......................................................................... 3
Opinions of Financial Advisors........................................................................... 4
The Provident Meeting.................................................................................... 4
Time, Place and Matters to Be Voted Upon............................................................... 4
Record Date and Vote Required.......................................................................... 4
The UNUM Special Meeting................................................................................. 5
Time, Place and Matters to Be Voted Upon............................................................... 5
Record Date and Vote Required.......................................................................... 5
The Merger Agreement..................................................................................... 5
Effective Time of the Merger........................................................................... 5
Conditions of the Merger............................................................................... 5
Termination............................................................................................ 6
Termination Fees and Expenses.......................................................................... 6
Stock Option Agreements.................................................................................. 7
Stockholders Agreement................................................................................... 7
Other.................................................................................................... 7
Interests of Management and Directors in the Merger.................................................... 7
Absence of Appraisal Rights............................................................................ 8
Accounting Treatment................................................................................... 8
Material Federal Income Tax Consequences of the Merger................................................. 8
Amendments of Provident Certificate of Incorporation and Bylaws; Comparison of Stockholders' Rights.... 8
Listing of UNUMProvident Common Stock.................................................................. 9
Regulatory Filings, Approvals and Clearances............................................................. 9
MARKET PRICE AND DIVIDEND INFORMATION...................................................................... 10
Dividend Information..................................................................................... 10
Recent Closing Prices.................................................................................... 11
Number of Stockholders................................................................................... 11
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION................................. 12
COMPARATIVE PER SHARE DATA................................................................................. 16
RISK FACTORS............................................................................................... 17
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Provident stockholders and UNUM stockholders cannot be sure of the market value of the UNUMProvident
common stock they will receive in the merger........................................................... 17
We may not be able to realize fully the cost savings and other benefits we expect to be realized in
connection with the merger, which may adversely affect UNUMProvident's earnings and financial
condition.............................................................................................. 17
The merger is subject to the receipt of consents and approvals from government entities that may impose
conditions that could have a material adverse effect on UNUMProvident or cause abandonment of the
merger................................................................................................. 17
Management anticipates merger related expenses of approximately $153.0 million in 1999 related to the
disruption of its claims operations.................................................................... 18
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................................................. 19
THE PROVIDENT MEETING...................................................................................... 20
General.................................................................................................. 20
Voting................................................................................................... 20
Proxies.................................................................................................. 21
Solicitation of Proxies.................................................................................. 23
THE UNUM SPECIAL MEETING................................................................................... 24
General.................................................................................................. 24
Voting................................................................................................... 24
Proxies.................................................................................................. 25
Solicitation of Proxies.................................................................................. 26
THE COMPANIES.............................................................................................. 27
Provident................................................................................................ 27
UNUM..................................................................................................... 27
THE MERGER................................................................................................. 29
General.................................................................................................. 29
The Provident Reclassification Amendment................................................................. 30
Amendment of Provident Certificate of Incorporation and Bylaws........................................... 31
Background to the Merger................................................................................. 31
Provident's Reasons for the Merger; Recommendations of the Provident Board of Directors.................. 35
UNUM's Reasons for the Merger; Recommendation of the UNUM Board of Directors............................. 38
Opinion of Provident's Financial Advisor................................................................. 41
Opinion of UNUM's Financial Advisor...................................................................... 52
Interests of Management and Directors in the Merger...................................................... 56
Governance of UNUMProvident After the Merger............................................................. 73
Public Trading Markets................................................................................... 74
Absence of Appraisal Rights.............................................................................. 74
Resale of UNUMProvident Common Stock..................................................................... 75
REGULATORY FILINGS, APPROVALS AND CLEARANCES............................................................... 76
Antitrust................................................................................................ 76
Insurance and Financial Services......................................................................... 77
THE MERGER AGREEMENT....................................................................................... 78
Introduction............................................................................................. 78
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Terms of the Merger...................................................................................... 78
Closing and Effective Time of the Merger................................................................. 78
Corporate Governance..................................................................................... 79
Conditions of the Merger................................................................................. 79
Representations and Warranties........................................................................... 81
Covenants................................................................................................ 82
Additional Agreements.................................................................................... 85
Termination.............................................................................................. 87
Termination Fees and Expenses............................................................................ 87
Amendment, Extension and Waiver.......................................................................... 88
STOCK OPTION AGREEMENTS.................................................................................... 89
General.................................................................................................. 89
Exercise; Expiration..................................................................................... 89
Cash-Out Right........................................................................................... 90
Adjustments to Number of Option Shares................................................................... 90
Limitation on Total Profit............................................................................... 90
Common Stock Equivalents................................................................................. 91
STOCKHOLDERS AGREEMENT..................................................................................... 92
General.................................................................................................. 92
Termination.............................................................................................. 92
ACCOUNTING TREATMENT....................................................................................... 93
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER..................................................... 93
Tax Opinions............................................................................................. 93
Tax Consequences of the Provident Reclassification Amendment and the Merger.............................. 93
Fractional Shares........................................................................................ 94
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS................................................ 95
Notes to Unaudited Pro Forma Combined Condensed Financial Statements..................................... 102
DESCRIPTION OF PROVIDENT CAPITAL STOCK..................................................................... 109
Authorized Capital Stock................................................................................. 109
Provident Common Stock................................................................................... 109
COMPARISON OF STOCKHOLDERS' RIGHTS......................................................................... 109
General.................................................................................................. 109
Comparison of Stockholders' Rights....................................................................... 110
RIGHTS AGREEMENT........................................................................................... 119
Before the Merger........................................................................................ 119
After the Merger......................................................................................... 119
DISCUSSION OF UNUMPROVIDENT CERTIFICATE OF INCORPORATION AND
UNUMPROVIDENT BYLAWS..................................................................................... 120
Increase in Authorized Shares............................................................................ 120
Anti-Takeover Considerations............................................................................. 120
STOCK PLAN AMENDMENTS...................................................................................... 122
General.................................................................................................. 122
Provident Companies, Inc. Stock Plan of 1999............................................................. 122
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
OTHER INFORMATION FOR THE PROVIDENT MEETING................................................................ 124
Nominees for Election as Provident Directors............................................................. 124
Attendance............................................................................................... 126
Committees............................................................................................... 126
Compensation of Directors................................................................................ 128
Executive Officers of Provident.......................................................................... 128
Compliance with Section 16(a)............................................................................ 129
Executive Compensation................................................................................... 129
Report of the Compensation Committee..................................................................... 129
Summary Compensation Table............................................................................... 133
Option Grants in Last Fiscal Year........................................................................ 135
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Value.................................. 136
Pension Plan Table....................................................................................... 137
Severance Agreement...................................................................................... 137
Employment Contract...................................................................................... 138
Change in Control........................................................................................ 139
Termination of Employment................................................................................ 139
Provident Performance.................................................................................... 141
Compensation Committee Interlocks and Insider Participants in
Compensation Decision During 1998...................................................................... 141
Security Ownership of Beneficial Owners and Management................................................... 142
Accountants.............................................................................................. 142
Other Business........................................................................................... 142
EXPERTS.................................................................................................... 143
STOCKHOLDER PROPOSALS...................................................................................... 143
Provident................................................................................................ 143
UNUM..................................................................................................... 143
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 144
VALIDITY OF SHARES......................................................................................... 145
APPENDIX A Agreement and Plan of Merger, dated as of November 22, 1998, as amended as of May 25, 1999,
between Provident Companies, Inc. and UNUM Corporation......................................... A-1
APPENDIX B Stock Option Agreement, dated as of November 22, 1998, by and between Provident Companies, Inc.,
as Issuer, and UNUM Corporation, as Grantee..................................................... B-1
APPENDIX C Stock Option Agreement, dated as of November 22, 1998, by and between UNUM Corporation, as
Issuer, and Provident Companies, Inc., as Grantee............................................... C-1
APPENDIX D Stockholders Agreement, dated as of November 22, 1998, among UNUM Corporation and the
individuals and other parties listed in Schedule A thereto..................................... D-1
APPENDIX E Opinion of Salomon Smith Barney Inc., dated November 22, 1998.................................. E-1
APPENDIX F Opinion of Morgan Stanley & Co. Incorporated, dated November 22, 1998.......................... F-1
APPENDIX G Form of Certificate of Amendment of the Amended and Restated Certificate
of Incorporation of Provident Companies, Inc.............................................. G-1
</TABLE>
v
<PAGE>
QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES FOR THE
MERGER AND RELATED PROPOSALS
Q: WHAT SHOULD I DO?
A: After you have carefully read this document, either mail your signed
proxy card in the enclosed envelope or, submit your proxy with voting
instructions by telephone or through the Internet in accordance with the
instructions on the accompanying proxy card so that your shares will be
represented at the Provident meeting or the UNUM special meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE
MY SHARES FOR ME?
A: No. Your broker will not be able to vote your shares without instructions
from you. You should instruct your broker to vote your shares, following
the directions provided by your broker. Your failure to instruct your
broker to vote your shares will be the equivalent of voting against the
adoption of the merger agreement.
Q: CAN I CHANGE MY VOTE AFTER I HAVE SUBMITTED MY PROXY WITH VOTING
INSTRUCTIONS?
A: Yes. There are three ways in which you may revoke your proxy and change
your vote. First, you may send a written notice to the party to whom you
submitted your proxy stating that you would like to revoke your proxy.
Second, you may complete and submit a new proxy card by mail or submit
your proxy with new voting instructions by telephone or through the
Internet. The latest vote actually received by Provident or UNUM, as the
case may be, prior to the stockholders meeting will be recorded and any
earlier votes will be revoked. Third, you may attend the Provident
meeting or the UNUM special meeting and vote in person. Simply attending
the stockholders meeting, however, will not revoke your proxy. If you
have instructed a broker to vote your shares, you must follow directions
received from your broker to change or revoke your proxy.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES?
A: No. You should not send in your stock certificates at this time.
UNUM stockholders will not exchange their certificates in the merger
unless we determine that such exchange is required by applicable law,
rule or regulation. The certificates currently representing the shares of
UNUM common stock will represent an equal number of shares of
UNUMProvident common stock after the merger.
Provident stockholders will exchange their certificates representing
Provident common stock as a result of the merger and the related
transactions and Provident stockholders will receive instructions for
exchanging their certificates after the merger is completed.
Q: WHO SHOULD STOCKHOLDERS CALL WITH QUESTIONS?
A: Provident stockholders and UNUM stockholders should call Georgeson &
Company Inc. at (800) 223-2064 with any questions about the merger and
the related transactions.
1
<PAGE>
SUMMARY
THIS SUMMARY, TOGETHER WITH THE PRECEDING QUESTION AND ANSWER SECTION,
HIGHLIGHTS SELECTED INFORMATION CONTAINED IN THIS DOCUMENT AND MAY NOT CONTAIN
ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. WE URGE YOU TO READ CAREFULLY
THIS ENTIRE DOCUMENT AND THE OTHER DOCUMENTS TO WHICH THIS DOCUMENT REFERS TO
UNDERSTAND FULLY THE MERGER AND OTHER RELATED TRANSACTIONS. SEE "WHERE YOU CAN
FIND MORE INFORMATION" ON PAGE 144. EACH ITEM IN THIS SUMMARY INCLUDES A PAGE
REFERENCE DIRECTING YOU TO A MORE COMPLETE DESCRIPTION OF THAT ITEM.
THE COMPANIES
PROVIDENT COMPANIES, INC. (PAGE 27)
Provident is a Delaware corporation and the parent holding company for a
group of insurance companies that collectively operate in all 50 states, the
District of Columbia, Puerto Rico and Canada. Provident's two principal
operating subsidiaries are Provident Life and Accident Insurance Company and The
Paul Revere Life Insurance Company.
Provident, through its subsidiaries:
- is the largest provider in North America of insurance policies, known as
disability policies, under which individuals are insured for disabilities
arising from illness, sickness or accident and is also a leading provider
of such insurance policies to groups; and
- provides a complementary portfolio of life insurance products.
UNUM CORPORATION (PAGE 27)
UNUM is a Delaware corporation and the parent holding company for insurance
companies that together serve North America, the United Kingdom, the Pacific Rim
and Latin America. UNUM's major operating subsidiaries are UNUM Life Insurance
Company of America, First UNUM Life Insurance Company, Colonial Life & Accident
Insurance Company, UNUM Limited and Duncanson & Holt Inc. UNUM Corporation and
its subsidiaries are:
- the leading providers in the United States and the United Kingdom of
insurance policies, known as group long term and short term disability
policies, under which an individual, through an employer or other group,
is insured for loss of income in the event of inability to work due to
sickness or injury; and a leading provider of such insurance policies sold
directly to individuals; and
- a major provider of other insurance products, including life insurance
offered through groups; long-term care policies providing payments in the
event of loss of independence in defined daily living activities; and
employee-paid insurance products offered to employees at their worksites.
THE MERGER (PAGE 29)
We propose a merger in which UNUM will merge with Provident under the name
"UNUMProvident Corporation." This proposed merger will join Provident, a leading
provider in North America of disability policies under which individuals are
insured for disabilities arising from illness, sickness or accident, with UNUM,
a global leader in disability policies sold through groups, which insure against
loss of income from the inability to work due to sickness or injury. We expect
UNUMProvident to be an innovator in developing insurance product offerings for
our customers, many of whom will be in largely underpenetrated segments of the
market. We also expect UNUMProvident and its customers to benefit from enhanced
capabilities in selling insurance and the combined financial and investment
strengths of the two companies.
Provident and UNUM believe that the merger offers both companies'
stockholders the opportunity to benefit from the growth opportunity expected to
result from combining the two companies. For a more detailed discussion of the
reasons for the merger, see pages 35 through 41.
2
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After the merger, UNUM stockholders initially will own approximately 58% of
the UNUMProvident common stock and Provident stockholders initially will own
approximately 42% of the UNUMProvident common stock.
WHAT YOU WILL RECEIVE
PROVIDENT STOCKHOLDERS (PAGE 29)
As a result of the change in Provident common stock discussed below and the
merger, Provident stockholders will receive 0.73 of a share of UNUMProvident
common stock for each share of Provident common stock they hold. No fractional
shares of Provident common stock will be issued in connection with such change
and the merger. Instead of fractional shares, Provident stockholders will be
entitled to receive an amount in cash based on the market value of UNUM common
stock on the last trading day prior to the date on which the change becomes
effective.
FOR EXAMPLE, A PROVIDENT STOCKHOLDER THAT OWNS 50 SHARES OF PROVIDENT COMMON
STOCK WILL OWN 36 SHARES OF UNUMPROVIDENT COMMON STOCK AND WILL BE ENTITLED TO
RECEIVE A CASH PAYMENT INSTEAD OF THE 0.5 OF A SHARE OF UNUMPROVIDENT COMMON
STOCK WHICH OTHERWISE WOULD HAVE BEEN CREATED.
UNUM STOCKHOLDERS (PAGE 29)
As a result of the merger, UNUM stockholders will receive one share of
UNUMProvident common stock for each share of UNUM common stock they hold. Each
certificate currently representing shares of UNUM common stock will represent an
equal number of shares of UNUMProvident common stock after the merger.
FOR EXAMPLE, A UNUM STOCKHOLDER THAT OWNS 50 SHARES OF UNUM COMMON STOCK
WILL OWN 50 SHARES OF UNUMPROVIDENT COMMON STOCK FOLLOWING THE MERGER.
THE RECLASSIFICATION (PAGE 30)
In the merger agreement, we have agreed that immediately prior to the
completion of the merger Provident will change its common stock in what is
legally known as a "reclassification". This reclassification will reduce the
number of shares of common stock that are held by Provident stockholders. In the
reclassification, Provident stockholders will receive 0.73 of a share of
Provident common stock for each share of Provident common stock that they hold
before the reclassification. In the merger, the shares of Provident common stock
will not be further affected, but will thereafter be shares of UNUMProvident
common stock. This 0.73 of a share of UNUMProvident common stock into which each
share of Provident common stock will be reclassified and converted is referred
to in this document as the "exchange ratio."
The reclassification is accomplished by amending Provident's certificate of
incorporation. We refer to this amendment in this document as the Provident
reclassification amendment. Because, technically, the reclassification is
legally independent of the merger, Provident stockholders are being asked to
vote upon a separate proposal to approve this amendment. However, the merger
will not be completed if the Provident reclassification amendment is not
approved by the Provident stockholders, and the reclassification will not be
completed if the conditions to the merger, other than the reclassification, are
not satisfied or waived. The reclassification will have no effect on the shares
of UNUMProvident common stock to be issued to UNUM stockholders in the merger.
RECOMMENDATIONS TO STOCKHOLDERS
Each of the Provident and UNUM board of directors has determined that the
merger and the exchange ratio are fair to, and in the best interests of, their
stockholders.
PROVIDENT (PAGE 20)
The Provident board of directors recommends that you vote "FOR" the adoption
of the merger agreement, "FOR" the approval of each of the Provident
reclassification amendment and the amendments to the stock plan and "FOR" the
election of each of the 11 nominees nominated to the Provident board of
directors.
3
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UNUM (PAGE 24)
The UNUM board of directors recommends that you vote "FOR" the adoption of
the merger agreement.
OPINIONS OF FINANCIAL ADVISORS (PAGES 41 AND 52)
In deciding to approve the merger agreement, the Provident board of
directors considered the opinion of its financial advisor, Salomon Smith Barney
Inc., and the UNUM board of directors considered the opinion of its financial
advisor, Morgan Stanley & Co. Incorporated. These opinions, dated November 22,
1998, are attached as Appendices E and F to this document. We encourage you to
read these opinions carefully and in their entirety.
THE PROVIDENT MEETING
TIME, PLACE AND MATTERS TO BE VOTED UPON (PAGE 20)
The Provident meeting will be held on June 30, 1999, at 8:30 a.m., local
time, in the Atrium of the West Building of Provident's Home Office at 1
Fountain Square, Chattanooga, Tennessee. At the Provident meeting, you will be
asked:
1. to elect 11 directors to the Provident board of directors;
2. to adopt the merger agreement;
3. to approve the Provident reclassification amendment;
4. to approve amendments to the Provident Companies, Inc. Stock Plan of
1999; and
5. to act on other matters relating to the foregoing proposals that may be
brought properly before the Provident meeting.
A vote to adopt the merger agreement is also a vote to approve the
transactions contemplated by the merger agreement, including, among others, the
merger, the issuance of the UNUMProvident common stock to UNUM stockholders
pursuant to the merger agreement and the amendment of each of the Provident
certificate of incorporation and the Provident bylaws. The changes to
Provident's organizational documents are explained more fully on page 31.
The election of directors to the Provident board of directors is required
under Provident's certificate of incorporation and does not have any effect on
Provident's right to designate seven members to the UNUMProvident board of
directors pursuant to the terms of the merger agreement, as discussed on page
124.
RECORD DATE AND VOTE REQUIRED (PAGE 20)
You may cast one vote at the Provident meeting for each share of Provident
common stock that you owned at the close of business on May 10, 1999.
On May 10, 1999, there were 135,643,319 shares of Provident common stock
outstanding and entitled to vote. To adopt the merger agreement and to approve
the Provident reclassification amendment, the holders of not less than sixty-six
and two-thirds percent (66 2/3%) of the shares of Provident common stock issued
and outstanding on May 10, 1999, must vote in favor of doing so. To approve the
amendments to the stock plan, the holders of not less than a majority of the
shares of Provident common stock voting on such proposal at the Provident
meeting, assuming at least a majority of outstanding shares of Provident common
stock are present in person or represented by proxy at the Provident meeting,
must vote in favor of doing so.
To elect the 11 nominees nominated for election to the Provident board of
directors, the holders of a plurality of the shares of Provident common stock
voting on the election at the Provident meeting, assuming at least a majority of
outstanding shares of Provident common stock are present in person or
represented by proxy at the Provident meeting, must vote in favor of each
nominee.
Members of the Maclellan family holding approximately 26% of Provident's
common stock
4
<PAGE>
have entered into an agreement with UNUM to vote in favor of adoption of the
merger agreement and approval of the Provident reclassification amendment.
Assuming that the Maclellan family votes in such a manner, the merger agreement
and the reclassification would be adopted and approved by Provident stockholders
if approximately 41% of the remaining outstanding shares were voted in favor of
the adoption of the merger agreement and the approval of the Provident
reclassification amendment. See page 92 for a more complete description of this
agreement.
As of May 10, 1999, directors and executive officers of Provident and their
affiliates owned an aggregate of approximately 29.51% of the outstanding shares
of Provident common stock, including the 26% owned by the Maclellan family which
is subject to the stockholders agreement. The directors and executive officers
have indicated their intention to vote the shares they hold in favor of the
adoption of the merger agreement, the approval of the Provident reclassification
amendment, the approval of the amendments to the stock plan and the election of
each of the 11 nominees nominated to the Provident board of directors.
THE UNUM SPECIAL MEETING
TIME, PLACE AND MATTERS TO BE VOTED UPON (PAGE 24)
The UNUM special meeting will be held on June 30, 1999, at 8:30 a.m., local
time, at the Portland Marriott, 200 Sable Oaks Drive, South Portland, Maine. At
the UNUM special meeting, you will be asked:
1. to adopt the merger agreement; and
2. to act on other matters relating to the foregoing proposal that may be
brought properly before the UNUM special meeting.
RECORD DATE AND VOTE REQUIRED (PAGE 24)
You may cast one vote at the UNUM special meeting for each share of UNUM
common stock that you owned at the close of business on May 10, 1999.
On May 10, 1999, there were 139,463,040 shares of UNUM common stock
outstanding and entitled to vote. To adopt the merger agreement, the holders of
not less than a majority of the shares of UNUM common stock issued and
outstanding on May 10, 1999 must vote in favor of doing so.
As of May 10, 1999, directors and executive officers of UNUM and their
affiliates owned an aggregate of approximately 1.71% of the outstanding shares
of UNUM common stock, which they have indicated they intend to vote in favor of
adoption of the merger agreement.
THE MERGER AGREEMENT
THE MERGER AGREEMENT IS ATTACHED TO THIS DOCUMENT AS APPENDIX A. PLEASE READ
THE MERGER AGREEMENT CAREFULLY AND IN ITS ENTIRETY. IT IS THE LEGAL DOCUMENT
THAT GOVERNS THE MERGER.
EFFECTIVE TIME OF THE MERGER (PAGE 78)
The merger will occur shortly after all the conditions to the completion of
the merger have been satisfied or waived. Although no assurances can be given,
it is currently expected that the merger will be completed by June 30, 1999.
CONDITIONS OF THE MERGER (PAGE 79)
The completion of the merger depends on a number of conditions being
satisfied, including the following:
- adoption of the merger agreement and the Provident reclassification
amendment by Provident stockholders and adoption of the merger agreement
by UNUM stockholders;
- approval of the merger by the state regulatory authorities set forth in
the merger agreement and the expiration of applicable federal and state
waiting periods;
- the absence of any injunction or legal restraint blocking the merger;
- effectiveness of the registration statement for the UNUMProvident
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<PAGE>
common stock to be issued in the merger;
- approval by the NYSE for the listing of the shares of UNUMProvident
common stock to be issued in the merger;
- receipt by each of us of letters from our respective independent
accountants that the merger will qualify for "pooling of interests"
accounting treatment;
- the effectiveness of the Provident reclassification amendment;
- the representations and warranties of each of us being true in all
material respects and each of us having performed in all material
respects our obligations under the merger agreement; and
- receipt by each of us of legal opinions that the United States federal
income tax treatment of Provident, UNUM, the holders of Provident common
stock and the holders of UNUM common stock will be as we have described
in this document.
If the law permits, either of us could choose to waive a condition to our
obligation to complete the merger even though that condition has not been
satisfied. We cannot be certain when, or if, the conditions to the merger will
be satisfied or waived, or that the merger will be completed.
TERMINATION (PAGE 87)
We may agree in writing to terminate the merger agreement at any time
without completing the merger, even after the stockholders of both our companies
have approved it.
In addition, either of us may decide, without consent of the other, to
terminate the merger agreement, even after adoption of the merger agreement by
our respective stockholders, if:
- the merger has not been completed by November 30, 1999;
- the Provident stockholders fail to adopt the merger agreement or the
Provident reclassification amendment, or the UNUM stockholders fail to
adopt the merger agreement;
- any legal restriction permanently prohibiting completion of the merger
has become final and non-appealable;
- either of us breaches our representations and warranties or fails to
perform our obligations under the merger agreement in a manner that
cannot be cured, and such breach or failure to perform would permit the
other party not to complete the merger;
- either of us decides to enter into a transaction with a third party that
is superior to the proposed merger;
- either of us or any of our respective directors or officers participates
in discussions or negotiations with a third party in breach of the
merger agreement; or
- the board of directors or any committee of either of us withdraws or
adversely modifies its approval or recommendation of the merger or the
merger agreement.
TERMINATION FEES AND EXPENSES (PAGE 87)
We have agreed that if one of us terminates the merger agreement in order to
accept a superior proposal from a third party, the terminating party must pay to
the other a termination fee of $150 million. We also have agreed that if the
merger agreement is terminated under certain circumstances and a party
thereafter executes an agreement or completes a transaction with a third party
within 18 months after termination, such party will pay the other party a
termination fee of $150 million.
Whether or not the merger is completed, we will each pay our own fees and
expenses, except that we will divide evenly the costs and expenses that we have
incurred in printing and mailing
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<PAGE>
this document, the fees that we have paid to the Securities and Exchange
Commission in connection with the merger and the fees that we have paid in
connection with our filings under the Hart-Scott-Rodino Act.
STOCK OPTION AGREEMENTS (PAGE 89)
THE STOCK OPTION AGREEMENTS ARE ATTACHED TO THIS DOCUMENT AS APPENDICES B
AND C. PLEASE READ EACH OF THEM CAREFULLY AND IN ITS ENTIRETY.
We have entered into stock option agreements with each other in which we
have granted the other party an option to purchase up to 19.9% of our
outstanding shares of common stock if any event occurs that entitles the company
exercising the option to receive a termination fee from the other company under
the merger agreement. The exercise price under the option granted by Provident
to UNUM is $35.131 per share and the exercise price under the option granted by
UNUM to Provident is $50.657 per share.
In addition to the option to purchase common stock, the company holding the
option may, under certain circumstances, require the company granting the option
to repurchase the option for cash. The stock option agreements limit the total
profit either company can obtain under its respective stock option agreement and
any termination fee receivable under the merger agreement to a total of $250
million.
The purpose of the stock options and termination fees is to increase the
likelihood that the merger will be completed in accordance with its terms, and
to compensate each of us for our efforts in the event the merger is not
completed under certain circumstances involving an acquisition or potential
acquisition of either of us by a third party.
STOCKHOLDERS AGREEMENT (PAGE 92)
THE STOCKHOLDERS AGREEMENT IS ATTACHED TO THIS DOCUMENT AS APPENDIX D.
PLEASE READ THE STOCKHOLDERS AGREEMENT CAREFULLY AND IN ITS ENTIRETY.
To induce UNUM to enter into the merger agreement, members of the Maclellan
family who together hold approximately 26% of Provident's common stock entered
into a stockholders agreement with UNUM. The stockholders signing the agreement
agreed to vote those shares of Provident common stock over which they have
voting power or control in favor of the adoption of the merger agreement and in
favor of the approval of the Provident reclassification amendment. Members of
the Maclellan family also agreed not to take actions that are inconsistent with
such agreement. The stockholders agreement terminates upon the earlier of the
completion of the merger, the termination of the merger agreement, the amendment
of the merger agreement in such a manner so as to reduce the exchange ratio and
in certain other circumstances.
OTHER
INTERESTS OF MANAGEMENT AND DIRECTORS IN THE MERGER (PAGE 56)
In considering the recommendations of your board of directors, you should be
aware that members of Provident's and UNUM's management and board of directors
may have interests in the merger that are different from, or in addition to,
your interests as Provident stockholders and UNUM stockholders generally. These
interests exist because of:
- rights the officers and directors of Provident and UNUM have pursuant to
the terms of benefit and compensation plans maintained by Provident and
UNUM which will allow stock-based awards to be available earlier and with
fewer restrictions; and
- the terms of employment agreements that provide certain officers with
severance benefits if their employment is terminated under certain
conditions after the merger.
Provident and UNUM have entered into a new employment agreement with James
F. Orr III, UNUM's current Chairman and Chief Executive Officer. Provident has
entered into a new employment agreement with J. Harold Chandler, Provident's
current Chairman of the Board, President and Chief Executive Officer. In
addition, the parties currently expect that prior to the merger, employment
7
<PAGE>
agreements will be signed with other persons who will serve in various senior
management positions in UNUMProvident.
The parties have also agreed that the board of directors of UNUMProvident
will consist of 15 members, seven of whom initially will be designated by
Provident and eight of whom initially will be designated by UNUM. Following the
merger and until June 30, 2000, Mr. Orr will serve as Chairman of the Board and
Chief Executive Officer of UNUMProvident and Mr. Chandler will serve as
President and Chief Operating Officer of UNUMProvident and also will be a member
of its board of directors. During the period Mr. Chandler is serving as Chief
Operating Officer, the operating and staff units of UNUMProvident will report to
Mr. Chandler and he will be responsible for their staffing and performance. On
July 1, 2000, Mr. Chandler will succeed Mr. Orr as Chief Executive Officer of
UNUMProvident and will continue to serve as President and Mr. Orr will
thereafter serve as executive Chairman of the Board of UNUMProvident. Also,
after the merger, UNUMProvident will indemnify the officers and directors of
UNUM for certain events occurring before the merger.
The members of both the Provident board of directors and the UNUM board of
directors knew about these additional interests, and considered them, when they
approved the merger agreement and the related transactions.
ABSENCE OF APPRAISAL RIGHTS (PAGE 74)
Both companies are incorporated under Delaware law. Under Delaware law,
neither Provident stockholders nor UNUM stockholders have any right to a court
determination, in a proceeding known as an appraisal, of the value of their
shares in connection with the merger.
ACCOUNTING TREATMENT (PAGE 93)
We intend the merger to qualify as a "pooling of interests," which means
that we will treat our companies as if they had always been combined for
accounting and financial reporting purposes.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 93)
In general, no gain or loss will be recognized for federal income tax
purposes by (1) Provident stockholders upon the reclassification and conversion
of their Provident common stock into UNUMProvident common stock pursuant to the
Provident reclassification amendment and the merger, except with respect to any
cash received instead of fractional shares or (2) UNUM stockholders upon the
conversion of their UNUM common stock into UNUMProvident common stock pursuant
to the merger.
We have conditioned the merger on our receipt of legal opinions that the
merger will be treated for federal income tax purposes as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, and
that each of Provident and UNUM will be a party to that reorganization within
the meaning of Section 368(b) of the Internal Revenue Code. Like other
conditions to the merger, either of us could choose to waive receipt of such
legal opinions. However, if the receipt of the legal opinion is waived and there
is a material difference in the tax consequences to you from what we have
described in this document, we will recirculate revised proxy materials and
resolicit the vote of stockholders.
THIS TAX TREATMENT MAY NOT APPLY TO CERTAIN PROVIDENT AND UNUM STOCKHOLDERS
AND MAY DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT WITHIN OUR
CONTROL. WE URGE YOU TO CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF
THE TAX CONSEQUENCES OF THE MERGER AND, IN THE CASE OF PROVIDENT STOCKHOLDERS,
THE PROVIDENT RECLASSIFICATION AMENDMENT.
AMENDMENT OF PROVIDENT CERTIFICATE OF INCORPORATION AND BYLAWS; COMPARISON OF
STOCKHOLDERS' RIGHTS (PAGES 31 AND 109)
In addition to amending its certificate of incorporation to complete the
Provident reclassification amendment, as part of the merger, Provident will
further amend each of its then-existing certificate of incorporation and its
8
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bylaws so that after the merger they read in their entirety as the parties have
agreed.
Accordingly, the rights of Provident stockholders currently are governed by
Delaware law, the Provident certificate of incorporation and the Provident
bylaws, and the rights of UNUM stockholders are currently governed by Delaware
law, the UNUM certificate of incorporation and the UNUM bylaws. After the
merger, the rights of UNUMProvident stockholders will be governed by Delaware
law, the UNUMProvident certificate of incorporation and the UNUMProvident
bylaws, which are attached as Exhibits A-1 and A-2, respectively, to the merger
agreement, attached as Appendix A to this document. The UNUMProvident
certificate of incorporation and UNUMProvident bylaws will be substantially
identical to the current UNUM certificate of incorporation and UNUM bylaws and
will differ in material respects from the current Provident certificate of
incorporation and Provident bylaws.
LISTING OF UNUMPROVIDENT COMMON STOCK
(PAGE 74)
The shares of UNUMProvident common stock to be issued in connection with the
merger will be listed on the NYSE under UNUM's current symbol, "UNM."
REGULATORY FILINGS, APPROVALS AND CLEARANCES (PAGE 76)
The Hart-Scott-Rodino Act requires us to furnish certain information and
material to the Antitrust Division of the Department of Justice and the Federal
Trade Commission and requires that a specified waiting period expire or be
terminated before the merger can be completed. Even after the waiting period
expires or is terminated, the Antitrust Division and the Federal Trade
Commission will have the authority to challenge the merger on antitrust grounds
before or after the merger is completed.
On December 7, 1998, Provident and UNUM each filed a notification and report
form for the merger with the Antitrust Division and the Federal Trade
Commission. On January 29, 1999, the Federal Trade Commission issued requests
for additional information and other documentary material to Provident and UNUM
relating to the merger. On May 18, 1999, the Federal Trade Commission announced
that it had accepted for public comment a proposed consent agreement with
Provident and UNUM, the terms of which are discussed on page 76. The consent
agreement will be subject to public comment for 60 days, after which the Federal
Trade Commission will decide whether to make it final. On May 18, 1999, the
Federal Trade Commission also granted early termination of the waiting period
under the Hart-Scott-Rodino Act. Accordingly, if the other approvals and
conditions to closing the merger are satisfied or waived, the parties may elect
to complete the merger prior to the end of the 60 day comment period.
On February 19, 1999, Provident and UNUM received an Advance Ruling
Certificate under Section 102 of the Competition Act (Canada) from the Mergers
Branch, Competition Bureau of Industry Canada, rendering the merger exempt from
the competition-related prenotification filing requirements of such Act.
The merger is subject to the prior approval of various state insurance
regulatory authorities and the insurance and financial services regulatory
authority of the United Kingdom. Provident and UNUM are also required to make
pre-merger notification filings with the insurance and financial services
regulatory authorities of other states and foreign countries. All necessary
filings were believed to be substantially complete as of the date of this
document.
We cannot predict whether we will obtain the required regulatory clearances
and approvals, the time frame within which such clearances and approvals may be
received or whether any such clearances and approvals would contain conditions
that would be detrimental to UNUMProvident.
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MARKET PRICE AND DIVIDEND INFORMATION
The table sets forth, for the calendar quarters indicated, the high and low
sales prices per share of Provident common stock and UNUM common stock, as
reported on the NYSE Composite Tape, and the dividends per share declared on
Provident common stock and UNUM common stock.
<TABLE>
<CAPTION>
UNUM
PROVIDENT COMMON
COMMON STOCK (A) STOCK (B)
------------------------------- ---------
CALENDAR QUARTER HIGH LOW DIVIDENDS HIGH
- ---------------------------------------------------------- ------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter........................................... $ 17 1/2 $ 14 1/2 $ 0.09000 $ 30
Second Quarter.......................................... 18 5/8 14 1/4 0.09000 31
Third Quarter........................................... 19 1/2 17 7/8 0.09000 33
Fourth Quarter.......................................... 25 3/4 18 7/16 0.09000 36
1997
First Quarter........................................... 28 7/8 23 3/16 0.09000 39
Second Quarter.......................................... 30 26 0.09000 46
Third Quarter........................................... 35 1/16 26 5/8 0.10000 48
Fourth Quarter.......................................... 39 1/16 31 5/8 0.10000 54
1998
First Quarter........................................... 38 7/8 32 1/2 0.10000 55
Second Quarter.......................................... 41 1/8 32 0.10000 59
Third Quarter........................................... 38 32 7/8 0.10000 59
Fourth Quarter.......................................... 42 7/16 26 1/8 0.10000 60
1999
First Quarter........................................... 44 3/8 31 1/2 0.10000 62
Second Quarter (through May 28, 1999)................... 42 7/8 30 5/8 -- 59
<CAPTION>
CALENDAR QUARTER LOW DIVIDENDS
- ---------------------------------------------------------- -------- ----------
<S> <C> <C> <C> <C>
1996
First Quarter........................................... 15/16 $ 27 3/8 $ 0.13250
Second Quarter.......................................... 1/2 27 3/4 0.13750
Third Quarter........................................... 28 3/8 0.13750
Fourth Quarter.......................................... 3/4 30 1/2 0.13750
1997
First Quarter........................................... 13/16 35 5/16 0.13750
Second Quarter.......................................... 1/2 33 5/8 0.14250
Third Quarter........................................... 7/16 40 11/16 0.14250
Fourth Quarter.......................................... 7/16 45 1/8 0.14250
1998
First Quarter........................................... 9/16 48 0.2900
Second Quarter.......................................... 5/8 51 1/2 --
Third Quarter........................................... 3/8 44 0.14750
Fourth Quarter.......................................... 1/16 42 0.14750
1999
First Quarter........................................... 1/2 43 13/16 0.2950
Second Quarter (through May 28, 1999)................... 1/2 42 7/16 --
</TABLE>
- ------------------------------
(a) All Provident common stock information has been adjusted to reflect a 2 for
1 stock split, effected as a stock dividend, paid on September 30, 1997.
(b) All UNUM common stock information has been adjusted to reflect a 2 for 1
stock split, effected as a stock dividend, paid on June 2, 1997.
DIVIDEND INFORMATION
UNUM and Provident have agreed that UNUMProvident will continue UNUM's
dividend practice with respect to holders of common stock, although the
UNUMProvident board of directors may change this practice at any time. In
addition, restrictions under applicable insurance laws will limit the amount of
dividends that can be paid to UNUMProvident from its insurance subsidiaries
without prior approval by regulatory authorities. For Provident and UNUM life
insurance subsidiaries domiciled or commercially domiciled in the United States,
generally prior approval is necessary for any amount that exceeds the greater
of:
(1) ten percent of an insurer's statutory surplus with respect to
policyholders as of the preceding year end; or
(2) the statutory net gain from operations, excluding realized investment
gains and losses, of the preceding year.
The payment of dividends is further limited to the amount of statutory
unassigned surplus. UNUM also has the ability to draw a dividend from its United
Kingdom-based affiliate, UNUM Limited. Such
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dividends are limited in amount, based on insurance company law in the United
Kingdom, which requires a minimum solvency margin. Based on these restrictions
under current law:
- in 1998, $151.9 million was available for the payment of dividends to
Provident from its insurance subsidiaries and $210.0 million and
approximately $25 million was available for the payment of dividends to
UNUM from its domestic insurance subsidiaries and from UNUM Limited,
respectively, and
- in 1999, approximately $153.3 million will be available for the payment of
dividends to Provident from its insurance subsidiaries, and approximately
$150.0 million and $20.0 million will be available for the payment of
dividends to UNUM from its domestic insurance subsidiaries and from UNUM
Limited, respectively.
The ability of UNUMProvident to continue to pay dividends in the future
without regulatory approval will be dependent upon the level of earnings of its
insurance subsidiaries as calculated under law. In addition to regulatory
restrictions, the amount of dividends that will be paid by insurance
subsidiaries will depend on additional factors, such as risk-based capital
ratios, funding growth objectives at an affiliate level and maintaining
appropriate capital adequacy ratios to support the ratings desired by
UNUMProvident.
RECENT CLOSING PRICES
Shares of Provident common stock are listed on the NYSE under the symbol
"PVT." Shares of UNUM common stock are listed on both the NYSE and the Pacific
Exchange under the symbol "UNM."
The following table sets forth the closing sales prices per share of
Provident common stock and UNUM common stock on the NYSE on November 20, 1998,
the last trading day before public announcement of the merger, and on May 28,
1999, the last practicable trading day prior to the date of this document. The
table also presents implied equivalent per share values for Provident common
stock by multiplying the price per share of UNUM common stock on the dates
indicated by the exchange ratio of 0.73.
<TABLE>
<CAPTION>
PROVIDENT
COMMON
STOCK
EQUIVALENT
VALUE
(0.73X
UNUM UNUM
PROVIDENT COMMON COMMON
COMMON STOCK STOCK STOCK)
----------------- ------- -------
<S> <C> <C> <C>
November 20, 1998................................................ $ 333/8 $48 1/8 $35 1/8
May 28, 1999..................................................... $ 391/16 $53 13/16 $39 5/16
</TABLE>
The market price of both Provident common stock and UNUM common stock will
fluctuate prior to the merger; similarly, the market value of the shares of
UNUMProvident common stock that Provident stockholders and UNUM stockholders
will receive in the merger may fluctuate following the merger. You should obtain
current market quotations for Provident common stock and UNUM common stock. The
future prices or markets for Provident common stock or UNUM common stock cannot
be predicted.
NUMBER OF STOCKHOLDERS
As of May 10, 1999, there were approximately 1,689 stockholders of record
who held shares of Provident common stock, as shown on the records of
Provident's transfer agent for such shares.
As of May 10, 1999, there were approximately 22,341 stockholders of record
who held shares of UNUM common stock, as shown on the records of UNUM's transfer
agent for such shares.
11
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
The following tables present selected historical financial information of
Provident and UNUM and selected unaudited pro forma combined financial
information after giving effect to the consummation of the merger. The tables
assume that the merger is accounted for as a "pooling of interests." Provident
and UNUM selected historical financial information for each of the five years in
the period ended December 31, 1998, have been derived from audited financial
statements filed with the Securities and Exchange Commission, and the related
historical financial information for the three-month periods ended March 31,
1999, and March 31, 1998, have been derived from unaudited financial statements
filed with the Securities and Exchange Commission. Certain historical financial
information has been reclassified to conform with the current presentation.
All per share amounts set forth in the pro forma information in the
following table give effect to the reclassification of Provident common stock on
a 0.73 to 1 basis. Stockholders should note that the data set forth below is
presented for illustrative purposes only and is not necessarily indicative of
the financial position or operating results that would have occurred or that
will occur upon consummation of the merger. The selected unaudited pro forma
combined financial information does not give effect to any cost and revenue
synergies which may result from the integration of the operations of Provident
and UNUM. Management of UNUM and Provident are currently assessing merger
related expenses and conforming accounting changes which may be material to
UNUMProvident's results of operations and financial condition for the period in
which the charge occurs. As such, no estimate has been reflected in the selected
pro forma combined financial information.
Stockholders should note that the following selected financial information
should be read in conjunction with the related historical and pro forma combined
condensed financial statements and notes thereto incorporated by reference or
included herein. See "References to Additional Information" on page i, "Where
You Can Find More Information" on page 144 and "Unaudited Pro Forma Combined
Condensed Financial Statements" on page 95.
12
<PAGE>
PROVIDENT--HISTORICAL
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT SHARE DATA)
Premium Income.................. $ 619.1 $ 587.2 $ 2,347.4 $ 2,053.7 $ 1,175.7 $ 1,251.9 $ 1,382.6
Net Investment Income........... 326.8 361.8 1,374.0 1,354.7 1,090.1 1,221.3 1,238.6
Net Realized Investment Gains
(Losses)...................... 4.0 6.2 34.0 15.1 (8.6) (31.7) (30.1)
Other Income.................... 38.5 38.4 182.6 129.7 34.7 113.8 171.1
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenue................. 988.4 993.6 3,938.0 3,553.2 2,291.9 2,555.3 2,762.2
Benefits and Expenses........... 873.7 880.7 3,535.2 3,172.9 2,065.7 2,379.3 2,561.3
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income Before Income Taxes.... 114.7 112.9 402.8 380.3 226.2 176.0 200.9
Income Taxes.................... 40.9 41.8 148.8 133.0 80.6 60.4 65.6
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income.................... $ 73.8 $ 71.1 $ 254.0 $ 247.3 $ 145.6 $ 115.6 $ 135.3
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
PER COMMON SHARE DATA:
Net Income--Diluted............. $ 0.54 $ 0.50 $ 1.82 $ 1.84 $ 1.44 $ 1.13 $ 1.35
Cash Dividends.................. $ 0.10 $ 0.10 $ 0.40 $ 0.38 $ 0.36 $ 0.36 $ 0.52
Book Value Per Share of Common
Stock......................... $ 23.81 $ 23.79 $ 25.20 $ 23.11 $ 17.34 $ 16.48 $ 11.17
Weighted Average Common Shares
Outstanding................... 137,684,612 138,645,330 138,269,245 127,253,246 92,154,470 90,931,790 90,729,928
Common Shares Outstanding at End
of Period..................... 135,355,470 135,020,780 135,246,629 135,119,909 91,255,258 90,795,772 90,699,072
BALANCE SHEET DATA (AT PERIOD
END):
Invested Assets................. $ 16,901.2 $ 19,540.7 $ 17,332.7 $ 19,520.8 $ 13,317.4 $ 14,751.0 $ 15,017.6
Total Assets.................... 22,760.0 23,285.1 23,088.1 23,177.6 14,992.5 16,301.3 17,149.9
Long-term Debt, Subordinated
Debt Securities and Preferred
Stock......................... 900.0 500.0 900.0 881.2 356.2 356.2 358.7
Total Liabilities............... 19,236.5 19,772.3 19,379.6 19,898.3 13,253.9 14,649.0 15,980.8
Common Stockholders' Equity..... 3,223.5 3,212.8 3,408.5 3,123.1 1,582.4 1,496.1 1,012.9
</TABLE>
13
<PAGE>
UNUM--HISTORICAL
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT SHARE DATA)
Premium Income.................. $ 1,085.1 $ 918.4 $ 3,841.7 $ 3,263.7 $ 3,151.5 $ 3,018.2 $ 2,721.3
Net Investment Income........... 172.8 163.3 661.4 661.0 803.3 806.3 770.2
Net Realized Investment Gains
(Losses)...................... 3.2 3.1 21.0 (3.6) 3.4 225.1 45.6
Other Income.................... 42.3 36.7 117.3 227.3 113.5 73.3 75.5
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenue................. 1,303.4 1,121.5 4,641.4 4,148.4 4,071.7 4,122.9 3,612.6
Benefits and Expenses........... 1,254.9 987.1 4,124.0 3,612.0 3,730.1 3,741.0 3,414.0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income Before Income Taxes.... 48.5 134.4 517.4 536.4 341.6 381.9 198.6
Income Taxes.................... 33.0 40.9 154.0 166.1 103.6 100.8 43.9
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income.................... $ 15.5 $ 93.5 $ 363.4 $ 370.3 $ 238.0 $ 281.1 $ 154.7
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
PER COMMON SHARE DATA:
Net Income--Diluted............. $ 0.11 $ 0.66 $ 2.57 $ 2.59 $ 1.61 $ 1.92 $ 1.04
Cash Dividends.................. $ 0.1475 $ 0.1425 $ 0.5850 $ 0.5650 $ 0.5450 $ 0.5175 $ 0.4600
Book Value Per Share of Common
Stock......................... $ 19.18 $ 17.93 $ 19.74 $ 17.61 $ 15.75 $ 15.77 $ 13.23
Weighted Average Common Shares
Outstanding................... 141,743,410 141,362,533 141,412,347 142,923,361 148,028,296 146,608,572 149,459,436
Common Shares Outstanding at End
of Period..................... 139,059,749 138,265,956 138,709,415 138,271,992 143,644,728 146,015,254 144,825,056
BALANCE SHEET DATA (AT PERIOD
END):
Invested Assets................. $ 9,824.9 $ 9,107.4 $ 9,837.7 $ 8,958.9 $ 8,736.7 $ 11,692.5 $ 10,433.8
Total Assets.................... 15,381.2 13,821.2 15,182.9 13,440.1 15,580.4 14,787.8 13,127.2
Long-term Debt, Subordinated
Debt Securities and Preferred
Stock......................... 598.5 558.9 598.3 509.2 409.2 457.3 182.1
Total Liabilities............... 12,714.4 11,342.7 12,445.2 11,005.3 13,317.3 12,484.9 11,211.8
Common Stockholders' Equity..... 2,666.8 2,478.5 2,737.7 2,434.8 2,263.1 2,302.9 1,915.4
</TABLE>
14
<PAGE>
PRO FORMA UNUM AND PROVIDENT COMBINED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT SHARE DATA)
Premium Income.................. $ 1,704.2 $ 1,505.6 $ 6,189.1 $ 5,317.4 $ 4,327.2 $ 4,270.1 $ 4,103.9
Net Investment Income........... 499.6 525.1 2,035.4 2,015.7 1,893.4 2,027.6 2,008.8
Net Realized Investment Gains
(Losses)...................... 7.2 9.3 55.0 11.5 (5.2) 193.4 15.5
Other Income.................... 80.8 75.1 299.9 357.0 148.2 187.1 246.6
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenue................. 2,291.8 2,115.1 8,579.4 7,701.6 6,363.6 6,678.2 6,374.8
Benefits and Expenses........... 2,128.6 1,867.8 7,659.2 6,784.9 5,795.8 6,120.3 5,975.3
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income Before Income Taxes.... 163.2 247.3 920.2 916.7 567.8 557.9 399.5
Income Taxes.................... 73.9 82.7 302.8 299.1 184.2 161.2 109.5
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income.................... $ 89.3 $ 164.6 $ 617.4 $ 617.6 $ 383.6 $ 396.7 $ 290.0
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
PER COMMON SHARE DATA:
Net Income--Diluted............. $ 0.37 $ 0.67 $ 2.54 $ 2.57 $ 1.72 $ 1.80 $ 1.29
Cash Dividends.................. $ 0.14 $ 0.14 $ 0.57 $ 0.55 $ 0.53 $ 0.51 $ 0.54
Book Value Per Share of Common
Stock......................... $ 24.13 $ 24.03 $ 25.89 $ 23.46 $ 18.29 $ 17.89 $ 13.88
Weighted Average Common Shares
Outstanding................... 242,253,177 242,573,624 242,348,896 235,818,231 215,301,059 212,988,779 215,692,283
Common Shares Outstanding at End
of Period..................... 237,869,242 236,831,125 237,439,454 236,909,526 210,261,066 212,296,168 211,035,379
BALANCE SHEET DATA (AT PERIOD
END):
Invested Assets................. $ 26,726.1 $ 28,648.1 $ 27,170.4 $ 28,479.7 $ 22,054.1 $ 26,443.5 $ 25,451.4
Total Assets.................... 38,141.2 37,106.3 38,271.0 36,617.7 30,572.9 31,089.1 30,277.1
Long-term Debt, Subordinated
Debt Securities and Preferred
Stock......................... 1,498.5 1,058.9 1,498.3 1,390.4 765.4 813.5 540.8
Total Liabilities............... 32,100.9 31,115.0 31,824.8 30,903.6 26,571.2 27,133.9 27,192.6
Common Stockholders' Equity..... 5,740.3 5,691.3 6,146.2 5,557.9 3,845.5 3,799.0 2,928.3
</TABLE>
RECENT DEVELOPMENTS
In April 1999, UNUM completed a comprehensive strategic review of its
reinsurance businesses. These businesses include reinsurance pool management
operations and risk assumption (pool participation, direct reinsurance, and
Lloyd's of London syndicate participation). UNUM's management concluded that
these businesses are not solidly aligned with UNUM's strength in the disability
insurance market. UNUM intends to sell the reinsurance management operations and
either reinsure the risk assumption businesses or place them in run-off. As a
result of the comprehensive review, UNUM recorded a special charge of $101.1
million ($88.0 million after tax) in the first quarter of 1999. The charge
includes reserve increases for estimated losses in the Lloyd's of London
syndicates and certain reinsurance pools, as well as a write-down of goodwill.
15
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical, pro forma combined, and
equivalent pro forma combined per share data of Provident and UNUM. The pro
forma comparative per share data is derived from the unaudited pro forma
combined condensed financial statements and notes thereto beginning on page 95
of this document. The pro forma equivalent per share data is derived by
multiplying the pro forma comparative per share amounts by the exchange ratio of
0.73. The pro forma and pro forma equivalent per share data does not purport to
represent what the financial position or results of operations of Provident,
UNUM, or UNUMProvident actually would have been had the merger occurred at the
beginning of the relevant periods or to project Provident's, UNUM's, or
UNUMProvident's financial position or results of operations for any future date
or period. The data set forth below should be read in conjunction with the pro
forma financial statements and the separate historical financial statements and
notes thereto of Provident and UNUM, which are included elsewhere in, or
incorporated by reference into, this document.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- COMBINED EQUIVALENT OF
PROVIDENT UNUM PRO FORMA ONE PROVIDENT SHARE
---------- ---------- ----------- -------------------
<S> <C> <C> <C> <C>
NET INCOME--BASIC:
Three Months Ended March 31, 1999....................... $ 0.54 $ 0.11 $ 0.38 $ 0.28
Year Ended December 31, 1998............................ 1.87 2.63 2.60 1.90
Year Ended December 31, 1997............................ 1.88 2.65 2.62 1.91
Year Ended December 31, 1996............................ 1.46 1.63 1.75 1.28
NET INCOME--DILUTED:
Three Months Ended March 31, 1999....................... $ 0.54 $ 0.11 $ 0.37 $ 0.27
Year Ended December 31, 1998............................ 1.82 2.57 2.54 1.85
Year Ended December 31, 1997............................ 1.84 2.59 2.57 1.88
Year Ended December 31, 1996............................ 1.44 1.61 1.72 1.26
CASH DIVIDENDS:
Three Months Ended March 31, 1999....................... $ 0.10 $ 0.1475 $ 0.14 $ 0.10
Year Ended December 31, 1998............................ 0.40 0.5850 0.57 0.42
Year Ended Decemebr 31, 1997............................ 0.38 0.5650 0.55 0.40
Year Ended December 31, 1996............................ 0.36 0.5450 0.53 0.39
BOOK VALUE PER SHARE OF COMMON STOCK AS OF:
March 31, 1999.......................................... $ 23.81 $ 19.18 $ 24.13 $ 17.61
December 31, 1998....................................... 25.20 19.74 25.89 18.90
</TABLE>
16
<PAGE>
RISK FACTORS
PROVIDENT STOCKHOLDERS AND UNUM STOCKHOLDERS CANNOT BE SURE OF THE MARKET VALUE
OF THE UNUMPROVIDENT COMMON STOCK THEY WILL RECEIVE IN THE MERGER
As a result of the reclassification and the merger, each share of Provident
common stock will be reclassified and converted into 0.73 of a share of
UNUMProvident common stock. Because the exchange ratio of 0.73 is fixed, the
market value of UNUMProvident common stock issued in the merger will depend upon
the market prices of UNUM common stock and Provident common stock. These market
values for UNUM common stock and Provident common stock may fluctuate prior to
the completion of the merger and therefore may be different at the time the
merger is completed than they were at the time the merger agreement was signed
and the exchange ratio agreed upon, and at the time of the stockholders
meetings. Accordingly, Provident stockholders and UNUM stockholders cannot be
sure of the market value of the UNUMProvident common stock that they will
receive in the merger.
WE MAY NOT BE ABLE TO REALIZE FULLY THE COST SAVINGS AND OTHER BENEFITS WE
EXPECT TO BE REALIZED IN CONNECTION WITH THE MERGER, WHICH MAY ADVERSELY
AFFECT UNUMPROVIDENT'S EARNINGS AND FINANCIAL CONDITION
Provident and UNUM expect significant benefits to result from the merger.
However, the merger involves the integration of two large companies that have
previously operated independently of each other and the successful combination
of the two business enterprises may result in a diversion of management
attention for an extended period of time. Further, the parties may not be able
to achieve the anticipated enhanced cross-selling opportunities, the development
and marketing of more comprehensive insurance product offerings, cost savings,
revenue growth and the consistent use of the best practices of Provident and
UNUM. Inability to realize the full extent of, or any of, the anticipated
benefits of the merger, as well as delays encountered in the transition process,
could have a material adverse effect upon the revenues, level of expenses,
operating results and financial condition of UNUMProvident, which may affect the
value of the UNUMProvident common stock. See "The Merger--Provident's Reasons
for the Merger; Recommendations of the Provident Board of Directors" on page 35
and "--UNUM's Reasons for the Merger; Recommendation of the UNUM Board of
Directors" on page 38.
THE MERGER IS SUBJECT TO THE RECEIPT OF CONSENTS AND APPROVALS FROM GOVERNMENT
ENTITIES THAT MAY IMPOSE CONDITIONS THAT COULD HAVE A MATERIAL ADVERSE EFFECT
ON UNUMPROVIDENT OR CAUSE ABANDONMENT OF THE MERGER
Completion of the merger is conditioned upon the expiration or termination
of the applicable waiting period under the Hart-Scott-Rodino Act and the receipt
of consents, orders, approvals and clearances from state and foreign
governmental entities. The terms and conditions of such consents, orders,
approvals and clearances may require the divestiture of divisions, operations or
assets of UNUMProvident or may affect the license of an insurance subsidiary of
UNUM or Provident. Such required divestitures or other conditions, if any, may
have a material adverse effect on the business, financial condition or results
of operations of UNUMProvident or may cause the abandonment of the merger by
Provident or UNUM. Provident and UNUM have not determined how they will respond
to conditions, limitations or divestitures which may be required in connection
with obtaining any consents, orders, approvals and clearances. See "Regulatory
Filings, Approvals and Clearances" on page 76 and "The Merger
Agreement--Conditions of the Merger" on page 79.
17
<PAGE>
MANAGEMENT ANTICIPATES MERGER RELATED EXPENSES OF APPROXIMATELY $153.0 MILLION
IN 1999 RELATED TO THE DISRUPTION OF ITS CLAIMS OPERATIONS
Provident and UNUM anticipate that as a result of integrating their
respective claims operations there will be a temporary increase in claim costs.
Accordingly, during the fourth quarter of 1998, Provident and UNUM increased
their claim reserves by approximately $93.6 million ($60.8 million after tax)
and $59.4 million ($38.6 million after tax), respectively, related to the
expected increase in disability claim duration on existing claims. These charges
are discussed more fully in Note 3 to the Unaudited Pro Forma Combined Condensed
Financial Statements on page 103. Provident and UNUM expect the disruption of
the claims operations to be confined to the year 1999; however, should the
proposed integration of the claims operations take longer than anticipated or
result in unforeseen difficulties, the disruption could continue into the year
2000. This would require an additional charge to be taken once a change in
circumstances becomes known.
18
<PAGE>
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking statements with respect to
the financial condition, results of operations and business of each of Provident
and UNUM. These statements may be made directly in this document referring to
Provident or UNUM or may be made part of this document by reference to other
documents filed with the Securities and Exchange Commission by Provident or
UNUM, which is known as "incorporation by reference," and may include statements
for the period following the completion of the merger. You can find many of
these statements by looking for words such as "believes," "expects,"
"anticipates," "estimates" or similar expressions in this document or in
documents incorporated herein.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Factors that may cause actual results to differ from those
contemplated by the forward-looking statements include, among others, the
following possibilities:
- Competitive pressures in the insurance industry may increase significantly
through industry consolidation, competitor demutualization, or otherwise.
- General economic or business conditions, both domestic and foreign, may be
less favorable than expected, resulting in, among other things, lower than
expected revenues, and Provident or UNUM could experience higher than
expected claims, or claims with longer duration than expected.
- Insurance reserve liabilities can fluctuate as a result of changes in
numerous factors, and such fluctuations can have material positive or
negative effects on net income.
- Costs or difficulties related to the integration of the businesses of
Provident and UNUM may be greater than expected.
- Legislative or regulatory changes may adversely affect the businesses in
which Provident and UNUM are engaged.
- Necessary technological changes, including changes to address "Year 2000"
data systems issues, may be more difficult or expensive to make than
anticipated, and Year 2000 issues at other companies may adversely affect
operations.
- Adverse changes may occur in the securities markets.
- Changes in the interest rate environment may adversely affect profit
margins.
- The rate of customer bankruptcies may increase.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Provident stockholders and UNUM stockholders are
cautioned not to place undue reliance on such statements, which speak only as of
the date of this document or the date of any document incorporated by reference.
All subsequent written and oral forward-looking statements attributable to
Provident or UNUM or any person acting on their behalf are expressly qualified
in their entirety by the cautionary statements contained or referred to in this
section. Neither Provident nor UNUM undertakes any obligation to release
publicly any revisions to such forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the occurrence of
unanticipated events.
19
<PAGE>
THE PROVIDENT MEETING
GENERAL
This document is being furnished to Provident stockholders in connection
with the solicitation of proxies by the Provident board of directors for use at
the Provident meeting, to be held on June 30, 1999, at 8:30 a.m., local time, in
the Atrium of the West Building of Provident's Home Office at 1 Fountain Square,
Chattanooga, Tennessee. The 1998 Annual Report to Stockholders, including
audited financial statements of Provident for the fiscal year ended December 31,
1998, and the proxy card enclosed with this document are being mailed to
stockholders on or about June 2, 1999.
The purpose of the Provident meeting is to consider and to vote upon:
(1) the election of 11 directors to the Provident board of directors;
(2) the adoption of the merger agreement;
(3) the approval of the amendment to the Provident certificate of
incorporation to reclassify the Provident common stock (the
"Provident Reclassification Amendment");
(4) the approval of amendments to the Provident Companies, Inc. Stock
Plan of 1999 to increase the number of shares of Provident common
stock authorized for issuance under such plan and to clarify the
calculation of the number of shares of Provident common stock
available for awards under such plan; and
(5) to transact such other business related to such proposals as may
properly come before the Provident meeting.
THE PROVIDENT BOARD OF DIRECTORS HAS DECLARED ADVISABLE, AUTHORIZED AND
APPROVED THE MERGER AGREEMENT, THE PROVIDENT RECLASSIFICATION AMENDMENT AND
APPROVED THE AMENDMENTS TO THE STOCK PLAN. THE PROVIDENT BOARD OF DIRECTORS
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT,
THE APPROVAL OF EACH OF THE PROVIDENT RECLASSIFICATION AMENDMENT AND THE
AMENDMENTS TO THE STOCK PLAN AND THE ELECTION OF EACH OF THE 11 NOMINEES
NOMINATED TO THE PROVIDENT BOARD OF DIRECTORS.
VOTING
RECORD DATE
The Provident board of directors has fixed the close of business on May 10,
1999, as the Provident record date for the determination of the holders of
Provident common stock entitled to receive notice of and to vote at the
Provident meeting. You may vote at the Provident meeting only if you owned
Provident common stock at that time.
As of the Provident record date, there were 135,643,319 shares of Provident
common stock issued and outstanding. Each share of Provident common stock
outstanding on the Provident record date is entitled to one vote upon each
matter properly submitted at the Provident meeting.
VOTE REQUIRED
The affirmative vote of the holders of not less than sixty-six and
two-thirds percent (66 2/3%) of the shares of Provident common stock issued and
outstanding on the Provident record date is required for adoption of the merger
agreement and the approval of the Provident Reclassification Amendment. The
affirmative vote of the holders of not less than a majority of the shares of
Provident common stock voting on the amendments to the stock plan, assuming at
least a majority of outstanding shares of Provident common stock are present in
person or represented by proxy at the Provident meeting, is required for
approval of such amendments. The affirmative vote of the holders of not less
than a
20
<PAGE>
plurality of the shares of Provident common stock voting on the election of
directors, assuming at least a majority of outstanding shares of Provident
common stock are present in person or represented by proxy at the Provident
meeting, is required to elect each of the 11 nominees nominated for election to
the Provident board of directors.
Any failure to be present at the Provident meeting, in person or by proxy,
any abstention and any broker non-vote, as explained below, will have the same
effect as a vote against the adoption of the merger agreement and against the
approval of the Provident Reclassification Amendment. With respect to the
amendments to the stock plan, any abstention or broker non-vote will have the
effect of reducing the aggregate number of shares of Provident common stock
voting and, therefore, the number of shares of Provident common stock required
to approve such amendments. Under the rules of the NYSE, brokers who hold shares
in street name for customers will not have authority to vote on the adoption of
the merger agreement, the approval of the Provident Reclassification Amendment
or the approval of the amendments to the stock plan unless they receive specific
instructions from the beneficial owners of such shares. Shares that are not
voted because brokers did not receive any such instructions are referred to as
"broker non-votes."
The presence, in person or represented by proxy, of a majority of the shares
of Provident common stock entitled to vote at the Provident meeting will
constitute a quorum for the transaction of business. Abstentions and broker
non-votes will be counted as present for purposes of determining a quorum.
As of May 10, 1999, directors and executive officers of Provident and their
affiliates owned beneficially an aggregate of 49,314,723 shares of Provident
common stock, including shares which may be acquired within 60 days upon
exercise of employee stock options, or approximately 36%, including the 33%
owned by the Maclellan family, of the shares of Provident common stock
outstanding on such date. Members of the Maclellan family who together hold
approximately 26% of Provident common stock have entered into a stockholders
agreement with UNUM to vote in favor of the merger. The directors and executive
officers of Provident have indicated their intention to vote their shares of
Provident common stock in favor of the adoption of the merger agreement, the
approval of the Provident Reclassification Amendment, the approval of the
amendments to the stock plan and the election of each of the 11 nominees
nominated to the Provident board of directors.
As of May 28, 1999, the directors and executive officers of Provident owned
no shares of UNUM common stock.
PROXIES
Each copy of this document mailed to Provident stockholders is accompanied
by a form of proxy for use at the Provident meeting. In addition, Provident
stockholders entitled to vote at the Provident meeting may submit their proxies
by telephone or through the Internet, in accordance with the instructions set
forth on the accompanying proxy card. However, submission of proxies with voting
instructions by telephone or through the Internet may not be available to
stockholders who hold their shares through a broker, nominee, fiduciary or other
custodian. Provident stockholders should contact such person to determine
whether they may submit their proxy by telephone or through the Internet. Shares
of Provident common stock represented by a proxy properly submitted as described
below and received at or prior to the Provident meeting, unless subsequently
revoked, will be voted in accordance with the instructions thereon. Provident
has been advised by counsel that submitting proxies by telephone or through the
Internet in the manner described in this document is consistent with the
requirements of applicable law.
SUBMITTING PROXIES BY MAIL. To submit a written proxy by mail, holders
of Provident common stock should complete, sign, date and mail the proxy
card provided with this document in accordance with the instructions set
forth on such card. If a proxy card is signed and returned
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without indicating any voting instructions, shares of Provident common stock
represented by the proxy will be voted "FOR" the adoption of the merger
agreement, "FOR" the approval of the Provident Reclassification Amendment,
"FOR" the approval of the amendments to the stock plan and "FOR" the
election of each of the 11 nominees nominated to the Provident board of
directors.
SUBMITTING PROXIES BY TELEPHONE OR INTERNET. Stockholders may submit
proxies with voting instructions by telephone by calling 1-800-652-8683, or
through the Internet at http://www.vote-by-net.com. In each case,
stockholders should follow the instructions that are set forth on the
reverse side of the accompanying proxy card. Each Provident stockholder has
been assigned a unique control number which has been printed on each
holder's proxy card. Stockholders who submit proxies by telephone or through
the Internet will be required to provide their assigned control number
before their proxy will be accepted. In addition to the instructions that
appear on the proxy card, step-by-step instructions will be provided by
recorded telephone message, for those stockholders submitting proxies by
telephone, or at the designated website for those stockholders submitting
proxies through the Internet. Stockholders submitting their proxies with
voting instructions by telephone or through the Internet will receive
confirmation on the telephone or through the Internet, as applicable, that
their proxies have been successfully submitted.
REVOCATION
Any person who submits a proxy with voting instructions may revoke it any
time before it is voted:
- by giving written notice of revocation to Provident, addressed to Susan
N. Roth, 1 Fountain Square, Chattanooga, Tennessee 37402;
- by submitting a later dated proxy with voting instructions by mail, by
telephone or through the Internet, if the proxy is received by
Provident prior to the Provident meeting; or
- by VOTING in person at the Provident meeting, although a proxy is not
revoked by simply ATTENDING the Provident meeting.
Provident stockholders who have instructed a broker to vote their shares
must follow directions received from their broker to change or revoke their
proxy.
SPECIAL PROCEDURES FOR THE PROVIDENT 401(K) PLAN AND EMPLOYEE STOCK PURCHASE
PLAN
Participants in The MoneyMaker, a long-term 401(k) Retirement Savings Plan
or the Provident Employee Stock Purchase Plan may not vote their shares held in
such plan using the procedures described above. Such stockholders must follow
the procedures described below.
Participants in the Provident 401(k) Plan may vote only by submitting a
proxy card by mail to the trustee of the Provident 401(k) Plan, Fidelity
Management Trust Company. Such proxy will serve as confidential voting
instructions with respect to the number of shares allocated to such participant
in that plan. Shares that are allocated to participants in the Provident 401(k)
Plan for which voting instructions are not received will not be voted.
Unallocated shares in the Provident 401(k) Plan will be voted by Fidelity in the
same proportion as the shares of Provident common stock for which voting
instructions are returned by other participants in such plan. Provident
stockholders must follow the instructions received from Fidelity in order to
change or revoke their proxy.
Participants in the Provident Employee Stock Purchase Plan may submit a
proxy card that will serve as voting instructions with respect to the number of
shares held in that plan by such stockholder to Salomon Smith Barney Inc., as
such participants' broker-dealer. Shares for which voting instructions are not
received that are held under the Provident Employee Stock Purchase Plan will not
be voted.
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Provident stockholders must follow the instructions received from Salomon Smith
Barney Inc. in order to change or revoke their proxy.
If a Provident stockholder holds shares outside of these plans and also
participates in either of these two plans or maintains accounts under a
different name in these plans, such as with and without a middle initial, such
stockholder may receive more than one copy of this document. In that case, to
ensure that all shares of Provident common stock owned by such stockholder are
voted, the stockholder must comply with the voting instructions that are
applicable to shares held in each plan and, if necessary, also comply with the
voting instructions that are applicable to shares held through a broker or
otherwise outside of such plans.
OTHER MATTERS
The Provident board of directors is not currently aware of any business to
be acted upon at its stockholders meeting, other than as described herein. If,
however, other matters related to the proposals at the Provident meeting are
properly brought before the Provident meeting, the persons appointed as proxies
will have discretion to vote or to act thereon according to their best judgment,
unless otherwise indicated on any particular proxy. The persons appointed as
proxies also will have discretion to vote on adjournment of the Provident
meeting. Such adjournment may be for the purpose of soliciting additional
proxies. Notwithstanding the foregoing, shares represented by proxies voting
against the adoption of the merger agreement will be voted against a proposal to
adjourn the Provident meeting for the purpose of soliciting additional proxies.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
Provident, none of whom will be specifically compensated for such services but
may be reimbursed for reasonable out-of-pocket expenses in connection therewith,
may solicit proxies from the stockholders of Provident personally or by
telephone, telecopy or telegram or other forms of communication. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending such materials to beneficial owners.
In addition, Provident has retained Georgeson & Company Inc. to assist in
the solicitation of proxies from its stockholders. The fees to be paid by
Provident to Georgeson & Company Inc. for such services will be equal to
approximately $7,000, plus reasonable out-of-pocket costs and expenses.
Provident will bear its own expenses in connection with the solicitation of
proxies for the Provident meeting, except that Provident and UNUM will share
equally all expenses incurred in connection with the filing of the registration
statement on Form S-4 filed by Provident with the Securities and Exchange
Commission to register the shares of UNUMProvident common stock to be issued to
UNUM stockholders in the merger, and the printing and mailing of this document.
PROVIDENT STOCKHOLDERS SHOULD NOT SEND PROVIDENT COMMON STOCK CERTIFICATES
WITH THEIR PROXY CARDS. IF THE RECLASSIFICATION AND THE MERGER ARE COMPLETED,
PROVIDENT STOCKHOLDERS WILL BE MAILED A TRANSMITTAL FORM WITH INSTRUCTIONS ON
HOW TO EXCHANGE THEIR CURRENT STOCK CERTIFICATES FOR STOCK CERTIFICATES OF
UNUMPROVIDENT.
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THE UNUM SPECIAL MEETING
GENERAL
This document is being furnished to UNUM stockholders in connection with the
solicitation of proxies by the UNUM board of directors for use at the UNUM
special meeting, to be held on June 30, 1999 at 8:30 a.m., local time, at the
Portland Marriott, 200 Sable Oaks Drive, South Portland, Maine. This document is
also furnished to UNUM stockholders as a prospectus in connection with the
issuance by UNUMProvident of shares of UNUMProvident common stock pursuant to
the merger agreement.
The purpose of the UNUM special meeting is to consider and to vote upon:
(1) the adoption of the merger agreement; and
(2) to transact such other business related to such proposal as may
properly come before the UNUM special meeting.
THE UNUM BOARD OF DIRECTORS HAS DECLARED ADVISABLE, AUTHORIZED AND APPROVED
THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT THE UNUM STOCKHOLDERS
VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT.
VOTING
RECORD DATE
The UNUM board of directors has fixed the close of business on May 10, 1999,
as the UNUM record date for the determination of the holders of UNUM common
stock entitled to receive notice of and to vote at the UNUM special meeting. You
may vote at the UNUM special meeting only if you owned UNUM common stock at that
time.
As of the UNUM record date, there were 139,463,040 shares of UNUM common
stock issued and outstanding. Each share of UNUM common stock outstanding on the
UNUM record date is entitled to one vote on each matter properly submitted at
the UNUM special meeting.
VOTE REQUIRED
The affirmative vote of the holders of not less than a majority of the
shares of UNUM common stock issued and outstanding on the UNUM record date is
required for adoption of the merger agreement.
Any failure to be present at the UNUM special meeting, in person or by
proxy, any abstention and any broker non-vote, as explained below, will have the
same effect as a vote against adoption of the merger agreement. Under the rules
of the NYSE, brokers who hold shares in street name for customers will not have
authority to vote on the adoption of the merger agreement unless they receive
specific instructions from the beneficial owners of such shares. Shares that are
not voted because brokers did not receive any such instructions are referred to
as "broker non-votes."
The presence, in person or represented by proxy, of a majority of the shares
of UNUM common stock entitled to vote at the UNUM special meeting will
constitute a quorum for the transaction of business. Abstentions and broker
non-votes will be counted as present for purposes of determining a quorum.
As of May 10, 1999, directors and executive officers of UNUM and its
affiliates owned beneficially an aggregate of 2,406,301 shares of UNUM common
stock, including shares which may be acquired
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within 60 days upon exercise of employee stock options, or approximately 1.71%
of the shares of UNUM common stock outstanding on such date. The directors and
executive officers of UNUM have indicated their intention to vote their shares
of UNUM common stock in favor of the adoption of the merger agreement.
As of May 28, 1999, the directors and executive officers of UNUM owned no
shares of Provident common stock.
PROXIES
Each copy of this document mailed to UNUM stockholders is accompanied by a
form of proxy for use at the UNUM special meeting. In addition, UNUM
stockholders entitled to vote at the UNUM special meeting may submit their
proxies by telephone or through the Internet in accordance with the instructions
set forth on the accompanying proxy card. However, submission of proxies with
voting instructions by telephone or through the Internet may not be available to
stockholders who hold their shares through a broker, nominee, fiduciary or other
custodian. UNUM stockholders should contact such person to determine whether
they may submit their proxies by telephone or through the Internet. Shares of
UNUM common stock represented by a proxy properly submitted as described below
and received at or prior to the UNUM special meeting, unless subsequently
revoked, will be voted in accordance with the instructions thereon. UNUM has
been advised by counsel that submitting proxies by telephone or through the
Internet in the manner described in this document is consistent with the
requirements of applicable law.
SUBMITTING PROXIES BY MAIL. To submit a written proxy by mail, holders
of UNUM common stock should complete, sign, date and mail the proxy card
provided with this document in accordance with the instructions set forth on
such card. If a proxy card is signed and returned without indicating any
voting instructions, shares of UNUM common stock represented by the proxy
will be voted "FOR" the adoption of the merger agreement.
SUBMITTING PROXIES BY TELEPHONE OR INTERNET. Stockholders may submit
proxies with voting instructions by telephone by calling 1-800-652-8683, or
through the Internet at http://www.vote-by-net.com. In each case,
stockholders should follow the instructions that are set forth on the
reverse side of the accompanying proxy card. Each UNUM stockholder has been
assigned a unique control number which has been printed on each holder's
proxy card. Stockholders who submit proxies by telephone or through the
Internet will be required to provide their assigned control number before
their proxy will be accepted. In addition to the instructions that appear on
the proxy card, step-by-step instructions will be provided by recorded
telephone message for those stockholders submitting proxies by telephone, or
at the designated website for those stockholders submitting proxies through
the Internet. Stockholders submitting their proxies with voting instructions
by telephone or through the Internet will receive confirmation on the
telephone or through the Internet, as applicable, that their proxies have
been successfully submitted.
REVOCATION
Any person who submits a proxy with voting instructions may revoke it any
time before it is voted:
- by giving written notice of revocation to UNUM, addressed to: Kevin J.
Tierney, UNUM Corporation, 2211 Congress Street, Portland, Maine 04122;
- by submitting a later dated proxy with voting instructions by mail, by
telephone or through the Internet, if the proxy is received by UNUM prior
to the UNUM special meeting; or
- by VOTING in person at the UNUM special meeting, although a proxy is not
revoked by simply ATTENDING the UNUM special meeting.
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UNUM stockholders who have instructed a broker to vote their shares must follow
directions received from their broker to change and revoke their proxy.
SPECIAL PROCEDURES FOR THE UNUM 401(K) PLAN
Participants in the UNUM Employees' 401(k) Plan may not vote their shares
held in such plan using the procedures described above. Participants in the UNUM
401(k) Plan may vote only by submitting separate confidential voting
instructions to the trustee of the plan, State Street Corporation. Instructions
regarding the voting of shares held in the UNUM 401(k) Plan will be sent to such
participants by UNUM. Shares held by the UNUM 401(k) Plan for which no voting
instructions are received will not be voted. UNUM stockholders must follow the
instructions received from UNUM in order to change or revoke their proxy.
If, in addition to stock held in the UNUM 401(k) Plan, a UNUM stockholder
holds stock directly, indirectly through a bank or broker, or as a UNUM Stock
Purchase Plan participant, they will receive separate mailings of proxy
materials. In that case, to ensure that all shares of UNUM common stock held by
the stockholder are voted, the stockholder must fill out and return each
separate proxy card and voter instruction form as instructed within each
separate package.
OTHER MATTERS
The UNUM board of directors is not currently aware of any business to be
acted upon at its special meeting, other than as described herein. If, however,
other matters related to the proposal at the UNUM special meeting are properly
brought before the UNUM special meeting, the persons appointed as proxies will
have discretion to vote or to act thereon according to their best judgment,
unless otherwise indicated on any particular proxy. The persons appointed as
proxies also will have discretion to vote on adjournment of the UNUM special
meeting. Such adjournment may be for the purpose of soliciting additional
proxies. Notwithstanding the foregoing, shares represented by proxies voting
against the adoption of the merger agreement will be voted against a proposal to
adjourn the UNUM special meeting for the purpose of soliciting additional
proxies.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
UNUM, none of whom will be specifically compensated for such services but may be
reimbursed for reasonable out-of-pocket expenses in connection therewith, may
solicit proxies from the stockholders of UNUM personally or by telephone,
telecopy or telegram or other forms of communication. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending such materials to beneficial owners.
In addition, UNUM has retained Georgeson & Company Inc. to assist in the
solicitation of proxies from its stockholders. The fees to be paid by UNUM to
Georgeson & Company Inc. for such services will be equal to approximately
$7,500, plus reasonable out-of-pocket costs and expenses. UNUM will bear its own
expenses in connection with the solicitation of proxies for the UNUM special
meeting, except that UNUM and Provident will share equally all expenses incurred
in connection with the filing of the registration statement, and the printing
and mailing of this document.
UNUM STOCKHOLDERS SHOULD NOT SEND UNUM COMMON STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IF THE MERGER IS COMPLETED, SHARES OF UNUM COMMON STOCK HELD BY
UNUM STOCKHOLDERS WILL REPRESENT AN EQUAL NUMBER OF SHARES OF UNUMPROVIDENT
COMMON STOCK. UNUM STOCKHOLDERS WILL NOT EXCHANGE THEIR STOCK CERTIFICATES
UNLESS THE PARTIES DETERMINE THAT SUCH EXCHANGE IS REQUIRED BY APPLICABLE LAW,
RULE OR REGULATION.
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THE COMPANIES
PROVIDENT
Provident is a Delaware corporation and the parent holding company for a
group of insurance companies that collectively operate in all 50 states, the
District of Columbia, Puerto Rico and Canada. Provident, through its
subsidiaries:
- is the largest provider in North America of insurance policies, known as
disability policies, under which individuals are insured, for disabilities
arising from illness, sickness or accident;
- is among the largest overall disability insurers in North America on the
basis of volume of premiums on insurance policies that are paid-up, or are
being paid; and
- provides a complementary portfolio of life insurance products, including
life insurance and employer- and employee-paid group benefits and related
services (including permanent and term life insurance, and insurance
coverage in the event of accidental death or the accidental loss of the
use of various parts of the body and for the treatment of cancer).
Provident's two principal operating subsidiaries are Provident Life and
Accident Insurance Company and The Paul Revere Life Insurance Company.
The mailing address of Provident's principal executive offices is 1 Fountain
Square, Chattanooga, Tennessee 37402, and its telephone number is (423)
755-1011.
UNUM
UNUM is a Delaware corporation organized in 1985 as an insurance holding
company. UNUM Corporation and its subsidiaries are:
- the leading providers in the United States and the United Kingdom of group
long-term disability policies under which an employee, through his
employer group, receives payments for loss of income in the event of
inability to work due to sickness or injury, with payments beginning after
an exclusion period and continuing for the length of disability;
- the leading provider in the United States of group short-term disability
policies under which an employee, through his employer group, receives
payments for loss of income in the event of inability to work due to
sickness or injury, with payments beginning immediately for an accident,
or with a short waiting period for illness, and continuing for a specified
period of time of disability; and
- a major provider of other insurance products, including life insurance
coverage through employer groups, individual policies paying for loss of
income in the event of inability to work due to sickess or injury;
long-term care policies which make payments in the event of loss of
independence in bathing, dressing, feeding or transferring and the need
for assistance by another person, or in the event of cognitive impairment;
and insurance products, including life insurance coverage and loss of
income coverage in the event of inability to work due to sickness or
injury, offered to employees at their worksites with payments deducted
from their earnings if the employee chooses to buy the coverage.
The operations of UNUM's subsidiaries, described below, account for
substantially all of UNUM's consolidated assets and revenues. UNUM has
operations in North America, the United Kingdom,
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France, Germany, The Netherlands, the Pacific Rim, Bermuda and Latin America
through its affiliates, including:
- UNUM Life Insurance Company of America, a Maine insurance company licensed
in 49 states, the District of Columbia, Canada and other foreign
jurisdictions;
- First UNUM Life Insurance Company, a New York insurance company;
- Colonial Life & Accident Insurance Company, a South Carolina insurance
company licensed in 49 states and the District of Columbia;
- UNUM Limited, a United Kingdom insurance company; and
- Duncanson & Holt, Inc., a New York corporation.
In April 1999, UNUM completed a comprehensive strategic review of its
reinsurance businesses. These businesses include reinsurance pool management
operations and risk assumption (pool participation, direct reinsurance and
Lloyd's of London syndicate participation). UNUM's management concluded that
these businesses are not solidly aligned with UNUM's strength in the disability
insurance market and decided to exit these businesses.
The mailing address of UNUM's principal executive offices is 2211 Congress
Street, Portland, Maine 04122, and its telephone number is (207) 770-2211.
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THE MERGER
THE DISCUSSION IN THIS DOCUMENT OF THE MERGER OF UNUM AND PROVIDENT AND THE
PRINCIPAL TERMS OF EACH OF:
- THE AGREEMENT AND PLAN OF MERGER, DATED AS OF NOVEMBER 22, 1998, AS
AMENDED AS OF MAY 25, 1999, BETWEEN UNUM AND PROVIDENT,
- THE STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER 22, 1998, BETWEEN
PROVIDENT, AS ISSUER, AND UNUM, AS GRANTEE (THE "PROVIDENT OPTION
AGREEMENT"),
- THE STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER 22, 1998, BETWEEN UNUM,
AS ISSUER, AND PROVIDENT, AS GRANTEE (THE "UNUM OPTION AGREEMENT") AND
- THE STOCKHOLDERS AGREEMENT, DATED AS OF NOVEMBER 22, 1998, AMONG UNUM AND
THE INDIVIDUALS AND OTHER PARTIES LISTED ON SCHEDULE A ATTACHED THERETO,
DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO, THE MERGER AGREEMENT, THE PROVIDENT OPTION AGREEMENT, THE UNUM
OPTION AGREEMENT AND THE STOCKHOLDERS AGREEMENT EACH OF WHICH IS INCORPORATED
HEREIN BY REFERENCE. COPIES OF THE MERGER AGREEMENT, THE PROVIDENT OPTION
AGREEMENT, THE UNUM OPTION AGREEMENT AND THE STOCKHOLDERS AGREEMENT ARE ATTACHED
AS APPENDICES A, B, C AND D, RESPECTIVELY, TO THIS DOCUMENT.
GENERAL
We are furnishing this document to Provident stockholders and UNUM
stockholders in connection with the solicitation of proxies by the boards of
directors of Provident and UNUM for use at their respective meetings of
stockholders, and at any adjournments or postponements thereof.
At the UNUM special meeting, UNUM stockholders will be asked to consider and
to vote on a proposal to adopt the merger agreement. At the Provident meeting,
Provident stockholders will be asked to consider and to vote upon a proposal to
adopt the merger agreement. Adoption of the merger agreement will also
constitute approval of the transactions contemplated thereby, including, among
others, the merger and, in the case of Provident, the issuance of UNUMProvident
common stock to holders of UNUM common stock, and the amendment of each of the
Provident certificate of incorporation and the Provident bylaws. Further,
Provident stockholders will be asked to consider and to vote upon a proposal to
approve an amendment to the Provident certificate of incorporation to effect the
reclassification of its issued and outstanding shares of common stock. We refer
to this amendment as the "Provident Reclassification Amendment." A more detailed
description of the Provident Reclassification Amendment is found under "--The
Provident Reclassification Amendment" on page 30.
The merger agreement provides that prior to the completion of the merger,
Provident will effect the Provident Reclassification Amendment and each share of
Provident common stock issued and outstanding immediately prior to the effective
time of the Provident Reclassification Amendment will be reclassified and
converted into 0.73 of a share of Provident common stock. Immediately after the
reclassification is complete, Provident and UNUM will complete the merger and
UNUM will be merged with and into Provident, with Provident as the surviving
corporation. Upon completion of the merger, Provident will change its name to
"UNUMProvident Corporation." In addition, in the merger:
(1) each share of UNUM common stock issued and outstanding immediately
prior to the merger, other than shares of UNUM common stock owned by
Provident or UNUM, will be converted into one share of UNUMProvident
common stock; and
(2) each share of Provident common stock issued and outstanding
immediately prior to the merger will remain an issued and outstanding
share of UNUMProvident common stock after the merger.
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With respect to Provident stockholders, the effect of the reclassification and
the merger together is that such stockholders will receive 0.73 of a share of
UNUMProvident common stock for each share of Provident common stock they own,
which fraction is referred to in this document as the "exchange ratio."
The merger will become effective when the certificate of merger is duly
filed with the Secretary of State of the State of Delaware, or at such
subsequent date or time as Provident and UNUM shall agree and specify in the
certificate of merger.
The transaction is intended to qualify as a "pooling of interests" for
accounting and financial reporting purposes and is intended to qualify as a
tax-free "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, for federal income tax purposes.
Based on the closing price per share of UNUM common stock on the NYSE on
November 20, 1998, the last trading day prior to public announcement of the
merger, of $48 1/8, giving effect to the exchange ratio, the implied per share
value of Provident common stock in the merger was $35 1/8 as of such date. The
closing price per share of UNUM common stock on the NYSE on May 28, 1999, the
last practicable trading day prior to the date of this document, was $53 13/16
and the implied per share value of Provident common stock in the merger was
$39 5/16 as of such date. As a result of the merger, UNUM stockholders
immediately prior to the merger initially will own approximately 58%, and
Provident stockholders immediately prior to the merger initially will own
approximately 42%, of UNUMProvident common stock, based on the number of shares
of Provident common stock and UNUM common stock outstanding as of November 22,
1998, and on the exchange ratio.
THE PROVIDENT RECLASSIFICATION AMENDMENT
In connection with the merger, the Provident board of directors has declared
advisable, authorized and approved the Provident Reclassification Amendment. To
approve the Provident Reclassification Amendment, the holders of not less than
sixty-six and two-thirds percent (66 2/3%) of the shares of Provident common
stock issued and outstanding on the Provident record date must vote in favor of
doing so. The reclassification of the Provident common stock is a condition to
the merger and the merger will not be completed if the Provident
Reclassification Amendment is not approved. If the Provident stockholders
approve the Provident Reclassification Amendment and the other conditions to the
merger, other than the reclassification, are met, the certificate of amendment
to effect the reclassification will be filed with the Secretary of State of the
State of Delaware, and the reclassification will be effected, immediately prior
to the completion of the merger.
As a result of the Provident Reclassification Amendment, each share of
Provident common stock issued and outstanding immediately prior to the effective
time of the Provident Reclassification Amendment will be reclassified and
converted into 0.73 of a share of Provident common stock. Fractional shares will
not be issued to Provident stockholders pursuant to the reclassification of
Provident common stock. Instead of fractional shares, Provident stockholders
will be entitled to receive an amount in cash, without interest, equal to the
product of (1) the fraction of a share of Provident common stock to which such
holder, after taking into account all shares of Provident common stock held
immediately prior to the effective time of the Provident Reclassification
Amendment, would otherwise be entitled to, and (2) the closing price per share
of UNUM common stock on the NYSE on the last trading day prior to the date on
which the effective time of the Provident Reclassification Amendment occurs.
The Provident Reclassification Amendment will not apply to UNUMProvident
common stock issued to UNUM stockholders in the merger. The form of the
Provident Reclassification Amendment is attached to this document as Appendix G.
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AMENDMENT OF PROVIDENT CERTIFICATE OF INCORPORATION AND BYLAWS
The merger agreement provides that at the completion of the merger, the
Provident certificate of incorporation and the Provident bylaws will be amended
so that after the merger, UNUMProvident will be governed by the UNUMProvident
certificate of incorporation and the UNUMProvident bylaws, attached as Exhibits
A-1 and A-2, respectively, to the merger agreement, which is attached as
Appendix A to this document.
The UNUMProvident certificate of incorporation and the UNUMProvident bylaws
will be substantially identical to the current UNUM certificate of incorporation
and UNUM bylaws and will differ in material respects from the current Provident
certificate of incorporation and Provident bylaws. See "Comparison of
Stockholders' Rights" on page 109. The UNUMProvident certificate of
incorporation and the UNUMProvident bylaws will, among other things:
(1) provide that the name of the combined company will be "UNUMProvident
Corporation";
(2) provide for an authorized capital stock of 750 million shares;
(3) provide for the classification of the board of directors into three
classes, with each class serving an overlapping three-year term;
(4) require an 80% vote of the stockholders of UNUMProvident to remove a
director for cause;
(5) provide for a board of directors of not less than three nor more than
15, and initially will be 15;
(6) require that the stockholders of UNUMProvident take action only at a
meeting of the stockholders, and not by written consent;
(7) permit only the Chairman of the Board, the Chief Executive Officer, the
President and a majority of the UNUMProvident board of directors to call
a special meeting of the stockholders;
(8) require an 80% vote of the stockholders to amend the sections of the
UNUMProvident certificate of incorporation and UNUMProvident bylaws
containing the provisions referred to in clauses (3) through (6) above;
and
(9) implement arrangements to govern UNUMProvident agreed between Provident
and UNUM, such as the initial composition of the UNUMProvident board of
directors, the management of UNUMProvident after the merger and
management succession, and provide for a supermajority vote of the board
of directors to amend such provisions until July 1, 2001.
The governance arrangements referred to in clause (9) above are set forth in
Exhibit B to the merger agreement, and are explained more fully under
"--Governance of UNUMProvident After the Merger" on page 73.
BACKGROUND TO THE MERGER
Over the past few years both Provident's and UNUM's strategies have included
significant growth. UNUM has been steadily growing its group insurance
businesses in the United States and has been expanding its international
insurance operations in Canada, the United Kingdom, Japan and Argentina. Since
going public in 1986, UNUM has completed a steady series of acquisitions and
mergers that were designed to enhance its business opportunities in the
insurance and reinsurance businesses on which it chose to focus. In part as a
result of its 1994 decision to stop selling individual non-cancelable disability
insurance products in the United States, UNUM had de-emphasized the sales of
individual insurance products in the United States other than through the
worksite marketing of voluntary insurance products through its Colonial Life
insurance subsidiary. In 1997 UNUM decided to increase its focus on individual
insurance products and formed its individual insurance division which sells long
term care
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insurance as well as individual guaranteed renewable disability insurance.
Consistent with its long-held strategy and history of focused mergers and
acquisitions, in 1998 UNUM began to consider a strategic alliance with Provident
which would not only enhance the growth of the individual insurance businesses
in the United States and internationally but would also provide the additional
size and efficiencies which UNUM's management believes are increasingly
important for competing in a globally consolidating insurance industry. During
the same period, Provident had been revising its individual disability products
and expanding the target populations for which they are suited while growing its
group disability business. Provident believed that sales of group disability
products also gave it the opportunity to sell individual disability products to
people it could reach at the workplace. Provident's management also considered
that the fastest and most efficient way to increase its business was through a
strategic business combination. Provident had recently completed its acquisition
and integration of The Paul Revere Corporation and management believed that the
company was in a position to undertake another major transaction that would
support its growth strategy.
While both Provident and UNUM have reviewed various possibilities for
strategic expansion that included acquisitions of blocks of insurance and
combinations with other, generally much smaller, companies throughout the past
few years and although both Provident and UNUM consider opportunities to support
their growth strategy, for various reasons, including timing, valuation,
strategic objectives, synergies and, most importantly, the lack of opportunity
for significant growth in a complementary manner, none of the alternatives
previously considered by Provident or UNUM progressed past a preliminary
discussion stage.
During April of 1998, Messrs. Chandler and Orr engaged in preliminary
discussions to explore the possibility of a strategic alliance or arrangement
between Provident and UNUM and to discuss the fundamental strategic rationale
for a combination of the two companies.
In May of 1998, at a meeting of the UNUM board of directors, the senior
management of UNUM discussed with the UNUM board of directors strategic
opportunities for the growth of UNUM's disability insurance business, including,
the possibility for growing the business through a strategic transaction with
Provident, and Mr. Orr discussed his conversations with Mr. Chandler with the
UNUM board of directors.
In July of 1998, Messrs. Orr and Chandler held brief further discussions
regarding strategic opportunities in combining each company's strengths in
disability insurance. On July 29, 1998, Mr. Chandler, Thomas R. Watjen, Vice
Chairman and Chief Financial Officer of Provident, and
F. Dean Copeland, Executive Vice President and General Counsel of Provident,
discussed with the Provident board of directors the potential for a transaction
with UNUM. Mr. Chandler summarized his conversations with Mr. Orr to the
Provident board of directors. The Provident board of directors encouraged Mr.
Chandler to continue discussions and appointed a special committee consisting of
Mr. Chandler, Hugh B. Jacks, Hugh O. Maclellan, Jr., A. S. MacMillan, C. William
Pollard and Burton E. Sorensen to work with management as discussions
progressed.
Throughout August of 1998, Messrs. Orr and Chandler continued to discuss a
possible strategic transaction between Provident and UNUM, the strategic and
operational issues associated with a potential merger and the potential
management and operating structure for a combined company following a merger.
On August 27, 1998, following consultation with Mr. Orr, representatives of
UNUM's financial advisor, Morgan Stanley & Co. Incorporated, met with Messrs.
Chandler and Watjen, to discuss, among other things, possibilities for
integrating the two management teams of UNUM and Provident, each company's
operations and their complementary strengths.
In mid-August 1998, Provident contacted Salomon Smith Barney Inc. for the
purpose of engaging it as Provident's financial advisor. Soon thereafter,
Messrs. Chandler and Orr met in New York City with representatives of Morgan
Stanley and Salomon Smith Barney and reached a consensus on certain
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structural, corporate governance and management issues. The decision was made to
expand the transaction team to include Messrs. Watjen and Copeland, and Robert
W. Crispin, Executive Vice President of UNUM, and Elaine D. Rosen, Executive
Vice President of UNUM.
On September 11, 1998, at a regular meeting of the UNUM board of directors,
Mr. Orr informed the UNUM board of directors of the nature and status of his
discussions with Mr. Chandler regarding a potential business combination between
UNUM and Provident.
On September 15, 1998, Kevin J. Tierney, Senior Vice President and General
Counsel of UNUM, and Mr. Copeland met in Washington, D.C., to discuss the
process for further discussions and exchange of information between the two
companies in connection with a possible transaction. This meeting was followed
by a meeting on September 17, 1998, in which Messrs. Orr and Crispin and Ms.
Rosen met with Messrs. Chandler, Watjen and Copeland to discuss certain business
and other information concerning the two companies. The parties signed a
confidentiality agreement on September 21, 1998, governing their exchange of
confidential information. On September 22 and 29, 1998, Mr. Crispin and Ms.
Rosen met with Messrs. Watjen and Copeland in Boston, Massachusetts to discuss
the best alternatives for efficiently combining the two companies' product
lines, underwriting, claims, staff and distribution capabilities to maximize
stockholder value in a combined company.
On October 1, 1998, senior executives of UNUM and Provident met with
representatives from PricewaterhouseCoopers LLP, UNUM's independent accountants,
and Ernst & Young LLP, Provident's independent accountants, to discuss
structuring a combination of UNUM and Provident as a stock-for-stock "pooling of
interests" transaction. On October 2, 1998, Messrs. Orr and Chandler agreed that
any further exchange of information between the two companies should await
confirmation of the availability of "pooling of interests" accounting treatment
of a business combination between UNUM and Provident.
On October 9, 1998, at a regular meeting of the UNUM board of directors, Mr.
Orr updated the UNUM directors on the status of discussions with Provident and
introduced Mr. Chandler to the UNUM board of directors.
On October 13, 1998, the Provident Special Committee met by teleconference
and received a report from Provident senior management on the status of
negotiations. Provident senior management described progress made on structure
and operations, as well as proposed management and succession, and preliminary
information relating to issues of valuation. On October 20, 1998, Mr. Chandler
introduced Mr. Orr to certain members of the Provident board of directors.
Beginning on October 19, 1998, representatives of UNUM, Provident and their
respective advisors exchanged certain business, personnel, legal and financial
information and conducted due diligence and negotiations regarding definitive
documentation for the proposed merger. During this due diligence investigation,
Messrs. Watjen, Copeland and Crispin and Ms. Rosen met several times to discuss
the most desirable operational structure, as well as transition planning, for
the combined company.
On October 27 and 28, 1998, at its regular meeting, the Provident board of
directors received a briefing from its senior management, representatives of
Salomon Smith Barney, and Sullivan & Cromwell, counsel to Provident, on the
status of the potential merger. The Provident board of directors considered the
strategic benefits of such a proposed merger, the opportunities it presented for
Provident, and the value creation for the Provident stockholders. Strategic
direction, specific provisions for management and succession, and operating
strategy were also discussed. Sullivan & Cromwell reviewed for the Provident
board of directors its fiduciary obligations and the terms of the proposed
agreements relating to the transaction.
On October 31, 1998, representatives of Salomon Smith Barney, on behalf of
Provident, and representatives of Morgan Stanley, on behalf of UNUM, held
discussions regarding whether a premium for Provident common stock was
appropriate and, if so, the appropriate methodology for determining
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any such premium, which discussions took into account the effect of fluctuations
in the market prices of Provident common stock and UNUM common stock over
various time periods. On November 12, 1998, representatives of Salomon Smith
Barney and representatives of Morgan Stanley held further discussions regarding
the financial terms of the proposed transaction. During these discussions,
Salomon Smith Barney conveyed Provident's proposal of an exchange ratio of
0.735. Morgan Stanley, on behalf of UNUM, responded that, based on an analysis
of the market value of Provident common stock over different time periods, the
proposed exchange ratio of 0.735 exceeded the exchange ratio UNUM would be
willing to accept. During early and mid-November 1998, Messrs. Orr and Chandler,
various other representatives of the senior management of both companies and
their respective financial and legal advisors, had discussions about the
structure and terms of the proposed merger; management, employment and
governance arrangements; operating and financial strategies and their effect on
the merged company; and potential synergies resulting from the proposed merger.
Also, during this time period the definitive agreements were negotiated in
connection with the proposed merger.
On November 16, 1998, Mr. Orr held a telephonic discussion with the UNUM
board of directors to update the UNUM directors on the status of discussions
with Provident. On the evening of November 20, 1998, Messrs. Orr and Chandler
agreed on the exchange ratio of 0.73 for Provident common stock in the proposed
transaction, subject to the final negotiation of the definitive agreements and
the approval of the UNUM board of directors and the Provident board of
directors. Throughout the discussions between the parties, the financial
officers of both Provident and UNUM worked with their respective financial
advisors to determine an appropriate exchange ratio. The exchange ratio was a
product of arm's length negotiation between Provident and UNUM.
The Provident Special Committee received a report on the status of the
negotiations on November 21, 1998. On November 22, 1998, the Provident board of
directors met to consider and to approve the terms of the merger agreement, the
stock option agreements, employment agreements for Messrs. Chandler and Orr, and
general terms of employment agreements for Messrs. Watjen, Copeland and Crispin
and Ms. Rosen. Members of Provident senior management, representatives of
Salomon Smith Barney and Sullivan & Cromwell updated the Provident board of
directors on developments since its October 28, 1998, meeting. Sullivan &
Cromwell reviewed the fiduciary obligations of the Provident board of directors
and described the definitive documentation and its effect. Salomon Smith Barney
made a financial presentation and delivered its opinion to the effect that,
based upon and subject to the considerations set forth in such opinion, as of
November 22, 1998, the exchange ratio-- assuming the conversion of UNUM common
stock into UNUMProvident common stock on a one-share for one-share basis in the
merger--was fair, from a financial point of view, to Provident stockholders.
After further discussion and deliberation, the Provident board of directors
declared advisable, authorized and approved the merger agreement, the merger and
the Provident Reclassification Amendment and the transactions contemplated
thereby, approved the stock option agreements, the employment agreements and
other documents relating to the merger and resolved to recommend that Provident
stockholders vote to adopt the merger agreement and approve the Provident
Reclassification Amendment, the merger and the other related transactions.
On November 22, 1998, the UNUM board of directors met to consider the
proposed merger. Members of UNUM's senior management and representatives of
Morgan Stanley and Cravath, Swaine & Moore, counsel to UNUM, made presentations
to the UNUM board of directors and discussed with the UNUM board of directors
their views and analyses of various business, financial, legal and regulatory
aspects of the proposed transaction, including a review of the terms and
conditions of the definitive agreements. Cravath, Swaine & Moore reviewed the
fiduciary obligations of the UNUM board of directors. Morgan Stanley delivered
its oral opinion, which was subsequently confirmed in writing, to the UNUM board
of directors to the effect that, as of such date, the exchange ratio pursuant to
the transactions contemplated by the merger agreement was fair from a financial
point of view to UNUM stockholders. After further discussion and deliberation,
the UNUM board of
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directors declared advisable, authorized and approved the merger agreement and
the merger and the transactions contemplated thereby, approved the stock option
agreements, the stockholders agreement, the employment agreements and other
documents relating to the merger and resolved to recommend that UNUM
stockholders vote to adopt the merger agreement and approve the merger and the
other related transactions.
The merger agreement, the stock option agreements, the stockholders
agreement and the employment agreements with Mr. Chandler and Mr. Orr were
signed on November 22, 1998, and a joint press release announcing the
transaction was issued prior to the opening of trading on the NYSE on November
23, 1998.
On May 25, 1999, the Provident board of directors and the UNUM board of
directors each approved, adopted and declared advisable an amendment to the
merger agreement to, among other things, increase the authorized capital stock
of UNUMProvident as provided in the UNUMProvident certificate of incorporation
and to provide that Mr. Chandler will succeed Mr. Orr as the Chief Executive
Officer, of UNUMProvident as of July 1, 2000, and will also remain as President
of UNUMProvident.
PROVIDENT'S REASONS FOR THE MERGER; RECOMMENDATIONS OF THE PROVIDENT BOARD OF
DIRECTORS
In reaching its conclusion to declare advisable, to authorize and to approve
the merger agreement and the merger and to recommend that Provident stockholders
vote "FOR" the adoption of the merger Agreement, and "FOR" the approval of the
Provident Reclassification Amendment, the Provident board of directors concluded
that the merger was likely to further the strategic plans of Provident and to
increase the value of shares of Provident common stock over what that value
would have been had Provident not agreed to the merger, and that the
opportunities created by the merger to increase such value more than offset the
risks inherent in the merger. In reaching this conclusion, the Provident board
of directors considered the following potentially positive factors:
- GROWTH OPPORTUNITIES. The Provident board of directors considered its
belief that certain business segments including, but not limited to, both
individual and group disability insurance are underpenetrated and that the
merger will create a combined company with sufficient financial strength,
global distribution capability and breadth of insurance product offerings
to capitalize on those business opportunities.
- COMPLEMENTARY BUSINESSES. The Provident board of directors considered the
complementary nature of Provident's and UNUM's businesses. In particular,
the Provident board of directors considered UNUM's leadership in group
disability and supplemental insurance and voluntary benefits and
Provident's leadership in individual disability insurance products. The
Provident board of directors also considered the enhanced cross-selling
opportunities between group and individual disability insurance products
that may be available and realizable by UNUMProvident.
- CUSTOMER BENEFITS. The Provident board of directors considered the
benefits that the merger will provide to Provident's customers. In
particular, the Provident board of directors believes that the merger will
increase Provident's ability to develop and to market more comprehensive
integrated insurance product offerings, thus providing superior value and
integrated solutions to a broader range of customers. In addition, the
Provident board of directors considered its belief that the merger will
accelerate the implementation of its plan to provide more comprehensive
disability insurance solutions featuring its industry-leading return to
work programs.
- CONSISTENT WITH BUSINESS STRATEGY. The Provident board of directors
considered that Provident has been proceeding for the past several years
to position itself in a manner that will support growth and provide
increased stockholder value. This has included strengthening its capital
position and investment portfolio, reorganizing internally, reassessing
and revising its product offerings, and
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acquiring or disposing of businesses consistent with Provident's strategic
direction. Specifically, Provident:
(1) sold its group medical business for $230 million in cash and stock;
(2) began winding down its traditional guaranteed-investment-contract
business which carried high capital requirements;
(3) reduced the annual dividend on Provident common stock from $1.04 to
$.72 per share to preserve capital to fund future growth;
(4) simplified its corporate legal structure and eliminated a dual class
of common stock that had special voting rights in order to present a
more conventional corporate structure profile to the investing
market;
(5) sold $962 million in commercial mortgage loans as part of
repositioning its investment portfolio;
(6) restructured its marketing and distribution channels, along with the
support areas of product development, underwriting and claims, to
better reach and serve individual and employee benefits customers;
(7) strengthened its claims management procedures in the disability
income insurance business on which Provident took a $423 million
pretax charge in the third quarter of 1993 to strengthen reserves as
Provident incurred losses on a portion of that block of business
which has encountered high claims experience;
(8) began restructuring its disability income products to discontinue
the sale of policies that combine non-cancelable contracts with
long-term "own-occupation" provisions;
(9) acquired The Paul Revere Corporation, a major provider of individual
disability insurance, for cash and stock approximating $1.2 billion
in 1997, which provided Provident with significant additional
product and distribution capabilities, making it the leading
provider of individual disability insurance in North America;
(10) acquired GENEX Services, Inc. in 1997, which provides disability
case management and vocational rehabilitation services, thereby
enhancing Provident's capabilities in assisting disabled
policyholders to return to a more full lifestyle, including the
benefits of being able to return to work;
(11) transferred its dental business to Ameritas Life Insurance in 1997;
and
(12) sold its in-force individual and tax-sheltered annuity business to
various affiliates of American General Corporation in 1998.
The Provident board of directors considered Mr. Chandler's belief that
the merger with UNUM represented the next "logical step" for Provident.
- SYNERGISTIC BENEFITS RESULTING FROM THE MERGER. The Provident board of
directors considered its belief and the belief of the Provident senior
management that the merger will result in significant opportunities for
revenue growth, cost savings and other synergistic benefits. Economies of
scope and scale, the elimination of duplicative expenditures and the
consistent use of the best practices of Provident and UNUM are expected to
enable UNUMProvident to realize significant revenue enhancements and to
achieve annual cost savings of $120 million to $130 million beginning in
2000 and other advantages associated with greater scale.
- EXCHANGE RATIO, TRANSACTION STRUCTURE AND MERGER AGREEMENT. The Provident
board of directors considered the relationship of the exchange ratio,
taking into account the merger, to the
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historical market prices for Provident common stock. Specifically, the
Provident board of directors considered the following:
- Based on the closing per share sale price of Provident common stock and
UNUM common stock on the NYSE on November 20, 1998, the last trading
day prior to the public announcement of the merger, the exchange ratio
would provide Provident stockholders a premium of approximately 5.3%;
and
- Based on the average closing per share sale price of Provident common
stock on the NYSE over the 20-day period prior to the public
announcement of the merger and the closing per share sale price of UNUM
common stock on the NYSE on November 20, 1998, the exchange ratio would
provide Provident stockholders a premium of approximately 14.1%.
The Provident board of directors also viewed favorably the form of the
merger consideration and the structure of the merger, including the Provident
Reclassification Amendment. This structure permits Provident stockholders to
receive, on a tax-free basis, registered shares of UNUMProvident representing
approximately 42% of the total outstanding equity of UNUMProvident, based on the
number of shares of Provident common stock outstanding as of November 20, 1998.
Provident stockholders can thereby retain a significant aggregate equity
interest in the combined enterprise and the related opportunity to share in its
future growth. The Provident board of directors also considered that the merger
agreement was structured as a stock-for-stock "merger of equals" providing for
reciprocal representations and warranties, conditions to closing and termination
rights.
- FAIRNESS PRESENTATION AND OPINION. The Provident board of directors
considered the detailed financial analyses and presentation of Salomon
Smith Barney, its financial advisor, and the opinion of Salomon Smith
Barney described below, that, based upon and subject to the considerations
set forth in such opinion, as of November 22, 1998, the exchange ratio,
assuming the conversion of UNUM common stock into UNUMProvident common
stock on a one-share for one-share basis in the merger, was fair, from a
financial point of view, to Provident stockholders. See "--Opinion of
Provident's Financial Advisor" on page 41.
- MANAGEMENT OF UNUMPROVIDENT. The Provident board of directors considered
the management arrangements agreed to between Provident and UNUM that will
provide for a strong management team drawn from both companies that will
work together to integrate the two companies, to realize growth
opportunities, to achieve synergistic benefits, and to successfully
implement strategies of UNUMProvident. Such arrangements provide that Mr.
Orr will become Chairman of the Board and Chief Executive Officer of
UNUMProvident following the merger and that Mr. Chandler will become
President and Chief Operating Officer of UNUMProvident following the
merger, and also will be a member of its board of directors, and will
succeed Mr. Orr as Chief Executive Officer of UNUMProvident on July 1,
2000 and will continue to serve as President, with Mr. Orr thereafter
serving as executive Chairman of the Board of UNUMProvident. The
management arrangements further provide that other members of Provident's
and UNUM's current senior management will maintain senior management
positions in UNUMProvident. See "--Governance of UNUMProvident After the
Merger" on page 73.
- TAX AND ACCOUNTING TREATMENT. The Provident board of directors considered
that the expected treatment of the merger will be a tax-free
"reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code and a "pooling of interests" for financial reporting and
accounting purposes.
- REGULATORY APPROVALS AND CLEARANCES. The Provident board of directors
considered its belief, after consultation with its legal counsel, that the
regulatory approvals and clearances necessary to complete the merger could
be obtained.
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The Provident board of directors weighed these advantages and opportunities
against the following risks associated with the merger:
- The Provident board of directors considered the challenges inherent in the
combination of two business enterprises of the size and scope of Provident
and UNUM and the possible resulting diversion of management attention for
an extended period of time.
- The Provident board of directors considered the obligations of Provident
under circumstances set forth in the merger agreement to pay UNUM a
termination fee of $150 million. The Provident board of directors also
considered the obligations of Provident to issue Provident common stock to
UNUM pursuant to the Provident Option Agreement under certain
circumstances and to pay cash for the option granted to UNUM if the option
is otherwise exercisable and UNUM so elects. The Provident board of
directors considered the limitation contained in the Provident Option
Agreement that the total profit that UNUM can realize pursuant to the
provisions of the merger agreement and the Provident Option Agreement is
$250 million. The Provident board of directors considered that the
issuance of Provident common stock pursuant to the terms of the Provident
Option Agreement would result in the unavailability of "pooling of
interests" accounting treatment for an alternative transaction with a
third party and that the existence of the Provident Option Agreement and
the requirement to pay termination fees to UNUM under certain
circumstances could have the effect of discouraging alternative proposals
for a business combination with Provident. On balance, the Provident board
of directors determined that agreement to these provisions, which are
often used in transactions of this nature, was a necessary part of
inducing UNUM's commitment to enter into the merger agreement.
In reaching the determination that the terms of the merger were fair to and
in the best interests of Provident and its stockholders, the Provident board of
directors also considered a number of additional factors, including:
- its management's knowledge of UNUM's business;
- its management's reports concerning the results of its due diligence
investigation of UNUM;
- the terms of the merger agreement; and
- the historical and current market prices of UNUM common stock.
The Provident board of directors also considered that members of Provident's
and UNUM's management and members of each parties' board of directors have
interests in the merger that are different from, or in addition to, the
interests of Provident stockholders generally. These interests are discussed in
detail under "--Interests of Management and Directors in the Merger" on page 56.
The foregoing discussion of the information and factors which were given
weight by the Provident board of directors is not exhaustive, but includes all
material factors considered by the Provident board of directors. The Provident
board of directors did not assign specific weights to the foregoing factors and
individual directors may have given different weights to different factors. The
Provident board of directors, however, declared advisable, authorized and
approved the merger agreement and the merger.
THE PROVIDENT BOARD OF DIRECTORS RECOMMENDS THAT PROVIDENT STOCKHOLDERS VOTE
"FOR" THE ADOPTION OF THE MERGER AGREEMENT AND "FOR" THE APPROVAL OF THE
PROVIDENT RECLASSIFICATION AMENDMENT.
UNUM'S REASONS FOR THE MERGER; RECOMMENDATION OF THE UNUM BOARD OF DIRECTORS
In reaching its conclusion to declare advisable, to authorize and to approve
the merger agreement and the merger and to recommend that UNUM stockholders vote
"FOR" the adoption of the merger agreement, the UNUM board of directors
concluded that the merger was likely to further the strategic
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plans of UNUM and to increase the value of shares of UNUM common stock over what
that value would have been had UNUM not agreed to the merger, and that the
opportunities created by the merger to increase such value more than offset the
risks inherent in the merger. In reaching this conclusion, the UNUM board of
directors considered the following potentially positive factors:
- EXCHANGE RATIO, TRANSACTION STRUCTURE AND MERGER AGREEMENT. The UNUM board
of directors considered the relationship of the exchange ratio to the
historical market prices for UNUM common stock and Provident common stock.
The UNUM board of directors also viewed favorably the form of the merger
consideration and the structure of the merger, which permit UNUM
stockholders to receive, on a tax-free basis, registered shares of
UNUMProvident representing approximately 58% of the total outstanding
equity of UNUMProvident, based on the number of shares of UNUM common
stock outstanding as of November 20, 1998. The UNUM board of directors
also considered that the terms and conditions of the merger agreement and
the other definitive agreements were reciprocal, which was consistent with
a merger of equals.
- CONSISTENT WITH UNUM'S GROWTH STRATEGY. The UNUM board of directors
considered the financial, technological, claims management, marketing and
sales resources of Provident and the likelihood that such resources would
enable UNUM to accelerate its long-term growth strategy and to facilitate
the introduction of new insurance products. The UNUM board of directors
also considered favorably the likelihood that the Provident resources
described above would enable UNUMProvident to compete more effectively as
the combined company will have sufficient financial strength, a global
distribution capability and a breadth of insurance product offerings to
capitalize on new business opportunities. Finally, the UNUM board of
directors considered the likelihood that UNUM's existing operations would
benefit from the combined UNUMProvident's increased financial strength,
expanded distribution capability and greater cross-selling capacity
between group and individual disability insurance products.
- MANAGEMENT OF UNUMPROVIDENT. The UNUM board of directors considered
favorably that the strength and expertise of UNUM's and Provident's senior
management teams would be combined to produce a strong management team
that will work together to integrate the two companies, to realize growth
opportunities, to achieve synergistic benefits and to successfully
implement strategies of UNUMProvident. The UNUM board of directors also
considered favorably the experience of senior management from UNUM and
Provident in successfully completing business combinations and integrating
geographically diverse businesses. The UNUM board of directors also
considered the terms of the employment arrangements agreed to by UNUM and
Provident. See "--Interests of Management and Directors in the Merger" on
page 56.
- COMPLEMENTARY BUSINESSES. The UNUM board of directors considered the
complementary nature of UNUM's and Provident's businesses, including
Provident's leadership in individual disability insurance products and
vocational rehabilitation resources and UNUM's leadership in group and
worksite insurance products, as well as UNUM's strength in insurance
brokerage distribution. The UNUM board of directors also considered the
enhanced cross-selling opportunities between group and individual
disability insurance products that may be available and realizable by
UNUMProvident.
- CUSTOMER BENEFITS. The UNUM board of directors considered the benefits
that the merger will provide to UNUM's customers. In particular, the UNUM
board of directors believes that the strengths of each of UNUM and
Provident in their respective insurance product offerings will allow
UNUMProvident to become a leading provider of group and individual
disability insurance, voluntary benefits and group life insurance, which
will allow UNUMProvident to provide superior value and integrated
solutions to a broader range of customers.
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- SYNERGISTIC BENEFITS RESULTING FROM THE MERGER. The UNUM board of
directors considered its belief and the belief of UNUM management that the
merger will result in significant opportunities for revenue growth, cost
savings and other synergistic benefits. Economies of scope and scale, the
elimination of duplicative expenditures and the consistent use of the best
practices of UNUM and Provident are expected to enable UNUMProvident to
realize significant revenue enhancements and achieving annual cost savings
of $120 million to $130 million and other advantages associated with
greater scale.
- FAIRNESS PRESENTATION AND OPINION. The UNUM board of directors considered
the detailed financial analyses and presentation of Morgan Stanley, its
financial advisor, and the opinion of Morgan Stanley described below,
that, based upon and subject to the considerations set forth in such
opinion, as of November 22, 1998, the exchange ratio pursuant to the
transactions contemplated by the merger agreement was fair, from a
financial point of view, to UNUM stockholders. See "--Opinion of UNUM's
Financial Advisor" on page 52.
- REGULATORY APPROVALS AND CLEARANCES. The UNUM board of directors
considered its belief, after consultation with its legal counsel, that the
required regulatory approvals and clearances could be obtained for the
merger.
The UNUM board of directors weighed these advantages and opportunities
against the following risks associated with the merger:
- TERMINATION FEES. The UNUM board of directors considered the obligations
of UNUM under circumstances set forth in the merger agreement to pay
Provident a termination fee of $150 million. The UNUM board of directors
also considered the obligations of UNUM to issue UNUM common stock to
Provident pursuant to the UNUM Option Agreement under certain
circumstances and to pay cash for the option granted to Provident if the
option is otherwise exercisable and Provident so elects. The UNUM board of
directors considered the limitation contained in the UNUM Option Agreement
that the total profit that Provident can realize pursuant to the
provisions of the merger agreement and the UNUM Option Agreement is $250
million. The UNUM board of directors considered that the issuance of UNUM
common stock pursuant to the terms of the UNUM Option Agreement would
result in the unavailability of "pooling of interests" accounting
treatment for an alternative transaction with a third party and that the
existence of the UNUM Option Agreement and the requirement to pay
termination fees to Provident under certain circumstances could have the
effect of discouraging alternative proposals for a business combination
with UNUM;
- INTEGRATION CHALLENGES. The UNUM board of directors considered the
challenges inherent in the combination of two business enterprises of the
size and scope of Provident and UNUM and the possible resulting diversion
of management attention for an extended period of time; and
- RISK OF MERGER NOT CLOSING. The UNUM board of directors considered the
risk that the merger might not be completed as a result of the failure of
any of the conditions to the closing contained in the merger agreement to
be satisfied or waived.
In addition, in determining whether to approve the merger agreement, the
UNUM board of directors also considered the financial condition, results of
operations and prospects of Provident and UNUM, the current and anticipated
regulatory environment with respect to UNUM's and Provident's operations and the
judgment, advice and analyses of UNUM management.
The UNUM board of directors also considered that members of Provident's and
UNUM's management and members of each party's board of directors have interests
in the merger that are different from, or in addition to, the interest of UNUM
stockholders generally. These interests are discussed in detail under
"--Interests of Management and Directors in the Merger" on page 56.
40
<PAGE>
The foregoing discussion of the information and factors which were given
weight by the UNUM board of directors is not exhaustive, but includes all
material factors considered by the UNUM board of directors. The UNUM board of
directors did not assign specific weights to the foregoing factors and
individual directors may have given different weights to different factors. The
UNUM board of directors declared advisable, authorized and approved the merger
agreement and the merger.
THE UNUM BOARD OF DIRECTORS RECOMMENDS THAT UNUM STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE MERGER AGREEMENT.
OPINION OF PROVIDENT'S FINANCIAL ADVISOR
Salomon Smith Barney was retained by Provident to act as financial advisor
to Provident in connection with the possible merger of UNUM with Provident.
Pursuant to Salomon Smith Barney's engagement letter, Salomon Smith Barney
rendered an opinion to the Provident board of directors on November 22, 1998, to
the effect that, based upon and subject to the considerations set forth in such
opinion, as of such date, the exchange ratio, assuming the conversion of UNUM
common stock into UNUMProvident common stock on a one-share for one-share basis,
was fair, from a financial point of view, to Provident stockholders.
The full text of Salomon Smith Barney's opinion, which sets forth the
assumptions made, general procedures followed, matters considered and limits on
the review undertaken, is attached as Appendix E to this document and is
incorporated herein by reference. The summary of Salomon Smith Barney's opinion
set forth below is qualified in its entirety by reference to the full text of
such opinion. No limitations were imposed by Provident or the Provident board of
directors with respect to the investigations made or procedures followed by
Salomon Smith Barney in rendering its opinion. STOCKHOLDERS ARE URGED TO READ
THE SALOMON SMITH BARNEY OPINION CAREFULLY AND IN ITS ENTIRETY.
In connection with rendering its opinion, Salomon Smith Barney reviewed,
among other things, the following:
(1) a draft of the merger agreement, including the exhibits and schedules
thereto, a draft of the Provident Option Agreement, a draft of the UNUM
Option Agreement and a draft of the stockholders agreement (collectively,
the "Transaction Agreements"), in each case that Provident advised
Salomon Smith Barney was substantially in the form to be executed by the
parties;
(2) certain publicly available information concerning Provident and UNUM;
(3) certain other financial information with respect to Provident and UNUM,
including both companies' estimates of the cost savings expected to be
derived from the merger, that were provided to Salomon Smith Barney by
Provident and UNUM, respectively;
(4) certain publicly available information prepared by third parties,
including equity research analysts, concerning the business, operations
and financial prospects of Provident and UNUM and the sectors in which
they operate;
(5) certain publicly available information concerning the trading of, and
the trading market for, Provident common stock and UNUM common stock;
(6) certain publicly available information with respect to certain other
companies that Salomon Smith Barney believed to be comparable to
Provident or UNUM and the trading markets for certain of such other
companies' securities; and
(7) certain publicly available information concerning the nature and terms
of certain other transactions that Salomon Smith Barney considered
relevant to its inquiry.
Salomon Smith Barney also considered such other information, financial studies,
analyses, investigations and financial, economic and market criteria that it
deemed relevant. Salomon Smith Barney also discussed the past and current
business operations and financial condition of Provident and UNUM as well as
other matters Salomon Smith Barney believed relevant to its inquiry with certain
officers and employees of Provident and UNUM, respectively.
41
<PAGE>
In its review and analysis and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon the accuracy and completeness of all of the
financial and other information provided to it or publicly available and neither
attempted independently to verify nor assumed any responsibility for verifying
any of such information and further relied on assurances of management of
Provident that they were not aware of facts that would make any of such
information inaccurate or misleading. Salomon Smith Barney did not conduct a
physical inspection of any of the properties or facilities of Provident or UNUM,
did not make or obtain or assume any responsibility for making or obtaining any
independent evaluations or appraisals of any of such properties or facilities,
and was not furnished with any such evaluations or appraisals. Salomon Smith
Barney is not an actuarial firm and Salomon Smith Barney's services did not
include making any actuarial determinations or evaluations or an attempt to
evaluate actuarial assumptions. In that regard, Salomon Smith Barney made no
analyses of, and expressed no opinion as to, the adequacy of the loss and loss
adjustment expense reserves of Provident or UNUM. With respect to financial
forecasts regarding Provident and UNUM, Salomon Smith Barney relied on publicly
available third-party equity research forecasts and expressed no view with
respect to such forecasts or the assumptions on which they were based. Salomon
Smith Barney assumed that the Transaction Agreements, when executed and
delivered, would not contain any terms or conditions that differed materially
from the drafts Salomon Smith Barney reviewed, that the merger will be accounted
for as a "pooling of interests" under generally accepted accounting principles
and will qualify as a tax-free "reorganization" for United States federal income
tax purposes, and that the merger will be completed in accordance with the terms
of the merger agreement, without waiver of any of the conditions precedent to
the merger contained in the merger agreement.
In conducting its analysis and arriving at its opinion, Salomon Smith Barney
considered such financial and other factors as it deemed appropriate under the
circumstances, including, among others, the following:
(1) the historical and current financial position and results of operations
of Provident and UNUM;
(2) the business prospects of Provident and UNUM;
(3) the historical and current market for Provident common stock, UNUM
common stock and the equity securities of certain other companies that
Salomon Smith Barney believed to be comparable to Provident or UNUM; and
(4) the nature and terms of certain other merger transactions that Salomon
Smith Barney believed to be relevant.
Salomon Smith Barney also took into account its assessment of general economic,
market and financial conditions as well as its experience in connection with
similar transactions and securities valuation generally. Salomon Smith Barney
was not asked to consider, and its opinion does not address, the relative merits
of the merger as compared to any alternative business strategy that might exist
for Provident. Salomon Smith Barney was not asked to, and did not, solicit other
proposals to merge with or acquire Provident. Salomon Smith Barney's opinion
necessarily was based on conditions as they existed and could be evaluated on
the date thereof and Salomon Smith Barney assumed no responsibility to update or
revise its opinion based upon circumstances or events occurring after such date.
Salomon Smith Barney's opinion does not constitute an opinion or imply any
conclusion as to the price at which Provident common stock or UNUM common stock
will trade following announcement of the merger or the price at which
UNUMProvident common stock will trade following consummation of the merger.
Salomon Smith Barney's opinion was, in any event, limited to the fairness, from
a financial point of view, of the exchange ratio, assuming the conversion of
UNUM common stock into UNUMProvident common stock on a one-share for one-share
basis, and did not address Provident's underlying business decision to effect
the merger or constitute a recommendation of the merger to
42
<PAGE>
Provident or a recommendation to any holder of Provident common stock as to how
such holder should vote with respect to the merger.
In connection with rendering its opinion, Salomon Smith Barney made a
presentation to the Provident board of directors on November 22, 1998, with
respect to certain analyses performed by Salomon Smith Barney in evaluating the
fairness of the exchange ratio, assuming the conversion of UNUM common stock
into UNUMProvident common stock on a one-share for one-share basis. The
following is a summary of this presentation. To the extent earnings forecasts
for Provident or UNUM were used in its analyses, Salomon Smith Barney relied on
I/B/E/S International, Inc. ("I/B/E/S") earnings estimates. The following
quantitative information, to the extent it is based on market data, is, except
as otherwise indicated, based on market data as it existed at or prior to
November 20, 1998, and is not necessarily indicative of current or future market
conditions. The summary of certain of the financial analyses includes
information presented in tabular format. IN ORDER TO UNDERSTAND FULLY THE
FINANCIAL ANALYSES USED BY SALOMON SMITH BARNEY, THESE TABLES MUST BE READ
TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A
COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES.
HISTORICAL TRADING ANALYSES. Salomon Smith Barney performed a number of
analyses based on the historical trading prices of Provident common stock and
UNUM common stock and the relationship between the two.
Salomon Smith Barney reviewed the relationship between the daily closing
prices of Provident common stock and UNUM common stock during the period from
November 21, 1997, through November 20, 1998, and the implied historical
exchange ratios determined by dividing the closing price per share of Provident
common stock by the closing price per share of UNUM common stock for each
trading day in such period. Salomon Smith Barney calculated that during this
period the average of the historical exchange ratios was 0.6823 compared with
the exchange ratio in the merger agreement of 0.73.
Based upon historical exchange ratios, Salomon Smith Barney reviewed the
implied average ownership of holders of Provident common stock in UNUMProvident
over the same period, excluding for the purpose of such analysis shares
underlying outstanding options to purchase Provident common stock or UNUM common
stock.
The following table compares the average implied ownership of holders of
Provident common stock in UNUMProvident based upon historical exchange ratios
over this period to the ownership of such stockholders resulting from the
merger.
<TABLE>
<CAPTION>
AVERAGE IMPLIED OWNERSHIP OF OWNERSHIP OF
PROVIDENT STOCKHOLDERS PROVIDENT STOCKHOLDERS
BASED ON HISTORICAL EXCHANGE RATIOS RESULTING FROM THE MERGER
EXCLUDING OPTIONS INCLUDING OPTIONS EXCLUDING OPTIONS INCLUDING OPTIONS
- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
40.0% 39.4% 41.7% 41.1%
</TABLE>
Based upon average prices of Provident common stock and UNUM common stock
for the 5-trading day, 10-trading day, 20-trading day, 30-trading day,
60-trading day, 90-trading day, 120-trading day, 180-trading day, 270-trading
day and 12-month periods, in each case ending on November 20, 1998, and for the
period January 2, 1998 through November 20, 1998, Salomon Smith Barney also
calculated the implied ownership of Provident stockholders in UNUMProvident by
determining the percentage of the aggregate market capitalization of the two
companies represented by Provident common stock.
43
<PAGE>
The following table compares the range of implied ownership of Provident
stockholders in UNUMProvident based on this analysis compared with the ownership
of such stockholders resulting from the merger.
<TABLE>
<CAPTION>
RANGE OF IMPLIED OWNERSHIP OF OWNERSHIP OF
PROVIDENT STOCKHOLDERS PROVIDENT STOCKHOLDERS
BASED ON HISTORICAL EXCHANGE RATIOS RESULTING FROM THE MERGER
<S> <C> <C> <C>
INCLUDING
EXCLUDING OPTIONS OPTIONS EXCLUDING OPTIONS INCLUDING OPTIONS
- ----------------- ---------------- ------------------- -------------------
39.3% to 40.5% 38.7% to 39.9% 41.7% 41.1%
</TABLE>
Salomon Smith Barney compared the performance of Provident common stock and
UNUM common stock for the period January 2, 1998 through November 20, 1998 and
for the period from September 1, 1998, through November 20, 1998. Salomon Smith
Barney noted that, except for periods in March and June of 1998, the performance
of Provident common stock closely tracked the performance of UNUM common stock.
Salomon Smith Barney reviewed the historical ratio of stock price to forward
earnings estimates for both Provident common stock and UNUM common stock during
the period from November 21, 1997, through November 20, 1998.
The following table compares the average ratio of stock price to forward
earnings estimates for UNUM and Provident over this one year period.
AVERAGE RATIO OF STOCK PRICE
TO FORWARD EARNINGS ESTIMATES
<TABLE>
<S> <C> <C>
PROVIDENT......................... 15.2x (average UNUM advantage: 2.5x)
UNUM.............................. 17.7x
</TABLE>
Salomon Smith Barney also reviewed the historical multiple of stock price to
book value for both Provident common stock and UNUM common stock during the
period from November 21, 1997, through November 20, 1998. For purposes of this
analysis, book value was shareholders' equity excluding any adjustments for
unrealized gains and losses on investments.
The following table compares the average multiple of stock price to book
value per share for UNUM and Provident over this one year period.
AVERAGE MULTIPLE OF STOCK PRICE
TO BOOK VALUE PER SHARE
<TABLE>
<S> <C> <C>
PROVIDENT......................... 1.84x (average UNUM advantage: 1.27x)
UNUM.............................. 3.11x
</TABLE>
44
<PAGE>
CONTRIBUTION ANALYSES. Salomon Smith Barney performed analyses of the
relative contributions of each of Provident and UNUM to UNUMProvident with
respect to certain market and financial data, including items in the following
table.
<TABLE>
<CAPTION>
PROVIDENT UNUM
CONTRIBUTION CONTRIBUTION
--------------- ---------------
<S> <C> <C>
1999 Estimated Earnings............................................................... 43.4% 56.7%
2000 Estimated Earnings............................................................... 43.1% 56.9%
1998 Estimated Earnings............................................................... 43.5% 56.5%
Stockholders' Equity as of September 30, 1998
(Excluding Adjustments for Unrealized Gains and Losses on Investments).............. 52.3% 47.7%
Assets as of September 30, 1998....................................................... 60.9% 39.1%
Estimated 1998 Premium Income
(Based on Annualized Results for 9 Months Ended September 30, 1998)................. 38.6% 61.4%
Estimated 1998 Revenue
(Based on Annualized Results for 9 Months Ended September 30, 1998)................. 46.0% 54.0%
<CAPTION>
PROVIDENT UNUM
PRO FORMA OWNERSHIP RESULTING FROM THE MERGER STOCKHOLDERS STOCKHOLDERS
- -------------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Pro Forma Ownership of UNUMProvident excluding Options................................ 41.7% 58.3%
Pro Forma Ownership of UNUMProvident including Options................................ 41.1% 58.9%
</TABLE>
Salomon Smith Barney also derived the ratio of the pro forma ownership of
Provident stockholders and pro forma ownership of UNUM stockholders in
UNUMProvident, excluding options, to the respective percentage represented by
Provident's and UNUM's relative contributions to certain of the combined income
statement and balance sheet items described above.
The following table presents these ratios.
<TABLE>
<CAPTION>
PROVIDENT UNUM
----------- -----------
<S> <C> <C>
RATIO OF PRO FORMA OWNERSHIP TO RELATIVE CONTRIBUTION TO:
1999 Estimated Earnings..................................................................... 0.96x 1.03x
2000 Estimated Earnings..................................................................... 0.97x 1.02x
1998 Estimated Earnings..................................................................... 0.96x 1.03x
Stockholders' Equity as of September 30, 1998
(Excluding Adjustments for Unrealized Gains and Losses on Investments).................... 0.80x 1.22x
Assets as of September 30, 1998............................................................. 0.68x 1.49x
Estimated 1998 Premium Income
(Based on Annualized Results for 9 Months Ended September 30, 1998)....................... 1.08x 0.95x
Estimated 1998 Revenue
(Based on Annualized Results for 9 Months Ended September 30, 1998)....................... 0.91x 1.08x
</TABLE>
Salomon Smith Barney noted that each of the ratios for Provident in the
preceding table would be approximately 0.01x lower if calculated including
options.
PREMIUM ANALYSIS. Salomon Smith Barney performed analyses summarizing the
premiums implied by the exchange ratio, assuming the conversion of UNUM common
stock into UNUMProvident common stock on a one-share for one-share basis.
Salomon Smith Barney calculated that, by multiplying the exchange ratio by
the UNUM closing price on November 20, 1998 of $48.13 per share, the implied
price per share of Provident common stock in the merger was $35.15. The
following tables compare the premium or discount of this $35.15
45
<PAGE>
implied price to the average, high and low closing prices for specified periods
ended November 20, 1998.
<TABLE>
<CAPTION>
PREMIUM (DISCOUNT) OF
AVERAGE PRICE OF $35.15 TO APPLICABLE
PERIOD ENDED NOVEMBER 20, 1998 PROVIDENT COMMON STOCK PRICE
- ---------------------------------------------------------- ---------------------------- -----------------------
<S> <C> <C>
Closing Price on November 20.............................. $33.38 5.3%
5 Trading Days............................................ $32.90 6.8%
20 Trading Days........................................... $30.79 14.1%
60 Trading Days........................................... $32.15 9.3%
Latest Twelve Months...................................... $35.14 0.0%
Year to Date.............................................. $35.12 0.0%
<CAPTION>
HIGH CLOSING PRICE OF
PROVIDENT COMMON STOCK
----------------------------
<S> <C> <C>
Year to Date.............................................. $41.06 (April 22, 1998) (14.4%)
<CAPTION>
LOW CLOSING PRICE OF
PROVIDENT COMMON STOCK
----------------------------
<S> <C> <C>
Year to Date.............................................. $27.38 (October 9, 1998) 28.3%
</TABLE>
STOCKHOLDER VALUE CREATION ANALYSIS. Salomon Smith Barney performed an
analysis designed to measure the increase in the value of the common stock to be
held by Provident and UNUM stockholders as a result of the merger, as compared
to the projected stand-alone market value of Provident common stock and UNUM
common stock in 1999 and 2000. The value of the common stock held as a result of
the merger was derived by calculating pro forma operating earnings per share for
UNUMProvident common stock--applying I/B/E/S estimates of 1999 earnings for
Provident and UNUM, respectively, both with and without projected annual cost
savings resulting from the merger (as estimated by Provident and UNUM
management) equal to 10.0%, or $128 million pre-tax and $83.2 million after-tax,
of 1999 combined operating expenses, of which 50.0% would be realized in 1999
and 100.0% in 2000, and the implied I/B/E/S 1998-1999 compound annual growth
rates of 13.6% for Provident and 14.7% for UNUM to derive stand-alone and pro
forma combined 1999 and 2000 operating earnings--and then assuming various
multiples of stock price to operating earnings per share ("P/E Multiple").
Salomon Smith Barney noted that, as of November 20, 1998, Provident's and UNUM's
P/E Multiples based on estimated 1998 operating earnings per share were 15.2x
and 17.2x, respectively. Salomon Smith Barney performed various calculations
assuming the estimated cost savings were or were not achieved and applying
various P/E Multiples.
Salomon Smith Barney noted that, with respect to a holder of Provident
common stock or UNUM common stock, the value per share created by the merger
would include:
(1) the premium, if any, received by a Provident stockholder in the merger;
(2) the effect of any cost savings achieved by UNUMProvident following the
merger; and
(3) the extent to which the P/E Multiple of UNUMProvident common stock would
exceed the P/E Multiple of Provident common stock or UNUM common stock,
as applicable.
Assuming that the estimated cost savings would be realized, Salomon Smith Barney
derived the increase (or decrease) in value per share to holders of Provident
common stock and UNUM common stock in 1999 and 2000 for certain assumed P/E
Multiples for UNUMProvident common stock. Based on a P/E Multiple for
UNUMProvident common stock equal to the P/E Multiple for Provident common stock
as of November 20, 1998 (15.2x, based on Provident's estimated 1998 operating
earnings per share), the merger would result in an implied increase in the value
per share to holders of Provident common stock of 0.6% and 4.9% in 1999 and
2000, respectively, and an implied decrease in
46
<PAGE>
the value per share to holders of UNUM common stock of 5.3% and 2.2% in 1999 and
2000, respectively. Based on a P/E Multiple for UNUMProvident common stock equal
to a weighted average of the P/E Multiple for Provident common stock and the P/E
Multiple for UNUM common stock as of November 20, 1998 (16.3x, based on
estimated 1998 operating earnings per share for both Provident and UNUM), the
merger would result in an implied increase in the value per share to holders of
Provident common stock of 8.4% and 13.1% in 1999 and 2000, respectively, and an
implied increase in the value per share to holders of UNUM common stock of 2.0%
and 5.4% in 1999 and 2000, respectively. Based on a P/E Multiple for
UNUMProvident common stock equal to the P/E Multiple for UNUM common stock as of
November 20, 1998 (17.2x, based on UNUM's estimated 1998 operating earnings per
share), the merger would result in an implied increase in the value per share to
holders of Provident common stock of 14.4% and 19.3% in 1999 and 2000,
respectively, and an implied increase in the value per share to holders of UNUM
common stock of 7.7% and 11.3% in 1999 and 2000, respectively.
In addition, Salomon Smith Barney noted that Provident's P/E Multiple would
need to expand on a stand-alone basis 0.7x, 2.0x and 2.9x in order for Provident
to achieve on a stand-alone basis the same increases in shareholder value in the
year 2000 that were calculated for the year 2000 assuming (1) the achievement of
the estimated cost savings but no expansion in the P/E Multiple from 15.2x
(based on Provident's estimated 1998 operating earnings per share), (2) the
achievement of the estimated cost savings and an expansion in the P/E Multiple
to the "blended" 16.3x (based on estimated 1998 operating earnings per share for
both Provident and UNUM), and (3) the achievement of the estimated cost savings
and an expansion in the P/E Multiple to UNUM's current 17.2x (based on UNUM's
estimated 1998 operating earnings per share), respectively.
STOCKHOLDER VALUE CREATION--SENSITIVITY ANALYSIS. Assuming the achievement
of the estimated cost savings, Salomon Smith Barney calculated the sensitivity
of stockholder value creation to changes in the pro forma P/E Multiples and
estimated operating earnings per share of UNUMProvident in 1999 and 2000.
Salomon Smith Barney performed such analysis assuming realization of 95.0% to
105.0% of UNUMProvident's pro forma estimated 1999 operating earnings per share
of $3.45 per share and estimated 2000 operating earnings per share of $4.08 per
share. For purposes of such analysis, Salomon Smith Barney utilized Provident's
November 20, 1998 P/E Multiple of 15.2x (based on Provident's estimated 1998
operating earnings per share), a "blended" P/E Multiple of 16.3x (based on
estimated 1998 operating earnings per share for both Provident and UNUM), UNUM's
November 20, 1998 P/E Multiple of 17.2x (based on UNUM's estimated 1998
operating earnings per share) and an "expanded" P/E Multiple of 18.2x (based on
a one multiple point expansion in UNUM's November 20, 1998 P/E Multiple (based
on estimated 1998 operating earnings per share)). Based on such analysis,
Salomon Smith Barney calculated that the effect on value per share to holders of
Provident common stock:
(1) in 1999 ranged from a decrease of 4.4% (assuming pro forma estimated
1999 UNUMProvident operating earnings per share of $3.27 per share and a
P/E Multiple of 15.2x) to an increase of 27.1% (assuming pro forma
estimated 1999 UNUMProvident operating earnings per share of $3.62 per
share and a P/E Multiple of 18.2x); and
(2) in 2000 ranged from a decrease of 0.3% (assuming pro forma estimated
2000 UNUMProvident operating earnings per share of $3.88 per share and a
P/E Multiple of 15.2x) to an increase of 32.5% (assuming pro forma
estimated 2000 UNUMProvident operating earnings per share of $4.29 per
share and a P/E Multiple of 18.2x).
MERGER CONSEQUENCES ANALYSIS. Giving pro forma effect to the estimated cost
savings and a 35.0% tax rate, Salomon Smith Barney noted that, based upon
I/B/E/S earnings estimates for each of Provident and UNUM, UNUMProvident would
have estimated 1999 operating earnings per share of $3.45 and estimated 2000
operating earnings per share of $4.08, representing estimated potential
accretion of 7.7% in 1999 and 11.3% in 2000 to holders of UNUM common stock.
47
<PAGE>
Using I/B/E/S earnings estimates, taking into account the pro forma
adjustments with respect to the merger described above (other than the estimated
cost savings) and varying the levels of, and the rates of realization for, cost
savings resulting from the merger, Salomon Smith Barney reviewed the sensitivity
of operating earnings per share accretion from the perspective of UNUM's
stockholders. Under each of these scenarios, Salomon Smith Barney noted that the
merger would be accretive to UNUM's stockholders.
ANALYSIS OF SELECTED "MERGER OF EQUALS" TRANSACTIONS. Salomon Smith Barney
analyzed certain publicly available financial, operating and stock market
information for ten selected "merger of equals" transactions since 1987 (the
"Precedent Transactions"). The Precedent Transactions reviewed were: Norwest
Corporation/Wells Fargo & Company; BANC ONE CORPORATION/First Chicago NBD
Corporation; NationsBank Corporation/BankAmerica Corporation; Travelers Group
Inc./Citicorp; Chemical Banking Corporation/The Chase Manhattan Corporation;
Society Corporation/KeyCorp; Comerica Incorporated/Manufacturers National
Corporation; Chemical Banking Corporation/ Manufacturers Hanover Corporation;
Sovran Financial Corporation/The Citizens and Southern Corporation; and Fleet
Financial Group, Inc./Norstar Bancorp. In each case, the stock of the first-
named company represents the "unitary" stock in the transaction (comparable to
UNUM in the merger) because stockholders of that company receive or retain one
share in the new company for each share they own, and the stock of the
second-named company represents the "non-unitary" stock in the transaction
(comparable to Provident in the merger). Salomon Smith Barney considered the
Precedent Transactions to be reasonably similar to the merger, but noted that
none of these transactions is identical to the merger.
The following table presents the ranges and median indicated for the
Precedent Transactions of the premium (discount) to the closing price of the
non-unitary stock for the day prior to announcement and to the average closing
price of the non-unitary stock for the five-trading day and 20-trading day
periods prior to announcement of the transaction compared to the values
indicated for the merger.
<TABLE>
<CAPTION>
THE MERGER
PRECEDENT TRANSACTIONS (PREMIUMS TO
------------------------------ PROVIDENT
RANGE MEDIAN SHARE PRICE)
----------------- ----------- -------------
<S> <C> <C> <C>
Premium (discount) to Day Prior Price................................. (1.1%)--16.5% 5.6% 5.3%
Premium (discount) to 5 Days Prior Average Price...................... (1.6%)--20.9% 6.4% 6.8%
Premium (discount) to 20 Days Prior Average Price..................... (2.2%)--18.8% 6.9% 14.1%
</TABLE>
The following table compares the ranges and median indicated for the
Precedent Transactions of the implied value per share of the non-unitary stock
in each Precedent Transaction (based on the price of the unitary stock for the
trading day immediately prior to announcement of the transaction) to the latest
twelve months earnings per share and book value per share.
<TABLE>
<CAPTION>
PRECEDENT TRANSACTIONS
------------------------
RANGE MEDIAN THE MERGER
----------- ----------- -----------
<S> <C> <C> <C>
Ratio of Implied Value Per Share to:
Latest Twelve Month Earnings Per Share.................... 9.1x--31.5x 13.4x 15.7x
Book Value Per Share...................................... 0.72x--3.65x 1.87x 1.40x
</TABLE>
Salomon Smith Barney also performed a number of analyses with respect to the
four most recent of such transactions--Norwest Corporation/Wells Fargo & Company
(announced June 8, 1998); BANC ONE CORPORATION/First Chicago NBD Corporation
(announced April 13, 1998); NationsBank Corporation/BankAmerica Corporation
(announced April 13, 1998); and Travelers Group Inc./Citicorp (announced April
6, 1998).
48
<PAGE>
The following table compares the ranges indicated for these recent
transactions of the premium to the closing price of the non-unitary stock for
the day prior to announcement and for the average closing price of the
non-unitary stock for the 20-trading day and 60-trading day periods prior to
announcement of the transaction compared to the values indicated for the merger.
<TABLE>
<CAPTION>
THE MERGER
(PREMIUMS TO
RANGE IN RECENT PROVIDENT
TRANSACTIONS SHARE PRICE)
--------------------------- -------------
<S> <C> <C>
Premium to Day Prior Price............................................ 0.0%--9.3% 5.3%
Premium to 20 Days Prior Average Price................................ 2.1%--11.4% 14.1%
Premium to 60 Days Prior Average Price................................ 10.5%--21.3% 9.3%
</TABLE>
For each of these recent transactions, Salomon Smith Barney calculated the
implied ownership of stockholders of the non-unitary merger partner in the
merged entity based on historical average trading prices for each of the merger
partners' common stock for the 20-day, 60-day, 90-day and 120-day periods
immediately prior to announcement. The following table compares, for each of
these periods, the range of the difference between the actual ownership
percentage of stockholders in the non-unitary merger partner in the merged
entity derived from the transaction's actual exchange ratio to such implied
levels with the difference between of the actual ownership percentage of
Provident stockholders in UNUMProvident to the implied ownership percentages
based on historical average trading prices for the same periods for the merger.
<TABLE>
<CAPTION>
RANGE OF INCREASE (DECREASE) INCREASE BETWEEN
BETWEEN OWNERSHIP IN OWNERSHIP IN THE MERGER
RECENT TRANSACTIONS AND AND AVERAGE IMPLIED
AVERAGE IMPLIED OWNERSHIP OWNERSHIP FOR PRIOR
PERIOD PRIOR TO ANNOUNCEMENT FOR PRIOR PERIOD PERIOD
- ----------------------------------------------------------- ---------------------------- -------------------------
<S> <C> <C>
20-Day..................................................... (0.6%)--2.3% 1.9%
60-Day..................................................... (0.2%)--2.1% 1.1%
90-Day..................................................... (2.7%)--2.8% 1.5%
120-Day.................................................... (4.3%)--2.7% 2.2%
</TABLE>
COMPARABLE COMPANY ANALYSIS. Salomon Smith Barney reviewed certain publicly
available financial, operating and stock market information for Provident, UNUM
and 16 other publicly-traded life/health insurance companies (American General
Corporation, Conseco, Inc., SunAmerica Inc., The Equitable Companies
Incorporated, AFLAC Incorporated, Lincoln National Corporation, Jefferson-Pilot
Corporation, Transamerica Corporation, Hartford Life, Inc., Nationwide Financial
Services, Inc., ReliaStar Financial Corp., Unitrin, Inc., American National
Insurance Company, Protective Life Corporation, American Annuity Group, Inc. and
Delphi Financial Group, Inc. (collectively, the "Comparable Companies")).
Salomon Smith Barney considered the Comparable Companies to be reasonably
similar to Provident and UNUM insofar as they participate in business segments
similar to Provident's and UNUM's business segments, but noted that none of
these companies has the same management, makeup, size and combination of
businesses as Provident or UNUM.
The following table presents the ranges, means and medians indicated for the
Comparable Companies of each of (1) the ratio of enterprise value (calculated as
market value plus debt (excluding debt of consumer finance and brokerage
subsidiaries) and preferred securities) to total capital; (2) dividend yield;
(3) the ratio of the closing stock price on November 20, 1998 to (a) book value
per share excluding adjustments for unrealized gains and losses on investments,
(b) median I/B/E/S 1998 operating earnings per share estimates and (c) median
I/B/E/S 1999 operating earnings per share estimates; (4) 1998 estimated return
on equity (based on median I/B/E/S estimates and excluding adjustments for
unrealized gains and losses on investment from stockholders' equity); and (5)
implied
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1998 to 1999 operating earnings per share growth rate, in each case compared to
the values indicated for each of Provident and UNUM.
<TABLE>
<CAPTION>
COMPARABLE COMPANIES
-------------------------------------
<S> <C> <C> <C> <C> <C>
RANGE MEAN MEDIAN PROVIDENT UNUM
--------------- --------- --------- ----------- ---------
Ratio of Enterprise Value to Total Capital.................... 0.7x--5.3x 1.8x 1.7x 1.9x 2.3x
Dividend Yield................................................ 0.0%--3.7% 1.4% 1.4% 1.2% 1.2%
Ratio of Closing Price on November 20, 1998 to:
(a) Book Value Per Share.................................... 0.83x--5.77x 2.51x 2.24x 1.72x 2.78x
(b) Median I/B/E/S 1998 operating earnings per share
estimates............................................... 10.3x--26.7x 17.3x 17.2x 15.2x 17.2x
(c) Median I/B/E/S 1999 operating earnings per share
estimates............................................... 8.2x--23.5x 15.2x 15.2x 13.4x 15.0x
1998 Estimated Return on Equity............................... 7.2%--21.6% 14.1% 13.9% 9.4% 15.9%
Implied 1998 to 1999 Operating
Earnings Per Share Growth Rate................................ 8.7%--26.2% 13.9% 13.5% 13.6% 14.7%
</TABLE>
DIVIDEND DISCOUNT ANALYSIS--PROVIDENT. Salomon Smith Barney also performed
a dividend discount analysis pursuant to which the value of Provident common
stock was estimated by adding (1) the estimated present value of Provident's
future stream of dividend payments to Provident's stockholders for the years
1999 through 2003, plus (2) the estimated present value of the terminal value
per share of Provident common stock at the end of the year 2003, based upon 1999
operating earnings per share estimates and assuming the 1998-1999 implied
compound annual growth rate of 13.6% thereafter and a constant dividend payout
ratio of 20.8%. For purposes of such analysis, Salomon Smith Barney utilized
discount rates of 10.0%, 11.0%, 12.0%, 13.0%, 14.0% and 15.0%, and terminal
values based on multiples of 12.5x, 13.0x, 13.5x, 14.0x and 14.5x projected year
2004 operating earnings (resulting in a range of value per share of Provident
common stock from $31.64 to $45.17) and multiples of 1.5x, 1.6x, 1.7x, 1.8x and
1.9x projected book value at the end of the year 2003 (resulting in a range of
value per share of Provident common stock from $27.22 to $42.10). Salomon Smith
Barney noted that Provident's closing stock price of $33.38 on November 20,
1998, the last trading day prior to the public announcement of the merger, was
within the range of values suggested by this analysis.
DIVIDEND DISCOUNT ANALYSIS--UNUM. Salomon Smith Barney also performed a
dividend discount analysis pursuant to which the value of UNUM common stock was
estimated by adding (1) the estimated present value of UNUM's future stream of
dividend payments to UNUM's stockholders for the years 1999 through 2003, plus
(2) the estimated present value of the terminal value per share of UNUM common
stock at the end of the year 2003, based upon 1999 operating earnings per share
estimates and assuming the 1998-1999 implied compound annual growth rate of
14.7% thereafter and a constant dividend payout ratio of 24.6%. For purposes of
such analysis, Salomon Smith Barney utilized discount rates of 10.0%, 11.0%,
12.0%, 13.0%, 14.0% and 15.0%, and terminal values based on multiples of 14.0x,
15.0x, 16.0x, 17.0x and 18.0x projected year 2004 operating earnings (resulting
in a range of value per share of UNUM common stock from $47.61 to $74.88) and
multiples of 2.4x, 2.6x, 2.8x, 3.0x and 3.2x projected book value at the end of
the year 2003, resulting in a range of value per share of UNUM common stock from
$45.01 to $73.18. Salomon Smith Barney noted that UNUM's closing stock price of
$48.13 on November 20, 1998, the last trading day prior to the public
announcement of the merger, was within the range of values suggested by this
analysis.
The foregoing is a summary of the material financial analyses furnished by
Salomon Smith Barney to the Provident board of directors but it does not purport
to be a complete description of the analyses performed by Salomon Smith Barney
or of its presentation to the Provident board of directors. The preparation of
financial analyses and fairness opinions is a complex process involving
subjective judgments and is not necessarily susceptible to partial analysis or
summary description. Salomon Smith
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Barney made no attempt to assign specific weights to particular analyses or
factors considered, but rather made qualitative judgments as to the significance
and relevance of the analyses and factors considered. Accordingly, Salomon Smith
Barney believes that its analyses (and the summary set forth above) must be
considered as a whole, and that selecting portions of such analyses and of the
factors considered by Salomon Smith Barney, without considering all of such
analyses and factors, could create a misleading or incomplete view of the
processes underlying the analyses conducted by Salomon Smith Barney and its
opinion. With regard to the comparable public company analysis and the
comparable transaction analysis summarized above, Salomon Smith Barney selected
comparable public companies on the basis of various factors, including the size
of the public company and similarity of the line of business; however, no public
company or transaction utilized as a comparison is identical to Provident or
UNUM, any business segment of Provident or UNUM or the merger. As a result,
these analyses are not purely mathematical, but also take into account
differences in financial and operating characteristics of the Comparable
Companies and other factors that could affect the transaction or public trading
value of the Comparable Companies and transactions to which Provident and UNUM,
the business segments of Provident and UNUM, and the merger, are being compared.
In its analyses, Salomon Smith Barney made numerous assumptions with respect to
Provident, UNUM, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Provident and UNUM. Any estimates contained in Salomon Smith Barney's analyses
are not necessarily indicative of actual values or predictive of future results
or values, which may be significantly more or less favorable than those
suggested by such analyses. Estimates of values of companies do not purport to
be appraisals or necessarily to reflect the prices at which companies may
actually be sold. Because such estimates are inherently subject to uncertainty,
none of Provident, UNUM, the Provident board of directors, Salomon Smith Barney
or any other person assumes responsibility if future results or actual values
differ materially from the estimates. Salomon Smith Barney's analyses were
prepared solely as part of Salomon Smith Barney's analysis of the fairness of
the exchange ratio, assuming the conversion of UNUM common stock into
UNUMProvident common stock on a one-share for one-share basis, and were provided
to the Provident board of directors in that connection. The opinion of Salomon
Smith Barney was one of the factors taken into consideration by the Provident
board of directors in making its determination to approve the merger agreement
and the merger. See "--Provident's Reasons for the Merger; Recommendations of
the Provident Board of Directors" on page 35.
Salomon Smith Barney is an internationally recognized investment banking
firm engaged, among other things, in the valuation of businesses and their
securities in connection with mergers and acquisitions, restructurings,
leveraged buyouts, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Provident selected Salomon
Smith Barney to act as its financial advisor on the basis of Salomon Smith
Barney's international reputation and Salomon Smith Barney's familiarity with
Provident. Salomon Smith Barney and its predecessors had previously rendered
investment banking and financial advisory services to Provident and UNUM, for
which they received customary compensation. In addition, in the ordinary course
of its business, Salomon Smith Barney and its affiliates (including Citigroup
Inc.) may trade the debt and equity securities of both Provident and UNUM for
its own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
Pursuant to Salomon Smith Barney's engagement letter, Provident will pay
Salomon Smith Barney the following fees: (1) $2 million, which has been paid;
and (2) an additional fee of $8 million, payable upon consummation of the
merger. Provident has also agreed to reimburse Salomon Smith Barney for its
reasonable travel and other out-of-pocket expenses incurred in connection with
its engagement, including the reasonable fees and disbursements of its counsel,
and to indemnify Salomon Smith Barney against certain liabilities and expenses
relating to or arising out of its engagement, including certain liabilities
under the federal securities laws.
51
<PAGE>
The exchange ratio was determined by arm's length negotiations between UNUM
and Provident, in consultation with their respective financial advisors and
other representatives, and was not established by such financial advisors.
OPINION OF UNUM'S FINANCIAL ADVISOR
UNUM retained Morgan Stanley to act as its financial advisor in connection
with the merger and related matters based upon Morgan Stanley's qualifications,
expertise and reputation. On November 22, 1998, Morgan Stanley delivered its
oral opinion to the UNUM board of directors that, as of such date and based upon
the procedures and subject to the assumptions and qualifications described to
the UNUM board of directors and later set forth in the written opinion of Morgan
Stanley, dated November 22, 1998, the exchange ratio pursuant to the
transactions contemplated by the merger agreement was fair from a financial
point of view to UNUM stockholders. UNUM did not impose any limitations with
respect to the investigations made or procedures followed by Morgan Stanley in
rendering its opinion.
The full text of Morgan Stanley's written opinion dated, November 22, 1998,
which sets forth, among other things, assumptions made, matters considered, and
scope and limitations on the review undertaken by Morgan Stanley, is attached as
Appendix F to this document and is incorporated in this document by reference.
UNUM stockholders are urged to, and should, read the Morgan Stanley Opinion
carefully and in its entirety. The Morgan Stanley Opinion is directed to the
UNUM board of directors and the fairness of the exchange ratio, pursuant to the
transactions contemplated by the merger agreement from a financial point of
view, to UNUM stockholders and it does not address any other aspect of the
merger nor does it constitute a recommendation to any UNUM stockholder as to how
to vote at the UNUM special meeting. The summary of the Morgan Stanley Opinion
set forth in this document is qualified in its entirety by reference to the full
text of the Morgan Stanley Opinion.
In arriving at its opinion, Morgan Stanley:
- reviewed certain publicly available financial statements and other
information of Provident and UNUM, respectively;
- analyzed certain internal financial statements and other financial and
operating data concerning Provident prepared by the management of
Provident;
- discussed the past and current operations and financial condition and the
prospects of Provident with senior executives of Provident;
- reviewed certain internal financial statements and other financial and
operating data concerning UNUM prepared by the management of UNUM;
- discussed with the senior managements of Provident and UNUM the strategic
objectives of the merger and their estimates of the synergies, cost
savings and other benefits expected to result from the merger;
- discussed the past and current operations and financial condition and the
prospects of UNUM with senior executives of UNUM, and analyzed the pro
forma impact of the merger on UNUM's earnings per share, consolidated
capitalization and financial ratios;
- reviewed the reported prices and trading activity for the Provident common
stock and the UNUM common stock;
- compared the financial performance of Provident and UNUM and the prices
and trading activity of the Provident common stock and the UNUM common
stock with that of certain other comparable publicly traded companies and
their securities;
52
<PAGE>
- reviewed the financial terms, to the extent publicly available, of certain
comparable transactions;
- participated in discussions and negotiations among representatives of
Provident and UNUM and their financial and legal advisors;
- reviewed the merger agreement and certain related documents; and
- performed such other analysis and considered such other factors as Morgan
Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of the Morgan Stanley Opinion. With
respect to the financial information, including estimates of the synergies, cost
savings and other benefits expected to result from the merger, Morgan Stanley
assumed that they were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of Provident and UNUM, respectively. In addition, Morgan Stanley assumed that
the transactions contemplated by the merger agreement will be completed in
accordance with the terms set forth in the merger agreement, including, among
other things, that the transactions contemplated by the merger agreement will be
accounted for as a "pooling of interests" business combination in accordance
with United States generally accepted accounting principles and the merger will
be treated as a tax-free reorganization, each pursuant to the Internal Revenue
Code. Morgan Stanley did not make any independent valuation or appraisal of the
assets or liabilities of Provident or UNUM, nor was Morgan Stanley furnished
with any such appraisals. The Morgan Stanley Opinion was necessarily based on
economic, market and other conditions as in effect on, and the information made
available to Morgan Stanley as of, the date of the Morgan Stanley Opinion.
The following is a brief summary of all material analyses performed by
Morgan Stanley and reviewed with the UNUM board of directors on November 22,
1998, in connection with the preparation of the Morgan Stanley Opinion and with
its oral presentation to the UNUM board of directors on November 22, 1998.
Certain of these summaries of financial analyses include information presented
in tabular format. In order to fully understand the financial analyses used by
Morgan Stanley, the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of the financial
analyses.
UNUM AND PROVIDENT COMMON STOCK PERFORMANCE. Morgan Stanley's analysis of
the performance of UNUM common stock consisted of a historical analysis of the
indexed price performance of UNUM common stock and Provident common stock from
November 17, 1995, through November 19, 1998, and from November 19, 1997,
through November 19, 1998, both relative to a market-weighted index of selected
publicly traded large-capitalization life insurance companies.
<TABLE>
<CAPTION>
PERCENTAGE CHANGE IN STOCK PRICE
--------------------------------------
11/17/95-11/19/98 11/19/97-11/19/98
----------------- -------------------
<S> <C> <C>
UNUM Common Stock.............................................................. 76.5% (3.3)%
Provident Common Stock......................................................... 137.6 1.2
Comparable Company Index....................................................... 111.3 24.9
</TABLE>
Morgan Stanley also analyzed the average historical exchange ratio (defined
as the closing trading price of Provident common stock divided by the
corresponding closing trading price of UNUM common stock, both based on a zero
premium to either company's market price) for selected historical periods ending
November 20, 1998.
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<PAGE>
Below is a summary table of the average historical exchange ratio and the
implied premium of that historical exchange ratio to the exchange ratio of 0.73
for selected periods ending November 20, 1998 and as of November 20, 1998.
<TABLE>
<CAPTION>
TIME PERIOD PRIOR AVERAGE
TO HISTORICAL IMPLIED PREMIUM TO A
NOVEMBER 20, 1998 EXCHANGE RATIO 0.7300 DEAL EXCHANGE RATIO
- ------------------- ----------------- -----------------------------
<S> <C> <C>
11/20/98 0.6935 5.3%
10 Day 0.6845 6.6%
20 Day 0.6765 7.9%
30 Day 0.6619 10.3%
60 Day 0.6839 6.7%
180 Day 0.6716 8.7%
One Year 0.6820 7.0%
</TABLE>
COMPARABLE PUBLIC COMPANY ANALYSIS. As part of its analysis, Morgan Stanley
compared certain financial information of Provident with corresponding publicly
available information of a group of ten publicly traded U.S.-based life
insurance companies comparable in certain respects with Provident (the
"Comparable Public Companies"). This group included: AFLAC, Incorporated;
American General Corporation; American National Insurance Corporation; Conseco,
Inc.; The Equitable Companies Incorporated; Jefferson-Pilot Corporation; Lincoln
National Corporation; Protective Life Corporation; Torchmark Corporation; and
Unitrin, Inc. Historical financial information used in connection with the
ratios provided below was as of September 30, 1998, with respect to the
financial information for UNUM, Provident and the Comparable Public Companies.
Morgan Stanley analyzed the relative performance of Provident by comparing
certain market trading statistics for Provident with those of the Comparable
Public Companies. The market trading information used in the valuation analysis
was (1) market price to adjusted book value, excluding the effects of Financial
Accounting Standards No. 115 ("FAS 115") which was 1.7x in the case of Provident
and 2.4x in the case of the average of the Comparable Public Companies; (2)
market price to estimated earnings per share for 1998, which was 15.3x in the
case of Provident and 16.8x in the case of the average of the Comparable Public
Companies; and (3) market price to estimated earnings per share for 1999, which
was 13.0x in the case of Provident and 14.9x in the case of the average of the
Comparable Public Companies. Earnings per share estimates for UNUM, Provident
and the Comparable Public Companies were based on median I/B/E/S estimates as of
November 20, 1998. I/B/E/S is a data service that monitors and publishes
compilations of earnings estimates by selected research analysts regarding
companies of interest to institutional investors. The implied range of public
market values for Provident common stock, on a stand-alone basis, derived from
the analysis of the Comparable Public Companies' market price to book value,
market price to 1998 estimated earnings per share and market price to 1999
estimated earnings per share ranged from approximately $30 to $35 per share
based on Provident's book value, excluding FAS 115, and 1998 and 1999 earnings
estimates.
TRANSACTION PREMIUMS OVER PUBLIC MARKET VALUATION ANALYSIS. Using the
implied public market values for Provident common stock derived from the
Comparable Public Company analysis, Morgan Stanley performed an analysis of the
implied transaction value of Provident common stock, based on premiums to public
market values. Using a range of premiums from 10% to 20%, a range Morgan Stanley
considered representative of the transaction premiums paid in comparable
transactions, the implied transaction value of Provident common stock ranged
from approximately $35 to $40 per share.
PRECEDENT TRANSACTION ANALYSIS. Using publicly available information,
Morgan Stanley performed an analysis of ten precedent mergers of equals
transactions (the "Morgan Stanley Precedent Transactions") that were comparable
to the merger in certain respects in order to compare the premiums paid to the
one-day unaffected market prices and the premiums paid to the average 30-day
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<PAGE>
unaffected market prices indicated by the exchange ratio pursuant to the
transactions contemplated by the merger agreement to those multiples indicated
for the Morgan Stanley Precedent Transactions. The ten transactions constituting
the Morgan Stanley Precedent Transactions were: The British Petroleum Company
p.l.c./Amoco Corporation; American Home Products Corporation/Monsanto Company;
SBC Communications Inc./Ameritech Corporation; Daimler-Benz AG/Chrysler
Corporation; NationsBank Corporation/BankAmerica Corporation; BANC ONE
CORPORATION/First Chicago NBD Corporation; Glaxo Wellcome plc/SmithKline Beecham
Corporation; Royal Bank of Canada/Bank of Montreal; Union Bank of
Switzerland/Swiss Bank Corporation; and Dean Witter Discover & Co./ Morgan
Stanley Group Inc. The ranges of premiums to the acquiree's market price for the
Morgan Stanley Precedent Transactions were 5.1% to 59.3%, based on a 30-day
average closing price, and -7.8% to 40.7%, based on the last closing price prior
to the announcement. Based on unaffected closing common share prices from
November 20, 1997 to November 20, 1998, the transaction premiums to Provident's
one-day and 30-day average unaffected closing market price are 5.3% and 10.3%,
respectively.
PRO FORMA EARNINGS ANALYSIS. Morgan Stanley analyzed the financial impact
of the merger on UNUM's estimated earnings per share and the estimates of the
synergies, cost savings and other benefits expected to result from the merger
for the years 1999 and 2000. Assuming 50% of the expected annual pre-tax cost
savings of approximately $128 million, based on estimates by management of UNUM
and Provident, is realized in 1999 and 100% in 2000, the transaction is
estimated at 9.6% and 15.0% accretive to earnings per UNUM share in 1999 and
2000, respectively. The earnings estimates for UNUM and Provident on a
stand-alone basis were based on median I/B/E/S earnings per share estimates for
calendar years 1999 and 2000 and the median I/B/E/S projected five-year growth
rate.
No company or transaction used in the Comparable Public Company and Morgan
Stanley Precedent Transaction analysis is identical to Provident or the merger.
Accordingly, an analysis of the results of the foregoing, including the
transaction premiums over public market valuation analysis, necessarily involves
complex considerations and judgments concerning financial and operating
characteristics of Provident and UNUM and other general business, economic,
market, or financial factors that could affect the public trading value of UNUM,
Provident and the companies to which they are being compared, many of which are
beyond the control of any particular company. Mathematical analysis, such as
determining the average or the median, is not itself a meaningful method of
using comparable public company data. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to a partial analysis or
summary description. In arriving at its opinion, Morgan Stanley considered the
results of all its analyses as a whole and did not attribute any particular
weight to any analysis or factor considered by it. Morgan Stanley believes that
selecting any portion of Morgan Stanley's analyses, without considering all
analyses, would create an incomplete view of the process underlying its opinion.
In addition, Morgan Stanley may have deemed various assumptions more or less
probable than other assumptions, so that the ranges of valuations resulting from
any particular analysis described above should not be taken to be Morgan
Stanley's view of the actual value of Provident or UNUM.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Provident or UNUM. The
analyses performed by Morgan Stanley are not necessarily indicative of actual
value, which may be significantly more or less favorable than suggested by such
analyses. Such analyses were performed solely as part of Morgan Stanley's
analysis of whether the exchange ratio pursuant to the transactions contemplated
by the merger agreement was fair from a financial point of view to UNUM
stockholders and were conducted in connection with the delivery of the Morgan
Stanley Opinion. The analyses do not purport to be appraisals or to reflect the
prices at
55
<PAGE>
which UNUMProvident common stock might actually be sold. Morgan Stanley did not
express any opinion as to the prices at which the UNUM common stock will trade
at any time.
As described above, the Morgan Stanley Opinion was one of a number of
factors taken into consideration by the UNUM board of directors in making its
determination to recommend the adoption of the merger agreement and the
transactions contemplated by the merger agreement. See "--UNUM's Reasons for the
Mergers; Recommendation of the UNUM Board of Directors" on page 38.
Consequently, the Morgan Stanley analyses described above should not be viewed
as determinative of the opinion of the UNUM board of directors or the view of
the management with respect to the value of Provident, or whether the UNUM board
of directors would have been willing to agree to a different exchange ratio.
The exchange ratio was determined through arm's length negotiations between
UNUM and its advisors and Provident and its advisors and was approved by the
UNUM board of directors. Morgan Stanley did not recommend any specific
consideration to UNUM or that any specific consideration constituted the only
appropriate consideration for the merger.
The UNUM board of directors retained Morgan Stanley based upon its
experience and expertise. Morgan Stanley is an internationally recognized
investment banking and advisory firm. As part of its investment banking
business, Morgan Stanley is regularly engaged in the valuation of business and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuation for estate, corporate and
other purposes. In the ordinary course of its business, Morgan Stanley and its
affiliates may actively trade the debt and equity securities or senior loans of
UNUM and Provident for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
In the past, Morgan Stanley has provided financial advisory and financing
services to UNUM and Provident and its affiliates, for which services Morgan
Stanley has received customary fees.
Pursuant to a letter agreement dated October 16, 1998 between UNUM and
Morgan Stanley, Morgan Stanley is entitled to, (a) in the event that the
transaction is not completed, an advisory fee of between $150,000 and $250,000,
(b) a customary agreement fee of $2 million due as a result of UNUM's entering
into the merger agreement, and (c) if the merger with Provident is completed, an
aggregate transaction fee of $13.5 million, less the amount of any of the
foregoing fees already paid to Morgan Stanley, which aggregate fee is payable
upon the closing.
UNUM has also agreed to reimburse Morgan Stanley for its reasonable expenses
related to the engagement. In addition, UNUM has agreed to indemnify Morgan
Stanley and its affiliates against certain liabilities and expenses, including
liabilities under federal securities laws, related to or arising out of the
engagement and the transactions in connection therewith.
INTERESTS OF MANAGEMENT AND DIRECTORS IN THE MERGER
In considering the respective recommendations of the Provident board of
directors and the UNUM board of directors, Provident stockholders and UNUM
stockholders should be aware that certain members of Provident's management and
UNUM's management and of the Provident board of directors and the UNUM board of
directors have certain interests in the merger that are different from, or in
addition to, the interests of stockholders generally. The members of the
Provident board of directors and the UNUM board of directors knew about these
additional interests, and considered them, when they approved the merger
agreement.
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<PAGE>
INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE
The merger agreement provides that UNUMProvident will indemnify each present
and former director and officer of UNUM and Provident and their subsidiaries as
provided in UNUM's, Provident's or such subsidiary's certificates of
incorporation or bylaws or comparable organizational documents. The merger
agreement also provides that UNUMProvident will assume any indemnification
agreements of UNUM or Provident.
The merger agreement further provides that, for a period of six years
following the merger, UNUMProvident will maintain in effect the better of UNUM's
and Provident's current directors' and officers' liability insurance covering
acts or omissions occurring prior to the merger. This insurance will provide
coverage and amounts no less favorable than those of such policy in effect on
the date of the merger agreement. However, UNUMProvident may replace such policy
with policies of UNUMProvident or its subsidiaries containing terms with respect
to such coverage and amount no less favorable to such directors and officers. In
no event will UNUMProvident be required to pay aggregate premiums in excess of
150% of the higher of the two amounts of aggregate premiums paid by UNUM and
Provident in 1998 on an annualized basis and if the existing or substituted
directors' and officers' liability insurance expires, is terminated or is
canceled during such six-year period, UNUMProvident will obtain as much
directors' and officers' insurance as can be obtained for the remainder of such
period for a premium not in excess of such amount.
BOARD OF DIRECTORS AND SENIOR MANAGEMENT FOLLOWING THE MERGER
The UNUMProvident bylaws provide that the board of directors of
UNUMProvident initially will consist of 15 members, seven of whom initially will
be designated by Provident and eight of whom initially will be designated by
UNUM. No more than one member designated by either UNUM or Provident may be an
"inside" director--any individual who is currently employed by such party or has
been employed by such party within the past three years. Provident will be
deemed to have designated any director that Zurich Insurance Company shall have
the right to designate pursuant to the Amended and Restated Relationship
Agreement, dated as of May 31, 1996, between Provident and Zurich Insurance
Company. Based on its current ownership of Provident common stock, Zurich
Insurance Company would not have the right to designate any directors of
UNUMProvident after the merger pursuant to the terms of the Relationship
Agreement.
Following the merger and until June 30, 2000, Mr. Orr, Chairman and Chief
Executive Officer of UNUM, will serve as Chairman of the Board and Chief
Executive Officer of UNUMProvident, and Mr. Chandler, Chairman of the Board,
President and Chief Executive Officer of Provident, will serve as President and
Chief Operating Officer of UNUMProvident and also be a member of its board of
directors. During that period, Mr. Orr and Mr. Chandler will participate equally
in setting the overall strategic direction of the company. During the period Mr.
Chandler is serving as Chief Operating Officer, the operating and staff units of
UNUMProvident will report to Mr. Chandler and he will be responsible for their
staffing and performance. From and after July 1, 2000, Mr. Orr will serve as
executive Chairman of the Board of UNUMProvident and Mr. Chandler will succeed
Mr. Orr as the Chief Executive Officer and continue to serve as President. Mr.
Orr is the "inside" director designated by UNUM and Mr. Chandler is the "inside"
director designated by Provident.
The merger agreement provides that the board of directors of UNUMProvident
will be divided into three classes. Each class will initially consist equally of
five directors with initial terms expiring at the annual meetings of
stockholders to be held in 2000, 2001 and 2002, respectively. Each class of
directors elected at an annual meeting of stockholders of UNUMProvident after
the merger will be elected for a three-year term. The merger agreement provides
that UNUM initially will have the right to designate three directors of the
board for class I, two directors for class II and three directors for class III;
and Provident initially will have the right to designate two directors for class
I, three directors
57
<PAGE>
for class II and two directors for class III. The UNUMProvident bylaws provide
that if a director reaches the mandatory retirement age of 72 during the term of
a directorship, such director may complete the term of the class to which he or
she is elected. The following table lists the persons expected to be designated
to serve as directors of UNUMProvident following the merger, including their
ages, current affiliation and initial terms.
<TABLE>
<CAPTION>
NAME, AGE AND CURRENT AFFILIATION INITIAL TERM EXPIRES
- ---------------------------------------------------------------------------------------- ------------------------
<S> <C>
James F. Orr III, 56, UNUM 2000
J. Harold Chandler, 50, Provident 2002
William L. Armstrong, 62, Provident 2000
Ronald E. Goldsberry, 56, UNUM 2001
Hugh O. Maclellan, Jr., 59, Provident 2001
A. S. (Pat) MacMillan, 55, Provident 2000
George J. Mitchell, 65, UNUM 2000
Cynthia A. Montgomery, 46, UNUM 2000
James L. Moody, Jr., 67, UNUM 2002
C. William Pollard, 60, Provident 2001
Lawrence R. Pugh, 66, UNUM 2002
Steven S Reinemund, 51, Provident 2001
Lois Dickson Rice, 66, UNUM 2002
John W. Rowe, 53, UNUM 2001
Burton E. Sorensen, 69, Provident 2002
</TABLE>
If any director listed above is unable or unwilling to serve as a director
of UNUMProvident, the party which designated such individual will designate
another individual to serve in such individual's place.
Set forth below is a table of the persons expected to serve as senior
executive officers of UNUMProvident immediately following the merger, including
their ages.
<TABLE>
<CAPTION>
NAME, AGE POSITION IN UNUMPROVIDENT
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
James F. Orr III, 56 Chairman of the Board; Chief Executive Officer
J. Harold Chandler, 50 President; Chief Operating Officer
F. Dean Copeland, 60 Executive Vice President--Legal and Administrative
Robert W. Crispin, 52 Executive Vice President--Distribution
Elaine D. Rosen, 46 Executive Vice President--Product and Risk Management
Thomas R. Watjen, 44 Executive Vice President--Finance
</TABLE>
If any officer listed above ceases to be a full-time employee of either
Provident or UNUM at or before the merger, or shall be unable or unwilling to
serve as an officer of UNUMProvident, UNUM and Provident will agree upon another
individual to serve in such individual's place.
58
<PAGE>
INFORMATION CONCERNING DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT
STOCKHOLDERS
PROVIDENT
The following table sets forth information regarding the beneficial
ownership of Provident common stock as of May 10, 1999, by each director,
nominee and named executive officer, and by all directors, nominees and
executive officers of Provident as a group. The total number of shares
beneficially owned by each person include those which are deemed to be
beneficially owned under applicable Securities and Exchange Commission
regulations. Unless otherwise indicated, the person indicated holds sole voting
and dispositive power. The percentage of UNUMProvident common stock that each
person will own following the merger is based on the number of shares of UNUM
common stock and Provident common stock, taking into account the exchange ratio,
outstanding as of May 10, 1999.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED SUBJECT
TO OPTIONS TOTAL % OF
SHARES EXERCISABLE AS SHARES % OF PROVIDENT UNUMPROVIDENT
BENEFICIALLY OF BENEFICIALLY COMMON COMMON
PERSON OWNED JULY 10, 1999 OWNED STOCK STOCK
- ---------------------------------- ------------ --------------- ------------ --------------- -----------------
<S> <C> <C> <C> <C> <C>
J. Harold Chandler(1)(5).......... 793,996 1,520,000 2,313,996 1.69 0.70
William L. Armstrong.............. 6,536 16,300 22,836 * *
William H. Bolinder(2)............ 3,128 2,500 5,628 * *
Charlotte M. Heffner(3)........... 7,700,862 10,700 7,711,562 5.69 2.36
Hugh B. Jacks(2).................. 9,960 0 9,960 * *
Hugh O. Maclellan, Jr.(3)......... 35,910,765 13,800 35,924,565 26.71 11.10
A. S. MacMillan (3)............... 902 10,700 11,602 * *
C. William Pollard (2)............ 16,910 0 16,910 * *
Scott L. Probasco, Jr. (4)........ 782,204 18,900 801,104 * *
Steven S Reinemund................ 3,960 13,800 17,760 * *
Burton E. Sorensen(2)............. 29,693 0 29,693 * *
Thomas R. Watjen(1)(5)............ 161,670 450,000 611,670 * *
Robert O. Best(1)................. 61,976 161,000 222,976 * *
F. Dean Copeland(1)(5)............ 27,441 100,000 127,441 * *
Peter C. Madeja(1)(5)............. 8,792 50,000 58,792 * *
All directors, nominees and
executive officers as a group
(16 persons including the above
named)(1)(2)(3)(5).............. 40,231,023 2,185,368 42,416,391 30.68 12.88
</TABLE>
- ------------------------
* Denotes less than one percent.
(1) Includes the following numbers of shares of phantom Provident common stock
representing performance shares awarded under the Performance Share Plan of
the Amended and Restated Annual Management Incentive Compensation Plan.
These performance shares represent deferred compensation based on the value
of the market price of Provident's common stock at the time the compensation
is earned. The performance shares include both shares awarded and shares
resulting from the "gross-up" described in the plan ("premium shares").
Performance shares cannot be converted into stock for a period of three
years after grant, unless (with respect to the awarded shares only) the
59
<PAGE>
participant terminates employment with Provident. The premium shares are
subject to forfeiture for a period of three years.
<TABLE>
<S> <C>
Mr. Chandler: 117,204 (including 35,160 premium shares)
Mr.Watjen: 43,004 (including 12,901 premium shares)
Mr. Best: 6,629 (including 1,988 premium shares)
Mr. Copeland: 12,949 (including 3,885 premium shares)
Mr. Madeja: 1,061 (including 318 premium shares)
As a group: 180,846 (including 54,253 premium shares)
</TABLE>
Also includes the following numbers of restricted stock awarded under the
Stock Plan of 1994 for which the executive has sole voting power and
receives dividends, but which are subject to risk of forfeiture until the
date indicated:
<TABLE>
<S> <C> <C>
Mr. Chandler (75,000 until March 31, 2000 and 75,000 until March 31,
150,000 2001)
Mr.Watjen (25,000 until March 31, 2000 and 25,000 until March 31,
50,000 2001)
Mr. Best 2,000 (until March 25, 2000)
Mr. Copeland 1,000 (until May 19, 1999)
Mr. Madeja 1,000 (until February 28, 2000)
As a group 206,000 (including additional 2,000 until March 25, 2000)
</TABLE>
(2) Includes the following numbers of shares of phantom Provident common stock
representing deferred share rights awarded under the Provident Companies,
Inc. Non-Employee Director Compensation Plan of 1998:
<TABLE>
<S> <C>
Mr. Bolinder: 2,312
Mr. Jacks: 4,344
Mr. Pollard: 3,352
Mr. Sorensen: 6,609
</TABLE>
(3) Information concerning the nature of the ownership of the securities listed
here may be found below under the heading "Beneficial Ownership of Provident
Securities." Information concerning shares for which ownership is disclaimed
may also be found in that section. There is duplication in the number of
shares reported for Ms. Heffner and Mr. Maclellan of 5,299,402; therefore,
the number reported for all directors, nominees and executive officers as a
group have been adjusted accordingly.
(4) Mr. Probasco has sole voting and investment power with respect to 782,204
shares of Provident common stock. However, he disclaims beneficial ownership
of 350,000 shares of Provident common stock of which he has sole voting and
investment power as these shares are held in a family trust for the benefit
of Mr. Probasco's sister.
(5) Shares owned by Messrs. Chandler, Watjen, Best, Copeland and Madeja and the
executive officers as a group include shares owned in The MoneyMaker, a
long-term 401(k) Retirement Savings Plan and the Provident Employee Stock
Purchase Plan.
BENEFICIAL OWNERSHIP OF PROVIDENT COMMON STOCK. Detailed information about
the security ownership of beneficial owners of more than 5% of Provident common
stock is set forth below including beneficial ownership based on sole voting and
shared voting power and investment power. Due to the shared voting and
investment power relating to a large portion of the Provident common stock,
there is significant duplication in the reported beneficial ownership. This
results from ownership by certain members of the Maclellan family and trusts and
foundations established by them or for their benefit. The following chart is
provided to summarize the reported Maclellan family interests.
60
<PAGE>
<TABLE>
<CAPTION>
DIRECT OWNED PERCENT OF PROVIDENT
(VOTING COMMON STOCK
NAME AND ADDRESS OF DIRECT OWNER POWER) OUTSTANDING
- ------------------------------------------------------------------------------ ------------- ---------------------
<S> <C> <C>
The Maclellan Foundation, Inc................................................. 15,198,693 11.20
Chattanooga, Tennessee
R. J. and Cora L. Maclellan Trusts for The Maclellan Foundation............... 6,425,650 4.74
Chattanooga, Tennessee
Charitable Trusts............................................................. 5,740,994 4.23
Chattanooga, Tennessee
Trusts U/A R. J. Maclellan and Trusts U/A Cora L. Maclellan................... 5,082,410 3.75
for Families of H. O. Maclellan, Sr. and R. L. Maclellan
Chattanooga, Tennessee
Trusts U/A H. O. Maclellan, Sr. for Children and Grandchildren................ 4,463,634 3.29
Chattanooga, Tennessee
Kathrina H. Maclellan......................................................... 2,756,283 2.03
Lookout Mountain, Tennessee
Hugh O. Maclellan, Jr......................................................... 1,496,054 1.10
Chattanooga, Tennessee
Charlotte M. Heffner.......................................................... 915,390 0.67
Atlanta, Georgia
Other (Trusts, Estates and Family Ownership).................................. 2,896,548 2.14
Chattanooga, Tennessee
</TABLE>
The following tables present information about the beneficial owners of
Provident's common stock. Voting power and investment (dispositive) power is
shown separately in the following tables, which list those persons holding five
percent (5%) or more of such voting power and those persons holding five percent
(5%) or more of such investment power, respectively. Provident does not know of
any other person that is a beneficial owner of more than five percent (5%) of
Provident common stock.
61
<PAGE>
BENEFICIAL OWNERSHIP BASED ON VOTING POWER
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF PROVIDENT
OWNED(1) COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER (VOTING POWER) OUTSTANDING
- ---------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
The Maclellan Foundation, Inc....................... 15,198,693(2) 11.20
Chattanooga, Tennessee
R. J. and Cora L. Maclellan Trusts for.............. 6,425,650(3) 4.74
The Maclellan Foundation, Inc.
Chattanooga, Tennessee
Hugh O. Maclellan, Jr............................... 35,910,765(2)( (4) 26.47
Chattanooga, Tennessee
Kathrina H. Maclellan............................... 17,838,735(2)( (5) 13.15
(Mrs. Robert L. Maclellan)
Lookout Mountain, Tennessee
Dudley Porter, Jr................................... 9,007,230(3)(6) 6.64
(retired officer of Provident)
Chattanooga, Tennessee
Charlotte M. Heffner................................ 7,700,862(2)(7) 5.68
(Mrs. Richard L. Heffner)
Atlanta, Georgia
Zurich Insurance Company............................ 12,447,620(8) 9.18
Zurich, Switzerland
</TABLE>
(1) Beneficial ownership of securities is disclosed according to Rule 13d-3 of
the Securities Exchange Act of 1934. If shares beneficially owned by more
than one person were shown as beneficially owned by only one person, then
the total number of shares owned by The Maclellan Foundation, Inc.; the R.
J. and Cora L. Maclellan Trusts for The Maclellan Foundation, Inc.; Kathrina
H. Maclellan; Hugh O. Maclellan, Jr.; Dudley Porter, Jr.; and Charlotte M.
Heffner would have been equal to 44,981,016 shares of Provident common stock
(33.16%).
(2) Trustees of The Maclellan Foundation, Inc. (the "Maclellan Foundation") were
Hugh O. Maclellan, Jr., Kathrina H. Maclellan, Charlotte M. Heffner, Robert
H. Maclellan, A. S. MacMillan, Frank A. Brock, G. Richard Hostetter and
Ronald W. Blue. Hugh O. Maclellan, Jr. held a revocable proxy to vote the
shares of Provident common stock held by the Maclellan Foundation.
Accordingly, shares owned by the Maclellan Foundation have been included
among those listed for Hugh O. Maclellan, Jr. The Maclellan Foundation is a
charitable organization treated as a private foundation for federal income
tax purposes.
(3) Trustees of the R. J. Maclellan Trust for the Maclellan Foundation and the
Cora L. Maclellan Trust for the Maclellan Foundation were Hugh O. Maclellan,
Jr., Kathrina H. Maclellan, Dudley Porter, Jr., and SunTrust Banks, Inc. For
information concerning the stock ownership of SunTrust Banks, Inc., see
Footnote 12 in the "Beneficial Ownership Based on Investment Power" table
below. Voting power with respect to shares owned by these trusts was held by
Hugh O. Maclellan, Jr., Kathrina H. Maclellan and Dudley Porter, Jr. The R.
J. and Cora L. Maclellan Trusts for the Maclellan Foundation are charitable
organizations treated as private foundations for federal income tax
purposes.
62
<PAGE>
(4) Hugh O. Maclellan, Jr. had the power to vote the following shares of
Provident common stock:
<TABLE>
<S> <C>
Sole Voting Power.................................. 4,237,366 shares--3.12%
31,673,399%
Shared Voting Power................................ shares--23.35
----------------------
35,910,765%
Total.......................................... shares--26.47
</TABLE>
Totals listed above, and in the "Beneficial Ownership Based on Investment
Power" table below, do not include 85,128 shares of Provident common stock
voted solely by spouse, Nancy B. Maclellan, of which beneficial interest is
disclaimed. Also, totals do not include options to purchase 13,800 shares of
Provident common stock which are exercisable within 60 days of May 10, 1999.
(5) Kathrina H. Maclellan had the power to vote the following shares of
Provident common stock:
<TABLE>
<S> <C>
Sole Voting Power.................................. 2,756,283 shares--2.03%
15,082,452%
Shared Voting Power................................ shares--11.12
----------------------
17,838,735%
Total.......................................... shares--13.15
</TABLE>
(6) Dudley Porter, Jr. had the power to vote the following shares of Provident
common stock:
<TABLE>
<S> <C>
Sole Voting Power.................................. 5,360 shares--0.00%
Shared Voting Power................................ 9,001,870 shares--6.64%
----------------------
Total.......................................... 9,007,230 shares--6.64%
</TABLE>
Totals listed above, and in the "Beneficial Ownership Based on Investment
Power" table below, do not include 41,852 shares of Provident common stock
voted solely by spouse, Mary M. Porter, of which beneficial interest is
disclaimed.
(7) Charlotte M. Heffner had the power to vote the following shares of Provident
common stock:
<TABLE>
<S> <C>
Sole Voting Power.................................. 2,401,460 shares--1.77%
Shared Voting Power................................ 5,299,402 shares--3.91%
----------------------
Total.......................................... 7,700,862 shares--5.68%
</TABLE>
Totals listed above, and in the "Beneficial Ownership Based on Investment
Power" table below, do not include 65,664 shares of Provident common stock
voted solely by spouse, Richard L. Heffner, of which beneficial interest is
disclaimed. Also, totals do not include options to purchase 10,700 shares of
Provident common stock which are exercisable within 60 days of May 10, 1999.
With respect to the shares of Provident common stock held by SunTrust Bank,
Chattanooga, N.A., Provident has been informed that as of May 10, 1999: (a)
6,103,670 shares (4.50%) were owned by the Maclellan Foundation. and the R.
J. and Cora L. Maclellan Trusts for the Maclellan Foundation; and (b)
7,718,682 shares (5.69%) were owned by other trusts and charitable
organizations within the Maclellan family. Accordingly, of the shares of
Provident common stock reported as held by SunTrust Bank, Chattanooga, N.A.,
as of May 10, 1999, an aggregate of 13,822,352 shares of Provident common
stock (10.19%) were also included among those listed as beneficially owned
by either the Maclellan Foundation, the R. J. and Cora L. Maclellan Trusts
for the Maclellan Foundation, Kathrina H. Maclellan, Hugh O. Maclellan, Jr.,
Dudley Porter, Jr., or Charlotte M. Heffner.
(8) Zurich Insurance Company has sole voting power of 12,447,620 shares (9.18%)
and sole dispositive power of 6,098,414 shares (4.50%). The shares as to
which Zurich has sole voting power are owned by Zurich and a number of its
wholly owned subsidiaries, with the exception of 6,349,206 shares which are
owned by Longfellow I, LLC. Under the Stock Purchase Agreement, dated March
27, 1997, between Longfellow and Zurich, Longfellow granted Zurich a proxy
to vote the shares of the Provident common stock held by Longfellow.
63
<PAGE>
BENEFICIAL OWNERSHIP BASED ON INVESTMENT POWER
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY
OWNED(1) PERCENT OF PROVIDENT
(INVESTMENT COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER POWER) OUTSTANDING
- ------------------------------------------------------------------------------ ------------- ---------------------
<S> <C> <C>
The Maclellan Foundation, Inc.
Chattanooga, Tennessee...................................................... 15,198,693(2) 11.20
R. J. and Cora L. Maclellan
Trusts for The Maclellan Foundation, Inc.
Chattanooga, Tennessee...................................................... 6,425,650 4.74
Hugh O. Maclellan, Jr.
Chattanooga, Tennessee...................................................... 35,910,765( (3) 26.47
Kathrina H. Maclellan
(Mrs. Robert L. Maclellan)
Lookout Mountain, Tennessee................................................. 33,037,428( (4) 24.36
Charlotte M. Heffner
(Mrs. Richard L. Heffner)
Atlanta, Georgia............................................................ 23,023,035( (5) 16.97
Robert H. Maclellan
Lookout Mountain, Tennessee................................................. 18,264,646( (6) 13.46
Dudley Porter, Jr.
(retired officer of Provident)
Chattanooga, Tennessee...................................................... 9,007,230( (7) 6.64
Frank A. Brock
Lookout Mountain, Tennessee................................................. 16,086,035( (8) 11.86
G. Richard Hostetter
Chattanooga, Tennessee...................................................... 15,204,693( (9) 11.21
A. S. MacMillan
Atlanta, Georgia............................................................ 15,199,595( 10) 11.21
Ronald W. Blue
Atlanta, Georgia............................................................ 15,198,693( 11) 11.21
SunTrust Banks, Inc.
Atlanta, Georgia............................................................ 15,123,568(12) 11.15
</TABLE>
- ------------------------
(1) Beneficial ownership of securities is listed according to Rule 13d-3 of the
Exchange Act. If shares beneficially owned by more than one person were
shown as beneficially owned by only one person, then the total number of
shares owned by the Maclellan Foundation; the R. J. and Cora L. Maclellan
Trusts for the Maclellan Foundation; Kathrina H. Maclellan, Hugh O.
Maclellan, Jr.; Charlotte M. Heffner; Robert H. Maclellan; Dudley Porter,
Jr.; Frank A. Brock; G. Richard Hostetter; A. S. MacMillan; Ronald W. Blue;
and SunTrust Banks, Inc. (with respect to the Maclellan family only) would
have been equal 45,373,653 shares of Provident common stock (33.45%). The
totals shown are for the total Maclellan family interest only. Shares of
common stock held by SunTrust Bank, Chattanooga, N.A. which are included in
the totals for the Maclellan family include 13,843,157 shares of Provident
common stock.
(2) The 15,198,693 shares of Provident common stock owned by the Maclellan
Foundation also have been included among those listed for Hugh O. Maclellan,
Jr., Kathrina H. Maclellan, Charlotte M. Heffner, Robert H. Maclellan, A. S.
MacMillan, Frank A. Brock, G. Richard Hostetter and Ronald W. Blue, the
trustees of the Maclellan Foundation, all of whom share investment power
with respect to these shares.
64
<PAGE>
(3) Hugh O. Maclellan, Jr. had the power to invest the following shares of
Provident common stock:
<TABLE>
<S> <C>
Sole Investment Power............................ 2,593,974 shares-- 1.91%
Shared Investment Power.......................... 33,316,791 shares--24.56%
-------------------------
Total.......................................... 35,910,765 shares--26.47%
</TABLE>
These shares listed above as beneficially owned by Mr. Maclellan based upon
investment power include the 15,198,693 shares of Provident common stock owned
by the Maclellan Foundation and 6,425,650 shares of Provident common stock owned
by the R. J. and Cora L. Maclellan Trusts for the Maclellan Foundation. Totals
listed above do not include 85,128 shares of Provident common stock for which
his spouse, Nancy B. Maclellan, had sole investment power, and for which
beneficial ownership is disclaimed. Also totals do not include options to
purchase 13,800 shares of Provident common stock which are exercisable within 60
days of May 10, 1999.
(4) Kathrina H. Maclellan had the power to invest the following shares of
Provident common stock:
<TABLE>
<S> <C>
Sole Investment Power............................ 2,756,283 shares-- 2.03%
Shared Investment Power.......................... 30,281,145 shares--22.33%
-------------------------
Total.......................................... 33,037,428 shares--24.36%
</TABLE>
These shares listed above as beneficially owned by Mrs. Maclellan based upon
investment power include the 15,198,163 shares of Provident common stock owned
by the Maclellan Foundation and 6,425,650 shares of Provident common stock owned
by the R. J. and Cora L. Maclellan Trusts for the Maclellan Foundation.
(5) Charlotte M. Heffner had the power to invest the following shares of
Provident common stock:
<TABLE>
<S> <C>
Sole Investment Power............................ 915,390 shares-- 0.67%
Shared Investment Power.......................... 22,107,645 shares--16.30%
-------------------------
Total.......................................... 23,023,035 shares--16.97%
</TABLE>
These shares listed above as beneficially owned by Mrs. Heffner based upon
investment power include 15,198,693 shares of Provident common stock owned by
the Maclellan Foundation for which Mrs. Heffner had shared investment power.
Totals listed above do not include 65,664 shares of Provident common stock for
which her spouse, Richard L. Heffner, had sole investment power, and for which
beneficial ownership is disclaimed. Also totals do not include options to
purchase 10,700 shares of Provident common stock which are exercisable within 60
days of May 10, 1999.
(6) Robert H. Maclellan had the power to invest the following shares of
Provident common stock:
<TABLE>
<S> <C>
Sole Investment Power............................ 383,805 shares-- 0.28%
Shared Investment Power.......................... 17,880,841 shares--13.18%
-------------------------
Total.......................................... 18,264,646 shares--13.46%
</TABLE>
These shares listed above as beneficially owned by Mr. Maclellan based upon
investment power include 15,198,693 shares of Provident common stock owned by
the Maclellan Foundation.
65
<PAGE>
(7) Dudley Porter, Jr. had the power to invest the following shares of Provident
common stock:
<TABLE>
<S> <C>
Sole Investment Power.............................. 5,360 shares--0.00%
Shared Investment Power............................ 9,001,870 shares--6.64%
-----------------------
Total............................................ 9,007,230 shares--6.64%
</TABLE>
Totals listed above do not include 41,852 shares of Provident common stock
for which his spouse, Mary M. Porter, had sole investment power, and for which
beneficial ownership is disclaimed.
(8) Frank A. Brock had the power to invest the following shares of Provident
common stock:
<TABLE>
<S> <C>
Sole Investment Power............................ 1,930 shares-- 0.00%
Shared Investment Power.......................... 16,084,105 shares--11.86%
-------------------------
Total.......................................... 16,086,035 shares--11.86%
</TABLE>
These shares listed above as beneficially owned by Mr. Brock based upon
investment power include 15,198,693 shares of Provident common stock owned by
the Maclellan Foundation.
(9) G. Richard Hostetter had the power to invest the following shares of
Provident common stock:
<TABLE>
<S> <C>
Sole Investment Power............................ 6,000 shares-- 0.00%
Shared Investment Power.......................... 15,198,693 shares--11.21%
-------------------------
Total.......................................... 15,204,693 shares--11.21%
</TABLE>
In addition to the 15,198,693 shares of Provident common stock owned by the
Maclellan Foundation for which Mr. Hostetter had shared investment power, Mr.
Hostetter held sole investment and sole voting power for 6,000 shares of
Provident common stock.
(10) A. S. MacMillan had the power to invest the following shares of Provident
common stock:
<TABLE>
<S> <C>
Sole Investment Power............................ 902 shares-- 0.00%
Shared Investment Power.......................... 15,198,693 shares--11.21%
-------------------------
Total.......................................... 15,199,595 shares--11.21%
</TABLE>
In addition to the 15,198,693 shares of Provident common stock owned by the
Maclellan Foundation, for which Mr. MacMillan had shared investment power, Mr.
MacMillan held sole investment and sole voting power for 902 shares of Provident
common stock. Also totals do not include options to purchase 7,500 shares of
Provident common stock which are exercisable within 60 days of May 10, 1999.
(11) Ronald W. Blue had the power to invest the following shares of Provident
common stock:
<TABLE>
<S> <C>
Sole Investment Power............................ 0 shares-- 0.00%
Shared Investment Power.......................... 15,198,693 shares--11.21%
-------------------------
Total.......................................... 15,198,693 shares--11.21%
</TABLE>
These shares listed above as beneficially owned by Mr. Blue based upon
investment power, include 15,198,693 shares of Provident common stock owned by
the Maclellan Foundation.
(12) SunTrust Banks, Inc. ("SunTrust"), a bank holding company, has informed
Provident that as of May 10, 1999, certain subsidiaries of SunTrust held in
various fiduciary capacities an aggregate of 15,123,568 shares (11.15%) of
Provident common stock. As to such shares, all of which are held in
66
<PAGE>
various fiduciary capacities, SunTrust and certain of its subsidiaries may
be deemed beneficial owners; however, SunTrust and such subsidiaries
disclaim any beneficial interest in such shares. Shares reported include
shares also reported for the Maclellan family as well as other shares held
for owners unrelated to the Maclellan family.
SunTrust and its subsidiaries had the power to invest the following shares
of Provident common stock:
<TABLE>
<S> <C>
Sole Investment Power............................ 746,923 shares-- 0.55%
Shared Investment Power.......................... 14,376,645 shares--10.60%
-------------------------
Total.......................................... 15,123,568 shares--11.15%
</TABLE>
SunTrust and its subsidiaries had the power to vote the following shares of
Provident common stock:
<TABLE>
<S> <C>
Sole Voting Power.................................. 1,654,186 shares--1.22%
Shared Voting Power................................ 62,415 shares--0.05%
-----------------------
Total............................................ 1,716,601 shares--1.27%
</TABLE>
As to the shares described above, SunTrust has informed Provident that as of
May 10, 1999, an aggregate of 14,824,002 shares (10.62%) of Provident common
stock was held in various fiduciary capacities by SunTrust Bank, Chattanooga,
N.A., which is a direct subsidiary of SunTrust Bank of Tennessee, which is a
direct subsidiary of SunTrust.
As of May 10, 1999, SunTrust Bank, Chattanooga, N.A. had the power to invest
the following shares:
<TABLE>
<S> <C>
Sole Investment Power............................ 456,357 shares-- 0.34%
Shared Investment Power.......................... 14,367,645 shares--10.59%
-------------------------
Total.......................................... 14,824,002 shares--10.93%
</TABLE>
As of May 10, 1999, SunTrust Bank, Chattanooga, N.A. had the power to vote
the following shares:
<TABLE>
<S> <C>
Sole Voting Power.................................. 1,571,304 shares--1.16%
Shared Voting Power................................ 62,415 shares--0.05%
-----------------------
Total............................................ 1,633,719 shares--1.20%
</TABLE>
With respect to the shares of Provident common stock held by SunTrust Bank,
Chattanooga, N.A., Provident has been informed that (a) 6,103,670 shares (4.50%)
were owned by the Maclellan Foundation and the R. J. and Cora L. Maclellan
Trusts for the Maclellan Foundation; and (b) 7,739,487 shares (5.71%) were owned
by other trusts and charitable organizations within the Maclellan family.
Accordingly, an aggregate of 13,843,157 shares (10.21%) were also included among
those listed as beneficially owned by either the R. J. and Cora L. Maclellan
Trusts for the Maclellan Foundation, Kathrina H. Maclellan, Hugh O. Maclellan,
Jr., Robert H. Maclellan, Dudley Porter, Jr., or Charlotte M. Heffner.
For information concerning the compensation of certain of Provident's
executive officers, see pages 133 to 140 of this document.
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<PAGE>
UNUM
The following table sets forth information regarding the beneficial
ownership of UNUM common stock, as of May 10, 1999, by each director, nominee
and named executive officer, and by all directors, nominees and executive
officers of UNUM as a group. The share holdings reported for all directors,
nominees and executive officers as a group total 1.71 percent of the outstanding
shares on May 10, 1999, as calculated pursuant to the rules of the Securities
and Exchange Commission. All other amounts reported total less than one percent
of the outstanding shares on such date. The total number of shares beneficially
owned by each person include those which are deemed to be beneficially owned
under applicable Securities and Exchange Commission regulations. Unless
otherwise indicated, the person indicated holds sole voting and dispositive
power. The percentage of UNUMProvident common stock that each person will own
following the merger is based on the number of shares of UNUM common stock and
Provident common stock, taking into account the exchange ratio, outstanding as
of May 10, 1999.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED SUBJECT
TO OPTIONS TOTAL % OF
SHARES EXERCISABLE AS SHARES % OF UNUM UNUMPROVIDENT
BENEFICIALLY OF BENEFICIALLY COMMON COMMON
PERSON OWNED JULY 10, 1999 OWNED STOCK STOCK
- --------------------------------------- ----------- --------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
James F. Orr (1)(2).................... 296,045 627,340 923,385 * *
Gayle O. Averyt (3).................... 300,251 10,000 310,251 * *
Robert E. Dillon (1)................... 11,715 21,000 32,715 * *
Gwain H. Gillespie (1)(4).............. 63,622 16,000 79,622 * *
Ronald E. Goldsberry (1)............... 8,845 18,000 26,845 * *
Donald W. Harward (5).................. 6,011 16,000 22,011 * *
George J. Mitchell (1)................. 3,839 14,000 17,839 * *
Cynthia A. Montgomery (1)(6)........... 9,329 22,000 31,329 * *
James L. Moody, Jr. (1)................ 9,191 24,000 33,191 * *
Lawrence R. Pugh (1)................... 16,336 24,000 40,336 * *
Lois Dickson Rice (1).................. 2,370 18,000 20,370 * *
John W. Rowe (1)....................... 4,237 16,000 20,237 * *
Robert W. Crispin (1).................. 99,002 181,814 280,816 * *
Elaine D. Rosen (1).................... 61,362 68,852 130,214 * *
Robert E. Broatch (1).................. 38,414 54,958 93,372 * *
Kevin P. O'Connell (1)................. 56,156 17,869 74,025 * *
All directors, nominees and executive
officers as a group (18 persons
including the above named)** (7)..... 1,121,926 1,284,375 2,406,301 1.71 1.00
</TABLE>
- ------------------------
* Denotes less than one percent.
** Includes officers of subsidiaries who are not officers of UNUM but are
considered "executive officers" of UNUM under rules of the Securities and
Exchange Commission.
(1) Includes restricted stock units with a value equivalent to 30,400 shares of
UNUM common stock held by Mr. Crispin; also includes the following number of
shares of phantom UNUM common stock credited to the named executive
officers' accounts under UNUM's Nonqualified 401(k) Plan: Mr. Orr: 4,107
shares; Mr. Crispin: 4,235 shares; Ms. Rosen: 2,059 shares; Mr. Broatch:
2,241 shares; and Mr. O'Connell: 1,920 shares; and the following number of
shares of phantom UNUM common stock credited to the non-employee directors'
accounts under UNUM's Director Deferred
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<PAGE>
Compensation Plan: Mr. Dillon: 6,115; Mr. Gillespie: 5,836; Mr. Goldsberry:
6,045; Mr. Mitchell: 2,839; Ms. Montgomery: 2,129; Mr. Moody: 1,191; Mr.
Pugh: 12,336; Ms. Rice: 1,770; and Mr. Rowe: 3,237.
(2) Includes 30,459 shares held by Mr. Orr's spouse and child.
(3) Includes 33,349 shares held by Mr. Averyt's spouse and 111,698 shares held
in trust for the benefit of the family members under various trusts pursuant
to which Mr. Averyt, as trustee, has sole or shared voting or dispositive
power. Mr. Averyt disclaims beneficial ownership of 19,077 of these shares
held in trust.
(4) Includes 51,708 shares held jointly with or by Mr. Gillespie's spouse.
(5) Includes 6,011 shares held jointly with Dr. Harward's spouse.
(6) Includes 7,200 shares held jointly with Ms. Montgomery's spouse.
(7) Includes 192,806 shares held in the name of a spouse, child or certain other
relative sharing the same home as the director or executive officer, or held
by the director or executive officer, or the spouse of the director or
executive officer, as a trustee or as a custodian for family members.
Indicated below are the number of shares beneficially owned as of December
31, 1998, by holders of more than five percent of UNUM common stock as reported
to the Securities and Exchange Commission by such holders on Schedule 13G and
the percentage of the total shares of UNUM common stock outstanding which such
holdings represented on such date. FMR Corp., 82 Devonshire Street, Boston, MA
02109, reported beneficial ownership of 8,593,853 shares (6.2%), including sole
voting power over 422,883 shares and sole dispositive power over all such
shares. In addition, J.P. Morgan & Co. Incorporated, 60 Wall Street, New York,
NY 10260, reported beneficial ownership of 10,084,034 shares (7.3%), including
sole voting power over 7,303,438 shares, shared voting power over 194,600
shares, sole dispositive power over 9,864,984 shares and shared dispositive
power over 216,850 shares.
Information concerning executive compensation is contained in UNUM's Annual
Report on Form 10-K for the year ended December 31, 1998, and is incorporated
herein by reference. For information on how to obtain this document, see "Where
You Can Find More Information" on page 144.
EMPLOYMENT AGREEMENTS
In connection with the signing of the merger agreement, Provident and UNUM
entered into a new employment agreement with Mr. Orr and Provident entered into
a new employment agreement with Mr. Chandler. The agreements for Messrs. Orr and
Chandler will take effect at the completion of the merger and will supersede Mr.
Orr's existing executive severance agreement with UNUM and Mr. Chandler's
existing employment agreement with Provident. The new agreements will be in
effect until June 30, 2005, and Mr. Chandler's agreement will be automatically
renewed for additional one-year terms unless prior notice not to renew is given
by either party.
Pursuant to the employment agreements, as amended, Mr. Orr initially will
serve as Chairman of the Board and Chief Executive Officer of UNUMProvident and
Mr. Chandler initially will serve as President and Chief Operating Officer of
UNUMProvident, each with equal participation in setting the overall strategy of
UNUMProvident, until June 30, 2000, or such earlier date upon which Mr. Orr
resigns as Chief Executive Officer. During the period Mr. Chandler is serving as
Chief Operating Officer, the operating and staff units of UNUMProvident will
report to Mr. Chandler and he will be responsible for their staffing and
performance. After June 30, 2000, Mr. Orr will serve as executive
69
<PAGE>
Chairman of the Board and Chairman of the Executive Committee of the
UNUMProvident board of directors and Mr. Chandler will succeed Mr. Orr as the
Chief Executive Officer of UNUMProvident and continue to serve as President.
Messrs. Orr and Chandler both will serve on the UNUMProvident board of directors
from the completion of the merger and Mr. Chandler will succeed to the position
of Chairman of the Board no later than July 1, 2005, or upon Mr. Orr's earlier
termination.
Messrs. Orr and Chandler each will receive an initial annual base salary of
$900,000. Mr. Orr will be eligible to receive an annual bonus with a target
level not less than 100% of his annual base salary through June 30, 2001
(receiving an annual bonus for the period January 1, 2001 through June 30, 2001
of 50% of the annual bonus that would have been paid with respect to the full
calendar year). Mr. Chandler will be eligible for an annual bonus with a target
level not less than 100% of his annual base salary during the term of his
agreement. Messrs. Orr and Chandler each will receive immediately after the
completion of the merger an initial grant of options to acquire 500,000 shares
of UNUMProvident common stock at fair market value pursuant to the existing
Provident Stock Plan of 1999, which will be binding on UNUMProvident after the
merger, to vest ratably over four years. Mr. Orr will receive an additional
one-time grant of 250,000 shares of UNUMProvident common stock in the form of
restricted stock, all restrictions upon which will lapse on July 1, 2005, if Mr.
Orr is still employed by UNUMProvident or is rendering consulting services to
UNUMProvident at that time, or upon Mr. Orr's earlier death or termination
without cause or for good reason. Mr. Orr may elect to convert his status from
employee to consultant for a period of at least two-years at any time after June
30, 2000, following his resignation as executive Chairman of the Board. As a
consultant, his monthly retainer will equal one-twelfth of his annual base
salary immediately preceding his becoming a consultant.
Messrs. Orr and Chandler both will be eligible for a retirement benefit
equal to 50% (the "replacement percentage") of the average of his base salary
and annual bonus for the five years in which such amounts were highest within
the last ten years of employment, less any benefit payable pursuant to
UNUMProvident's defined benefit retirement plans. Such benefit will be paid only
if such executive remains employed until June 30, 2001, or is terminated without
cause or for good reason (as such terms are defined in the agreements, a
"Qualifying Termination"). After each of Mr. Orr or Mr. Chandler reaches age 55,
the replacement percentage will increase by 1% per year, up to a maximum of 60%.
Upon Mr. Orr's or Mr. Chandler's death, his surviving spouse will be paid an
annual benefit of 75% of the retirement benefit for her life, commencing when
such executive would have attained age 55. Upon commencement of the retirement
benefit, any amounts owed under Mr. Orr's current split-dollar life policy will
be forgiven and the amount forgiven will be grossed up for applicable federal,
state and local taxes.
Each agreement provides for payments upon Mr. Orr's or Mr. Chandler's
Qualifying Termination, equal to the greater of:
(x) three times the sum of the highest annual bonus paid to such
executive for any of the three years prior to termination (the "Recent
Annual Bonus") plus such executive's annual base salary; and
(y) base salary plus such executive's Recent Annual Bonus through the
remainder of the term, plus the present value of the retirement benefit,
assuming such executive had accumulated the greater of three additional
years of employment and the number of years and portions thereof from the
date of termination until the end of the term.
Upon a Qualifying Termination, all stock options will vest, all restrictions
on restricted stock awards will lapse, other equity-based awards will vest and
options will remain exercisable for a period of three years or the earlier
expiration of their initial term. Lifetime medical and dental benefits will be
provided to Mr. Orr and Mr. Chandler and their spouses on the same basis as such
benefits are
70
<PAGE>
provided to the Chief Executive Officer of UNUMProvident, but coverage will be
secondary and the aggregate amount of premium payments for such coverage may not
exceed $1,000,000. Mr. Chandler will receive this coverage on any termination
after age 55 and Mr. Orr will receive this coverage upon any termination.
If any payments pursuant to the agreements or otherwise would be subject to
any excise tax under Section 4999 of the Internal Revenue Code, UNUMProvident
will provide an additional payment such that the executive retains a net amount
equal to the payments he would have retained if such excise tax had not applied.
Messrs. Orr and Chandler both are subject to a non-competition provision for
one year following termination of employment or termination of Mr. Orr's
consulting arrangement, if applicable.
In connection with the completion of the merger, Provident and UNUM have
also approved the general terms of employment agreements with Messrs. Crispin,
Watjen and Copeland, and Ms. Rosen. The respective agreements for each of these
individuals, which Provident and UNUM currently expect will be signed prior to
the completion of the merger, would supersede current agreements regarding the
employment and termination of these individuals. UNUM and Provident are
currently in the process of an overall evaluation of compensation in connection
with determining compensation and benefits for different levels of officers of
UNUMProvident. Subject to final agreement, the current terms for Messrs. Crispin
and Watjen and Ms. Rosen include base salaries in the range of $500,000 to
$600,000 and initial grants of options to acquire approximately 150,000 shares
of UNUMProvident common stock at fair market value. Mr. Copeland's base salary
will be in the range of $350,000 to $400,000 and his initial grant will cover
approximately 100,000 shares. The stock options will be granted under the terms
of the existing Provident Companies, Inc. Stock Plan of 1999, to vest ratably
over four years. Each of these executives will be eligible for a target bonus of
75% of base salary and will hold the title of Executive Vice President.
Mr. Crispin and Ms. Rosen would continue to be entitled to a retirement
benefit under the current formula contained in the UNUM Corporation Supplemental
Executive Retirement Plan until January 1, 2005, or such later date deemed
appropriate by the Compensation Committee of UNUMProvident, and Mr. Crispin's
historic pension arrangement, which grants him two times his years of service
for ten years, would continue in effect and would be taken into account for
severance purposes. Mr. Watjen and Mr. Copeland would also be entitled to an
annual retirement benefit under the terms of the current formula contained in
the UNUM Corporation Supplemental Executive Retirement Plan until January 1,
2005, or such later date deemed appropriate by the Compensation Committee of
UNUMProvident, but such benefit will not be less than the benefit each executive
will have accrued at the completion of the merger under the Provident Companies,
Inc. Supplemental Executive Retirement Plan.
In the event of termination during the three-year period following the
merger and after any subsequent change in control, these individuals would each
receive, generally on the basis of termination of employment without cause or
for good reason, an amount equal to three times salary and bonus and three years
of pension accrual, and continued welfare benefit coverage for three years. Upon
such a termination, all stock options will vest, all restrictions on restricted
stock awards will lapse, other equity-based awards will vest and options will
remain exercisable for a period of two years or the earlier expiration of their
initial term. Upon termination at any other time without cause or for good
reason, each of these individuals would receive two times salary and bonus and
two years of health continuation coverage.
If any payments pursuant to the agreements or otherwise would be subject to
any excise tax under Section 4999 of the Internal Revenue Code, UNUMProvident
will provide an additional payment such
71
<PAGE>
that these individuals retain a net amount equal to the payments each would have
retained if such excise tax had not applied.
PROVIDENT AND UNUM STOCK-BASED RIGHTS
As of May 10, 1999, approximately 2,652,216 unvested Provident stock options
held by producers, retirees and employees will, pursuant to the terms of the
Provident stock-based compensation plans, become fully vested and exercisable
upon adoption of the merger agreement by Provident stockholders. Of this
2,652,216, approximately 1,790,000 stock options are held by executive officers
and directors of Provident. The dollar amount of in-the-money options held by
Provident's executive officers, and directors that will become vested upon such
adoption and approval is approximately $32.7 million, based on the closing sale
price of Provident common stock on the NYSE on May 10, 1999. As of May 10, 1999,
approximately 3,426,532 unvested UNUM stock options held by employees will,
pursuant to the terms of the UNUM stock-based compensation plans, become fully
vested and exercisable upon the adoption of the merger agreement and approval of
the merger by UNUM stockholders or upon completion of the merger, depending upon
the terms of the particular plan. Of this 3,426,532, approximately 467,761 stock
options are held by executive officers and directors of UNUM. The dollar amount
of in the money options held by UNUM's executive officers and directors that
will become vested either upon such adoption and approval or upon completion of
the merger, as applicable, is approximately $3.2 million. Pursuant to the terms
of the Provident stock-based compensation plans and the UNUM stock-based
compensation plans, as a result of the merger, the restrictions on certain
awards of restricted stock, including performance-based restricted stock, and
certain other stock-based performance awards held by employees, including
certain executive officers and employee directors, will lapse. Approximately
237,766 shares of restricted Provident common stock will have their restrictions
lapse upon stockholder adoption of the merger agreement and approximately
375,092 shares of restricted UNUM common stock will have their restrictions
lapse as a result of the merger.
In the merger agreement, Provident has agreed that before the Provident
Reclassification Amendment becomes effective, it will take all action necessary
to adjust all Provident stock options granted under Provident's stock-based
compensation plans to give effect to the Provident Reclassification Amendment.
Such adjustment will apply to all stock options granted under such plans,
whether vested or unvested, and outstanding immediately prior to the
effectiveness of the Provident Reclassification Amendment. As a result of such
adjustment, each such option will be converted into an option to acquire a
number of shares of Provident common stock giving effect to the Provident
Reclassification Amendment at an exercise price that is correspondingly
adjusted.
In the merger agreement, UNUM has agreed that before the merger is
completed, it will take all action necessary to adjust all UNUM stock options
granted under UNUM's stock-based compensation plans to give effect to the
merger. Such adjustment will apply to all stock options granted under such
plans, whether vested or unvested, and outstanding immediately prior to
completion of the merger. As a result of such adjustment, each such option will
be amended and converted into an option to acquire one share of UNUMProvident
common stock for each share of UNUM common stock subject to the option.
After the completion of the merger:
- all outstanding stock options to purchase shares of Provident common stock
under the Provident stock-based compensation plans, as adjusted in
connection with the Provident Reclassification Amendment, whether vested
or unvested, will be options to acquire UNUMProvident common stock; and
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<PAGE>
- all outstanding stock options to purchase shares of UNUM common stock
under UNUM's stock-based compensation plans will be options to acquire
UNUMProvident common stock at the same aggregate spread.
GOVERNANCE OF UNUMPROVIDENT AFTER THE MERGER
In the merger agreement, the parties agreed to various governance
arrangements for UNUMProvident, the terms of which are set forth in Exhibit B to
the merger agreement, which is attached as Appendix A to this document and some
of which have been incorporated into the terms of the UNUMProvident bylaws. A
summary of the terms of these arrangements is set forth below.
BOARD OF DIRECTORS
The UNUMProvident bylaws contain provisions relating to the composition of
the UNUMProvident board of directors. These provisions are described under
"--Interests of Management and Directors in the Merger" on page 56.
NOMINATION OF DIRECTORS
The UNUMProvident bylaws provide that the Executive Committee of the
UNUMProvident board of directors is the only committee of the board with the
power to recommend nominees to the full board of directors:
- for election to the UNUMProvident board of directors at the stockholders
meetings at which directors are to be elected,
- to fill vacancies on the UNUMProvident board of directors in between such
stockholders meetings, and
- to serve on, and fill vacancies in, any committee of the UNUMProvident
board of directors.
EXECUTIVE COMMITTEE
The UNUMProvident bylaws provide that, until July 1, 2001, the Executive
Committee will consist of three directors initially designated by UNUM, which
will include the Chief Executive Officer initially serving UNUMProvident, who
will serve as Chairman of the Executive Committee as provided in his employment
contract, and three directors initially designated by Provident, which will
include the President initially serving UNUMProvident.
MANAGEMENT COMMITTEES
The merger agreement provides that, upon completion of the merger, a
Corporate Policy Committee and an Operating Committee will be established.
The Corporate Policy Committee will consist of:
<TABLE>
<S> <C>
- - Mr. Orr (as Chairman) - Mr. Watjen
- - Mr. Chandler - Mr. Crispin
- - Mr. Copeland - Ms. Rosen
</TABLE>
Subject to the authority of the UNUMProvident board of directors, this
committee will assist the Chief Executive Officer and the President in setting
the overall strategic direction for UNUMProvident. In addition, during the
integration period immediately following the completion of the merger, this
committee will serve as the transition committee. Subject to the foregoing, Mr.
Watjen will direct the transition and integration team.
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<PAGE>
The Operating Committee will consist of:
<TABLE>
<S> <C>
- - Mr. Orr - Mr. Watjen
- - Mr. Chandler (as Chairman) - Mr. Crispin
- - Mr. Copeland - Ms. Rosen
</TABLE>
The Operating Committee may also include other officers of UNUMProvident.
Subject to the authority of the UNUMProvident board of directors and the Chief
Executive Officer, this committee will assist the President in managing
UNUMProvident.
AMENDMENT OF CORPORATE GOVERNANCE ARRANGEMENTS
In order to amend the provisions of the UNUMProvident bylaws that
incorporate the governance arrangements set forth above and in order to take
certain other actions, the UNUMProvident bylaws provide for a supermajority vote
of the board of directors for a limited period of time. In particular, the
UNUMProvident bylaws provide that until July 1, 2001, any of the following
changes require, when a quorum of the UNUMProvident board of directors is
present, the affirmative vote of not less than 75% of the directors voting at a
meeting for which proper notice of the actions taken was duly given:
- any change in the size of the UNUMProvident board of directors or in the
size of any class of directors;
- any change in the composition or power and authority of the Executive
Committee of the UNUMProvident board of directors or the chairmanship
thereof;
- any change or amendment to the UNUMProvident bylaws;
- any proposals to be submitted to the stockholders of UNUMProvident by the
UNUMProvident board of directors;
- the removal of (1) the Chairman of the Board and Chief Executive Officer
other than in accordance with his employment contract, or (2) the
President and Chief Operating Officer other than in accordance with his
employment contract, in each case, appointed upon completion of the
merger; and
- any modification to the provisions of either of the respective employment
contracts of Messrs. Orr and Chandler, or any modification to either of
their respective roles, duties or authority.
PUBLIC TRADING MARKETS
UNUM common stock is currently listed on the NYSE and the Pacific Exchange,
Inc. under the symbol "UNM." Upon completion of the merger, UNUM common stock
will be delisted from the NYSE and the Pacific Exchange, Inc. and deregistered
under the Securities Exchange Act of 1934. Provident common stock is currently
listed on the NYSE under the symbol "PVT." Application will be made for the
listing on the NYSE of the shares of UNUMProvident common stock to be issued in
the merger. After the merger, UNUMProvident common stock will be listed on the
NYSE under UNUM's current symbol, "UNM." The authorization for listing on the
NYSE, subject to official notice of issuance, of the shares of UNUMProvident
common stock issuable to UNUM stockholders pursuant to the merger agreement is a
condition to the completion of the merger.
ABSENCE OF APPRAISAL RIGHTS
Appraisal rights are statutory rights that enable stockholders who object to
certain extraordinary transactions, such as mergers, to demand that the
corporation pay the fair value for their shares as determined by a court in a
judicial proceeding in lieu of receiving the consideration offered to
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<PAGE>
stockholders in connection with the extraordinary transaction. Appraisal rights
are not available in all circumstances.
Provident stockholders are not entitled to appraisal rights under Delaware
law in connection with the merger, the reclassification or the amendments to the
stock plan because Provident common stock was listed on the NYSE on the record
date for the Provident meeting and the shares of UNUMProvident common stock will
be listed on the NYSE at the completion of the merger.
UNUM stockholders are not entitled to appraisal rights under Delaware law in
connection with the merger because the UNUM common stock was listed in the NYSE
on the record date for the UNUM special meeting and the shares of UNUMProvident
common stock that such holders will be entitled to receive will be listed on the
NYSE at the completion of the merger.
RESALE OF UNUMPROVIDENT COMMON STOCK
The shares of UNUMProvident common stock issuable to UNUM stockholders in
the merger have been registered under the Securities Act of 1933. Such shares
may be traded freely and without restriction by those stockholders not deemed to
be "affiliates" of UNUM prior to the date of the UNUM special meeting, or of
UNUMProvident following the completion of the merger, as that term is defined in
the rules under the Securities Act. "Affiliates" are generally defined as
persons who control, are controlled by or are under common control with, UNUM at
the time of the UNUM special meeting or UNUMProvident following the completion
of the merger. Shares of UNUMProvident common stock received by those
stockholders of UNUM who are deemed to be "affiliates" of UNUM may be resold
without registration as provided for by Rule 144 or 145, or as otherwise
permitted, under the Securities Act, subject to the provisions of the UNUM
affiliates letter referred to below. The registration statement to register the
shares of UNUMProvident common stock to be issued in the merger, of which this
document is a part, does not cover any resales of UNUMProvident common stock
received by affiliates of UNUM in the merger or by certain of their family
members or related interests.
Pursuant to the merger agreement, each of UNUM and Provident has agreed to
deliver to the other no later than 40 days prior to the closing date of the
merger, a letter identifying all persons who are, in the opinion of such
company, at the time the merger agreement is submitted for adoption by its
stockholders, "affiliates" of such company for purposes of qualifying the merger
for "pooling of interests" accounting treatment and, in the case of "affiliates"
of UNUM, for purposes of Rule 145 under the Securities Act. Each of UNUM and
Provident has agreed to use its respective reasonable efforts to cause each
person who is identified as an "affiliate" in the letter referred to above to
deliver to Provident, in the event such person is a UNUM stockholder, and to
UNUM, in the event such person is a Provident stockholder, 30 days prior to the
closing date, a written agreement in the form attached to the merger agreement.
The provisions of the agreement executed by affiliates of UNUM restrict sales by
such affiliates of securities of UNUM prior to the merger and of securities of
UNUMProvident following the merger. The provisions of the agreement executed by
affiliates of Provident restrict sales by such affiliates of securities of
Provident, and UNUMProvident after completion of the merger, at certain times
prior to and following the merger.
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REGULATORY FILINGS, APPROVALS AND CLEARANCES
Pursuant to the merger agreement, each of Provident and UNUM has agreed:
(1) to promptly make its respective filings and any other required
submissions under the Hart-Scott-Rodino Act and other regulatory
filings with respect to the merger and the transactions contemplated
by the transaction documents; and
(2) to use its reasonable efforts to promptly take all other action that
may be necessary, proper or appropriate to obtain as promptly as
practicable all consents, approvals, clearances and other
authorizations required to be obtained from any governmental entity
or third party in connection with the execution and delivery of the
merger agreement and the consummation of the merger and the other
transactions contemplated by the transaction documents as soon as
practicable after the date of the merger agreement.
However, neither Provident nor UNUM is required to agree to, or proffer:
(1) to divest or hold separate any of its, or any of its affiliates'
businesses or assets; or
(2) to cease to conduct business or operations in any jurisdiction in
which it or any of its subsidiaries conducts business or operations
as of the date of the merger agreement.
ANTITRUST
Under the Hart-Scott-Rodino Act, and the rules promulgated thereunder by the
Federal Trade Commission, certain transactions, including the merger, may not be
completed unless notifications have been given and certain information has been
furnished to the Federal Trade Commission and the Antitrust Division of the
Department of Justice and the waiting period requirements specified in the
Hart-Scott-Rodino Act have been satisfied. Provident and UNUM each filed
notification and report forms under the Hart-Scott-Rodino Act with the Antitrust
Division and the Federal Trade Commission on December 7, 1998. On January 29,
1999, the Federal Trade Commission issued a request for additional information
and other documentary material to Provident and UNUM relating to the merger. On
May 18, 1999, the Federal Trade Commission announced that it had accepted for
public comment a proposed consent agreement containing an order with Provident
and UNUM which would require UNUMProvident to submit historical individual
disability insurance claims data in response to any industry-wide request for
data by the Society of Actuaries or the National Association of Insurance
Commissioners or its designee, which data will be used to create or supplement
industry-wide actuarial tables for individual disability insurance. The proposed
consent agreement contains a number of provisions restricting the use of
UNUMProvident's data in preparing tables in order to protect the confidentiality
of the data and to shield the source of the data UNUMProvident will contribute
to the tables, including the following:
(i) UNUMProvident may require a written commitment that its contributed raw
data will not be viewed by any competitor or actuarial consultant who
provides services to competitors without the prior consent of
UNUMProvident,
(ii) UNUMProvident may require that the aggregated data from the several
providers of data be used only in connection with creating or
supplementing actuarial tables,
(iii) at least three other providers of individual disability insurance that
are among the ten largest providers as measured by direct earned premium
must provide data for each specification in a request, and
(iv) if 60 percent or more of the data submitted for any specification in a
request is UNUMProvident's data, UNUMProvident may require that its raw
data be weighted in accordance with generally accepted experience study
practices so that when weighted UNUMProvident's raw data represents no
more than 50 percent of the aggregated data.
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Compliance reports are required under the proposed consent agreement on each
of May 22, 1999, 90 days after the consent agreement becomes final and 90 days
after a request for data is made. These reports would include a description of
UNUMProvident's efforts to comply with the consent agreement and may include the
text of any agreement or condition associated with the use of the data.
The Federal Trade Commission also granted early termination of the waiting
period under the Hart-Scott-Rodino Act on May 18, 1999. The proposed consent
agreement will be subject to public comment for 60 days, after which the Federal
Trade Commission will decide whether to make it final. If the other approvals
and conditions to closing the merger are satisfied or waived, the parties may
elect to complete the merger prior to the end of the 60 day comment period. The
final order will remain in effect for a term of 20 years unless modified or
terminated by the Federal Trade Commission upon application by UNUMProvident.
At any time before or after the merger, the Federal Trade Commission, the
Antitrust Division or any state could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
prohibit the completion of the merger or seeking divestiture of substantial
assets of Provident or UNUM. Private parties may also seek to take legal action
under the antitrust laws under certain circumstances. There can be no assurance
that a challenge to the merger on antitrust or competition grounds will not be
made or, if such a challenge is made, that it would not be successful.
On February 19, 1999, Provident and UNUM received an Advance Ruling
Certificate under Section 102 of the Competition Act (Canada) from the Mergers
Branch, Competition Bureau of Industry Canada, rendering the merger exempt from
the competition related prenotification filing requirements under such Act.
INSURANCE AND FINANCIAL SERVICES
Provident's and UNUM's insurance subsidiaries are subject to the state or
foreign insurance statutes of the jurisdictions in which they are incorporated
or licensed. State insurance holding company acts generally require approval of
the acquisition of control of insurance companies domiciled or commercially
domiciled in such states, whether such acquisition of control is direct or
indirect. Accordingly, in connection with the merger, on January 8, 1999,
Provident, as the surviving party in the merger, filed the necessary
applications for approval of acquisition of control of UNUM's insurance
subsidiaries in the states where such companies are domiciled. As of the date
hereof, an approval from the Commissioner of Insurance of Delaware has been
obtained, and no others have been denied. The prior approval of the insurance
and financial services regulatory authorities of the United Kingdom is required.
Provident and UNUM have contacted these foreign jurisdictions to confirm the
nature of their required filings.The necessary filing which was made with the
United Kingdom on March 31, 1999, is pending. Receipt of such approval pursuant
to these filings free of any conditions, other than those conditions that,
individually or in the aggregate, are not reasonably likely to have a material
adverse effect on the combined business of Provident and UNUM, is a condition to
the merger.
In addition, pre-merger notification filings have been made by Provident and
UNUM with the insurance and financial services regulatory authorities of some
other states and foreign countries. Receipt of clearances pursuant to these
filings is not a condition to the merger unless the failure to receive such
clearances, individually or in the aggregate, is reasonably likely to have a
material adverse effect on the combined business of Provident and UNUM.
There can be no assurance that the approvals and clearances described above
that have not yet been obtained will be obtained, or, if obtained, will not
include conditions that could result in the abandonment of the merger by
Provident and UNUM. Provident and UNUM have not determined how they will respond
to conditions, limitations or divestitures which may be sought by governmental
entities in connection with any requisite approvals and clearances. If any
conditions, limitations or divestitures are sought by governmental entities,
Provident and UNUM will make such determinations at the appropriate time.
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THE MERGER AGREEMENT
THE FOLLOWING DESCRIBES CERTAIN ASPECTS OF THE PROPOSED MERGER, INCLUDING
MATERIAL PROVISIONS OF THE MERGER AGREEMENT. THE FOLLOWING DESCRIPTION OF THE
MERGER AGREEMENT DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE MERGER AGREEMENT, WHICH IS
ATTACHED AS APPENDIX A TO THIS DOCUMENT AND IS INCORPORATED HEREIN BY REFERENCE.
ALL PROVIDENT STOCKHOLDERS AND UNUM STOCKHOLDERS ARE URGED TO READ THE MERGER
AGREEMENT CAREFULLY AND IN ITS ENTIRETY.
INTRODUCTION
The merger agreement provides, among other things, for a merger of Provident
and UNUM pursuant to which UNUM will be merged with and into Provident, with
Provident as the surviving corporation. UNUMProvident will be governed by the
laws of the State of Delaware. The transaction is intended to qualify as a
"pooling of interests" for accounting and financial reporting purposes and is
intended to qualify as a tax-free "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
TERMS OF THE MERGER
Prior to the completion of the merger, Provident will effect the
reclassification of Provident common stock and each share of Provident common
stock issued and outstanding immediately prior to the effective time of the
Provident Reclassification Amendment will be reclassified and converted into
0.73 of a share of Provident common stock. Immediately after the
reclassification is complete, Provident and UNUM will complete the merger. In
the merger:
(1) each share of UNUM common stock issued and outstanding immediately
prior to the merger, other than shares of UNUM common stock owned by
Provident or UNUM, will be converted into one share of UNUMProvident common
stock; and
(2) each share of Provident common stock issued and outstanding
immediately prior to the merger will remain an issued and outstanding share
of UNUMProvident common stock after the merger.
With respect to Provident stockholders, the effect of the reclassification and
the merger together is that such stockholders will receive 0.73 of a share of
UNUMProvident common stock for each share of Provident common stock they own.
Fractional shares of Provident common stock will not be issued to Provident
stockholders pursuant to the reclassification of Provident common stock. Instead
of fractional shares, Provident stockholders will be entitled to receive an
amount in cash, without interest, equal to the product of (1) the fraction of a
share of Provident common stock to which such holder, after taking into account
all shares of Provident common stock held immediately prior to the effective
time of the Provident Reclassification Amendment, would otherwise be entitled
to, and (2) the closing price per share of UNUM common stock on the NYSE on the
last trading day prior to the date on which the effective time of the Provident
Reclassification Amendment occurs.
CLOSING AND EFFECTIVE TIME OF THE MERGER
The merger agreement provides that the closing will take place on the fifth
business day after satisfaction or waiver of the conditions set forth in the
merger agreement, other than those conditions that by their nature are to be
satisfied at the closing, but subject to the fulfillment or waiver of those
conditions, unless another time or date is agreed to by Provident and UNUM. As
soon as practicable on the closing date, UNUM and Provident will acknowledge and
file a certificate of merger executed in accordance with the relevant provisions
of Delaware law and will make all other filings or recordings
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required under Delaware law. The merger will become effective at the time when
the certificate of merger is duly filed with the Secretary of State of the State
of Delaware or such other time as agreed upon by the parties and set forth in
the certificate of merger.
CORPORATE GOVERNANCE
CERTIFICATE OF INCORPORATION AND BYLAWS OF UNUMPROVIDENT
The merger agreement provides that each of the Provident certificate of
incorporation and the Provident bylaws as in effect immediately prior to the
merger will be amended in the merger so as to read in its entirety in the form
set forth as Exhibit A-1 and Exhibit A-2, respectively, to the merger agreement.
See "Comparison of Stockholders' Rights" on page 109 for a summary of the
differences between the current Provident certificate of incorporation and
Provident bylaws and the UNUMProvident certificate of incorporation and the
UNUMProvident bylaws.
DIRECTORS AND OFFICERS OF UNUMPROVIDENT
The parties have agreed to various corporate governance arrangements,
including the composition of the UNUMProvident board of directors, and have
agreed that certain persons will constitute part of the senior management of
UNUMProvident, as more fully set forth under "The Merger--Interests of
Management and Directors in the Merger" on page 56.
CONDITIONS OF THE MERGER
The respective obligations of each of Provident and UNUM to effect the
merger are subject to the satisfaction or waiver, at or prior to the merger, of
the following conditions:
- the adoption of the merger agreement or the Provident Reclassification
Amendment by Provident stockholders and the adoption of the merger
agreement by UNUM stockholders;
- the expiration or termination of the waiting period applicable to the
merger under the Hart-Scott-Rodino Act;
- the receipt of approvals from various state insurance regulatory agencies,
except for those approvals the failure of which to receive are not
reasonably likely to have a material adverse effect on the combined
businesses of UNUM and Provident, and all such approvals must be obtained
free of any conditions that are reasonably likely to have a material
adverse effect on such combined businesses;
- the absence of any legal restriction that prohibits completion of the
merger or is reasonably likely to have a material adverse effect on the
combined businesses of UNUM and Provident, but the parties must have used
reasonable efforts to prevent the imposition of any such legal restriction
and to appeal any such restriction;
- the registration statement on Form S-4 filed with the Securities and
Exchange Commission to register the shares of UNUMProvident common stock
to be issued in the merger having become effective under the Securities
Act of 1933 and no stop order or proceeding seeking a stop order with
respect to such registration statement being in effect;
- the shares of UNUMProvident common stock issuable to UNUM stockholders
pursuant to the merger agreement having been approved for listing on the
NYSE, subject to official notice of issuance;
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- Provident and UNUM having received letters in customary form and substance
from each of their respective independent public accounting firms to the
effect that the merger will qualify for "pooling of interests" accounting
treatment; and
- the effectiveness of the Provident Reclassification Amendment.
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PROVIDENT AND UNUM
The obligations of each of Provident and UNUM are subject to the further
satisfaction or waiver by each party of the following conditions:
- the representations and warranties of the other party set forth in the
merger agreement being true and correct both as of the date of the merger
agreement and at and as of the closing date, as if made at and as of such
time, or, if the representation or warranty is made as of an earlier date,
being true as of such date;
- the other party having performed in all material respects all obligations
required to be performed by it under the merger agreement at or prior to
the closing date; and
- the other party having received from its counsel, on a date immediately
prior to the mailing of this document and on the closing date, opinions,
in each case dated as of such respective dates and stating that:
(1) the merger will be treated for federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code; and
(2) that UNUM and Provident each will be a party to that
"reorganization" within the meaning of Section 368(b) of the Internal
Revenue Code.
For purposes of the merger agreement, "material adverse change" or "material
adverse effect" means, when used in connection with Provident or UNUM, any
change, effect, event, occurrence or state of facts that:
(a) is, or is reasonably likely to be, materially adverse to the
business, financial condition or results of operations of such party and its
subsidiaries taken as a whole;
(b) materially impairs the ability of such party to perform its
obligations under the merger agreement or the stock option agreements; or
(c) prevents the consummation of any of the transactions contemplated by
the merger agreement or the stock option agreements or, in the case of UNUM,
the stockholders agreement,
OTHER THAN ANY:
(1) change, effect, event, occurrence or state of facts that occurs
as a result of any act or omission of either Provident or UNUM that has
been previously consented to in writing by the other party; or
(2) change, effect, event, occurrence or state of facts relating to
- the United States economy or securities markets in general,
- the merger agreement or the transactions contemplated thereby
or the announcement thereof,
- the insurance industry in general, and not specifically
relating to Provident or UNUM or their respective subsidiaries,
or
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- any decline in the share price of either Provident common stock
or UNUM common stock, but, with respect to either party,
excluding any change or effect underlying such decline to the
extent such change or effect would otherwise constitute a
material adverse effect on such party; or
(3) mandated change in U.S. generally accepted accounting principles
or interpretations thereof or statutory accounting practices prescribed
or permitted by the applicable insurance regulatory authorities or
interpretations thereof not applying specifically to Provident and UNUM.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various representations and warranties made by
Provident and UNUM, some of which are qualified as to materiality, regarding the
following matters, among others:
- corporate existence and capitalization;
- ownership of the shares of capital stock of its material subsidiaries;
- corporate power and authority to execute, deliver and perform its
obligations under the transaction documents, and to consummate the merger;
- that the transaction documents and the transactions contemplated thereby,
will not result in a violation of Provident's or UNUM's organizational
documents or the organizational documents of any of their subsidiaries,
contracts to which Provident or UNUM is a party, or violate any law, rule
or regulation;
- consents and regulatory approvals necessary to complete the merger;
- documents filed with the Securities and Exchange Commission and applicable
insurance regulatory authorities, including financial statements, and the
accuracy of information contained therein;
- absence of certain material adverse events, changes or effects;
- pending or threatened suits, actions or other proceedings;
- employee benefit plans;
- tax matters;
- compliance with laws and required licenses and permits;
- accounting matters, including qualification of the merger as a "pooling of
interests" transaction;
- material contracts;
- ownership of intellectual property and absence of infringement of third
party intellectual property rights;
- absence of regulatory disqualifications;
- full recovery under material reinsurance contracts; and
- year 2000 compliance.
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In addition, UNUM represented and warranted to Provident that it has amended
the Rights Agreement, dated as of March 13, 1992, between UNUM and First Chicago
Trust Company of New York, as rights agent, to render such agreement
inapplicable to the merger.
COVENANTS
CONDUCT OF PROVIDENT'S AND UNUM'S BUSINESS PRIOR TO THE MERGER
Provident and UNUM have each agreed as to itself and each of its
subsidiaries, from the date of the merger agreement to the completion of the
merger, unless the other party otherwise approves in writing, and except as
otherwise expressly contemplated by the merger agreement or the stock option
agreements, or disclosed to the other party, that, among other things:
(a) it will conduct its businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and will use all
reasonable efforts to preserve intact its current business, keep
available the services of its current officers and employees and preserve
its various business relationships to preserve its goodwill and
businesses;
(b) it will not declare, set aside or pay any dividends payable in cash,
stock or property on, or make any other distributions in respect of, any
of its capital stock, other than dividends and distributions by a direct
or indirect wholly owned subsidiary to itself, except that it may
continue to pay regular quarterly dividends and dividends on
participating policies;
(c) it will not split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of or
in substitution for shares of its capital stock;
(d) it will not purchase, redeem or otherwise acquire any shares of capital
stock of it or any of its subsidiaries or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities;
(e) it will not issue, sell or pledge securities, other than the issuance of
common stock upon the exercise of outstanding stock options or otherwise
pursuant to outstanding equity stock-based awards;
(f) it will not amend its certificate of incorporation, bylaws or other
comparable charter or organizational documents;
(g) it will not acquire any business or any entity or division thereof or
any assets that are material, individually or in the aggregate, to such
party;
(h) it will not dispose of any of its properties or assets, except sales of
investment securities or other assets in the ordinary course of business
consistent with past practice;
(i) it will not incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of either itself
or any of its subsidiaries, except for short-term borrowings incurred in
the ordinary course of business or to refund existing or maturing
indebtedness consistent with past practice and except for intercompany
indebtedness between either UNUM or Provident and any of its respective
subsidiaries or between the subsidiaries of such party;
(j) it will not make any loans, advances or capital contributions to, or
investments in, any other person, other than investments made in the
ordinary course of business consistent with past practice;
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(k) it will not make or agree to make any new capital expenditure or
expenditures, or enter into any agreement or agreements providing for
payments which, individually, are in excess of $10,000,000 or, in the
aggregate, are in excess of $100,000,000;
(l) it will not make or agree to make any tax election that, individually or
in the aggregate, is reasonably likely to have a material adverse effect
on its tax liability or settle or compromise any material income tax
liability;
(m) it will not pay, discharge, settle or satisfy any claims, liabilities,
obligations or litigation, other than in the ordinary course of business
consistent with past practice or in accordance with their terms, or agree
to modify in any manner, any confidentiality, standstill or similar
agreement to which it or any of its subsidiaries is a party;
(n) it will not take any action that would prevent Provident from accounting
for the business combination to be effected by the merger as a "pooling
of interests" or from treating the merger as a "reorganization" under
Section 368 of the Internal Revenue Code;
(o) it will not make any material amendment or change to any of its benefits
plans or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any pension plan, or change
the manner in which contributions to any pension plan are made or the
basis on which such contributions are determined;
(p) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of it or its subsidiaries, or
as contemplated by the merger agreement or by the terms of any contract
the existence of which does not constitute a violation of the merger
agreement, it will not increase the compensation of any director,
executive officer or other key employee or pay any benefit or amount not
required by a plan or arrangement as in effect on the date of the merger
agreement to any such person; and
(q) it will not authorize, or commit or agree to take, any of the foregoing
actions.
In addition, UNUM has agreed that it will not amend the UNUM rights
agreement or authorize, or commit to agree to take any such action.
AGREEMENT NOT TO SOLICIT OTHER OFFERS
In the merger agreement and except as described below, each of UNUM and
Provident has agreed that it will not, directly or indirectly through another
person, solicit or facilitate any inquiries or the making of any "Takeover
Proposal," as defined below, or participate in any discussions or negotiations
regarding a Takeover Proposal. This prohibition on solicitation and facilitation
precludes, among other things, either party from furnishing information to any
other person.
In addition, neither party's board of directors, or any committee thereof,
may:
- withdraw or adversely modify, or propose publicly to withdraw or adversely
modify, the approval or recommendation of the merger agreement or the
merger, or, in the case of Provident, the Provident Reclassification
Amendment or the issuance of the UNUMProvident common stock in the merger;
notwithstanding the foregoing, either party may take such actions if, in
the good faith judgment of its board of directors and after consultation
with outside counsel, the failure to take the foregoing actions would be
inconsistent with its obligations under applicable law;
- approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal; or
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- enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement related to any Takeover Proposal.
For purposes of the merger agreement, "Takeover Proposal" means with respect
to either Provident or UNUM, any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of a business that
constitutes 15% or more of the net revenues, net income or the assets of it and
its subsidiaries, taken as a whole, or 15% or more of any class of equity
securities of it or any of its subsidiaries, any tender offer or exchange offer
that if completed would result in any person beneficially owning 15% or more of
any class of equity securities of it or any of its subsidiaries, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving it or any of its subsidiaries, other than the
transactions contemplated by the merger agreement.
However, before its stockholders meeting and in response to a "Superior
Proposal," as defined below, which it did not solicit and which did not
otherwise result from a breach of the merger agreement, either party may:
- furnish information with respect to it and its subsidiaries to any person
making a Superior Proposal; and
- participate in discussions or negotiations regarding such Superior
Proposal.
In order to engage in such activities, a party must provide prior written
notice of its decision to take such action to the other party and must advise
the other party of the material terms and conditions of such request or Takeover
Proposal and the identity of the person making the request.
In addition, a party's board of directors may terminate the merger agreement
in response to a Superior Proposal by sending the other party a written notice
that:
(1) advises the other party that the board of directors is prepared to
accept a Superior Proposal;
(2) specifies the material terms and conditions of such Superior Proposal;
and
(3) identifies the person making such proposal.
Termination of the merger agreement under such circumstances may only occur
at a time that is after the fifth business day following the receipt of such
written notice and prior to the date of the terminating party's stockholders
meeting and will require the terminating party to pay the other a termination
fee of $150 million, as discussed under "--Termination Fees and Expenses" on
page 87. Each party has agreed to keep the other reasonably informed of the
status and details, including amendments or proposed amendments, of any such
request or Takeover Proposal.
For purposes of the merger agreement, a "Superior Proposal" means with
respect to either Provident or UNUM any proposal:
(1) made by a person other than Provident or UNUM to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, more
than 50% of the combined voting power of the shares of the common stock
of such party then outstanding or all or substantially all the assets of
such party and its subsidiaries taken together;
(2) which is otherwise on terms which the board of directors of such party
determines in its good faith judgment, based on the advice of a financial
advisor of nationally recognized reputation, to be more favorable to such
party's stockholders than the merger; and
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(3) for which financing, to the extent required, is then committed or which,
in the good faith judgment of the board of directors of such party, is
reasonably capable of being obtained by such third party.
Nothing contained in the merger agreement prohibits either party from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
under the Securities Exchange Act of 1934. In addition, the merger agreement
does not prohibit either party from making any disclosure to its stockholders
if, in the good faith judgment of its board of directors and after consultation
with outside counsel, failure so to disclose would be inconsistent with its
obligations under applicable law. However, neither party is permitted to:
(1) withdraw or modify, or propose publicly to withdraw or modify, its
position with respect to the merger agreement or the merger, or, in the
case of Provident, the Provident Reclassification Amendment or the
issuance of UNUMProvident common stock in the merger; notwithstanding the
foregoing, either party may take such actions if, in the good faith
judgment of its board of directors and after consultation with outside
counsel, the failure to take the foregoing actions would be inconsistent
with its obligations under applicable law; or
(2) approve or recommend, or propose publicly to approve or recommend, a
Takeover Proposal.
ADDITIONAL AGREEMENTS
STOCK PLANS AND STOCK OPTIONS
The merger agreement provides that UNUMProvident will assume the UNUM stock
plans upon completion of the merger. This means that all of the obligations of
UNUM under the UNUM stock plans will be obligations of UNUMProvident upon
completion of the merger. As a result of the merger all outstanding options
granted under UNUM stock plans, whether vested or unvested, will become options
to acquire shares of UNUMProvident common stock with the same aggregate spread.
As a result of the merger and the reclassification of Provident common
stock, all outstanding options granted under the Provident stock plans, whether
vested or unvested, will be converted into an option to acquire a number of
shares of UNUMProvident common stock giving effect to the reclassification of
Provident common stock at an exercise price that is correspondingly adjusted.
EMPLOYMENT AGREEMENTS
Following the merger, UNUMProvident will assume and honor all obligations
under employment agreements of UNUM, unless such agreements constitute a
violation of the merger agreement. In connection with the signing of the merger
agreement, Provident and UNUM entered into a new employment agreement with Mr.
Orr and Provident entered into a new employment agreement with Mr. Chandler. In
addition, Provident and UNUM currently expect that prior to the completion of
the merger, employment agreements will be signed with Messrs. Crispin, Watjen
and Copeland and Ms. Rosen. The terms of these employment agreements are
explained in "The Merger--Interests of Management and Directors in the Merger"
on page 56.
INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE
In the merger agreement, Provident and UNUM have agreed to provisions
relating to indemnification of officers and directors of the companies and the
provision of directors and officers' liability insurance, which are described in
"The Merger--Interests of Management and Directors in the Merger" on page 56.
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POOLING OF INTERESTS
The merger agreement provides that UNUM and Provident each will use their
respective reasonable efforts to cause the transactions contemplated by the
merger agreement to be accounted for as a "pooling of interests." For more
detailed information, see "Accounting Treatment" on page 93.
OTHER AGREEMENTS
The merger agreement contains additional agreements relating to the conduct
of the parties prior to the merger, including the following:
- to promptly make their respective filings with applicable governmental
entities;
- to use reasonable efforts in obtaining all necessary regulatory approvals
and consents;
- to give prompt notice of the failure of any representation or warranty,
the failure to comply with any covenant, condition or agreement or any
change which, in each case, is reasonably likely to result in a material
adverse effect;
- to coordinate declaration and payment of dividends to ensure that
Provident stockholders or UNUM stockholders do not receive multiple
dividends, or fail to receive a dividend, in any calendar quarter;
- to deliver to the other party no later than 40 days prior to the closing
date a list of all individuals that such party believes to be "affiliates"
of such party at the time the merger agreement is submitted to such
party's stockholders and to use reasonable efforts to cause such persons
to deliver "affiliates' letters" to the other party;
- to use reasonable efforts to cause the transactions contemplated by the
merger agreement to qualify as a "reorganization" under Section 368(a) of
the Internal Revenue Code;
- to use reasonable efforts to cause to be delivered to the other party
"comfort letters" from such party's independent accountants;
- to afford the other party reasonable access to information pertaining to
such party;
- to take such actions as may be required to adjust options under any stock
plans, and, in the case of Provident, to take all necessary actions to
assume the UNUM stock plans, including the reservation, issuance and
listing of shares of UNUMProvident common stock issuable pursuant to such
options and the registration of such shares;
- in the case of Provident, to use its reasonable efforts to cause the
shares of UNUMProvident common stock to be issued in the merger to be
approved for listing on the NYSE;
- in the case of UNUM, to take all further action reasonably requested by
Provident in order to render the UNUM rights agreement inapplicable to the
merger; and
- in the case of Provident, to take all actions necessary to cause the
Provident Reclassification Amendment to become effective.
Provident and UNUM have also agreed that none of the information they supply
for inclusion in the registration statement on Form S-4 filed with the
Securities and Exchange Commission to register the shares of UNUMProvident to be
issued in the merger, of which this document is a part, will contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances in which they were
made, not misleading.
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TERMINATION
The merger agreement may be terminated at any time prior to the merger,
whether before or after the approval by the Provident stockholders or UNUM
stockholders,
(a) by the mutual written consent of Provident and UNUM,
(b) by either Provident or UNUM if:
(1) the merger is not completed by November 30, 1999; so long as the
party seeking to terminate did not prevent completion of the merger
by the failure to perform any of its obligations under the merger
agreement;
(2) the Provident stockholders fail to adopt the merger agreement or the
Provident Reclassification Amendment or the UNUM stockholders fail to
adopt the merger agreement;
(3) any legal restriction permanently prohibits completion of the merger,
so long as the party seeking termination has used reasonable efforts
to prevent or remove such restriction;
(4) if the other party breaches or fails to perform in any material
respect any of its representations, warranties, covenants or
agreements in the merger agreement which would result in a failure of
a condition to the other party's obligation to close the merger and
such breach or failure is incapable of being cured;
(5) pursuant to the terms of the merger agreement relating to the receipt
of a Superior Proposal by the terminating party, as long as such
terminating party complied with all of the terms of the merger
agreement relating to termination under such circumstances;
(6) if the other party or any of its directors or officers participates
in discussions or negotiations with respect to alternative
transactions with third parties in breach of the merger agreement; or
(7) if the other party's board of directors or any committee thereof
withdraws or modifies in a manner adverse to the terminating party
its approval or recommendation of the merger or the merger agreement.
TERMINATION FEES AND EXPENSES
TERMINATION FEE
The merger agreement provides that, upon the occurrence of the following
events, one party will be obligated to pay to the other a termination fee in the
amount of $150 million:
(1) a Takeover Proposal has been made known to one party or any of its
subsidiaries or has been made directly to such party's stockholders
generally or any person has publicly announced an intention to make a
Takeover Proposal with respect to such party and thereafter the merger
agreement is terminated by either Provident or UNUM either:
- because the merger has not been completed by November 30, 1999, or
- because the requisite stockholder approval has not been obtained and
the party that was the subject of the Takeover Proposal enters into
an agreement regarding, or completes, a Takeover Proposal within 18
months after the termination;
(2) the merger agreement is terminated by a party that receives a Superior
Proposal that did not result from a breach of the merger agreement;
(3) the merger agreement is terminated by one party as permitted by the
merger agreement when the non-terminating party's board of directors
withdraws or adversely modifies its approval or
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recommendation to its stockholders of the merger or the merger agreement
and such non-terminating party enters into an agreement regarding, or
completes, a Takeover Proposal within 18 months after the termination; or
(4) the merger agreement is terminated by one party as permitted by the
merger agreement when the non-terminating party or any of its directors
or officers participates in discussions or negotiations with a third
party in breach of the merger agreement and such non-terminating party
enters into an agreement regarding, or completes, a Takeover Proposal
within 18 months after the termination.
The merger agreement provides that for the purposes of the termination right
discussed in clauses (1), (3) and (4) above, all references in the definition of
Takeover Proposal to 15% will become 35%. For the definition of Takeover
Proposal, see "--Covenants" on page 82.
EXPENSES
The merger agreement also provides that, whether or not the merger is
completed, all fees and expenses incurred in connection with the merger
agreement and the transactions contemplated thereby will be paid by the party
incurring such expense, except that:
(1) costs and expenses incurred in connection with the filing, printing and
mailing of the registration statement on Form S-4 and this document and
the filing of forms under the Hart-Scott-Rodino Act will be shared
equally by Provident and UNUM; and
(2) Provident will pay any taxes which are attributable to the transfer of
the beneficial ownership of UNUM's real property.
AMENDMENT, EXTENSION AND WAIVER
AMENDMENT
Provident and UNUM may amend the merger agreement at any time before or
after the Provident stockholders or the UNUM stockholders adopt the merger
agreement. After adoption of the merger agreement by the Provident stockholders
or the UNUM stockholders, the merger agreement cannot be amended in any way that
by law requires further approval of such stockholders without obtaining such
further approval.
On May 25, 1999, UNUM and Provident executed a first amendment to the merger
agreement to increase the authorized capital stock of UNUMProvident as provided
in the UNUMProvident certificate of incorporation from 500 million shares,
consisting of 475 million shares of common stock and 25 million shares of
preferred stock, to 750 million shares, consisting of 725 million shares of
common stock and 25 million shares of preferred stock, to provide that Mr.
Chandler will succeed Mr. Orr as the Chief Executive Officer of UNUMProvident as
of July 1, 2000, and will also continue to serve as President, and to correct
typographical errors in the merger agreement and the exhibits thereto.
EXTENSION AND WAIVER
At any time prior to the merger, Provident or UNUM may extend the time for
performance of any of the obligations or other acts of the other party, waive
any inaccuracies in the representations and warranties of the other party
contained in the merger agreement or in any document delivered pursuant to the
merger agreement or waive compliance by the other party with any of the
agreements or conditions contained in the merger agreement. After the Provident
stockholders or the UNUM stockholders adopt the merger agreement, however, if
any such extension or waiver would require further approval of the merger
agreement by stockholders under applicable law then such approval must be
obtained.
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STOCK OPTION AGREEMENTS
THE FOLLOWING DESCRIPTION SETS FORTH THE MATERIAL PROVISIONS OF EACH OF THE
PROVIDENT OPTION AGREEMENT AND THE UNUM OPTION AGREEMENT, BUT DOES NOT PURPORT
TO BE COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO,
SUCH AGREEMENTS, WHICH ARE ATTACHED AS APPENDICES B AND C, RESPECTIVELY, TO THIS
DOCUMENT AND ARE INCORPORATED HEREIN BY REFERENCE. ALL PROVIDENT STOCKHOLDERS
AND UNUM STOCKHOLDERS ARE URGED TO READ EACH OF THE PROVIDENT OPTION AGREEMENT
AND THE UNUM OPTION AGREEMENT CAREFULLY AND IN ITS ENTIRETY.
GENERAL
Immediately following the execution of the merger agreement, Provident and
UNUM entered into two stock option agreements, each dated November 22, 1998.
Pursuant to the Provident Option Agreement, Provident granted to UNUM an option
to purchase Provident common stock from Provident on the conditions set forth
below. Pursuant to the UNUM Option Agreement, UNUM granted to Provident an
option to purchase UNUM common stock from UNUM on the conditions set forth
below. Except as otherwise noted below, the terms and conditions of the
Provident Option Agreement and the UNUM Option Agreement are identical in all
material respects.
Arrangements such as the stock option agreements are often entered into in
connection with corporate mergers and acquisitions in an effort to increase the
likelihood that the transactions will be completed in accordance with their
terms, and to compensate the optionholder for the efforts undertaken and the
expenses, losses and opportunity costs incurred by it in connection with the
transactions if they are not completed under certain circumstances involving an
acquisition or potential acquisition of the issuer by a third party. The stock
option agreements were entered into to accomplish these objectives. The stock
option agreements may have the effect of discouraging offers by third parties to
acquire either party prior to the merger, even if such persons were prepared to
offer to pay consideration to either party's stockholders which has a higher
current market price than the UNUMProvident common stock to be received by
Provident stockholders and UNUM stockholders pursuant to the merger agreement.
The stock option agreements are not subject to the approval of Provident
stockholders or UNUM stockholders and are effective whether or not Provident
stockholders or UNUM stockholders adopt the merger agreement at the respective
stockholders meetings. To the best knowledge of Provident and UNUM, no event
giving rise to the right to exercise the Provident option or UNUM option has
occurred as of the date of this document.
EXERCISE; EXPIRATION
Pursuant to the Provident Option Agreement, Provident granted UNUM an
irrevocable option to purchase, subject to the terms thereof, up to 26,945,874
shares of Provident common stock at a price per share of $35.131 (the "Provident
Option Price"). Pursuant to the UNUM Option Agreement, UNUM granted to Provident
an irrevocable option to purchase, subject to the terms thereof, up to
27,563,644 shares of UNUM common stock at a price per share of $50.657 (the
"UNUM Option Price"). The Provident Option Price and the UNUM Option Price, as
the case may be, are each referred to as the "Option Price." The number of
shares subject to the option and the Option Price are each subject to possible
adjustment, but in no event will the number of shares subject to the option
exceed 19.9% of the issuer's common stock issued and outstanding at the time of
exercise, without giving effect to the common stock issued or issuable under the
option.
The stock option agreements provide that the option will become exercisable
on the occurrence of any of the events that would cause the optionholder to
become entitled to a termination payment from the issuer under the merger
agreement, described above under "The Merger Agreement--Termination Fees and
Expenses" on page 87, which events are referred to in the stock option
agreements as a "Purchase Event".
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The option will terminate upon the earliest to occur of:
(1) the merger;
(2) 18 months after the first occurrence of a Purchase Event; and
(3) the termination of the merger agreement in accordance with its terms
prior to the occurrence of a Purchase Event, unless, in the case of this
clause (3), the optionholder will have the right to receive a termination
fee following such termination upon the occurrence of certain events, in
which case the option will not terminate until the later of:
(a) six months following the time such termination fee becomes payable;
and
(b) the expiration of the period in which the optionholder has such right
to receive a termination fee.
Any purchase of shares upon exercise of the option will be subject to
compliance with the Hart-Scott-Rodino Act and the obtaining or making of any
required consents, approvals or filings so that the issuance of shares to the
optionholder would not be illegal. The issuer has agreed to use reasonable
efforts to assist the optionholder in seeking or making any such consents,
approvals or filings.
CASH-OUT RIGHT
The stock option agreements further provide that at any time the option is
exercisable, the optionholder may elect to exercise its "Cash-Out Right." This
right allows the optionholder to require the issuer to pay to the optionholder
an amount in cash in exchange for the cancellation of the option with respect to
such number of shares as the optionholder specifies. This cash amount is equal
to such number of shares multiplied by the difference between:
(1) an average closing price, as determined pursuant to the stock option
agreements, for the issuer's common stock; and
(2) the Option Price.
ADJUSTMENTS TO NUMBER OF OPTION SHARES
The stock option agreements provide for automatic adjustment of the number
of shares purchaseable upon the exercise of the option in the event that any
additional shares of the issuer's common stock are issued or otherwise become
outstanding after the date of the stock option agreements, other than pursuant
to the stock option agreements. In this event, the aggregate number of shares
which may be purchased upon exercise of the option will automatically be
increased so that, taking into consideration any such issuance of additional
shares, the aggregate number equals 19.9% of the shares of issuer's common stock
then issued and outstanding. This increase will take place without any further
action on the part of issuer or the optionholder.
LIMITATION ON TOTAL PROFIT
The stock option agreements provide that, notwithstanding any other
provision of the stock option agreements, in no event will the optionholder's
Total Profit (as defined below) plus any termination fee paid to the
optionholder, pursuant to the provision of the merger agreement described under
"The Merger Agreement--Termination Fees and Expenses" on page 87, exceed in the
aggregate $250 million. If the total amount that otherwise would be received by
the optionholder would exceed such amount, the optionholder, at its sole
election, is required to:
(1) reduce the number of shares subject to the option;
(2) deliver to the issuer for cancellation shares previously purchased by
the optionholder against the refund of the Option Price therefor;
(3) pay cash to the issuer; or
(4) any combination of (1), (2) and (3),
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so that the optionholder's actually realized Total Profit, when aggregated with
any termination fee paid to the optionholder, will not exceed $250 million after
taking into account the actions listed in these clauses (1) through (4).
For purposes of the stock option agreements, "Total Profit" means the
aggregate amount before taxes of the following:
(1) the amount received by the optionholder pursuant to the issuer's
repurchase of some or all of the option pursuant to the exercise of the
optionholder's Cash-Out Right; and
(2) (x) the net cash amounts or the fair market value of any property
received by the optionholder pursuant to the sale of shares purchased
under the option, or any other securities into which such shares are
converted or exchanged, to any unaffiliated party, but in no case less
than the fair market value of such Option Shares, less (y) the
optionholder's purchase price of such shares; and
(3) the net cash amounts received by the optionholder on the transfer of
some or all of the option to any unaffiliated party.
The stock option agreements also provide that, notwithstanding any other
provision of the stock option agreement, the option may not be exercised for a
number of shares as would, as of the date of exercise, result in a Notional
Total Profit (as defined below) which, together with any termination fee
theretofore paid to the optionholder, would exceed $250 million. For purposes of
the stock option agreements, the term "Notional Total Profit" with respect to
any number of shares as to which the optionholder may propose to exercise the
option, means the Total Profit determined as of the date of such proposal
assuming for such purpose that:
(1) the option was exercised on such date for such number of shares; and
(2) such shares, together with all other shares held by the optionholder and
its affiliates as of such date, were sold for cash at the closing market
price on the NYSE for the issuer's common stock as of the close of
business on the preceding trading day, less customary brokerage
commissions.
COMMON STOCK EQUIVALENTS
The Provident Option Agreement provides that in the event a sufficient
number of shares of Provident common stock are not authorized to permit the
issuance by Provident of the number of shares required by the optionholder,
Provident will use its best efforts to cause such number of shares of Provident
common stock to become authorized for issuance. Instead of authorizing shares of
Provident common stock, Provident may cause to be authorized a number of shares
of preferred stock, par value $1.00 per share, authorized and designated by
Provident in accordance with Delaware law. These shares of preferred stock, or
units thereof, will be equal in number and voting power to the number of
Provident shares issuable and otherwise have terms that make such preferred
stock substantially similar to Provident common stock.
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STOCKHOLDERS AGREEMENT
THE FOLLOWING DESCRIPTION SETS FORTH THE MATERIAL PROVISIONS OF THE
STOCKHOLDERS AGREEMENT, BUT DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO,
AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, SUCH AGREEMENT, WHICH IS ATTACHED
AS APPENDIX D TO THIS DOCUMENT, AND IS INCORPORATED HEREIN BY REFERENCE. ALL
STOCKHOLDERS OF PROVIDENT AND UNUM ARE URGED TO READ THE STOCKHOLDERS AGREEMENT
CAREFULLY AND IN ITS ENTIRETY.
GENERAL
Immediately prior to the execution of the merger agreement, UNUM and members
of the Maclellan family who together hold approximately 26% of Provident's
common stock entered into the stockholders agreement. The stockholders signing
the stockholders agreement agreed, among other things and so long as the
conditions set forth in the stockholders agreement are satisfied, to vote those
shares of Provident common stock for which they have voting power or control in
favor of adoption of the merger agreement and approval of the transactions
contemplated by the merger agreement at every meeting of the stockholders of
Provident at which such matters are considered and at every adjournment thereof.
The members of the Maclellan family have also agreed not to grant any proxy or
powers of attorney with respect to any of the shares of Provident common stock
for which they have voting power or control with respect to such matters other
than to UNUM or any person designated in writing by UNUM. They have further
agreed not to deposit or permit to be deposited any of such shares in a voting
trust or subject such shares to any arrangement inconsistent with the
stockholders agreement.
TERMINATION
The stockholders have also agreed that the stockholders agreement and the
obligations thereunder will attach to such stockholders' shares and will be
binding upon any person to which legal or beneficial ownership of such shares
shall pass, whether by operation of law or otherwise.
The stockholders agreement provides that it will terminate upon the earlier
of:
(1) the completion of the merger;
(2) the date on which the merger agreement is terminated in accordance
with its terms; and
(3) the date of any amendment or modification of the merger agreement, or
other agreement entered into in connection therewith, or action
taken, including any waiver of the terms of the merger agreement, by
Provident or UNUM which:
(a) reduces the exchange ratio or otherwise alters the exchange ratio
in a manner adverse to the stockholders signatory to the
stockholders agreement or Provident stockholders generally;
(b) grants to UNUM stockholders any securities or other rights, or
requires UNUM or Provident to take any action which would have
the effect of altering the relative interests of the UNUM
stockholders and the Provident stockholders implied by the
exchange ratio;
(c) alters the provisions of the merger agreement relating to UNUM's
agreements with respect to the UNUM Rights Agreement;
(d) extends the date by which the merger shall have been completed
under the terms of the merger agreement; or
(e) waives, amends or modifies the provisions of the merger agreement
relating to the tax opinion to be received by Provident in
connection with the merger.
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ACCOUNTING TREATMENT
Based on the advice of their respective independent public accountants,
Provident and UNUM believe that the merger will qualify as a "pooling of
interests" for accounting and financial reporting purposes. Under this method of
accounting, UNUMProvident will retroactively restate its consolidated financial
statements at the effective time of the merger to include the assets,
liabilities, stockholders' equity and results of operations of UNUM as if the
companies had always been combined. Completion of the merger is conditioned on
receipt by Provident and UNUM of letters from their respective independent
public accounting firms to the effect that the merger will qualify as a "pooling
of interests" for accounting purposes. See "The Merger Agreement--Conditions of
the Merger" on page 79 and "The Merger Agreement--Additional Agreements--Pooling
of Interests" on page 86. The unaudited pro forma financial information
contained in this document has been prepared using the "pooling of interests"
method of accounting.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary discusses the material federal income tax consequences
of the merger. The summary is based upon the Internal Revenue Code, applicable
Treasury Regulations thereunder and administrative rulings and judicial
authority as of the date of this document. All of the foregoing are subject to
change, possibly with retroactive effect, and any such change could affect the
continuing validity of the discussion. The discussion and the opinions of
Sullivan & Cromwell and Cravath, Swaine & Moore assume that Provident
stockholders and UMUM stockholders hold such shares as capital assets. Further,
the discussion does not address the tax consequences that may be relevant to a
particular stockholder subject to special treatment under certain federal income
tax laws, such as dealers in securities, traders in securities that elect to use
a mark-to-market method of accounting, tax-exempt organizations, foreign
persons, persons that hold UNUM common stock or Provident common stock as part
of a straddle or conversion transaction and persons who acquired shares of UNUM
common stock or Provident common stock through the exercise of employee stock
options or rights or otherwise as compensation or through a tax-qualified
retirement plan. This discussion does not address any consequences arising under
the laws of any state, locality or foreign jurisdiction.
TAX OPINIONS
It is intended that the merger will be treated as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code. The respective
obligations of the parties to complete the merger are conditioned upon the
receipt by Provident of an opinion of Sullivan & Cromwell and the receipt by
UNUM of an opinion of Cravath, Swaine & Moore, in each case dated as of the
closing date, to the effect that:
(1) the merger will be treated for federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code; and
(2) each of Provident and UNUM will be a party to that "reorganization"
within the meaning of Section 368(b) of the Internal Revenue Code.
Such opinions will not be binding on the Internal Revenue Service and there
can be no assurance that the Internal Revenue Service will not contest the
conclusions expressed therein. The opinions will be based in part upon certain
representations made by Provident, UNUM and certain of their respective
stockholders, officers and other persons customarily given in transactions of
this type.
Like other conditions to the merger, either party can choose to waive the
receipt of such legal opinions. However, if the receipt of the legal opinion is
waived and there is a material difference in the consequences to Provident
stockholders or UNUM stockholders from what we described in this document, we
will recirculate revised proxy materials and resolicit the vote of the
stockholders.
TAX CONSEQUENCES OF THE PROVIDENT RECLASSIFICATION AMENDMENT AND THE MERGER
As provided in their respective opinions, each dated as of the effective
date of the registration statement of which this document is a part, in the
opinion of Sullivan & Cromwell, counsel to
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Provident, and Cravath, Swaine & Moore, counsel to UNUM, assuming that the
representations described above under "--Tax Opinions" on page 93 are true and
complete as of the effective time of the merger and the merger is completed in
accordance with the merger agreement and pursuant to the laws of Delaware, the
merger will be treated as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code and each of Provident and UNUM will be a
party to that "reorganization" within the meaning of 368(b) of the Internal
Revenue Code.
As a result, in the opinion of Cravath, Swaine & Moore, counsel to UNUM:
(1) No gain or loss will be recognized by UNUM stockholders as a result of
the conversion of shares of UNUM common stock into shares of
UNUMProvident common stock pursuant to the merger.
(2) The aggregate tax basis of the shares of UNUMProvident common stock
received by UNUM stockholders in the merger will be the same as the
aggregate tax basis of the shares of UNUM common stock converted.
(3) The holding period of the shares of UNUMProvident common stock received
by UNUM stockholders will include the holding period of shares of UNUM
common stock converted.
And further as a result, in the opinion of Sullivan & Cromwell, counsel to
Provident:
(1) No gain or loss will be recognized by Provident stockholders on the
exchange of their shares of Provident common stock for UNUMProvident
common stock pursuant to the Provident Reclassification Amendment and the
merger, except as discussed below with respect to cash received instead
of fractional shares.
(2) The aggregate tax basis of the shares of UNUMProvident common stock held
by the Provident stockholders in connection with the Provident
Reclassification Amendment and the merger, including any fractional
shares of UNUMProvident common stock deemed received as described below,
will be the same as the aggregate tax basis of the shares of Provident
common stock held prior to the Provident Reclassification Amendment.
(3) The holding period of the shares of UNUMProvident common stock held by
the Provident stockholders as a result of the Provident Reclassification
Amendment and the merger, including any fractional shares deemed received
as described below, will include the holding period of the shares of
Provident common stock held prior to the Provident Reclassification
Amendment and the merger.
FRACTIONAL SHARES
If a Provident stockholder receives cash instead of a fractional share
interest pursuant to the reclassification of Provident common stock, such
fractional share interest will be treated as having been distributed to such
stockholder, and such cash amount will be treated as received in redemption of
the fractional share interest. In general, the stockholder will recognize
capital gain or loss equal to the cash amount received for the fractional share
reduced by the portion of the stockholder's tax basis in shares of Provident
common stock surrendered that is allocable to the fractional share interest in
Provident common stock. The capital gain or loss will be long-term capital gain
or loss if the stockholder's holding period in the fractional share interest for
federal income tax purposes is more than one year. Long-term capital gain of a
non-corporate U.S. stockholder's is generally subject to a maximum tax rate of
20%.
THE PRECEDING STATEMENTS DO NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. THUS, PROVIDENT
AND UNUM STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
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UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
and explanatory notes are presented to show the impact on the historical
financial positions and results of operations of Provident and UNUM of the
merger under the "pooling of interests" method of accounting. The unaudited pro
forma combined condensed financial statements combine the historical financial
information of Provident and UNUM as of March 31, 1999, for the three-month
periods ended March 31, 1999 and March 31, 1998, and for each of the years ended
December 31, 1998, 1997 and 1996. The unaudited pro forma combined condensed
statements of income give effect to the merger as if it had been completed at
the beginning of the earliest period presented. The pro forma combined condensed
balance sheet assumes the merger was completed on March 31, 1999.
The pro forma combined condensed financial statements as of March 31, 1999,
for the three-month periods ended March 31, 1999 and March 31, 1998, and for
each of the years ended December 31, 1998, 1997 and 1996, are based on and
derived from, and should be read in conjunction with:
- the historical consolidated financial statements and related notes thereto
of Provident, which are incorporated by reference herein; and
- the historical consolidated financial statements and related notes thereto
of UNUM, which are incorporated by reference herein.
For information on how to obtain these documents, see "Where You Can Find
More Information" on page 144.
Pro forma stockholders' equity at March 31, 1999, does not include the
effect of estimated expenses related to the merger of approximately $139.0
million ($109.0 million net of income taxes) and an expense related to the early
retirement offer to employees of $94.0 million ($66.0 million net of income
taxes). See Note 3 to the unaudited pro forma combined condensed financial
statements on page 103 for further information. The pro forma combined condensed
financial statements do not reflect any benefit expected from revenue
enhancements or derived from potential cost savings related to the merger.
Provident's acquisition of The Paul Revere Corporation on March 27, 1997,
was accounted for using the "purchase" method of accounting. Accordingly, the
results of operations of The Paul Revere Corporation have been included in the
Provident historical financial statements from the date of acquisition. Under
the purchase method of accounting, the purchase price was allocated to assets
acquired and liabilities assumed based on their estimated fair values at the
closing date of the transaction.
The pro forma financial statements are presented for comparative purposes
only and are not necessarily indicative of the results of operations that would
have been realized had the merger been completed during the periods or as of the
date for which the pro forma financial statements are presented, nor are they
necessarily indicative of the results of operations in future periods or the
future financial position of UNUMProvident.
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PROVIDENT COMPANIES, INC. AND UNUM CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
PROVIDENT/
HISTORICAL UNUM
---------------------- PRO FORMA PRO FORMA
PROVIDENT UNUM ADJUSTMENTS COMBINED
----------- --------- ------------- -----------
<S> <C> <C> <C> <C>
(IN MILLIONS)
ASSETS
Fixed Maturity Securities
Available-for-sale.............................................. $14,392.9 $ 7,972.0 $ -- $22,364.9
Held-to-maturity................................................ 312.8 -- -- 312.8
Equity Securities................................................. 4.0 28.8 -- 32.8
Mortgage Loans.................................................... 17.8 1,273.3 -- 1,291.1
Real Estate....................................................... 43.6 140.0 -- 183.6
Policy Loans...................................................... 2,090.5 137.1 -- 2,227.6
Other Long-term Investments....................................... 8.4 2.1 -- 10.5
Short-term Investments............................................ 31.2 271.6 -- 302.8
----------- --------- ------------- -----------
TOTAL INVESTMENTS............................................... 16,901.2 9,824.9 -- 26,726.1
Cash.............................................................. 56.9 77.0 -- 133.9
Premiums Receivable............................................... 65.1 636.4 -- 701.5
Reinsurance Receivable............................................ 3,057.4 1,806.5 -- 4,863.9
Deposit Assets.................................................... -- 665.7 -- 665.7
Accrued Investment Income......................................... 368.7 154.4 -- 523.1
Deferred Policy Acquisition Costs................................. 497.4 1,357.3 -- 1,854.7
Value of Business Acquired........................................ 483.7 76.5 -- 560.2
Goodwill.......................................................... 687.5 93.2 -- 780.7
Property and Equipment............................................ 137.7 238.8 -- 376.5
Miscellaneous..................................................... 116.2 415.2 -- 531.4
Separate Account Assets........................................... 388.2 35.3 -- 423.5
----------- --------- ------------- -----------
TOTAL ASSETS.................................................... $22,760.0 $15,381.2 $ -- $38,141.2
----------- --------- ------------- -----------
----------- --------- ------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy and Contract Benefits...................................... $ 533.5 $ 6,958.0 $ 230.0 $ 7,721.5
Reserves for Future Policy and Contract
Benefits and Unearned Premiums.................................. 13,923.2 2,491.9 -- 16,415.1
Other Policyholders' Funds........................................ 2,980.1 871.6 -- 3,851.7
Federal Income Tax Liability...................................... 185.6 618.7 (80.0) 724.3
Short-term Debt................................................... 73.2 362.6 -- 435.8
Long-term Debt.................................................... 600.0 598.5 -- 1,198.5
Other Liabilities................................................. 552.7 777.8 -- 1,330.5
Separate Account Liabilities...................................... 388.2 35.3 -- 423.5
----------- --------- ------------- -----------
TOTAL LIABILITIES............................................... 19,236.5 12,714.4 150.0 32,100.9
----------- --------- ------------- -----------
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEBT
SECURITIES OF THE COMPANY....................................... 300.0 -- -- 300.0
----------- --------- ------------- -----------
Common Stock...................................................... 135.9 20.0 (132.1) 23.8
Additional Paid-in Capital........................................ 764.0 1,153.5 (948.0) 969.5
Accumulated Other Comprehensive Income............................ 438.2 150.6 -- 588.8
Retained Earnings................................................. 1,894.6 2,439.9 (150.0) 4,184.5
Treasury Stock.................................................... (9.2) (1,080.1) 1,080.1 (9.2)
Restricted Stock Deferred Compensation............................ -- (17.1) -- (17.1)
----------- --------- ------------- -----------
TOTAL STOCKHOLDERS' EQUITY...................................... 3,223.5 2,666.8 (150.0) 5,740.3
----------- --------- ------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $22,760.0 $15,381.2 $ -- $38,141.2
----------- --------- ------------- -----------
----------- --------- ------------- -----------
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined condensed financial statements.
96
<PAGE>
PROVIDENT COMPANIES, INC. AND UNUM CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
HISTORICAL PROVIDENT/UNUM
---------------------------- PRO FORMA PRO FORMA
PROVIDENT UNUM ADJUSTMENTS COMBINED
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT SHARE DATA)
Premium Income.......................................... $ 619.1 $ 1,085.1 $ -- $ 1,704.2
Net Investment Income................................... 326.8 172.8 -- 499.6
Net Realized Investment Gains........................... 4.0 3.2 -- 7.2
Other Income............................................ 38.5 42.3 -- 80.8
------------- ------------- ------------- ----------------
TOTAL REVENUE......................................... 988.4 1,303.4 -- 2,291.8
------------- ------------- ------------- ----------------
Policyholder Benefits................................... 633.3 891.5 -- 1,524.8
Commissions............................................. 80.5 162.0 -- 242.5
Operating Expenses...................................... 153.3 250.4 -- 403.7
Increase in Deferred Policy Acquisition Costs........... (22.4) (95.6) -- (118.0)
Amortization of Value of Business Acquired.............. 8.2 1.2 -- 9.4
Amortization of Goodwill................................ 4.7 28.6 -- 33.3
Interest Expense........................................ 16.1 16.8 -- 32.9
------------- ------------- ------------- ----------------
TOTAL BENEFITS AND EXPENSES........................... 873.7 1,254.9 -- 2,128.6
------------- ------------- ------------- ----------------
Income Before Income Taxes.............................. 114.7 48.5 -- 163.2
Income Taxes............................................ 40.9 33.0 -- 73.9
------------- ------------- ------------- ----------------
NET INCOME............................................ $ 73.8 $ 15.5 $ -- $ 89.3
------------- ------------- ------------- ----------------
------------- ------------- ------------- ----------------
Net Income Per Common Share
Basic................................................. $ 0.54 $ 0.11 $ -- $ 0.38
Diluted............................................... $ 0.54 $ 0.11 $ -- $ 0.37
Average Shares Outstanding--Basic....................... 135,459,501 138,899,870 (36,574,065) 237,785,306
Average Shares Outstanding--Diluted..................... 137,684,612 141,743,410 (37,174,845) 242,253,177
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined condensed financial statements.
97
<PAGE>
PROVIDENT COMPANIES, INC. AND UNUM CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
HISTORICAL PROVIDENT/UNUM
---------------------------- PRO FORMA PRO FORMA
PROVIDENT UNUM ADJUSTMENTS COMBINED
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT SHARE DATA)
Premium Income......................................... $ 587.2 $ 918.4 $ -- $ 1,505.6
Net Investment Income.................................. 361.8 163.3 -- 525.1
Net Realized Investment Gains.......................... 6.2 3.1 -- 9.3
Other Income........................................... 38.4 36.7 -- 75.1
------------- ------------- ------------- ----------------
TOTAL REVENUE........................................ 993.6 1,121.5 -- 2,115.1
------------- ------------- ------------- ----------------
Policyholder Benefits.................................. 635.6 691.2 -- 1,326.8
Commissions............................................ 90.7 142.7 -- 233.4
Operating Expenses..................................... 145.5 218.7 -- 364.2
Increase in Deferred Policy Acquisition Costs.......... (20.9) (79.9) -- (100.8)
Amortization of Value of Business Acquired............. 8.7 1.2 -- 9.9
Amortization of Goodwill............................... 5.5 1.5 -- 7.0
Interest Expense....................................... 15.6 11.7 -- 27.3
------------- ------------- ------------- ----------------
TOTAL BENEFITS AND EXPENSES.......................... 880.7 987.1 -- 1,867.8
------------- ------------- ------------- ----------------
Income Before Income Taxes............................. 112.9 134.4 -- 247.3
Income Taxes........................................... 41.8 40.9 -- 82.7
------------- ------------- ------------- ----------------
NET INCOME........................................... $ 71.1 $ 93.5 $ -- $ 164.6
------------- ------------- ------------- ----------------
------------- ------------- ------------- ----------------
Net Income Per Common Share
Basic................................................ $ 0.51 $ 0.68 $ -- $ 0.69
Diluted.............................................. $ 0.50 $ 0.66 $ -- $ 0.67
Average Shares Outstanding--Basic...................... 134,929,080 138,112,535 (36,430,852) 236,610,763
Average Shares Outstanding--Diluted.................... 138,645,330 141,362,533 (37,434,239) 242,573,624
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined condensed financial statements.
98
<PAGE>
PROVIDENT COMPANIES, INC. AND UNUM CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORICAL PROVIDENT/UNUM
---------------------------- PRO FORMA PRO FORMA
PROVIDENT UNUM ADJUSTMENTS COMBINED
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT SHARE DATA)
Premium Income.......................................... $ 2,347.4 $ 3,841.7 $ -- $ 6,189.1
Net Investment Income................................... 1,374.0 661.4 -- 2,035.4
Net Realized Investment Gains........................... 34.0 21.0 -- 55.0
Other Income............................................ 182.6 117.3 -- 299.9
------------- ------------- ------------- ----------------
TOTAL REVENUE......................................... 3,938.0 4,641.4 -- 8,579.4
------------- ------------- ------------- ----------------
Policyholder Benefits................................... 2,577.2 2,932.6 -- 5,509.8
Commissions............................................. 330.3 496.2 -- 826.5
Operating Expenses...................................... 593.4 868.8 -- 1,462.2
Increase in Deferred Policy Acquisition Costs........... (90.7) (235.1) -- (325.8)
Amortization of Value of Business Acquired.............. 33.6 5.1 -- 38.7
Amortization of Goodwill................................ 21.4 6.5 -- 27.9
Interest Expense........................................ 70.0 49.9 -- 119.9
------------- ------------- ------------- ----------------
TOTAL BENEFITS AND EXPENSES........................... 3,535.2 4,124.0 -- 7,659.2
------------- ------------- ------------- ----------------
Income Before Income Taxes.............................. 402.8 517.4 -- 920.2
Income Taxes............................................ 148.8 154.0 -- 302.8
------------- ------------- ------------- ----------------
NET INCOME............................................ $ 254.0 $ 363.4 $ $ 617.4
------------- ------------- ------------- ----------------
------------- ------------- ------------- ----------------
Net Income Per Common Share
Basic................................................. $ 1.87 $ 2.63 $ -- $ 2.60
Diluted............................................... $ 1.82 $ 2.57 $ -- $ 2.54
Average Shares Outstanding--Basic....................... 135,117,820 138,339,168 (36,481,811) 236,975,177
Average Shares Outstanding--Diluted..................... 138,269,245 141,412,347 (37,332,696) 242,348,896
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined condensed financial statements.
99
<PAGE>
PROVIDENT COMPANIES, INC. AND UNUM CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL PROVIDENT/UNUM
---------------------------- PRO FORMA PRO FORMA
PROVIDENT UNUM ADJUSTMENTS COMBINED
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT SHARE DATA)
Premium Income......................................... $ 2,053.7 $ 3,263.7 $ -- $ 5,317.4
Net Investment Income.................................. 1,354.7 661.0 -- 2,015.7
Net Realized Investment Gains (Losses)................. 15.1 (3.6) -- 11.5
Other Income........................................... 129.7 227.3 -- 357.0
------------- ------------- ------------- ----------------
TOTAL REVENUE........................................ 3,553.2 4,148.4 -- 7,701.6
------------- ------------- ------------- ----------------
Policyholder Benefits.................................. 2,358.1 2,522.3 -- 4,880.4
Commissions............................................ 305.7 410.5 -- 716.2
Operating Expenses..................................... 491.9 794.8 -- 1,286.7
Increase in Deferred Policy Acquisition Costs.......... (69.1) (166.9) -- (236.0)
Amortization of Value of Business Acquired............. 31.2 3.3 -- 34.5
Amortization of Goodwill............................... 12.6 5.6 -- 18.2
Interest Expense....................................... 42.5 42.4 -- 84.9
------------- ------------- ------------- ----------------
TOTAL BENEFITS AND EXPENSES.......................... 3,172.9 3,612.0 -- 6,784.9
------------- ------------- ------------- ----------------
Income Before Income Taxes............................. 380.3 536.4 -- 916.7
Income Taxes........................................... 133.0 166.1 -- 299.1
------------- ------------- ------------- ----------------
NET INCOME........................................... $ 247.3 $ 370.3 $ -- $ 617.6
------------- ------------- ------------- ----------------
------------- ------------- ------------- ----------------
Net Income Per Common Share
Basic................................................ $ 1.88 $ 2.65 $ -- $ 2.62
Diluted.............................................. $ 1.84 $ 2.59 $ -- $ 2.57
Average Shares Outstanding--Basic...................... 124,505,397 139,852,234 (33,616,457) 230,741,174
Average Shares Outstanding--Diluted.................... 127,253,246 142,923,361 (34,358,376) 235,818,231
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined condensed financial statements.
100
<PAGE>
PROVIDENT COMPANIES, INC. AND UNUM CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PROVIDENT/UNUM
---------------------------- PRO FORMA PRO FORMA
PROVIDENT UNUM ADJUSTMENTS COMBINED
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT SHARE DATA)
Premium Income......................................... $ 1,175.7 $ 3,151.5 $ -- $ 4,327.2
Net Investment Income.................................. 1,090.1 803.3 -- 1,893.4
Net Realized Investment Gains (Losses)................. (8.6) 3.4 -- (5.2)
Other Income........................................... 34.7 113.5 -- 148.2
------------- ------------- ------------- ----------------
TOTAL REVENUE........................................ 2,291.9 4,071.7 -- 6,363.6
------------- ------------- ------------- ----------------
Policyholder Benefits.................................. 1,661.2 2,542.8 -- 4,204.0
Commissions............................................ 168.3 386.9 -- 555.2
Operating Expenses..................................... 225.3 861.8 -- 1,087.1
Increase in Deferred Policy Acquisition Costs.......... (7.4) (109.3) -- (116.7)
Amortization of Value of Business Acquired............. 0.5 0.9 -- 1.4
Amortization of Goodwill............................... -- 6.3 -- 6.3
Interest Expense....................................... 17.8 40.7 -- 58.5
------------- ------------- ------------- ----------------
TOTAL BENEFITS AND EXPENSES.......................... 2,065.7 3,730.1 -- 5,795.8
------------- ------------- ------------- ----------------
Income Before Income Taxes............................. 226.2 341.6 -- 567.8
Income Taxes........................................... 80.6 103.6 -- 184.2
------------- ------------- ------------- ----------------
NET INCOME........................................... $ 145.6 $ 238.0 $ -- $ 383.6
------------- ------------- ------------- ----------------
------------- ------------- ------------- ----------------
Net Income Per Common Share
Basic................................................ $ 1.46 $ 1.63 $ -- $ 1.75
Diluted.............................................. $ 1.44 $ 1.61 $ -- $ 1.72
Average Shares Outstanding--Basic...................... 91,044,834 145,938,794 (24,582,105) 212,401,523
Average Shares Outstanding--Diluted.................... 92,154,470 148,028,296 (24,881,707) 215,301,059
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined condensed financial statements.
101
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma combined condensed financial statements have been
prepared using the "pooling of interests" method of accounting, giving effect to
the merger as if it had occurred as of the beginning of the earliest period
presented. The pro forma financial statements are presented for comparative
purposes only and are not necessarily indicative of the results of operations
that would have been realized had the merger been completed during the periods
or as of the date for which pro forma financial statements are presented, nor
are they necessarily indicative of the results of operations in future periods
or the future financial position of UNUMProvident. Certain historical financial
information has been reclassified to conform with the current presentation.
Prior to the completion of the merger, Provident will effect the Provident
Reclassification Amendment and each share of Provident common stock issued and
outstanding immediately prior to the effective time of the Provident
Reclassification Amendment will be reclassified and converted into 0.73 of a
share of Provident common stock. Immediately after the reclassification is
complete, Provident and UNUM will complete the merger. In the merger:
(1) each share of UNUM common stock issued and outstanding immediately prior
to the merger, other than shares of UNUM common stock owned by Provident
or UNUM, will be converted into one share of UNUMProvident common stock;
and
(2) each share of Provident common stock issued and outstanding immediately
prior to the merger will remain an issued and outstanding share of
UNUMProvident common stock after the merger.
With respect to Provident stockholders, the effect of the reclassification and
the merger together is that such stockholders will receive 0.73 of a share of
UNUMProvident common stock for each share of Provident common stock they own.
The merger is subject to regulatory and UNUM stockholder and Provident
stockholder approval.
On March 27, 1997, Provident completed the acquisition of The Paul Revere
Corporation for approximately $1.2 billion. The fair value of assets acquired
was $6,680.0 million and the fair value of liabilities assumed was $6,675.4
million. The acquisition was accounted for by the "purchase" method of
accounting, and, accordingly, is included in Provident's historical financial
statements from the date of the acquisition.
2. ACCOUNTING POLICIES AND FINANCIAL STATEMENT CLASSIFICATIONS
UNUM and Provident are in the process of reviewing their accounting policies
and financial statement classifications and as a result of this review, it may
be necessary to adjust the combined financial statements to conform to those
accounting policies and classifications that are determined to be most
appropriate.
One aspect of this preliminary review has indicated that UNUM's process and
assumptions used to calculate the discount rate for claim reserves of certain
disability businesses differs from that used by Provident. While UNUM and
Provident's current methods for calculating the discount rate for disability
claim reserves are in accordance with generally accepted accounting principles,
both companies' management believe that the combined entity should have
consistent discount rate accounting policies and methods for applying these
policies for similar products. Anticipated in the merger was the combination of
the investment functions of UNUM and Provident. UNUMProvident's investment
function will be managed by Provident's personnel and the current investment
strategies of Provident will be utilized by the combined entity. The current
UNUM methodology uses the same
102
<PAGE>
2. ACCOUNTING POLICIES AND FINANCIAL STATEMENT CLASSIFICATIONS (CONTINUED)
investment strategy for assets backing both liabilities and surplus. The
Provident methodology allows for different investment strategies for assets
backing surplus than those backing product liabilities which management has
determined to be the most appropriate approach for the combined entity.
Accordingly, UNUM will adopt Provident's method of calculating the discount rate
for claim reserves.
UNUM estimated the impact of this change in method on the estimate of unpaid
claims reserves and will record a pretax charge effective with the merger of
approximately $230 million ($150.0 million after-tax). This estimated merger
related adjustment has not been reflected in the unaudited pro forma combined
condensed statements of income and related per share calculations. This
estimate, which will be reported in operating earnings, was based on a
projection of UNUM's investment portfolio and claim liabilities as of June 30,
1999, the expected completion date of the merger. For the discount rates
affected by the change in methodology, the current interest rates used to
discount claim reserves, and the project interest rates using the Provident
method as of June 30, 1999, are as follows:
<TABLE>
<CAPTION>
MARCH 31, PROJECTED AS OF
1999 JUNE 30, 1999
----------- ---------------
<S> <C> <C>
Group long term disability (North America)............................ 7.74% 6.65%
Group long term disability and individual disability (United
Kingdom)............................................................. 8.80% 7.74%
Individual disability (North America)................................. 7.37% 6.79%
</TABLE>
UNUM's unpaid claim reserves for these disability lines as of June 30, 1999,
were estimated to be $5,376 million using the UNUM method for determining
reserve discount rates, and $5,606 million using the Provident method.
3. EXPENSES RELATED TO THE MERGER AND TO THE EARLY RETIREMENT OFFER TO EMPLOYEES
On the date the merger is completed UNUMProvident will record an expense
related to the merger of approximately $139.0 million ($109.0 million net of
income taxes). In addition, Provident will record an expense related to the
early retirement offer on the date the merger is consummated of approximately
$19.0 million ($13.0 million net of income taxes). The early retirement offer to
Provident's employees is subject to acceptance by the employees and the closing
of the merger. Generally accepted accounting principles requires both
contingencies to be met before the charge is recognized. UNUM will record an
expense related to the early retirement offer of approximately $75.0 million
($53.0 million net of income taxes). The UNUM early retirement offer to
employees is not contingent upon the closing of the merger; therefore, under
GAAP, the charge will be recorded as soon as the employees accept the offer. The
employees have until June 15, 1999 to accept the offer or the offer will expire.
The estimated expenses related to the merger and to the early retirement
offers to employees have not been reflected in the unaudited pro forma combined
condensed balance sheet or statements of income and related per share
calculations. The estimated expenses related to the merger and to the early
retirement offer to employees represent management's best estimates based on
available information at this time. Actual charges will differ from the
estimates reflected below.
103
<PAGE>
3. EXPENSES RELATED TO THE MERGER AND TO THE EARLY RETIREMENT OFFER TO EMPLOYEES
(CONTINUED)
The estimated expenses related to the merger and to the early retirement
offer to employees consist of the following (in millions):
<TABLE>
<S> <C>
Employee related expense............................................ $ 56.0
Exit activities related to duplicate facilities/asset
abandonments...................................................... 51.0
Investment banking, legal, and accounting fees...................... 32.0
---------
Subtotal............................................................ 139.0
Estimated expense related to the early retirement offer to
employees......................................................... 94.0
---------
Subtotal............................................................ 233.0
Income tax benefit.................................................. 58.0
---------
Total estimated expenses related to the merger and to the early
retirement offer to employees..................................... $ 175.0
---------
---------
</TABLE>
Employee related expense consists of employee severance costs, restricted
stock costs which fully vest upon stockholder adoption of the merger agreement
or upon completion of the merger, and outplacement costs to assist employees who
have been involuntarily terminated. Provident and UNUM currently estimate that
approximately 925 positions will be eliminated over a twelve month period.
Severance benefits and costs associated with the vesting of restricted stock are
currently estimated to be $36.0 million and $20.0 million, respectively. In
addition, it is expected that approximately 650 employees will accept an early
retirement offer.
Exit activities related to duplicate facilities/asset abandonments consist
of closing of duplicate offices and write-off of redundant computer hardware and
software. Provident and UNUM currently expect to close approximately 70
duplicate field offices over a period of one year after the completion of the
merger. The cost associated with these office closures is approximately $21.0
million, which represents the cost of future minimum lease payments less any
estimated amounts recovered under subleases. Also, the total book value of
physical assets, primarily computer equipment, redundant systems and systems
incapable of supporting the combined entity, will be abandoned as a result of
the merger. This abandonment will result in an immediate write-down of the
assets' book values by approximately $30.0 million.
The pro forma combined condensed financial statements do not reflect any
benefit expected from revenue enhancements or derived from potential cost
savings related to the merger. Although management anticipates revenue
enhancements and costs savings will result from the merger, there can be no
assurance that these items will be achieved. Anticipated cost savings are
discussed in "The Merger--Provident's Reasons for the Merger; Recommendations of
the Provident Board of Directors" on page 35 and "The Merger--UNUM's Reasons for
the Merger; Recommendation of the UNUM Board of Directors" on page 38.
As noted in UNUM's and Provident's 1998 annual reports on Form 10-K (as
amended), it is UNUM's and Provident's policy to estimate the ultimate cost of
settling claims in each reporting period based upon the information available to
management at the time. Actual claim resolution results are monitored and
compared to those anticipated in claim reserve assumptions. Claim resolution
rate assumptions are based upon industry standards adjusted as appropriate to
reflect actual experience as well as management's actions which would have a
material impact on claim resolutions and for which plans have been established
and committed to by management. The Companies' actions for which plans have been
established and committed to by management are factors which would modify past
experience in establishing claims reserves. Adjustments to the reserve
assumptions will be made if expectations change.
104
<PAGE>
3. EXPENSES RELATED TO THE MERGER AND TO THE EARLY RETIREMENT OFFER TO EMPLOYEES
(CONTINUED)
During the fourth quarter of 1998, UNUM and Provident recorded an increase
in the reserve for existing individual and group disability claims incurred as
of December 31, 1998 of $59.4 million and $93.6 million, respectively. Incurred
claims included claims known as of that date and an estimate of those claims
that had been incurred but not yet reported. Claims that had been incurred but
were not yet reported are considered liabilities of the companies. These claims
are expected to be reported during 1999 and will be affected by the claims
operations integration activities. The $59.4 million UNUM claim reserve increase
and the $93.6 million Provident claim reserve increase represents the estimated
value of cash payments to be made to these claimants as a result of the claim
operations integration activities. UNUM and Provident's management believe the
reserve adjustment is required based upon the integration plan it has in place
and to which it has committed, and based upon its ability to develop a
reasonable estimate of the financial impact of the expected disruption to the
claims management process.
Claims management is an integral part of the disability operations.
Disruptions in that process can create material, short-term increases in claim
costs. The proposed merger of UNUM and Provident is expected to have a near term
adverse impact on the efficiency and effectiveness of the both companies' claims
management functions resulting in some delay in claim resolutions and additional
claim payments to policyholders. Claim personnel will be distracted from normal
claims management activities as a result of planning and implementing the
integration of the two companies' claims organizations. In addition, employee
turnover and additional training will further reduce resources and productivity.
An important part of the claims management process is assisting disabled
policyholders with rehabilitation efforts. This complex activity is important to
the policyholders because it can assist them in returning to productive work and
lifestyles more quickly, and it is important to both companies because it
shortens the duration of claim payments and thereby reduces the ultimate cost of
settling claims.
Immediately following the announcement of the merger and continuing into
December of 1998, senior management of UNUM and Provident worked to develop the
strategic direction of the UNUMProvident claims organization. As part of the
strategic direction, senior management committed claims management personnel to
be involved in the development of the detailed integration plans during 1999.
For the first six months of 1999, the plans anticipate that 80 claims managers
and benefits specialists will be involved up to 30% of their time developing the
detailed integration plans. Once the merger is consummated, which is expected to
be June 30, 1999, all claims personnel are expected to be involved in the
process of implementing the new work processes and will require training. The
implementation and training efforts were estimated to require one month of
productive time from each of the claims staff between June 30, 1999 and December
31, 1999. Both companies' management believe that the anticipated twelve month
period is adequate to execute the integration plans. Knowing that those involved
in the claims operations integration activities would not be available full time
to perform their normal claims management functions, management deemed it
necessary to anticipate this effect on the claim reserves at December 31, 1998.
The reserving process begins with the assumptions indicated by past
experience and modifies these assumptions for current trends and other known
factors. Both companies anticipated the merger-related developments discussed
above would generate a significant change in claims department productivity,
thus reducing claim resolution rates, a key assumption when establishing
reserves. UNUM/Provident management developed actions to attempt to mitigate the
impact of the merger on claims department productivity including the hiring of
additional claims staff and restriction of early retirement elections by claims
personnel. Where feasible, UNUM/Provident management also planned to obtain
additional claims management resources through outsourcing. All such costs will
be expensed in the period incurred and management does not expect these
additional costs to be material in relation to results of
105
<PAGE>
3. EXPENSES RELATED TO THE MERGER AND TO THE EARLY RETIREMENT OFFER TO EMPLOYEES
(CONTINUED)
operations. Management reviewed its integration plans and the actions intended
to mitigate the impact of the integration with claim managers to determine the
extent of disruption in normal activities. Considering all of the above, the
revised Provident claim resolution rates, as a percentage of original
assumptions (i.e., excluding the effect of the claim operations integration
activities), are 90% for the first and second quarters of 1999, 85% for the
third quarter, and 90% for the fourth quarter of 1999.
In order to validate these assumptions, Provident also examined the
historical level and pattern of claims management effectiveness as reflected in
claim resolution rates for the insurance subsidiaries of The Paul Revere
Corporation ("Paul Revere") which was acquired by Provident in 1997. Subsequent
to the Paul Revere acquisition and integration, Provident has been able to
develop experience studies for the Paul Revere business. These studies are
prepared for pricing purposes and to identify trends or changes in the business.
These studies, which were not available for the Paul Revere business at the time
of the acquisition, allowed Provident to gain a greater understanding of the
impact of the claims integration activities on the claim resolution rates of the
Paul Revere business. These studies show that the Paul Revere business
experienced a decline in its claim resolution rates from a base in 1995 of 100%
to 90.4% in 1996 and 80.3% in 1997. Changes in morbidity and other factors were
considered and reviewed to determine that a primary cause of the reduced claim
resolution rates was the disruption caused by the change in the claims
management process. Although the circumstances of the UNUM/Provident merger are
very different, the claims integration activities are similar and the Paul
Revere experience is relevant. The primary circumstances that created claims
disruption for Paul Revere were the initial lack of clarity of the organization,
process and structure, the need to plan for a significant transition to new
claims processes and the training and implementation related to those changes.
All of those elements will impact Provident in the UNUM/Provident merger. One
primary difference is that the duration of the potential disruption in the
UNUM/Provident merger is not expected to be as long as was the case with the
Paul Revere transaction. Provident's revised claim resolution rates assumed for
the first two quarters in 1999 (90%) were compared to the Paul Revere experience
in 1996, the period preceding the acquisition. It was determined that the
revised assumptions appeared to be reasonable. During the third and fourth
quarters of 1999, the claims integration plan provides for increased activity
due to training and implementation of new processes. Provident's revised claim
resolution rates for the third and fourth quarter of 1999 are 85% and 90%,
respectively. These rates were compared to the Paul Revere experience in 1997,
during the implementation and training phase of the Paul Revere claims
organization when claims resolution rates declined to 80.3% of prior levels.
Management judged that it was reasonable to assume that the impact to Provident
would be less than it was to Paul Revere since some of Provident's claims
management practices will not change. The historical experience of Paul Revere
provides a statistical reference for the expected experience for the Company
when adjusted for the projected effects of the claim integration plan.
Considering all of the above, the revised UNUM claim resolution rates, as a
percentage of the original assumptions (i.e., excluding the effect of the claim
operations integration activities), were 90% for the first and second quarters
of 1999, 81% for the third quarter, and 85% for the fourth quarter of 1999. The
revised claim resolution rates for the third quarter is lower than the first and
second quarters because all claims staff are expected to be involved in the
implementation and training efforts. The integration activities as indicated in
the action plans are expected to be complete by December 31, 1999.
In order to evaluate the financial effect of merger-related integration
activities, both companies' projected the ultimate cost of settling all claims
incurred as of December 31, 1998, using the revised claim resolution rates. This
projection was compared to the projection excluding the adjustment to the claim
resolution rates to obtain the amount of the charge. Both companies reviewed its
estimates of the
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<PAGE>
3. EXPENSES RELATED TO THE MERGER AND TO THE EARLY RETIREMENT OFFER TO EMPLOYEES
(CONTINUED)
financial impact of the claims operations integration activities with its
actuaries and independent auditors.
Claim reserves at December 31, 1998 include $93.6 million for Provident and
$59.4 million for UNUM as the estimated value of projected additional claim
payments resulting from these claims operations integration activities. This
reserve increase was reflected as an increase in reserves for policy and
contract benefits. The Provident effect of lower claims resolutions is expected
to emerge quarterly in 1999 in the amount of $22.1 million for each of the first
two quarters of 1999, $29.6 million in the third quarter, and $19.8 million in
the fourth quarter of 1999. The UNUM 1999 effect of lower claims resolutions is
expected to emerge quarterly in 1999 in the amount of $14.1 million for each of
the first two quarters of 1999, $18.0 million in the third quarter, and $13.2
million in the fourth quarter of 1999. If claims resolutions emerge as expected,
there will be no impact to income from operations during 1999. UNUMProvident
will report in its subsequent filings and will discuss within the "Management's
Discussion and Analysis" the status of the claims operations integration
activities, the impact of these activities, and any material variances from the
revised estimate of claim resolution rates. As part of the periodic review of
claim reserves, UNUMProvident management will review the status and execution of
the claim operations integration plan with claims management on a quarterly
basis. The review will consider claims operations integration activities planned
for future periods and evaluate whether the future planned activities will
result in claim resolution rates consistent with those considered in the reserve
established at December 31, 1998. The claim reserves may require further
increases or decreases as facts concerning the merger and its effect on benefits
to policyholders emerge. Among the factors that could affect the reserve
assumptions is the possible delay in the consummation of the merger, thus
delaying implementation of integration of the companies' claims management
operations. Other factors include the level of employee turnover, timing and
complexity of computer system conversions, and the timing and level of training
and integration activities of the claims management staff relative to the
original integration plan of the companies.
During the first quarter of 1999, those claim operations integration
activities progressed as assumed. At December 31, 1998, both companies'
management assumed the revised claim resolution rates for the first quarter of
1999 to be 90% of assumptions, excluding the impact of the claims operations
integration activities. The actual experience of Provident for the first quarter
of 1999 was 90%, resulting in a reduction of $22.0 million from the $93.6
million additional 1998 claim reserve adjustment. In the first quarter of 1999,
there was not a significant difference between the $22.1 million effect
anticipated by Provident in the $93.6 million additional claims reserves
adjustment and the effect of lower claim resolution experience. Provident's
liability remaining for the claims operations integration activities at March
31, 1999 was $71.6 million. The actual experience of UNUM for the first quarter
of 1999 was 88% as compared with the 90% revised assumption, and the $59.4
million additional 1998 claim reserve adjustment was reduced by $14.1 million.
First quarter 1999 pre-tax operating income of UNUM was negatively impacted by
$3.1 million representing the difference between the $14.1 million effect
anticipated in the $59.4 million additional claim reserve adjustment and the
effect of lower claim resolutions experienced during the first quarter of 1999.
The liability of UNUM remaining for claim operations integration activities at
March 31, 1999 was $45.3 million. Both companies' management expect the
remaining claim operations integration activities to impact claim reserves as
anticipated at December 31, 1998. UNUM/Provident management will continue to
evaluate the impact of the proposed merger on disability claims experience and
the assumptions related to expected claim resolutions.
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<PAGE>
4. PRO FORMA ADJUSTMENTS
Pro forma adjustments to stockholders' equity, policy and contract benefits,
and federal tax liability have been reflected in the pro forma combined
condensed financial statements and are described below.
The pro forma adjustments to common stock, additional paid-in capital and
treasury stock reflect the retirement of shares of UNUM common stock held in
treasury, the reclassification of Provident common stock on a 0.73 to 1 basis,
which results in 98.8 million shares issued to replace the 135.4 million shares
of Provident common stock held by Provident stockholders on March 31, 1999, the
reduction in par value of Provident's common stock from $1.00 to $.10 and the
issuance to UNUM stockholders of 139.1 million shares of UNUMProvident common
stock pursuant to the merger (which amount was calculated by multiplying the
number of shares of UNUM common stock outstanding at March 31, 1999 (139.1
million shares), by 1.0 (the number of shares of UNUMProvident common stock that
UNUM stockholders will receive for each share of UNUM common stock they own at
the completion of the merger)). The number of shares of UNUMProvident common
stock that will be issued after completion of the merger will be based on the
actual number of shares of UNUM common stock and Provident common stock, after
the effectiveness of the Provident Reclassification Amendment, outstanding at
the effective time of the merger.
The pro forma adjustments to increase policy and contract benefits ($230.0
million) to decrease the federal tax liability ($80.0 million), and to decrease
retained earnings ($150.0 million) reflect the change in methodology to conform
UNUM's discounting of claim reserves to Provident's methodology as described in
Note 2.
5. PRO FORMA EARNINGS PER SHARE
The pro forma combined basic and diluted earnings per share for the
respective periods presented are based on the combined weighted average number
of common and dilutive potential common shares and adjusted weighted shares of
Provident and UNUM. The number of weighted average common shares and adjusted
weighted average shares, including all dilutive potential common shares,
reflects the reclassification of Provident common stock on a 0.73 to 1 basis and
the conversion of each outstanding share of UNUM common stock into one share of
UNUMProvident common stock in the merger. Amounts used in the determination of
pro forma basic and dilutive earnings per share are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Net income....................................................... $ 89.3 $ 164.6 $ 617.4 $ 617.6 $ 383.6
Less dividends on preferred stock................................ -- 1.9 1.9 12.7 12.7
--------- --------- --------- --------- ---------
Total available to common stockholders........................... $ 89.3 $ 162.7 $ 615.5 $ 604.9 $ 370.9
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average common shares--basic............................ 237.8 236.6 237.0 230.7 212.4
Assumed exercise of stock options and restricted share rights.... 4.5 6.0 5.3 5.1 2.9
--------- --------- --------- --------- ---------
Weighted average common shares--diluted.......................... 242.3 242.6 242.3 235.8 215.3
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
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<PAGE>
DESCRIPTION OF PROVIDENT CAPITAL STOCK
The following description of material terms of the capital stock of
Provident does not purport to be complete and is qualified in its entirety by
reference to the Provident certificate of incorporation, which document is
incorporated herein by reference as an exhibit to the registration statement of
which this document is a part.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Provident currently consists of 150 million
shares of Provident common stock, par value $1.00 per share, and 25 million
shares of preferred stock, par value $1.00 per share, issuable in series. As of
the record date for the Provident meeting, there were issued and outstanding
135,643,319 shares of Provident common stock, with an additional 294,151 shares
issued and held in treasury. There are no shares of Provident preferred stock
outstanding.
PROVIDENT COMMON STOCK
The holders of Provident common stock are entitled to one vote per share for
each share held of record on all matters voted on by stockholders, including the
election of directors, and are entitled to participate equally in dividends when
and as such dividends may be declared by the Provident board of directors out of
funds legally available therefor. As a Delaware corporation, Provident is
subject to statutory limitations on the declaration and payment of dividends. In
the event of a liquidation, dissolution or winding-up of Provident, holders of
Provident common stock have the right to a ratable portion of assets remaining
after satisfaction in full of the prior rights of creditors (including holders
of Provident's indebtedness), all liabilities and the aggregate liquidation
preferences of any outstanding shares of Provident preferred stock. The holders
of Provident common stock have no conversion, redemption, preemptive or
cumulative voting rights. All outstanding shares of Provident common stock are,
and the shares of UNUMProvident common stock to be issued in the merger will be,
validly issued, fully paid and non-assessable.
The transfer agent and registrar for Provident common stock is First Chicago
Trust Company of New York.
COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
Provident is incorporated under the laws of the State of Delaware and,
accordingly, the rights of Provident stockholders are governed by the Provident
certificate of incorporation, the Provident bylaws and the laws of the State of
Delaware. UNUM is also incorporated under the laws of the State of Delaware and,
accordingly, the rights of UNUM stockholders are governed by the UNUM
certificate of incorporation, the UNUM bylaws and the laws of the State of
Delaware.
As a result of the merger, UNUM stockholders will become stockholders of
UNUMProvident and each of the Provident certificate of incorporation and the
Provident bylaws will be amended in its entirety. Accordingly, following the
merger, the rights of the Provident stockholders and of the UNUM stockholders
who become UNUMProvident stockholders in the merger will be governed by the
UNUMProvident certificate of incorporation, the UNUMProvident bylaws and the
laws of the State of Delaware. The UNUMProvident certificate of incorporation
and the UNUMProvident bylaws are attached as Exhibits A-1 and A-2, respectively,
to the merger agreement, which is attached as Appendix A to this document.
Provident and UNUM have agreed that the UNUMProvident certificate of
incorporation and the UNUMProvident bylaws will be substantially identical to
the current UNUM certificate of incorporation and UNUM bylaws and will differ in
material respects from the current Provident certificate of incorporation and
Provident bylaws.
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<PAGE>
COMPARISON OF STOCKHOLDERS' RIGHTS
Set forth on the following pages is a summary comparison of material
differences among the rights of a Provident stockholder under the current
Provident certificate of incorporation and Provident bylaws (left column), the
rights of a UNUM stockholder under the current UNUM certificate of incorporation
and UNUM bylaws (right column), and the rights of a UNUMProvident stockholder
following the merger under the UNUMProvident certificate of incorporation and
UNUMProvident bylaws (middle column). The summary set forth below is not
intended to provide a comprehensive summary of each of such company's governing
documents. This summary is qualified in its entirety by reference to the full
text of each of such documents. Copies of the Provident certificate of
incorporation and Provident bylaws, and the UNUM certificate of incorporation
and UNUM bylaws, will be sent to Provident and UNUM stockholders upon request.
See "Where You Can Find More Information" on page 144.
<TABLE>
<CAPTION>
<S> <C> <C>
CURRENT PROVIDENT UNUMPROVIDENT CURRENT UNUM
<CAPTION>
<S> <C> <C>
CAPITAL STOCK
AUTHORIZED CAPITAL
150 million shares of common 725 million shares of common 240 million shares of common
stock, par value $1.00 per stock, par value $.10 per stock, par value $.10 per
share. share. share.
25 million shares of 25 million shares of 10 million shares of
preferred stock, par value preferred stock, par value preferred stock, par value
$1.00 per share. $.10 per share. $.10 per share.
As of May 10, 1999, there Based on the number of shares As of May 10, 1999, there
were 135,643,319 shares of of common stock of Provident were 139,463,040 shares of
Provident common stock issued and UNUM issued and UNUM common stock issued and
and outstanding and 9,027,705 outstanding on May 10, 1999, outstanding and 10,809,183
shares reserved for issuance. and the exchange ratio, shares reserved for issuance.
As of that date, there were approximately 238,482,663 As of that date, there were
no shares of preferred stock shares of common stock of no shares of preferred stock
issued and outstanding and no UNUMProvident will be issued issued and outstanding and no
shares were reserved for and outstanding after shares were reserved for
issuance. completion of the merger. issuance.
Based on the number of shares
of common stock of Provident
and UNUM reserved for
issuance on May 10, 1999, and
the exchange ratio,
approximately 17,399,408
shares of common stock of
UNUMProvident will be
reserved for issuance after
completion of the merger.
Based on the number of shares
of preferred stock of
Provident and UNUM issued and
outstanding on May 10, 1999,
no shares of preferred stock
of UNUMProvident will be
issued and outstanding after
completion of the merger.
</TABLE>
110
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROVIDENT UNUMPROVIDENT CURRENT UNUM
<S> <C> <C>
BOARD OF DIRECTORS
CLASSIFICATION
All directors are elected Directors are divided into Directors are divided into
annually. three classes. Following the three classes. Each class
initial two annual meetings serves a three-year term and
after the merger, each class is as nearly equal in size as
serves a three-year term. possible.
Each class is as nearly equal
in size as possible;
PROVIDED, HOWEVER, that until
July 1, 2001, any change in
the size of the classes of
directors will, when a quorum
is present, require the
affirmative vote of not less
than 75% of directors voting
at a meeting for which proper
notice of the actions taken
was duly given.
NUMBER OF DIRECTORS
As fixed by the board of Not less than three nor more Not less than three nor more
directors from time to time than 15, as fixed by the than 15, as fixed by the
and currently fixed at 12. board of directors from time board of directors from time
to time and initially 15, to time and currently fixed
seven of whom initially will at 12.
be designated by Provident
and eight of whom initially
will be designated by UNUM.
However, until July 1, 2001,
any change in the size of the
board of directors will
require, when a quorum is
present, the affirmative vote
of not less than 75% of
directors voting at a meeting
for which proper notice of
the actions taken was duly
given.
REMOVAL
Directors may be removed, Directors may be removed only for cause, and in that event
with or without cause, by the only by the affirmative vote of 80% of the stockholders.
affirmative vote of a
majority of the stockholders.
VACANCIES AND NEWLY CREATED DIRECTORSHIPS
Filled by the vote of a Filled only by a majority of the directors then in office,
majority of the remaining though less than a quorum, or by the sole remaining
directors or the sole director.
remaining director.
QUALIFICATIONS
No specific qualifications. A person who reaches the age A person who reaches the age
of 72 must retire at the end of 72 must retire at the next
of his or her current term. annual meeting after his or
her 72nd birthday.
</TABLE>
111
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROVIDENT UNUMPROVIDENT CURRENT UNUM
<S> <C> <C>
EXECUTIVE COMMITTEE
The creation of committees is The creation of committees is The creation of committees is
permitted; Provident has an permitted. UNUMProvident will permitted; however, no
executive committee. have an Executive Committee executive committee has been
which, among other things, created.
will have the sole power and
authority to recommend
nominees to the board of
directors for election at
stockholders meetings and to
fill vacancies on the board
of directors or any committee
thereof. Until July 1, 2001,
the Executive Committee will
consist of three directors
initially designated by UNUM,
including the Chief Executive
Officer initially serving
UNUMProvident who will serve
as chairman of the Executive
Committee as provided in his
employment contract, and
three directors initially
designated by Provident,
including the President
initially serving
UNUMProvident.
SPECIAL MEETINGS OF THE BOARD
May be called by the May be called by the Chairman May be called by the
President or by one-third of of the Board, the Chief Chairman, the President or by
the board of directors. Executive Officer, the any three directors.
President or by any three
directors.
</TABLE>
112
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROVIDENT UNUMPROVIDENT CURRENT UNUM
<S> <C> <C>
STOCKHOLDERS
STOCKHOLDER ACTION BY WRITTEN CONSENT
Permitted if all stockholders Prohibited. Prohibited.
give written consent to
taking an action without a
meeting.
SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of Special meetings of Special meetings of
stockholders may be called stockholders may be called by stockholders may be called by
only by the President, the the Chairman of the Board, the Chairman of the board of
board of directors or upon the Chief Executive Officer directors, or the President,
the written request of the or the President, and are to and are to be called by any
holders of at least 10% of be called by any such officer such officer at the request
the votes entitled to be cast at the request of a majority of a majority of the board of
on any issue proposed to be of the board of directors. directors.
considered at the special
meeting.
VOTING
Elections for the board of Elections for the board of directors are decided by a
directors are decided by a plurality of the votes cast.
plurality of the votes cast. All other questions are decided by a majority of the votes
All other questions are entitled to be cast by the holders of stock represented and
decided by a majority of the entitled to vote at a meeting, except as otherwise required
votes cast, except as by law or applicable stock exchange rules or regulations or
otherwise required by as otherwise provided in the certificate of incorporation or
Delaware law, or as otherwise bylaws.
provided in the certificate
of incorporation or bylaws.
</TABLE>
113
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROVIDENT UNUMPROVIDENT CURRENT UNUM
<S> <C> <C>
STOCKHOLDER PROPOSALS AND NOMINATIONS OF DIRECTORS
A stockholder must give notice of director nominations or
For an annual meeting, a proposals to the Secretary between 60 and 90 days before the
stockholder must give notice meeting of stockholders, in the case of a notice of director
of director nominations or nominations, or before the annual meeting of stockholders,
proposals to the Secretary in the case of proposals. However, if less than 75 days'
between 60 and 90 days prior notice or prior public disclosure of the date of such
to the first anniversary of meeting is given to stockholders, such notice must be
the preceding year's annual received by the 15th day after the day that such notice of
meeting. However, if the date the meeting was mailed or such public disclosure was made.
of the annual meeting is more
than 30 days before or more
than 60 days after such
anniversary, then stockholder
notice must be given not
earlier than the close of
business on the 90th day
prior to such annual meeting
and not later than the later
of:
(a) 60 days prior to such
annual meeting; or
(b) 10 days following the
date on which public
announcement of the date of
such annual meeting is first
made.
Stockholders may also
nominate directors for
election to the board of
directors at a special
meeting of stockholders
called for such purpose by
delivering notice to the
Secretary not earlier than 90
days and not later than the
later of:
(a) 60 days prior to such
special meeting; or
(b) 10 days following the
date on which public
announcement of the date of
such special meeting is first
made.
</TABLE>
114
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROVIDENT UNUMPROVIDENT CURRENT UNUM
<S> <C> <C>
AMENDMENT OF CERTIFICATE OF INCORPORATION
Delaware law requires the board of directors to adopt a
resolution setting forth any amendment, to declare its
advisability and to call a stockholder meeting to adopt such
amendment. Amendment also requires the affirmative vote of a
majority of the outstanding stock, except that:
(a) 80% of the outstanding voting stock, voting together as
a single class, is required for amendment of provisions
regarding:
- management of the corporation by the directors and the
classification of the board of directors;
Delaware law requires the - the ability of stockholders to act by written consent; or
board of directors to adopt a - the power of the board of directors and the stockholders
resolution setting forth any to amend the bylaws; and
amendment, to declare its (b) both (1) 80% of the outstanding voting stock, voting
advisability and to call a together as a single class, and (2) a majority of the
stockholder meeting to adopt outstanding voting stock beneficially owned by persons other
such amendment. Amendment than "interested stockholders", as defined in the
also requires the affirmative certificate of incorporation, if any, voting together as a
vote of both:
(a) a majority of the members single class, is required for amendment of
of the board of directors, - the provisions regarding "business combinations" with
and
(b) 66 2/3% of the capital
stock, voting together as a interested stockholders; and
single class. - the provisions setting forth the supermajority voting
requirements outlined above;
unless such amendment, in the case of either clause (a) or
(b) above, is recommended by the board of directors and the
board of directors consists of a majority of Continuing
Directors.
A "Continuing Director" is a member of the board of
directors (or his or her successor) who is not an affiliate
of an "interested stockholder" and who was a member of the
board of directors before the interested stockholder became
such.
</TABLE>
115
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROVIDENT UNUMPROVIDENT CURRENT UNUM
<S> <C> <C>
AMENDMENT OF BYLAWS
Amendment requires: Amendment requires the Amendment requires
- - the affirmative vote of affirmative vote of a - the affirmative vote of a
two-thirds of the board of majority of the board of majority of the board of
directors; or directors. However, until directors; or
- - the affirmative vote of a July 1, 2001, when a quorum - the affirmative vote of at
majority of the shares is present, the affirmative least 80% of the votes
entitled to vote generally vote of not less than 75% of entitled to be cast by the
in the election of the directors voting at a holders of all outstanding
directors or at least meeting for which proper shares of voting stock,
66 2/3% of such shares notice of the actions taken voting together as a single
present and in person or was duly given is required class.
represented by proxy at a for amendments regarding:
meeting and entitled to - any change in size of the
vote, whichever is less. board of directors or a
class thereof,
- any change in the
composition or power and
authority of the Executive
Committee of the board or
the chairmanship thereof,
- any change or amendment to
the bylaws,
- any proposals to be
submitted to the stockholders
by the board of directors,
- any removal of the Chairman
of the Board and Chief
Executive Officer other
than in accordance with his
employment contract or the
President and Chief
Operating Officer other
than in accordance with his
employment contract, in
each case as appointed as
of the effective time of
the merger, and
- modification to the
provisions of either of the
respective employment
contracts of Messrs. Orr
and Chandler, or any
modification to either of
their respective roles,
duties or authority.
Amendment may also be made by
the affirmative vote of at
least 80% of the votes
entitled to be cast by the
holders of all outstanding
shares of voting stock,
voting together as a single
class.
</TABLE>
116
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROVIDENT UNUMPROVIDENT CURRENT UNUM
<S> <C> <C>
TRANSACTIONS WITH INTERESTED STOCKHOLDERS
Provident has elected not to Generally prohibits certain Generally prohibits certain
be governed by restrictions transactions between the transactions between the
imposed by Delaware law on company and any 15% company and any 10%
transactions with interested stockholder, or any affiliate stockholder, or any affiliate
stockholders. or associate of UNUMProvident or associate of UNUM who has
who has been a 15% been a 10% stockholder within
stockholder within the past the past two years prior to
two years prior to the date the date in question, unless
in question, unless such such transaction is:
transaction is: (a) approved by the
(a) approved by the affirmative vote of
affirmative vote of (1) 80% of the voting
(1) 80% of the voting stock, voting together as a
stock, voting together as a single class; and
single class; and (2) a majority of voting
(2) a majority of voting stock beneficially owned by
stock beneficially owned by stockholders who are not
stockholders who are not interested stockholders,
interested stockholders, voting together as a single
voting together as a single class; or
class; or (b) approved by a majority of
(b) approved by a majority of the Continuing Directors.
the Continuing Directors.
Prohibited transactions Prohibited transactions
include: include:
- mergers and consolidations; - mergers and consolidations;
- certain transfers of - certain transfers of
company assets or securities; company assets or securities;
- liquidation or dissolution; - liquidation or dissolution;
and and
- reclassification, - reclassification,
recapitalization or similar recapitalization or similar
transactions that have the transactions that have the
effect of increasing the effect of increasing the
percentage of stock owned percentage of stock owned
by an interested by an interested
stockholder. stockholder.
UNUMProvident also will be UNUM also is subject to
subject to restrictions restrictions imposed by
imposed by Delaware law on Delaware law on transactions
transactions with interested with interested stockholders.
stockholders. These These restrictions are
restrictions are similar to similar to the restrictions
the restrictions described described above and contained
above and contained in the in the UNUM certificate of
UNUMProvident certificate of incorporation. In order to
incorporation. In order to engage in any transaction
engage in any transaction that is subject to the
that is subject to the provisions of the UNUM
provisions of the certificate of incorporation
UNUMProvident certificate of or such provisions of
incorporation or such Delaware law, the
provisions of Delaware law, requirements of both the UNUM
the requirements of both the certificate of incorporation
UNUMProvident certificate of and Delaware law must be
incorporation and Delaware satisfied.
law must be satisfied.
</TABLE>
117
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROVIDENT UNUMPROVIDENT CURRENT UNUM
<S> <C> <C>
APPRAISAL RIGHTS
Delaware law provides stockholders of a corporation involved in a merger the right to
demand and receive payment in cash of the fair value of their stock in certain mergers.
However, such appraisal rights are not available to holders of
(a) shares (1) listed on a national securities exchange, (2) designated as a national
market system security on an interdealer quotation system operated by the National
Association of Securities Dealers, Inc., or (3) held by more than 2,000 holders,
or
(b) shares of the surviving corporation in the merger, if the merger did not require
the approval of the stockholders of such corporation
unless in either case, the holders of such stock are required by the terms of the merger
agreement to accept for such stock anything other than
(a) shares of stock (or depositary receipts) of the surviving corporation,
(b) shares of stock (or depositary receipts) of another corporation that, at the
effective date of the merger, will be either (1) listed on a national securities
exchange, (2) designated as a national market system security on an interdealer
quotation system operated by the National Association of Securities Dealers, Inc.,
or (3) held of record by more than 2,000 holders,
(c) cash in lieu of fractional shares or fractional depositary receipts, or
(d) any combination of the shares of stock, depositary receipts and cash in lieu of
fractional shares described in clauses (a) through (c) above.
Unless otherwise provided in the corporation's certificate of incorporation, appraisal
rights are not available for a sale of assets or an amendment to the certificate of
incorporation. None of the certificates of incorporation of either Provident, UNUM or
UNUMProvident provide for appraisal rights under these circumstances.
LIMITATION ON BUSINESS TRANSACTIONS
The affirmative vote of No specific limitations.
66 2/3% of the voting stock,
voting together as a single
class, is required for
approval of certain business
combinations, including:
- - mergers, consolidations, or
share exchanges;
- - transfer of substantially
all of the assets of
Provident; or
- - dissolution or liquidation.
OTHER CONSTITUENTS
No specific provision. When considering a business combination or similar
transaction, the board of directors, committees, directors
and officers may, in the best interests of the company and
its stockholders, consider the effects of such business
combination or similar transaction upon employees,
customers, suppliers and the communities in which the
company's offices are located.
</TABLE>
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RIGHTS AGREEMENT
BEFORE THE MERGER
The UNUM rights agreement, provides for the issuance of a right to the
holder of each share of UNUM common stock. If any person becomes the beneficial
owner of 10% or more of the outstanding common stock of UNUM, except pursuant to
a tender or exchange offer for all outstanding shares that a majority of the
"uninterested" members of the UNUM board of directors determines to be fair to
and in the best interests of UNUM and its stockholders, each owner of such right
will have the right to receive upon exercise of such right, UNUM common stock or
other consideration with a value equal to twice the exercise price of the right.
In connection with the merger agreement, UNUM amended the UNUM Rights Agreement
to provide that it will not be triggered by the merger agreement, the stock
option agreements, the stockholders agreement, the merger and the transactions
contemplated thereby.
The foregoing description of the rights and the UNUM rights agreement does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, the text of the UNUM rights agreement, which is incorporated
herein by reference to the UNUM rights agreement filed as an exhibit to the
Registration Statement on Form 8-A, dated March 18, 1992, Amendment No. 1 to the
Registration Statement on Form 8-A/A, dated June 21, 1996 and Amendment No. 2 to
the Registration Statement on Form 8-A/A, dated November 25, 1998. See "Where
You Can Find More Information" on page 144.
Provident does not currently have a rights agreement in place.
AFTER THE MERGER
Although the merger agreement does not provide for UNUMProvident to adopt a
rights agreement following the merger, the UNUMProvident board of directors may
choose to adopt a rights agreement at any time following the merger, which
rights agreement may include some or all of the provisions of the UNUM Rights
Agreement.
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DISCUSSION OF UNUMPROVIDENT CERTIFICATE OF INCORPORATION AND UNUMPROVIDENT
BYLAWS
INCREASE IN AUTHORIZED SHARES
Provident is currently authorized to issue 150 million shares of Provident
common stock and UNUM is currently authorized to issue 240 million shares of
UNUM common stock. The UNUMProvident certificate of incorporation provides for
an authorized capital stock of 725 million shares of common stock. A vote "FOR"
the adoption of the merger agreement by Provident stockholders will also
represent a vote in favor of the adoption of the UNUMProvident certificate of
incorporation and the increased number of authorized common stock.
Without the proposed increase in the number of authorized shares of common
stock, UNUMProvident will not have sufficient uncommitted authorized but
unissued shares of UNUMProvident common stock to issue to UNUM stockholders in
the merger. Further, the proposed increase in the number of authorized shares
will provide the flexibility needed to meet future corporate objectives and will
ensure that, following the issuance of shares in the merger, UNUMProvident
retains a sufficient number of shares available for issuance. Maintaining the
availability of shares for issuance is advisable to provide UNUMProvident with
flexibility to take advantage of opportunities to issue common stock to obtain
capital, as consideration for possible acquisitions and for other corporate
purposes. There are currently no plans, understandings, agreements or
arrangements concerning the issuance of additional shares of UNUMProvident
common stock, other than in connection with the merger and employee benefit
plans. If any plans, understandings, agreements or arrangements are made
concerning the issuance of additional shares, holders of the UNUMProvident
common stock outstanding at that time may or may not be given the opportunity to
vote upon the issuance of the shares, depending on the nature of the
transaction, the law applicable thereto, the applicable rules and regulations of
the NYSE and the judgment of the UNUMProvident board of directors as to whether
the stockholders should vote on the issuance.
ANTI-TAKEOVER CONSIDERATIONS
GENERAL
Provisions of the UNUMProvident certificate of incorporation and the
UNUMProvident bylaws, such as those providing for the classified board of
directors, the requirement of stockholder action by meeting only, the
restrictions on who may call special meetings of the stockholders, and the
requirement of an 80% stockholder vote to amend certain provisions of the
UNUMProvident certificate of incorporation and to amend the UNUMProvident
bylaws, may have anti-takeover effects. These provisions may discourage attempts
by others to acquire control of UNUMProvident without negotiation with its board
of directors. This would enhance the board of directors' ability to attempt to
promote the interests of all of UNUMProvident stockholders. However, to the
extent that these provisions make UNUMProvident a less attractive takeover
candidate, they may not always be in the best interests of UNUMProvident or its
stockholders. None of these provisions is the result of any specific effort by a
third party to accumulate securities of UNUMProvident or to obtain control by
means of merger, tender offer, solicitation in opposition to management or
otherwise.
CLASSIFIED BOARD AND REMOVAL OF DIRECTORS
The provisions providing for the classification of the board of directors,
which parallel the provisions in the UNUM certificate of incorporation and the
UNUM bylaws, will have the effect of making it more difficult to change the
overall composition of the UNUMProvident board of directors. At least two
stockholders' meetings will be required for stockholders to effect a change in a
majority of the UNUMProvident board of directors, as is currently the case with
the UNUM board of directors.
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Under Delaware law, unless the certificate of incorporation provides
otherwise, directors on a classified board may be removed only for cause by the
holders of a majority of the shares then entitled to vote at an election of
directors. The provisions of the UNUMProvident certificate of incorporation
providing for a classified board of directors do not permit stockholders to
remove a director without cause. In addition, the UNUMProvident certificate of
incorporation requires an 80% stockholder vote to remove a director for cause.
Provident stockholders currently have the right to remove directors at any time
without cause.
Although there has been no problem in the past with the continuity or
stability of the Provident board of directors, the parties believe that the
longer time required to elect a majority of the UNUMProvident board of directors
and the higher stockholder vote requirement to remove a director with cause will
help assure continuity and stability in the management of the business and
affairs of UNUMProvident after the merger.
STOCKHOLDER MEETINGS
The limitation of persons authorized to call a special meeting of the
stockholders and the requirement that stockholder action be taken only pursuant
to a meeting, which parallel provisions in the UNUM certificate of incorporation
and the UNUM bylaws, are intended to ensure that any action taken by the
UNUMProvident stockholders is not taken precipitously, and is only taken after
giving opportunity for reasoned discussion among the stockholders and the
management and directors of UNUMProvident.
SUPERMAJORITY AMENDMENT PROVISIONS
The provisions that require the affirmative vote of 80% of the stockholders
to amend certain provisions of the UNUMProvident certificate of incorporation
and UNUMProvident bylaws, many of which parallel similar stockholder vote
requirements in the UNUM certificate of incorporation and the UNUM bylaws, are
intended to prevent a large minority of UNUMProvident stockholders from being
adversely affected by the amendment of key governance provisions contained in
such documents.
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STOCK PLAN AMENDMENTS
THE AMENDMENTS TO THE PROVIDENT COMPANIES, INC. STOCK PLAN OF 1999 ARE BEING
SUBMITTED BY THE PROVIDENT BOARD OF DIRECTORS FOR APPROVAL BY THE PROVIDENT
STOCKHOLDERS AND SUCH AMENDMENTS, IF APPROVED, WOULD BECOME EFFECTIVE AT THE
COMPLETION OF THE MERGER. THE FOLLOWING DISCUSSION DOES NOT PURPORT TO BE
COMPLETE AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE
TEXT OF THE PROVIDENT COMPANIES, INC. STOCK PLAN OF 1999, WHICH IS INCORPORATED
HEREIN BY REFERENCE TO PROVIDENT'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED JUNE 30, 1998.
GENERAL
The Provident board of directors has adopted a resolution, subject to
stockholder approval, to amend the Provident Companies, Inc. Stock Plan of 1999
to increase the number of shares of Provident common stock authorized for
issuance under such plan and to clarify the calculation of the number of shares
of Provident common stock available for awards under such plan.
The reclassification of Provident common stock pursuant to the Provident
Reclassification Amendment will reduce the number of shares of Provident common
stock authorized for issuance under the plan. Further, after consummation of the
merger, a larger number of employees will be entitled to receive awards under
the plan. Accordingly, the Provident board of directors believes that it is
appropriate and in the best interests of Provident and its stockholders to
increase the number of shares of Provident common stock authorized for issuance
under the Provident Companies, Inc. Stock Plan of 1999, as set forth below.
PROVIDENT COMPANIES, INC. STOCK PLAN OF 1999
The Provident Companies, Inc. Stock Plan of 1999 authorizes the granting of
awards to employees, officers, consultants, including producers, and directors
of Provident to align the personal interests of such persons with those of the
Provident stockholders, and to provide such persons with an incentive to achieve
outstanding performance. The amendment to the Provident Companies, Inc. Stock
Plan of 1999 increases the number of shares of Provident common stock available
for awards under the plan from 4,000,000 to 7,500,000. In no case will more than
30% of the number of authorized shares of Provident common stock be available
for restricted stock awards. In addition, the amendment also clarifies the
calculation of the number of shares of Provident common stock available for
awards under such plan. The full text of Section 5.1 and 5.2, as amended,
follows:
"5.1. NUMBER OF SHARES. The aggregate number of shares of Stock
reserved and available for Awards or which may be used to provide
a basis for measurement for or to determine the value of an Award
(such as with a Stock Appreciation Right or Performance Unit
Award) shall be 7,500,000. Notwithstanding anything contained
herein to the contrary, in no event shall more than thirty percent
(30%) of the number of shares of Stock which are available for the
grant of Awards under the Plan be available in the aggregate for
the issuance of Stock pursuant to Awards of Restricted Stock or
unrestricted stock awards. The shares of Stock issued under the
Plan may be authorized and unissued shares or treasury shares, as
the Corporation may from time to time determine.
"5.2. LAPSED AWARDS AND SHARES WITHHELD OR TENDERED. To the extent
that an Award is canceled, terminates, expires or lapses for any
reason, any shares of Stock subject to the Award will again be
available for the grant of Awards under the Plan. Shares subject
to SARs or other Awards settled in cash will be available for the
grant of Awards under the Plan. Shares of Stock that are
surrendered or withheld from any Award to satisfy a Participant's
income tax
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<PAGE>
withholding obligations, or shares of Stock owned by a Participant
that are tendered to pay the exercise price of Options granted
under the Plan will be available for the grant of Awards under the
Plan. Stock delivered by the Corporation, any shares of stock with
respect to which Awards are made by the Corporation and any shares
of Common Stock with respect to which the Corporation becomes
obligated to make Awards, through the assumption of, or in
substitution for, outstanding awards previously granted by an
acquired entity, shall not be counted against the shares available
for Awards under this Plan."
After the Provident Companies, Inc. Stock Plan of 1999 is amended, it will
make clear that any shares of Provident common stock that are tendered in order
to pay the exercise price for options granted under such plan are not counted
against the share limit under such plan. In addition, shares that are not
delivered by Provident when a participant exercises an option and that are
withheld in order to satisfy tax withholding obligations that arise upon the
exercise of certain options are not counted against the share limit under such
plan. As amended, the Provident Companies, Inc. Stock Plan of 1999 also
clarifies that if Provident assumes the obligation for outstanding awards
previously granted by an acquired entity, then any shares of stock delivered by
Provident, any shares of stock with respect to which awards are made by
Provident and any shares of stock as to which Provident becomes obligated to
make awards through such assumption or in substitution of such outstanding
awards, will not be counted against the share limit under such plan.
Provident stockholder approval of the amendments to the stock plan is not a
condition to the merger and the merger will be completed even if the amendments
to the stock plan are not approved. If approved, however, the amendments to the
stock plan will become effective only upon completion of the merger.
The Provident board of directors recommends that Provident stockholders vote
"FOR" the approval of the amendments to the Provident Companies, Inc. Stock Plan
of 1999.
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<PAGE>
OTHER INFORMATION FOR THE PROVIDENT MEETING
NOMINEES FOR ELECTION AS PROVIDENT DIRECTORS
At the Provident meeting, Provident stockholders will elect 11 directors.
Such directors will hold office until the next annual meeting of Provident
stockholders and until their successors are duly elected and qualified, unless
the merger is completed prior to such time. If the merger is completed prior to
the next annual meeting of Provident stockholders then, at the completion of the
merger, certain directors elected by Provident stockholders at the Provident
meeting will resign from the Provident board of directors and certain persons
designated by UNUM will become members of the UNUMProvident board of directors.
Accordingly, immediately following completion of the merger, the UNUMProvident
board of directors will consist of 15 members, seven of whom will have been
designated by Provident and eight of whom will have been designated by UNUM. See
"Interests of Management and Directors in the Merger--Board of Directors and
Senior Management Following the Merger" on page 57.
Provident has inquired of each nominee and has ascertained that each will
serve if elected. If any nominee shall become unavailable prior to the election,
the accompanying proxy card will be voted for the election in the nominee's
stead of such other person as the Provident board of directors may recommend.
The Provident board of directors recommends that Provident shareholders vote
"FOR" each of the nominees nominated for election to the Provident board of
directors.
Currently, there are 12 members of the Provident board of directors. Scott
L. Probasco, Jr., who became a director of Provident in October 1962 will be
retiring from Provident's board of directors as a result of attaining
Provident's mandatory retirement age for directors. At the completion of the
merger, Mr. Bolinder, Ms. Heffner, Mr. Jacks and Mr. Watjen will be succeeded by
members designated by UNUM in accordance with the merger agreement.
All nominees, except Messrs. Bolinder and Watjen, became directors of
Provident on December 27, 1995, the effective date of the Share Exchange between
Provident and Provident Life and Accident Insurance Company of America. Mr.
Watjen became a director on March 26, 1997. Mr. Bolinder became a director on
March 27, 1997, effective with the closing of a transaction involving the
purchase by Zurich Insurance Company and one or more of its affiliates of
19,047,620 (on a post-split basis) shares of Provident's common stock in
connection with financing Provident's acquisition of The Paul Revere
Corporation. Pursuant to the Relationship Agreement discussed on page 57 between
Provident and Zurich related to the acquisition of Paul Revere, Zurich has
certain rights in connection with designating one person to serve as director of
Provident while Zurich remains the beneficial owner of 5% or more of the
outstanding shares of Provident's common stock.
Each of the persons listed below as a nominee to be a director of Provident
will also be a director of the principal wholly owned subsidiaries of Provident,
including Provident Life and Accident Insurance Company, Provident Life and
Casualty Insurance Company, Provident National Assurance Company and The Paul
Revere Corporation, as well as its principal subsidiary, The Paul Revere Life
Insurance Company. GENEX Services, Inc. has a board of directors whose members
include some Provident board of director members as well as other employees of
Provident. As the context requires, Provident may include direct and indirect
subsidiaries.
<TABLE>
<S> <C>
William L. Armstrong, 62 Director since 1991
</TABLE>
From 1979 to 1991, Senator Armstrong served as a Senator from Colorado in
the United States Senate. He has been Chairman of Ambassador Media Corporation
since 1984, Chairman of Cherry Creek Mortgage Company, Inc. since 1991, Chairman
of El Paso Mortgage Company since 1993, Chairman of Centennial State Mortgage
Company, Frontier Real Estate, Inc. and Frontier Title, LLC
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since 1994, Chairman of Frontier Real Estate since 1994, and Chairman of
Transland Financial Services, Inc. since 1996. He is also a director of Storage
Technology Corporation, and Helmerich and Payne, Inc.
<TABLE>
<S> <C>
William H. Bolinder, 55 Director since 1997
</TABLE>
Mr. Bolinder is a member of the Corporate Executive Board of the Zurich
Insurance Company, headquartered in Zurich, Switzerland. He also serves as
Chairman of the direct life and non-life operations of the Zurich Group in the
U.S. and is a director of many of Zurich's other affiliated companies in the
U.S. The Zurich Group is a leading international insurance organization
providing global coverage in all lines of insurance along with asset management
services.
<TABLE>
<S> <C>
J. Harold Chandler, 50 Director since 1993
</TABLE>
Mr. Chandler became Chairman of Provident on April 28, 1996, and President
and Chief Executive Officer and a Director of Provident Life and Accident
Insurance Company of America, Provident Life Capital Corporation, Provident Life
and Accident Insurance Company and Provident Life and Casualty Insurance Company
effective November 8, 1993. Immediately prior to his employment with Provident
Life and Accident Insurance Company, he served as President of NationsBank
Mid-Atlantic Banking Group which includes the NationsBank and Maryland National
Corporation entities in the District of Columbia, Maryland, and northern
Virginia. He formerly served as President of the Citizens and Southern National
Bank of South Carolina, a predecessor company of NationsBank. He is a director
of AmSouth Bancorporation, Herman Miller, Inc., and Storage Technology
Corporation.
<TABLE>
<S> <C>
Charlotte M. Heffner, 61 Director since 1995
</TABLE>
Ms. Heffner is a trustee of The Maclellan Foundation, Inc. She is the sister
of Hugh O. Maclellan, Jr.
<TABLE>
<S> <C>
Hugh B. Jacks, 65 Director since 1988
</TABLE>
Mr. Jacks retired in December 1991 as President and Chief Executive Officer
of BellSouth Services, Incorporated, a provider of lead staff, strategic
planning and support for BellSouth Companies. He is President of Potential
Enterprises, Inc.
<TABLE>
<S> <C>
Hugh O. Maclellan, Jr., 59 Director since 1975
</TABLE>
Mr. Maclellan, Jr. is President of The Maclellan Foundation, Inc., and a
director of SunTrust Bank, Chattanooga, N.A., and Covenant Transport, Inc. Mr.
Maclellan is the brother of Charlotte M. Heffner.
<TABLE>
<S> <C>
A. S. (Pat) MacMillan, 55 Director since 1995
</TABLE>
Mr. MacMillan has served as the Chief Executive Officer of Team Resources,
Inc., since 1980. The company specializes in the areas of team and
organizational design and development, including management consulting,
management training, and organizational audits and surveys. He is also a trustee
of The Maclellan Foundation, Inc.
<TABLE>
<S> <C>
C. William Pollard, 60 Director since 1992
</TABLE>
Mr. Pollard has served as Chairman of the Board of Directors of The
ServiceMaster Company since January 1994. From June 1990 to December 1993 he
served as Chairman and Chief Executive Officer of The ServiceMaster Company. The
ServiceMaster Company provides professional cleaning, termite and pest control,
maid service, lawn care, and appliance and other home equipment and
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<PAGE>
maintenance, as well as management of plant operations, laundry and linen,
clinical equipment maintenance, and food service for health care, educational
and industrial facilities. He is a director of Herman Miller, Inc.
<TABLE>
<S> <C>
Steven S Reinemund, 51 Director since 1995
</TABLE>
Mr. Reinemund has served as Chairman and Chief Executive Officer of
Frito-Lay, Inc. since June 1992. He served as President and Chief Executive
Officer of Pizza Hut, Inc. from 1986 to 1992. He also serves as a director of
PepsiCo, Inc. and The ServiceMaster Company.
<TABLE>
<S> <C>
Burton E. Sorensen, 69 Director since 1985
</TABLE>
From December 1984 until December 1995, Mr. Sorensen served as Chairman and
Chief Executive Officer of Lord Securities Corp., an investment banking firm.
Prior to that time, Mr. Sorensen was a General Partner of Goldman, Sachs & Co.,
investment bankers. He is a director of The ServiceMaster Company.
<TABLE>
<S> <C>
Thomas R. Watjen, 44 Director since 1997
</TABLE>
Mr. Watjen became Vice Chairman of the Company on March 26, 1997, and
retains his position as Chief Financial Officer. He became Executive Vice
President and Chief Financial Officer of Provident Life and Accident Insurance
Company of America, Provident Life Capital Corporation, Provident Life and
Accident Insurance Company, Provident Life and Casualty Insurance Company and
Provident National Assurance Company on July 1, 1994. Prior to that time, he
served as a Managing Director of the insurance practice of the investment
banking firm, Morgan Stanley & Co., which he joined in 1987.
ATTENDANCE
During 1998, the Provident board of directors held six meetings. No director
attended fewer than 75% of the aggregate of (a) the total number of meetings of
the Provident board of directors (held during the period for which each was a
director) and (b) the total number of meetings held by all committees of the
board of directors on which a director served (during the period that such
director served).
COMMITTEES
In 1998, the Provident board of directors had five standing committees:
Audit, Compensation, Executive, Finance and Nominating. In addition to the
duties described below, each committee may be assigned additional duties by the
Provident board of directors from time to time and each is charged with
reporting its activities to the Provident board of directors. Membership of each
committee is given as of December 31, 1998. In July 1998, the Provident board of
directors also established a Special Committee to work with and advise
management in connection with a proposed merger with UNUM. Members of the
Special Committee, which met twice in 1998, were Hugh O. Maclellan, Jr., J.
Harold Chandler, A.S. MacMillan, C. William Pollard and Burton E. Sorensen.
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AUDIT COMMITTEE
The members of the Audit Committee were C. William Pollard, Chairman,
William L. Armstrong, Hugh B. Jacks and Burton E. Sorensen. The committee met
five times in 1998. The committee's duties include recommending independent
public accountants for selection by the PRovident board of directors and
reviewing and approving the audit plans of the independent public accountants
and Provident's internal audit department. The committee monitors the internal
and external auditors, including their work with regard to financial audits,
systems security oversight, fraud detection, and internal financial and
accounting controls. The committee also monitors progress on Provident's Year
2000 project.
COMPENSATION COMMITTEE
The members of the Compensation Committee were Hugh B. Jacks (Chairman),
A.S. MacMillan, C. William Pollard, Scott L. Probasco, Jr., and Steven S
Reinemund. The committee met five times during 1998. The committee's duties
include reviewing and approving compensation philosophy and guidelines for
executive officers and senior management. The committee consults with the Chief
Executive Officer concerning compensation matters affecting senior management,
including those affecting or affected by management succession planning. The
committee reviews the performance of the Chief Executive Officer and recommends
appropriate compensation for approval by the Provident board of directors. The
committee reviews all employee benefit plans and policies including pension and
profit-sharing plans, as well as incentive and stock option plans described
below under "-- Executive Compensation." As to such incentive and stock option
plans, the committee reviews management's recommendations and approves such
awards under the plans as it deems appropriate within the terms of such plans.
EXECUTIVE COMMITTEE
The members of the Executive Committee were Hugh O. Maclellan, Jr.
(Chairman), William H. Bolinder, J. Harold Chandler, A.S. MacMillan and C.
William Pollard. The committee did not meet during 1998. The duties of the
committee include review of strategic plans, issues and direction, and of the
operating results of Provident. The committee may review significant financial
issues, including dividend policy, mergers, acquisitions and divestitures, and
report to the Provident board of directors. The committee serves as a sounding
board for the Chief Executive Officer and other directors as to the composition,
duties and powers of the committees of the Provident board of directors and
meeting agenda. Much of the work of the Executive Committee in 1998 was carried
out by the Special Committee discussed above.
FINANCE COMMITTEE
The members of the Finance Committee were William L. Armstrong (Chairman),
William H. Bolinder, Charlotte M. Hefner, Burton E. Sorensen and Thomas R.
Watjen. The committee met five times during 1998. The committee develops and
monitors appropriate policy and strategies to guide and govern the lending and
investment of funds held by Provident. As permitted under state law, the
committee has established and oversees an Investment Subcommittee which carries
out the daily activities required to authorize and oversee the loans and
investments of its insurance subsidiaries.
NOMINATING COMMITTEE
The members of the Nominating Committee were A.S. MacMillan (Chairman), Hugh
O. Maclellan, Jr., and Steven S Reinemund. The committee did not meet during
1998. The duties of the committee include standardizing and formalizing the
process for nominating persons to be elected or re-elected to the Provident
board of directors. The committee develops its own nominations and
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<PAGE>
accepts nominations submitted in writing from stockholders. It considers and
makes recommendations concerning issues relating to the composition and size of
the Provident board of directors, as well as issues relating to tenure,
retirement age, honorary directorships and term limits.
COMPENSATION OF DIRECTORS
Employees of Provident or any subsidiary of Provident are not compensated
for their services as directors of Provident or of any of its direct or indirect
subsidiaries. Provident pays its non-employee directors an annual retainer of
$80,000. The annual retainer is paid in the form of stock options or deferred
share rights, as elected by each director in accordance with the terms of
Provident's Non-Employee Director Compensation Plan. Any amount not elected to
be received in the form of options or deferred share rights is paid to the
director in cash. No fees are paid for attendance at meetings. In 1998,
directors who were participating in the director retirement program were
required to convert their accrued account balance on a net present value basis
to either stock options or deferred share rights to be issued under Provident's
Non-Employee Director Compensation Plan.
EXECUTIVE OFFICERS OF PROVIDENT
The executive officers of Provident, all of whom are also executive officers
of its principal subsidiaries, were elected to serve in their respective offices
for one year or until their successors are chosen and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
J. Harold Chandler................................... 50 Chairman, President, Chief Executive Officer, and
Director
Thomas R. Watjen..................................... 44 Vice Chairman and Chief Financial Officer, and
Director
Robert O. Best....................................... 49 Executive Vice President and Chief Information
Officer/Client Services
F. Dean Copeland..................................... 60 Executive Vice President and General Counsel
Peter C. Madeja...................................... 40 Executive Vice President and President and CEO of
GENEX Services, Inc.
Ralph A. Rogers, Jr.................................. 50 Senior Vice President and Treasurer
</TABLE>
Mr. Chandler became Chairman of Provident on April 28, 1996, and President
and Chief Executive Officer and a Director of Provident effective November 8,
1993. Immediately prior to his employment with Provident, he served as President
of NationsBank Mid-Atlantic Banking Group which includes the NationsBank and
Maryland National Corporation entities in the District of Columbia, Maryland,
and northern Virginia. He formerly served as President of the Citizens and
Southern National Bank of South Carolina, a predecessor company of NationsBank.
He is a director of AmSouth Bancorporation, Herman Miller, Inc., and Storage
Technology Corporation. He is currently a member of the Board of Trustees of
Wofford College.
Mr. Watjen became Vice Chairman and Chief Financial Officer of Provident on
March 26, 1997. He became Executive Vice President and Chief Financial Officer
on July 1, 1994. Prior to joining the Company, he served as a Managing Director
of the insurance practice of the investment banking firm, Morgan Stanley & Co.,
which he joined in 1987.
Mr. Best became an Executive Vice President of Provident on May 7, 1997. He
became Senior Vice President and Chief Information Officer of Provident on July
11, 1994. He was previously Senior Vice President and Chief Information Officer
at UNUM Corporation, which he joined in 1993 following UNUM's acquisition of
Colonial Life and Accident Insurance Company. At Colonial, he
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served as Vice President, Operations and Information Systems, until 1992 when he
was named Executive Vice President.
Mr. Copeland became Executive Vice President and General Counsel of
Provident on May 12, 1997. Prior to joining Provident he had been a partner
since 1972 in the law firm of Alston & Bird, where he concentrated primarily on
matters related to consolidation within the financial services industry.
Mr. Madeja became an Executive Vice President of Provident on May 7, 1997.
He became Senior Vice President of Provident in February 1997 when Provident
acquired GENEX Services, Inc. He continues to serve as President and Chief
Executive Officer of GENEX Services, Inc., which he joined in 1982.
Mr. Rogers became Senior Vice President and Treasurer of Provident on May 7,
1997. Prior to this position he served as Vice President and Controller of
Provident since 1984.
COMPLIANCE WITH SECTION 16(A)
Under Section 16(a) of the Exchange Act, Provident's directors, officers,
and 10% beneficial holders of common stock are required to file with the
Securities and Exchange Commission certain forms reporting their beneficial
ownership of and transactions in common stock. Based solely upon information
provided to Provident by each of such persons, Provident believes that each of
its directors, officers and 10% beneficial owners filed all required reports on
a timely basis during the last fiscal year with the following exception: Mr.
Madeja, an executive officer of Provident, purchased shares of Provident common
stock on October 27, 1998, which transaction should have been reported on a Form
4 filed on or before November 10, 1998. The Form 4 reflecting the transaction
was filed on December 4, 1998.
EXECUTIVE COMPENSATION
The named executive officers of Provident work primarily for Provident Life
and Accident Insurance Company, except for Mr. Madeja, who serves as President,
GENEX Services, Inc., and also provide services to the other subsidiaries under
a general services agreement between Provident and the respective subsidiaries.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Provident board of directors is composed
entirely of non-employee directors. The Compensation Committee is responsible
for establishing and administering Provident's executive compensation programs.
This report addresses Provident's compensation policies and practices, and the
Compensation Committee's decisions regarding 1998 compensation and long-term
incentive as they affected the Chief Executive Officer and the four other most
highly paid executive officers of Provident. The five individuals are
collectively referred to as the "named executive officers". These policies and
practices also generally affect the compensation of Provident's other officers
and high level executives.
EXECUTIVE COMPENSATION POLICIES
The Compensation Committee is responsible for establishing and administering
Provident's executive compensation programs. The Compensation Committee
establishes compensation according to the following guiding principles:
(a) Compensation should be directly linked to Provident's operating and
financial performance.
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(b) Total compensation should be competitive when compared to compensation
levels of executives of companies against which Provident competes for
management.
(c) Performance-related pay should be a significant component of total
compensation, placing a substantial portion of an executive's
compensation at risk.
(d) Stock ownership guidelines and programs should encourage significant
stock ownership in Provident by its executives to align their interests
with the interests of stockholders.
STOCK OWNERSHIP REQUIREMENT
The foundation for Provident's executive compensation program is ownership
of Provident's common stock by members of the senior management group. This
ownership requirement, involving a substantial portion of each executive's net
worth, is intended to motivate the executive to think and act like a
stockholder, and to assume responsibility for profitability and improving total
stockholder return. The stock ownership requirement can be met with shares
beneficially owned by the executive, through purchase of shares via the Employee
Stock Purchase Plan, exercise of stock options, shares allocated to the
executive through Provident's 401(k) retirement plan (The "MoneyMaker"), phantom
shares or restricted stock issued under the Performance Share Subplan
constituting a part of the Management Incentive Compensation Plan of 1994,
restricted stock awards, or open market purchases from personal funds.
Unexercised stock options do not apply toward the ownership requirement.
BASE SALARY
A competitive base salary program is necessary to attract and retain key
executives. It is Provident's practice to establish executive salaries at a
conservative level relative to the median for salaries for comparable positions
in other companies in its competitor group. For the named executive officers
other than the Chief Executive Officer, one of the executive's 1998 base salary
was above the median and three of these executives' 1998 base salaries were
below the median.
The companies in the competitor group are life, health and multi-line
insurance companies that Provident has determined are its primary competitors
for key executives. For compensation purposes the competitor group is comprised
of a size, measured by assets, comparable to Provident that competes with
Provident for business and key executives. This is a smaller group of companies
than is included in the "Insurance Index" used for the "Comparison of Five-Year
Cumulative Total Return" chart on page 141. The group of companies in the
"Insurance Index" is comprised of firms the Compensation Committee has
determined are competing with Provident in the capital markets and includes some
companies which are not included in the compensation comparison.
Merit increases in salary generally are awarded annually by the Compensation
Committee, based primarily on an assessment of Provident's position relative to
competitors and on an appraisal of the executive's contribution. The assessment
of salary position relative to competitors is performed by use of a national
survey of the competitor group of life and health insurance companies as
described above, conducted by a recognized compensation consulting firm and also
by use of internally generated surveys of data gathered from proxy statements.
Salary levels for 1998 were established by the Compensation Committee following
the policies described.
ANNUAL INCENTIVE COMPENSATION
Annual incentive awards in 1998 for all officers were based on performance
measures included in the Amended and Restated Annual Management Incentive
Compensation Plan of 1994. The annual incentive portion of the Management
Incentive Compensation Plan includes the Corporate Performance Subplan and the
Individual Performance Subplan.
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The Corporate Performance Subplan of the Management Incentive Compensation
Plan is based solely on the achievement of objective corporate performance
goals. At the beginning of each plan year, the Compensation Committee
establishes measurable performance goals based on one or more corporate
performance criteria, and establishes target awards and any formula for payouts
in excess of target based on the achievement of these goals. Target awards under
the Corporate Performance Subplan are set by the Compensation Committee as
percentages of base salary, which percentages may differ from participant to
participant and from year to year. Under the Corporate Performance Subplan, the
three performance measures for 1998 were Return on Equity, Sales Growth and
Relative Stock Performance. The Compensation Committee established stretch
targets for 1998 for the Corporate Performance Subplan. Above target payouts
resulted for certain executives due to payments under the Individual Performance
Subplan.
The Individual Performance Subplan of the Management Incentive Compensation
Plan is based on an individual's contribution to the business of Provident, as
determined by the Compensation Committee. This contribution may be assessed on
non-objective as well as objective measures. Awards are payable under this
subplan, also based on percentages of salary.
Based on 1998 results, awards under the Management Incentive Compensation
Plan to the named executive officers ranged from 43% of salary to 110% percent
of salary.
LONG-TERM INCENTIVE COMPENSATION
STOCK PLAN OF 1994
The Stock Plan of 1994 permits the grant to executive officers and certain
other key employees of restricted stock, stock appreciation rights and options
to purchase shares of Provident common stock. The purposes of this plan are to
encourage and enable the acquisition of a financial interest in Provident by key
employees and to reward key employees for the long-term growth in the market
value of the stock. On January 13, 1997, each named executive officer, except
Mr. Copeland and Mr. Madeja, was granted an option which was expected to cover
the three year period from 1997 to 1999. Mr. Copeland was granted an option upon
his employment in May 1997, which was expected to cover the three year period as
well. As shown in the tables following this report, Mr. Madeja was granted
options on January 7, 1998. The Compensation Committee approved no other grants
under the Stock Plan of 1994 to any named executive officer in 1998.
CHIEF EXECUTIVE OFFICER COMPENSATION
Compensation of the Chief Executive Officer follows the general principles
for executive compensation as set forth above. Specific applications of these
principles to Mr. Chandler's pay for 1998 were as follows:
BASE SALARY
Base salary for Mr. Chandler was set pursuant to his employment agreement
described in the 1994 proxy statement and will be reviewed annually and adjusted
as deemed appropriate by the Compensation Committee. For 1998, Mr. Chandler's
salary was increased to a level reflecting pay of chief executive officers of
companies in Provident's competitor group.
ANNUAL INCENTIVE COMPENSATION
For 1998, Mr. Chandler received an annual incentive under the Management
Incentive Compensation Plan of $960,000. Of this total, $688,000 was paid under
the Corporate Performance Subplan (86% of his base salary) and $272,000 was paid
under the Individual Performance Subplan
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(34% of his base salary) for the achievement of goals established by the
Compensation Committee which were specific to Mr. Chandler.
STOCK PLAN OF 1994
The Compensation Committee believes that it is appropriate to make stock
option grants to the Chief Executive Officer at a higher multiple of salary than
for other senior executives. This higher level of award is in recognition of the
higher level of responsibility and accountability of the Chief Executive Officer
and also to produce compensation at a level comparable to competitor companies.
On January 13, 1997, Mr. Chandler was granted options to purchase 1,200,000
shares of Provident common stock, as approved by the Compensation Committee in
January 1997, and previously reported in the proxy statement for the annual
meeting of Provident stockholders held on May 7, 1997.
MILLION DOLLAR DEDUCTION LIMITATION (IRC SECTION 162(M))
Section 162(m) of the Internal Revenue Code limits Provident's ability to
deduct compensation in excess of $1,000,000 paid during a tax year to the Chief
Executive Officer and the four other highest paid executive officers at year
end. Certain performance-based compensation is not subject to such deduction
limit. Annual bonuses under the Corporate Performance Subplan of the Management
Incentive Compensation Plan are designed to meet the criteria of
"performance-based" compensation that is fully deductible under Code Section
162(m), as are awards of stock options under Provident's Stock Plan of 1994. It
is the Compensation Committee's intent to maximize the deductibility of
executive compensation while retaining the discretion necessary to compensate
executive officers in a manner commensurate with performance and the competitive
market of executive talent.
CONCLUSION
Provident's compensation program described above closely links pay with
performance and the creation of stockholder value. The Compensation Committee
believes that the program has been and will continue to be successful in
supporting Provident's financial, growth and other business objectives.
Hugh B. Jacks, Chairman
A.S. MacMillan
C. William Pollard
Scott L. Probasco, Jr.
Steven S Reinemund
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The following table summarizes the compensation of the Chief Executive
Officer and the four other most highly compensated executive officers for the
years 1996, 1997, and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION
------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AWARDS
----------------------- PAYOUTS
RESTRICTED SECURITIES -------------
NAME AND STOCK UNDERLYING LTIP
PRINCIPAL OTHER ANNUAL AWARD(S) OPTIONS PAYOUTS
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION($) ($)(8) (#) (10) ($)
- -------------- --------- ----------- ----------- ----------------------- ----------- ---------- -------------
J. Harold 1998 828,846 960,000(3) 0 368,571(8) 0 0
Chandler 1997 736,539 922,500 0 4,590,670 1,200,000 0
President/CEO 1996 686,539 1,076,157 0 309,000 400,000 0
Thomas R. 1998 519,231 550,000(4) 0 129,576(8) 0 0
Watjen 1997 461,539 500,000 0 1,559,152 500,000 0
EVP/CFO 1996 418,269 427,164 0 105,888 100,000 0
F. Dean 1998 272,116 300,000(5) 0 63,348(8) 0 0
Copeland(1) 1997 153,846 151,875 0 55,938 200,000 0
EVP/General 1996 0 0 0 0 0 0
Counsel
Robert O. Best 1998 259,616 187,875(6) 0 18,141(8) 0 0
EVP/CIO 1997 230,962 150,000 0 80,045 150,000 0
1996 217,308 113,685 0 18,271 40,000 0
Peter C. 1998 225,000 106,750(7) 0 10,366(9)
Madeja(2) 1997 227,346 92,156 0 83,344
EVP/President, 1996 0 0 0
GENEX
<CAPTION>
<S> <C>
NAME AND
PRINCIPAL ALL OTHER
POSITION COMPENSATION($)
- -------------- ----------------
J. Harold 2,917(11)
Chandler 1,615
President/CEO 2,375
Thomas R. 2,400(11)
Watjen 0
EVP/CFO 0
F. Dean 2,063(11)
Copeland(1) 0
EVP/General 0
Counsel
Robert O. Best 3,160(11)
EVP/CIO 2,375
2,375
Peter C. 25,000
Madeja(2) 50,000
EVP/President, 0
GENEX
</TABLE>
- ------------------------
(1) Mr. Copeland became Executive Vice President and General Counsel of
Provident on May 12, 1997.
(2) Mr. Madeja became Executive Vice President of Provident on February 28, 1997
when Provident acquired GENEX Services, Inc.
(3) Bonus comprised of $960,000 Incentive Bonus of which $860,000 was deferred
in the form of phantom shares and accounted for under the Performance Share
Plan.
(4) Bonus comprised of $550,000 Incentive Bonus of which $302,344 was deferred
in the form of phantom shares and accounted for under the Performance Share
Plan.
(5) Bonus comprised of $250,000 Incentive Bonus of which $147,813 was deferred
in the form of phantom shares and accounted for under the Performance Share
Plan and $50,000 Transition Signing Bonus.
(6) Bonus comprised of $162,875 Incentive Bonus of which $42,328 was deferred in
the form of phantom shares and accounted for under the Performance Share
Plan. Additionally, Mr. Best was awarded a $25,000 Key Contributor Award for
year 2000 initiatives which was paid in the form of Provident common stock
with a 3 year restriction on sale.
(7) Bonus comprised of $106,750 Incentive Bonus of which $24,187 was deferred in
the form of phantom shares and accounted for under the Performance Share
Plan.
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(8) As of December 31, 1998, the named executive officers held the following
aggregate shares of restricted stock, with the following values (based on
December 31, 1998 closing price of $41.50 per share): Mr. Chandler, 150,000
shares valued at $6,225,000; Mr. Watjen, 50,000 shares valued at $2,075,000;
Mr. Copeland, 2,000 shares valued at $83,000; Mr. Best, 2,000 shares valued
at $83,000; and Mr. Madeja, 2,000 shares valued at $83,000. Dividends are
paid on the restricted shares. Additionally, each named executive officer
held premium phantom shares which were issued in February 1998 under the
Performance Share Plan upon deferral of the 1997 incentive award into
phantom shares. The phantom shares are subject to risk of forfeiture for
three years. The number of phantom shares held along with their value as of
December 31, 1998 are as follows: Mr. Chandler, 23,843 shares valued at
$989,485; Mr. Watjen, 8,922 shares valued at $370,263; Mr. Copeland, 1,939
shares valued at $80,469; Mr. Best, 1,432 shares valued at $59,428.
(9) This amount represents premium phantom shares issued in February 1999, under
the Performance Share Plan upon deferral of the 1998 incentive award into
phantom shares. These phantom shares are subject to risk of forfeiture for
three years.
(10) Share amounts have been adjusted to reflect the 2 for 1 stock split on
September 30, 1997, which was in the form of a 100% stock dividend.
Additionally, the amounts for Mr. Watjen exclude the option of which he
relinquished ownership and economic interest pursuant to a domestic
relations order in January 1997. This includes 100,000 from the 1996 grant
and 100,000 from the 1997 grant. On January 13, 1997, Messrs. Chandler,
Watjen and Best were granted an option which was expected to cover the three
year period from 1997 to 1999. Mr. Copeland was granted an option in May
1997, upon employment which was expected to cover the three year period as
well. Mr. Madeja was granted 25,000 options on January 7, 1998.
(11) The amounts reported for Messrs. Chandler, Best, and Heys include
Provident's match of their respective contributions to The MoneyMaker, a
long-term 401(k) retirement plan, along with a supplemental match of $517,
$760, and $359, respectively, based on Provident's performance during 1997.
The amounts reported for Mr. Watjen and Mr. Copeland include only
Provident's match of their respective contribution to The MoneyMaker.
Additionally, the amount reported for Mr. Madeja includes $5,178, which
reflects the full dollar value of the premium on a Key Man Life Insurance
for which Provident pays the premium.
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The following table describes the options granted to the named executive
officers individuals for 1998:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF ------------------------------
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME (#)(1) FISCAL YEAR ($/SH) DATE VALUE(2)
- ------------------------------------------ --------------- ------------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
J. Harold Chandler........................ 0
Thomas R. Watjen.......................... 0
Robert O. Best............................ 0
F. Dean Copeland.......................... 0
Peter C. Madeja........................... 25,000 2.48 $ 37.625 01/06/08 $ 265,625
</TABLE>
- ------------------------
(1) Options granted are non-qualified stock options, with the exercise price
equal to fair market value on the date of the grant. All options were for
Provident common stock. To encourage increased ownership, the Stock Plan of
1994 includes what is commonly referred to as a "reload" feature. Under this
arrangement, when options are exercised, payment for the option shares by
delivery of shares already owned by the optionee entitle the optionee to a
new stock option grant equal to the number of shares delivered. The new
option grant acquires the remaining exercise period with respect to the
options exercised and the option price is equal to the then-current fair
market value of Provident common stock.
(2) The grant date present value of options granted in 1998 was determined using
the Black-Scholes option pricing model. The underlying assumptions were as
follows:
VOLATILITY. Volatility for Provident's common stock was calculated using
32 quarterly days stock prices for Mr. Madeja's grant. The volatility was
18.8% for Mr. Madeja's grant.
RISK-FREE RATE OF RETURN. Rates of return were based on U.S. Treasury
strip rates of return for an investment whose term is equal to the time of
exercise of the option as set forth below. The rate for Mr. Madeja's grant
was 5.57%.
DIVIDEND PAYOUT RATE. The dividend payout rates were determined by
dividing the expected annual dividend rate by the exercise price.
TIME OF EXERCISE. The time of exercise was assumed to be 8 years from
the date of grant for Mr. Madeja's grant. A discount of 15% was applied in
determining the grant date present value of these options to recognize the
risk of forfeiture.
(3) The options granted to Mr. Madeja vest on January 7, 2000. Options expire on
the earliest of the following dates: (a) upon termination of employment
other than by death or disability; (b) three years after the date of death
or disability; (c) five years after the date of normal retirement or early
retirement with Compensation Committee approval; or (d) ten years after the
date of the grant. In the event of a change in control, options would become
immediately exercisable, or the Compensation Committee can exercise its
discretion to cash out any unvested options.
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The following table shows information concerning options for Provident
common stock exercised by the named executive officers individuals during 1998
and the value of unexercised options held by the named executive officers
individuals at December 31, 1998:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FY-END (#) FY-END ($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE(1) UNEXERCISABLE(2)
- -------------------------------- -------------- ------------ --------------------- --------------------------
<S> <C> <C> <C> <C>
J. Harold Chandler.............. 600,000 13,701,242 1,400,000/1,200,000 $ 40,887,500/$21,337,440
Thomas R. Watjen(3)............. 0 0 350,000/450,000 9,442,180/8,001,540
F. Dean Copeland................ 0 0 50,000/150,000 734,375/2,203,125
Robert O. Best.................. 61,000 1,517,375 131,000/120,000 3 ,435,124/2,133,744
Peter C. Madeja................. 0 0 50,000/75,000 912,500/543,750
</TABLE>
- ------------------------
(1) Share amounts have been adjusted to reflect the 2 for 1 stock split on
September 30, 1997, which was in the form of a 100% stock dividend.
(2) Calculated as the difference between the fair market value of a share of
Provident common stock on December 31, 1998 ($41.50) and the exercise price
of the options.
(3) The amounts for Mr. Watjen exclude 300,000 options of which he relinquished
ownership and economic interest pursuant to a domestic relations order in
January 1997. In 1997, 100,000 of those options were exercised at a value of
$1,409,375. The value of the remaining options transferred pursuant to the
domestic relations order, all of which are exercisable, is $5,656,250.
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PENSION PLAN TABLE
The following table shows the estimated annual aggregate benefits payable at
normal retirement under the tax-qualified, defined benefit Retirement Plan for
Salaried Employees for various combinations of compensation and years of
service:
<TABLE>
<CAPTION>
AVERAGE BASE
SALARY IN FIVE 1998 ESTIMATED ANNUAL BENEFIT FOR
CONSECUTIVE REPRESENTATIVE YEARS OF SERVICE CREDIT
HIGHEST PAID ----------------------------------------------
YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS
- ----------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 150,000 $ 37,752 $ 53,052 $ 60,852 $ 68,652
175,000 45,252 63,048 72,108 81,156
200,000 52,752 73,056 83,352 93,648
225,000 60,252 83,052 94,608 106,152
250,000 67,752 93,048 105,852 118,656
300,000 82,752 113,052 128,352 143,652
350,000 97,752 133,056 150,852 168,648
400,000 112,752 153,048 173,352 193,656
450,000 127,752 173,052 195,852 218,652
500,000 142,752 193,056 218,352 243,648
</TABLE>
Benefits are based on the average base salary earned during the five
consecutive years of highest compensation preceding retirement date plus $5 per
each year of service subject to a maximum of 30 years, subject to a partial
offset for the Social Security benefits to which the participant is entitled
upon retirement. Credit for years of service cease after 30 years. A reduction
of 4% per year is applied for retirement before age 62. As of December 31, 1998,
Messrs. Chandler, Watjen, Copeland, Best, and Madeja had approximately 5, 4, 2,
4 and 2 years of credited service, respectively.
Provident also provides a Supplemental Executive Retirement Plan pursuant to
which certain current officers of Provdent may be entitled to retirement
benefits in addition to those that may be funded or paid through a tax-qualified
plan such as the Retirement Plan for Salaried Employees. Such benefits are not
included in the Pension Plan Table above. Generally, participants in the
Supplemental Executive Retirement Plan become entitled to benefits upon
retirement at or after age 65, age 55 with 20 years of service or age 62 with
the consent of the Compensation Committee. The maximum annual amount of such
additional benefits is the greater of (a) 50 percent of the average of the
participant's compensation for the five highest consecutive calendar years of
active service with Provident (which will be achieved when the participant has
20 years of service), plus $1,800, offset by the benefits payable under the
Retirement Plan for Salaried Employees and certain Social Security benefits; or
(b) the difference between the benefits which are payable under the Retirement
Plan for Salaried Employees and the benefits which would be payable under the
Retirement Plan for Salaried Employees to the participant without the
limitations on annual benefits imposed by Section 415 of the Internal Revenue
Code, which for 1998 was $160,000. Proportionately smaller supplemental
retirement benefits are payable under the Supplemental Executive Retirement Plan
upon retirement before age 65. Mr. Chandler will be covered under the Retirement
Plan for Salaried Employees, the Supplemental Executive Retirement Plan, and the
supplemental retirement benefit described in his employment agreement which is
described below.
SEVERANCE AGREEMENT
Provident offers severance agreements to certain other of its key executives
as determined by the Provident board of directors, acting on the recommendation
of the Compensation Committee. While agreements can vary slightly in details,
the basic arrangements require Provident to make certain payments and provide
certain benefits in the event that the executive's employment terminates for any
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reason except death, disability, retirement, or for good cause by Provident or
without good reason by the executive within two years following a change of
control as that term is defined below. The amounts and benefits are:
(1) a multiple of one to three times the executive's annual base salary at
the highest rate in effect at any time immediately prior to the change in
control until the termination date;
(2) participation at no additional direct costs to the executive in the
life, accident and health insurance plans in effect prior to the change in
control (or equivalent benefits) for one to three years following the
termination date;
(3) up to $10,000 of reasonable expenses associated with outplacement
through a professional placement firm for a period of not more than one year. In
addition, each is entitled to death or long-term disability benefits no less
favorable than those to which the executive would have been entitled if death or
termination for disability occurred within six months prior to the change in
control. Messrs. Watjen, Copeland, and Best entered into agreements providing
the amounts and benefits described above. The severance agreements for Messrs.
Watjen and Copeland provide a multiple of two times, and the severance agreement
for Mr. Best provides a multiple of one times, their respective annual base
salaries at the highest rate in effect at any time from immediately prior to the
change in control until the termination date.
Provident and UNUM have approved the general terms of employment agreements
with Messrs. Watjen and Copeland with respect to their employment with
UNUMProvident, the terms of which are disclosed on page 71. The respective
agreements for each of these individuals, which Provident currently expects will
be signed prior to the completion of the merger, would supersede these
individuals' current employment and termination agreements with Provident.
EMPLOYMENT CONTRACT
J. Harold Chandler has an agreement with Provident by which he became
President and Chief Executive Officer of Provident, Provident Life Capital
Corporation, Provident Life and Accident Insurance Company (Provident's
predecessor) and Provident Life and Casualty Insurance Company effective
November 8, 1993. The period of employment covered by the agreement is one year,
with automatic extensions for additional one year terms unless either party
terminates the agreement. Compensation under the agreement includes
(1) a base annual salary of $650,000, subject to being increased annually
upon recommendation of the Compensation Committee;
(2) a transition bonus of $130,000;
(3) a special bonus of $170,000;
(4) an annual incentive bonus for 1993 of not less than $200,000;
(5) 29,216 shares of restricted Class B Common Stock, 7,304 shares of which
became vested and unrestricted on December 31, 1993, and 7,304 shares of which
shall become unrestricted by vesting and being delivered on each December 31 of
1994, 1995, and 1996;
(6) a grant of options for 190,000 shares of Class B Common Stock on
November 8, 1993 (having a two year vesting and a five year exercise period);
(7) a grant of options on January 6, 1994 for 110,000 shares of Class B
Common Stock (having a two year vesting and a five year exercise period); and
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(8) such other options or other stock grants to be recommended by the
Compensation Committee from time to time over a ten year period beginning
November 8, 1993, within the terms of the approved stock option plan then in
effect for approximately an additional 700,000 shares of Class B Common Stock.
The agreement states the intent of Provident and Mr. Chandler that he have
the opportunity to acquire 2 - 3% of Provident's outstanding common stock. The
agreement also grants eligibility to participate in the Retirement Plan for
Salaried Employees and the Supplemental Executive Retirement Plan. In addition,
a supplemental retirement benefit calculated using the Supplemental Executive
Retirement Plan formula applied to the annual base salary will be provided.
Rights to receive the supplemental retirement benefit will vest at 10% per year
provided that employment continues for five years. Generally, if employment is
terminated prior to the expiration of the five year period none of the
supplemental retirement benefit will be payable. Any supplemental retirement
benefit payments will be reduced by amounts paid under the other plans listed in
this paragraph and any qualified or nonqualified retirement benefit paid by Mr.
Chandler's previous employer. Provident agreed to pay reasonable relocation
expenses including the purchase of Mr. Chandler's former house. Certain other
benefits including club memberships and up to $10,000 in 1993 and $4,000 in each
year of employment thereafter for personal financial planning were also
included.
In connection with the signing of the merger agreement, Provident entered
into a new employment agreement with Mr. Chandler, which employment agreement
will take effect at the completion of the merger and will supersede Mr.
Chandler's existing employment agreement. The terms of this new employment
agreement are discussed on pages 69-71.
CHANGE IN CONTROL
For purposes of accelerating benefits under one or more of the incentive
compensation plans (annual and stock option), and for purposes of the severance
agreements for certain executive officers, and for purposes of certain
termination provisions in Mr. Chandler's existing employment contract described
above, a change in control will be deemed to have occurred if either of the
following sets of events happen:
(a) both (1) the Maclellan family holdings fall below 30 percent of the
outstanding stock of Provident, and (2) concurrently at least 30 percent of
the outstanding stock of Provident are owned by a person or group other than
the Maclellan family; or
(b) stockholders approve (1) a merger or consolidation of Provident in
which Provident is not the surviving entity, (2) a plan of complete
liquidation of Provident, or (3) an agreement for the sale of or disposition
of all or substantially all of the assets of Provident.
TERMINATION OF EMPLOYMENT
Mr. Chandler's employment agreement provides benefits in the event of a
termination for the following reasons:
DISABILITY: Benefits include: (1) payment of base salary for two years
from the date of notice of termination; (2) full vesting of nonvested
restricted stock, stock options and other equity awards and of supplemental
retirement benefits; (3) two annual payments each equal to the average of
the annual incentive bonus received for the two years prior to the year in
which the notice of termination is given, less any amounts paid to Mr.
Chandler under Provident's disability plan. In addition, Provident will
continue to provide, for a period of two years from the date of the notice
of termination, such health benefits and life insurance benefits as were in
effect immediately prior to such termination for disability.
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DEATH: Benefits include (1) the amount of base salary which would have
been paid for the remainder of the year in which death occurs; (2) the sum
of any unpaid transition, special and annual incentive bonuses which would
have been payable during the period of employment; (3) vesting of granted
but unvested stock options or other equity awards and of supplemental
retirement benefits.
CAUSE: Only earned but unpaid base salary through the date of
termination for cause will be paid, while all nonvested benefits held as of
the date of such termination shall be canceled as of such date.
VOLUNTARY RESIGNATION OR RETIREMENT: Benefits include: (1) earned but
unpaid base salary through the date of voluntary resignation or retirement;
(2) such health benefits and life insurance benefits as were in effect
immediately prior to such termination; and such other payments or benefits
as may be negotiated.
WITHOUT CAUSE: Benefits include: (1) payment of up to $2,250,000, less
the total of all base salary and annual incentive bonus received from
November 8, 1993, to the effective date of the termination, but in no event
will the total payable be greater than two times the sum of the then current
base salary and target annual incentive bonus for the year in which such
termination occurs; (2) for a period of two years from the date of the
notice of termination, such health benefits and life insurance benefits as
were in effect immediately prior to such termination; immediate and full
vesting of all unvested stock options and other equity awards as well as the
supplemental retirement benefits.
CHANGE IN CONTROL: If within 24 months following a change in control as
defined above, Mr. Chandler voluntarily resigns or retires or his employment
is terminated except for disability, death or cause, benefits include: (1)
payment of 299% of Mr. Chandler's average (for the preceding years of
service up to five years of such prior service) base salary and annual
incentive bonus; (2) vesting of unvested options and restricted stock as of
the date of such termination; and (3) a cash payment equal to the value of
any options anticipated to be granted during the three years following such
termination.
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PROVIDENT PERFORMANCE
The following graph shows a five year comparison of cumulative total returns
for Provident common stock (NYSE symbol: PVT), Class B Common Stock of Provident
Life and Accident Insurance Company of America (NYSE symbol: PVB), the Class A
Common Stock of Provident Life and Accident Insurance Company of America (NYSE
symbol: PVA), the S&P Composite Index, and the Insurance Index (non-weighted
average of "total returns" from the S&P Life Index and the S&P Multi-line
Index). Effective December 27, 1995, all shares of Provident Life and Accident
Insurance Company of America were exchanged for shares of Provident.
PVT, PVB, PVA, S&P 500, INSURANCE INDEX
COMPARISON OF FIVE YEARS CUMULATIVE TOTAL RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PVA PVB INSURANCE INDEX S&P 500
<S> <C> <C> <C> <C>
Dec. 1993 $100.00 $100.00 $100.00 $100.00
Dec. 1994 $78.10 $73.30 $94.07 $101.32
Dec. 1995 $131.06 $117.44 $136.86 $139.40
Dec. 1996 $190.84 $170.99 $170.79 $171.40
Dec. 1997 $308.67 $276.56 $240.51 $228.59
Dec. 1998 $335.28 $300.39 $260.78 $293.91
</TABLE>
Assumes $100 invested in each at December 1993 with dividends reinvested
The following table contains the values used to plot the performance graph
above:
<TABLE>
<CAPTION>
DEC. 1993 DEC. 1994 DEC. 1995 DEC. 1996 DEC. 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PVA.................................................... $ 100.00 $ 78.10 $ 131.06 $ 190.84 $ 308.67
PVB.................................................... $ 100.00 $ 73.30 $ 117.44 $ 170.99 $ 276.56
Insurance Index........................................ $ 100.00 $ 94.07 $ 136.86 $ 170.79 $ 240.51
S&P 500................................................ $ 100.00 $ 101.32 $ 139.40 $ 171.40 $ 228.59
<CAPTION>
DEC. 1998
-----------
<S> <C>
PVA.................................................... $ 335.28
PVB.................................................... $ 300.39
Insurance Index........................................ $ 260.78
S&P 500................................................ $ 293.91
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPANTS IN COMPENSATION
DECISION DURING 1998:
1. No member of the Compensation Committee:
(a) was an employee or officer of Provident or any of its subsidiaries; or
(b) had any relationship requiring disclosure under Item 404 of Regulation
S-K.
2. No executive officer of Provident served as a:
(a) member of a compensation committee (or its equivalent or the board of
directors in the absence of such a committee) of another entity, one of
whose executive officers served on Provident's Compensation Committee or
was a director of Provident; and
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<PAGE>
(b) director of an entity, one of whose executive officers served on
Provident's Compensation Committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding the beneficial ownership of Provident common stock
as of May 10, 1999, by each director, nominee and named executive director, and
by all directors, nominees and executive officers of Provident as a group is
found on page 59 of this document.
Detailed information about the security ownership of beneficial owners of
more than 5% of Provident common stock is set forth beginning on page 60 of this
document, including beneficial ownership based on sole voting and shared voting
power and investment power.
ACCOUNTANTS
Representatives of Provident's accountants, Ernst & Young LLP, are expected
to be present at the Provident meeting to respond to appropriate questions and
to make a statement if they so desire.
OTHER BUSINESS
As of the time this document was printed, the Provident board of directors
was not aware of any other business to be presented at the Provident meeting;
however, if any matters other than those referred to above properly come before
the meeting, the persons voting the proxies will vote them in accordance with
their best judgment.
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<PAGE>
EXPERTS
The consolidated financial statements of Provident appearing in Provident's
Annual Report on Form 10-K/A for the year ended December 31, 1998, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
With respect to the unaudited condensed consolidated interim financial
information for the six-month periods ended June 30, 1998 and June 30, 1997, and
the three-month periods ended March 31, 1999 and March 31, 1998, incorporated by
reference in this document, Ernst & Young LLP have reported that they have
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate reports, included in
Provident's Quarterly Reports on Form 10-Q for the quarter ended June 30, 1998
and Form 10-Q/A for the quarter ended March 31, 1999, and incorporated herein by
reference, states that they did not audit and they do not express an opinion on
that interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted considering the limited nature
of the review procedures applied. The independent auditors are not subject to
the liability provisions of Section 11 of the Securities Act of 1933 for their
reports on the unaudited interim financial information because those reports are
not a "report" or a "part" of the Registration Statement prepared or certified
by the auditors within the meaning of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of UNUM and subsidiaries as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998, incorporated by reference in this document, have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
STOCKHOLDER PROPOSALS
PROVIDENT
Stockholder proposals intended to be presented at the 2000 annual meeting of
Provident stockholders pursuant to Rule 14a-8 promulgated under the Exchange Act
of 1934 must be received by the Secretary of Provident, or by UNUMProvident if
the merger is completed prior thereto, not later than February 5, 2000, in order
to be included in the proxy materials sent by management of Provident for such
meeting. Stockholder proposals intended to be presented at the 2000 annual
meeting of Provident stockholders that are not intended to be included in
management's proxy materials pursuant to Rule 14a-8 must be received by the
Secretary of Provident, or by UNUMProvident if the merger is completed prior
thereto, not earlier than April 1, 2000, and not later than May 1 2000, in order
to be considered at the 2000 annual meeting.
UNUM
If the merger is not completed, UNUM will hold a 1999 annual meeting of its
stockholders. If such a meeting is held, stockholder proposals intended to be
presented at that meeting pursuant to Rule 14a-8 must be received by the
Secretary of UNUM a reasonable time prior to the time UNUM begins to print and
mail proxy materials for such meeting in order to be included in the proxy
materials sent by management of UNUM for the 1999 annual meeting. Stockholder
proposals intended to be presented at the 1999 annual meeting of UNUM
stockholders that are not intended to be included in management's proxy
materials pursuant to Rule 14a-8 must be received by the Secretary of UNUM not
less than 60 days prior to such meeting in order to be considered at the 1999
annual meeting.
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WHERE YOU CAN FIND MORE INFORMATION
Provident has filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act of 1933 that registers the
distribution to the UNUM stockholders of the UNUMProvident common stock to be
issued in the merger. The Registration Statement, including the attached
exhibits and schedules, contains additional relevant information about Provident
and UNUMProvident common stock. The rules and regulations of the Securities and
Exchange Commission allow us to omit certain information included in the
Registration Statement from this document.
In addition, Provident and UNUM file reports, proxy statements and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934. You may read and copy this information at the following
locations of the Securities and Exchange Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. Further
information on the operation of the Securities and Exchange Commission's Public
Reference Room in Washington, D.C. can be obtained by calling the Securities and
Exchange Commission at 1-800-SEC-0330.
The Securities and Exchange Commission also maintains an Internet world wide
web site that contains reports, proxy statements and other information about
issuers, such as Provident and UNUM, who file electronically with the Securities
and Exchange Commission. The address of that site is http:// www.sec.gov.
You can also inspect reports, proxy statements and other information about
Provident and UNUM at the offices of the NYSE, 20 Broad Street, New York, New
York 10005 and, in the case of UNUM, the offices of the Pacific Exchange, Inc.
301 Pine Street, San Francisco, California 94104.
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this document, which means that we can disclose
important information to you by referring you to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is deemed to be part of this document, except for any
information superseded by information in this document. This document
incorporates by reference the documents set forth below that we have previously
filed with the Securities and Exchange Commission. These documents contain
important information about our companies and their finances.
<TABLE>
<CAPTION>
PROVIDENT COMMISSION FILINGS (FILE NO. 1-11834) PERIOD OR DATE FILED
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K/A Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended June 30, 1998 and March 31, 1999
or 10-Q/A, as applicable
The description of the Provident common stock set forth Filed pursuant to Section 12 of the Exchange Act on July
in the Registration Statement on Form 8-A 24, 1992, including any amendment or report filed with
the Securities and Exchange Commission for the purpose
of updating such description
</TABLE>
144
<PAGE>
<TABLE>
<CAPTION>
UNUM COMMISSION FILINGS (FILE NO. 1-9254) PERIOD OR DATE FILED
- -------------------------------------------------------- --------------------------------------------------------
Annual Report on Form 10-K/A Year ended December 31, 1998
<S> <C>
Quarterly Report on Form 10-Q/A Quarter ended March 31, 1999
The description of the UNUM common stock set forth in Filed pursuant to Section 12 of the Exchange Act on
the Registration Statement on Form 8-A September 5, 1986, including any amendment or report
filed with the Securities and Exchange Commission for
the purpose of updating such description
The description of the UNUM Rights Agreement set forth Filed March 18, 1992, June 21, 1996 and November 25,
in the Registration Statement on Form 8-A, and the 1998
amendments thereto
</TABLE>
Provident and UNUM also incorporate by reference additional documents that
either company may file with the Securities and Exchange Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 between
the date of this document and the date of the Provident meeting or the UNUM
special meeting, as applicable. These documents include periodic reports, such
as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
Provident has supplied all information contained or incorporated by
reference in this document relating to Provident, and UNUM has supplied all such
information relating to UNUM.
VALIDITY OF SHARES
The validity of the UNUMProvident common stock to be issued to UNUM
stockholders pursuant to the merger will be passed upon for Provident by F. Dean
Copeland, Executive Vice President and General Counsel. As of the date of this
document, Mr. Copeland owned less than 0.1% of the shares (including options
representing certain rights to purchase shares) of Provident common stock.
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<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of November 22,
1998, as amended as of May 25, 1999, between UNUM CORPORATION, a Delaware
corporation ("UNUM"), and PROVIDENT COMPANIES, INC., a Delaware corporation
("Provident").
WHEREAS the respective Boards of Directors of UNUM and Provident have
approved and declared advisable this Agreement and the merger of UNUM with and
into Provident (the "Merger"), with Provident as the surviving corporation (the
"Surviving Corporation"), upon the terms and subject to the conditions set forth
in this Agreement, whereby each issued and outstanding share of common stock,
par value $.10 per share, of UNUM ("UNUM Common Stock"), other than shares owned
by Provident or UNUM, will be converted, subject to the prior effectiveness of
the Reverse Stock Split (as defined in Section 3.01(n)), into one share of
common stock, par value $.10 per share, of the Surviving Corporation ("Surviving
Corporation Common Stock"); PROVIDED, HOWEVER, that immediately prior to the
Effective Time (as defined in Section 1.03), Provident shall effect the Reverse
Stock Split, pursuant to which, among other things, each issued and outstanding
share of common stock, par value $1.00 per share, of Provident ("Provident
Common Stock") shall be reclassified and converted into (assuming the
effectiveness of the Merger) 0.730 of a validly issued, fully paid and
nonassessable share of Surviving Corporation Common Stock;
WHEREAS the respective Boards of Directors of UNUM and Provident have each
determined that the Merger and the other transactions contemplated hereby are
consistent with, and in furtherance of, their respective business strategies and
goals;
WHEREAS UNUM and Provident desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction;
WHEREAS, substantially concurrently herewith and as a condition and
inducement to UNUM's willingness to enter into this Agreement, UNUM and certain
stockholders of Provident have entered into a Stockholders Agreement (the
"Stockholders Agreement");
WHEREAS, immediately following the due execution and delivery of this
Agreement, Provident and UNUM will enter into a stock option agreement (the
"Provident Stock Option Agreement"), pursuant to which Provident will grant UNUM
the option (the "Provident Option") to purchase shares of Provident Common
Stock, upon the terms and subject to the conditions set forth therein; and
WHEREAS, immediately following the due execution and delivery of this
Agreement, UNUM and Provident will enter into a stock option agreement (the
"UNUM Stock Option Agreement" and, together with the Provident Stock Option
Agreement, the "Option Agreements"), pursuant to which UNUM will grant Provident
the option (the "UNUM Option") to purchase shares of UNUM Common Stock, upon the
terms and subject to the conditions set forth therein.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), UNUM shall be merged with and into Provident at the Effective
Time. Following the Effective Time, Provident, as the
<PAGE>
Surviving Corporation, shall succeed to and assume all the rights and
obligations of UNUM in accordance with the DGCL.
SECTION 1.02. CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on the fifth business day after satisfaction or waiver of
the conditions set forth in Article VI (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions), unless another time or date is agreed to by the
parties hereto (the "Closing Date").
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall acknowledge and
file a certificate of merger or other appropriate documents (in any such case,
the "Certificate of Merger") executed in accordance with the relevant provisions
of the DGCL and shall make all other filings or recordings required under the
DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State, or at such subsequent
date or time as UNUM and Provident shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The Amended and Restated Certificate of Incorporation of Provident, as
in effect immediately prior to the Effective Time, shall be amended as of the
Effective Time so as to read in its entirety in the form set forth as Exhibit
A-1 and, as so amended, such Certificate of Incorporation shall be the
certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The By-laws of Provident, as in effect immediately prior to the
Effective Time, shall be amended as of the Effective Time so as to read in their
entirety in the form set forth as Exhibit A-2 and, as so amended, such By-laws
shall be the by-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
SECTION 1.06. BOARD OF DIRECTORS AND OFFICERS. The Board of Directors and
the officers of the Surviving Corporation shall be as set forth on or designated
in accordance with Exhibit B hereto until the earlier of the resignation or
removal of any individual set forth on or designated in accordance with Exhibit
B or until their respective successors are duly elected and qualified, as the
case may be, it being agreed that if any director shall be unable or unwilling
to serve as a director at the Effective Time the party which designated such
individual as indicated in Exhibit B shall designate another individual to serve
in such individual's place. If any officer set forth on or designated in
accordance with Exhibit B ceases to be a full-time employee of either Provident
or UNUM at or before the Effective Time or shall be unable or unwilling to serve
as an officer of the Surviving Corporation at the Effective Time, the parties
will agree upon another individual to serve in such individual's stead.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Provident Common Stock or UNUM Common Stock:
(a) CANCELATION OF TREASURY STOCK AND PROVIDENT-OWNED STOCK. Each share of
UNUM Common Stock that is owned by Provident or UNUM (in each case not held on
behalf of third parties) shall
A-2
<PAGE>
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) CONVERSION OF UNUM AND PROVIDENT COMMON STOCK. (i) Except as set forth
in Section 2.01(a), each issued and outstanding share of UNUM Common Stock
immediately prior to the Effective Time shall be converted into, subject to the
prior effectiveness of the Reverse Stock Split, one fully paid and nonassessable
share of Surviving Corporation Common Stock. As of the Effective Time, all
shares of UNUM Common Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate representing any such shares of UNUM Common Stock shall cease to
have any rights with respect thereto, except that, from and after the Effective
Time, certificates representing UNUM Common Stock (other than shares to be
canceled in accordance with Section 2.01(a)) immediately prior to the Effective
Time shall be deemed for all purposes to represent the number of shares of
Surviving Corporation Common Stock into which they were converted pursuant to
this subparagraph (b) (provided that if an exchange of certificates formerly
representing UNUM Common Stock for certificates representing Surviving
Corporation Common Stock is required by law or applicable rule or regulation,
the parties will cause the Surviving Corporation to arrange for such exchange on
a one share-for-one share basis).
(ii) Each share of Provident Common Stock issued and outstanding immediately
prior to the Effective Time, assuming the prior effectiveness of the Reverse
Stock Split, shall remain an issued and outstanding share of Surviving
Corporation Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF PROVIDENT. Except as
disclosed in the Provident Filed SEC Documents (as defined in Section 3.01(g))
or as set forth on the Disclosure Schedule dated the date hereof and delivered
by Provident to UNUM in connection with the execution of this Agreement (the
"Provident Disclosure Schedule"), Provident represents and warrants to UNUM as
follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Provident and its
subsidiaries (as defined in Section 8.03) is a corporation duly organized,
validly existing and in good standing under the laws of the respective
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of Provident
and its subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, is not reasonably likely to have
a material adverse effect (as defined in Section 8.03) on Provident. Provident
has made available to UNUM prior to the date hereof complete and correct copies
of its Amended and Restated Certificate of Incorporation and By-laws and the
certificates of incorporation and by-laws of its subsidiaries, in each case as
amended to the date hereof.
(b) SUBSIDIARIES. Exhibit 21 to Provident's Annual Report on Form 10-K for
the year ended December 31, 1997 (the "Provident Form 10-K"), lists each
subsidiary of Provident which as of the date of this Agreement is a Significant
Subsidiary (as defined in Rule 1-02 of Regulation S-X of the Securities and
Exchange Commission (the "SEC")). All the outstanding shares of capital stock
of, or other ownership interests in, each such Significant Subsidiary have been
validly issued and are fully paid and nonassessable and are owned directly or
indirectly by Provident, free and clear of all liens and free of any other
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or such other ownership interest). Except for the
capital stock of, or other ownership interests in, its Significant Subsidiaries
noted above, Provident does not own, directly or indirectly, any capital stock
or other
A-3
<PAGE>
ownership interest in any corporation, partnership, limited liability company,
joint venture or other entity constituting a Significant Subsidiary.
(c) CAPITAL STRUCTURE. The authorized capital stock of Provident consists
of 150,000,000 shares of Provident Common Stock and 25,000,000 shares of
preferred stock, par value $1.00 per share. At the close of business on November
17, 1998, (i) 135,406,403 shares of Provident Common Stock and no shares of
preferred stock were issued and outstanding and (ii) 294,151 shares of Provident
Common Stock were held by Provident in its treasury. As of November 17, 1998,
collectively, 6,983,551 shares of Provident Common Stock were subject to options
("Provident Stock Options") granted under the Stock Plan of 1994, Stock Option
Plan of 1989, Employee Stock Option Plan of 1998, Non-Employee Director
Compensation Plan of 1998 and Amended and Restated Annual Management Incentive
Compensation Plan of 1994 (collectively, the "Provident Stock Plans"). As of
November 17, 1998, there were 9,278,780 shares of Provident Common Stock
reserved for issuance under the Provident Stock Plans. Except as set forth
above, at the close of business on November 17, 1998, no shares of capital stock
or other voting securities of Provident were issued, reserved for issuance or
outstanding. There are no outstanding stock appreciation rights ("SARs") or
rights (other than the Provident Stock Options) to receive shares of Provident
Common Stock on a deferred basis granted under the Provident Stock Plans or
otherwise. Schedule 3.01(c) of the Provident Disclosure Schedule sets forth a
true and complete list, as of November 17, 1998, of all Provident Stock Options,
the number of shares subject to each such option, the grant dates and the
exercise prices thereof. All outstanding shares of capital stock of Provident
are, and all shares which may be issued pursuant to this Agreement or the
Provident Stock Plans will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. As of the
date of this Agreement, no bonds, debentures, notes or other indebtedness of
Provident having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
Provident may vote are issued or outstanding. Except as set forth above, as of
the date of this Agreement, there are no preemptive or other outstanding
securities, options, warrants, calls, rights, conversion rights, redemption
rights, repurchase rights, commitments, agreements, arrangements or undertakings
of any kind to which Provident or any of its subsidiaries is a party or by which
any of them is bound obligating Provident or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of Provident or any of its
subsidiaries, or giving any person a right to subscribe for or acquire, any
securities of Provident or any of its subsidiaries or obligating Provident or
any of its subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, conversion right, redemption right, repurchase
right, commitment, agreement, arrangement or undertaking. There are no
outstanding contractual obligations of Provident or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of Provident
or any of its subsidiaries. There are no outstanding contractual obligations of
Provident to vote or to dispose of any shares of the capital stock of any of its
subsidiaries. To the knowledge of Provident, each individual or entity executing
the Stockholders Agreement contemporaneously with or prior to the execution and
delivery hereof is the record owner of, or is a trustee of a trust that is the
record holder of, a number of shares of Provident Common Stock which is equal to
the number of shares of Provident Common Stock set forth opposite such
individual's or entity's name on Schedule A to the Stockholders Agreement.
(d) AUTHORITY; NONCONTRAVENTION. (i) Provident has all requisite corporate
power and authority to enter into this Agreement and the Option Agreements and,
subject to receipt of the Provident Stockholder Approval (as defined in Section
3.01(n)), to consummate the transactions contemplated by this Agreement and the
Option Agreements. The execution and delivery of this Agreement and the Option
Agreements by Provident and the consummation of the transactions contemplated by
this Agreement and the Option Agreements have been duly authorized by all
necessary corporate action on the part of Provident, subject to receipt of the
Provident Stockholder Approval in the case of this Agreement. This Agreement and
the Option Agreements have been duly executed and delivered by Provident and,
assuming the due execution and delivery of each such agreement by the
counterparties thereto, each such agreement constitutes a valid and binding
obligation of Provident as to Provident's obligations therein, enforceable
against Provident in
A-4
<PAGE>
accordance with its terms. The execution and delivery of this Agreement and the
Option Agreements do not, and the consummation of the transactions contemplated
by this Agreement, the Option Agreements and the Stockholders Agreement and
compliance with the provisions of this Agreement and the Option Agreements by
Provident will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancelation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any lien upon any of
the properties or assets of Provident or any of its subsidiaries under, (A) the
Amended and Restated Certificate of Incorporation or By-laws of Provident or the
comparable charter or organizational documents of any of its subsidiaries, (B)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
Provident or any of its subsidiaries or their respective properties or assets or
(C) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Provident or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (B) and (C),
any such conflicts, violations, defaults, obligations, losses, rights, liens,
judgments, orders, decrees, statutes, laws, ordinances, rules or regulations
that, individually or in the aggregate, are not reasonably likely to have a
material adverse effect on Provident. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state or local government or any court, administrative agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to Provident or any of its subsidiaries
in connection with the execution and delivery of this Agreement and the Option
Agreements by Provident or the consummation by Provident of any of the
transactions contemplated by this Agreement and the Option Agreements, except
for (A) the filing of a premerger notification and report form by Provident
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"); (B) the filing with the SEC of (w) a registration statement on Form
S-4 relating to the issuance of Surviving Corporation Common Stock in the Merger
(the "Form S-4"), (x) a proxy statement relating to the Provident Stockholders
Meeting (as defined in Section 5.01(b)) (such proxy statement, together with the
proxy statement relating to the UNUM Stockholders Meeting (as defined in Section
5.01(c)), in each case as amended or supplemented from time to time, the "Joint
Proxy Statement"), (y) such reports under Section 13(a), 13(d), 15(d) or 16(a)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may
be required in connection with this Agreement, the Option Agreements and the
transactions contemplated hereby and thereby and (z) a registration statement on
Form S-8 under the Securities Act of 1933, as amended (the "Securities Act");
(C) the filing with the Delaware Secretary of State of (x) an amendment to the
Amended and Restated Certificate of Incorporation of Provident to effect the
Reverse Stock Split immediately prior to the occurrence of the Effective Time
and (y) the Certificate of Merger, and the filing of appropriate documents with
the relevant authorities of other states in which Provident is qualified to do
business and such filings with Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; (D) such filings with and
approvals of the New York Stock Exchange, Inc. (the "NYSE"), to permit the
shares of Surviving Corporation Common Stock that are to be issued in the Merger
to be listed on the NYSE; (E) filings in respect of, and approvals and
authorizations of, and, as applicable, the expiration of applicable waiting
periods of, and, as applicable, the expiration of applicable waiting periods of,
the respective Commissioners of Insurance of the states of Maine, New York,
Delaware and South Carolina (the "Designated State Insurance Approvals"); (F)
such other filings in respect of, and, to the extent necessary, approvals and
authorizations of, and, as applicable, the expiration of applicable waiting
periods of, the respective state Commissioners of Insurance or other similar
state authorities to satisfy applicable state insurance and competition control
and licensing laws or the expiration of applicable waiting periods (the "Other
State Insurance Approvals", and together with the Designated State Insurance
Approvals, the "State Insurance Approvals"); (G) notification under the
Competition Act (Canada) and other relevant Canadian approvals; and (H) such
consents, approvals, orders or authorizations the failure of which to be made or
obtained, individually or in the aggregate, is not reasonably likely to have a
material adverse effect on Provident.
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(ii) As of the date hereof, the Board of Directors of Provident has
approved and declared advisable this Agreement, the Reverse Stock Split and
the Merger, and has approved the Option Agreements and the other
transactions contemplated by this Agreement and the Option Agreements.
(e) SEC DOCUMENTS; UNDISCLOSED LIABILITIES; SAP STATEMENTS. (i) Provident
has filed all required reports, schedules, forms, statements and other documents
with the SEC since January 1, 1997 (including all filed reports, schedules,
forms, statements and other documents whether or not required, the "Provident
SEC Documents"). As of their respective dates, the Provident SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Provident SEC Documents, and none of
the Provident SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except to the extent that information contained
in any Provident SEC Document has been revised or superseded by a later filed
Provident SEC Document, none of the Provident SEC Documents contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Provident included in the Provident SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with U.S. generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of Provident and its consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
adjustments). Except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the date of the most
recent consolidated balance sheet included in the Provident SEC Documents,
neither Provident nor any of its subsidiaries has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) required by
U.S. generally accepted accounting principles to be recognized or disclosed on a
consolidated balance sheet of Provident and its consolidated subsidiaries or in
the notes thereto.
(ii) Provident conducts its material insurance operations through
Provident Life and Accident Insurance Company, Provident Life and Casualty
Insurance Company, Provident National Assurance Company, The Paul Revere
Life Insurance Company, The Paul Revere Variable Annuity Insurance Company
and The Paul Revere Protective Life Insurance Company (collectively, the
"Provident Insurance Subsidiaries"). Each of the Provident Insurance
Subsidiaries has filed all annual and quarterly statements, together with
all exhibits, interrogatories, notes, schedules and any actuarial opinions,
affirmations or certifications or other supporting documents in connection
therewith, required to be filed with or submitted to the appropriate
regulatory authorities of the jurisdiction in which it is domiciled or
commercially domiciled on forms prescribed or permitted by such authority
(collectively, the "Provident SAP Statements"). Provident has delivered or
made available to UNUM all Provident SAP Statements for each Provident
Insurance Subsidiary for the periods beginning January 1, 1996, each in the
form (including exhibits, annexes and any amendments thereto) filed with the
applicable state insurance regulatory agency. Financial statements included
in the Provident SAP Statements and prepared on a statutory basis, including
the notes thereto, were prepared in conformity with statutory accounting
practices prescribed or permitted by the applicable insurance regulatory
authority consistently applied for the periods covered thereby and present
fairly the statutory financial position of such Provident Insurance
Subsidiaries as at the respective dates thereof and the results of
operations of such Provident Insurance Subsidiaries for the respective
periods then ended. The Provident SAP Statements complied in all material
respects with all applicable laws, rules and regulations when filed, and no
material deficiency has been asserted with respect to any Provident SAP
Statements by the applicable insurance regulatory body or any other
governmental agency or
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body. Except as indicated therein, all assets that are reflected on
Provident SAP Statements comply with all applicable foreign, federal, state
and local statutes and regulations regulating the business and products of
insurance and all applicable orders and directives of insurance regulatory
authorities (collectively, the "Insurance Laws") with respect to admitted
assets and are in an amount at least equal to the minimum amounts required
by Insurance Laws. The statutory balance sheets and income statements
included in the Provident SAP Statements have been audited by Ernst & Young
LLP and Provident has delivered or made available to UNUM true and complete
copies of all audit opinions related thereto for periods beginning January
1, 1996. As promptly as practicable following the date of this Agreement,
Provident will deliver or make available to UNUM true and complete copies of
all examination reports of insurance departments and any insurance
regulatory agencies received by Provident on or after January 1, 1996
relating to Provident Insurance Subsidiaries.
(f) INFORMATION SUPPLIED. No statement, certificate, instrument or other
writing furnished or to be furnished by Provident or any affiliate (as defined
in Section 8.03) thereof to UNUM pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by Provident for inclusion or incorporation by reference in (i) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) the Joint Proxy Statement will, at the date the
Joint Proxy Statement is first mailed to Provident's stockholders or at the time
of the Provident Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Form S-4 and the
Joint Proxy Statement will comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and the
respective rules and regulations promulgated thereunder, except that no
representation or warranty is made by Provident with respect to statements made
or incorporated by reference therein based on information supplied by UNUM
specifically for inclusion or incorporation by reference in the Form S-4 or the
Joint Proxy Statement.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Provident SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Provident Filed SEC
Documents"), since the date of the most recent audited financial statements
included in the Provident Filed SEC Documents, Provident has conducted its
business only in the ordinary course, and there has not been since such date,
(i) any material adverse change (as defined in Section 8.03) in Provident, (ii)
except for regular quarterly cash dividends not in excess of $.10 per share
declared on Provident Common Stock and subject to Section 4.01(c), any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Provident's capital
stock, (iii) except for the Reverse Stock Split, any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, (iv) (x) any granting by
Provident or any of its subsidiaries to any director, executive officer or key
employee of Provident or any of its subsidiaries of any award or incentive
payment or increase in compensation or benefits, except in the ordinary course
of business consistent with past practice or as was required under employment
agreements in effect as of the date of this Agreement (copies of which have been
made available to UNUM), (y) any granting by Provident or any of its
subsidiaries to any such director, executive officer or key employee of any
increase in severance or termination pay, except as was required under any
employment, severance or termination agreements in effect as of the date of this
Agreement (copies of which have been made available to UNUM) or (z) any entry by
Provident or any of its subsidiaries into any employment, severance or
termination agreement with any such director, executive officer or key employee
or (v) any change in accounting methods, principles or
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practices by Provident materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in U.S. generally accepted
accounting principles.
(h) LITIGATION. There is no suit, action or proceeding pending or, to the
knowledge of Provident, threatened against or affecting Provident or any of its
subsidiaries that, individually or in the aggregate, is reasonably likely to
have a material adverse effect on Provident nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Provident or any of its subsidiaries having, or which is reasonably
likely to have, individually or in the aggregate, a material adverse effect on
Provident; PROVIDED, that for purposes of this paragraph (h) any such suit,
action, proceeding, judgment, decree, injunction, rule or order arising after
the date hereof shall not be deemed to have a material adverse effect on
Provident if and to the extent such suit, action, proceeding, judgment, decree,
injunction, rule or order (or any relevant part thereof) is based on this
Agreement, the Option Agreements or the Stockholders Agreement or the
transactions contemplated hereby or thereby.
(i) LABOR RELATIONS. Neither Provident nor any of its subsidiaries is the
subject of any suit, action or proceeding which is pending or, to the knowledge
of Provident, threatened, asserting that Provident or any of its subsidiaries
has committed an unfair labor practice (within the meaning of the National Labor
Relations Act or applicable state statutes) or is seeking to compel it to
bargain with any labor union or labor organization, nor is there pending or, to
the knowledge of Provident, threatened, nor has there been for the past five
years, any labor strike, dispute, walk-out, work stoppage, slow-down, lockout or
organizational effort involving Provident or any of its subsidiaries that,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on Provident.
(j) BENEFIT PLANS. (i) Schedule 3.01(j) contains a list and brief
description of all "employee pension benefit plans" (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes collectively referred to herein as "Provident Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(l) of ERISA,
hereinafter a "Welfare Plan"), severance, termination, change in control,
incentive compensation profit sharing stock option, stock purchase, stock
ownership, phantom stock, deferred compensation plans, and other employee fringe
benefit plans or arrangements maintained, contributed to or required to be
maintained or contributed to by Provident or its subsidiaries for the benefit of
any present or former officers, employees, directors or independent contractors
of Provident or any of its subsidiaries (all the foregoing being herein called
"Provident Benefit Plans"). Provident has made available to UNUM true, complete
and correct copies of (1) each Provident Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (2) the most recent annual
report on Form 5500 filed with the Internal Revenue Service with respect to each
Provident Benefit Plan (if any such report was required by applicable law), (3)
the most recent summary plan description for each Provident Benefit Plan for
which such a summary plan description is required by applicable law and (4) each
currently effective trust agreement and insurance or annuity contract relating
to any Provident Benefit Plan.
(ii) Each Provident Benefit Plan has been administered in accordance
with its terms except for any failure so to administer as, individually or
in the aggregate, is not reasonably likely to have a material adverse effect
on Provident. Provident, its subsidiaries and all the Provident Benefit
Plans are in compliance with the applicable provisions of ERISA, the Code
and other applicable laws as to the Provident Benefit Plans except for any
failure so to be in compliance as, individually or in the aggregate, is not
reasonably likely to have a material adverse effect on Provident.
(iii) With respect to the Provident Benefit Plans, individually and in
the aggregate, no event has occurred and, to the knowledge of Provident,
there exists no condition or set of circumstances, in connection with which
Provident or any of its subsidiaries could be subject to any liability that
is reasonably likely to have a material adverse effect on Provident under
ERISA, the Code or any other applicable law.
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(iv) Each Provident Pension Plan that is intended to comply with the
provisions of Section 401(a) of the Code has been the subject of a
determination letter from the Internal Revenue Service to the effect that
such Provident Pension Plan is qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code; no such
determination letter has been revoked, and, to the knowledge of Provident,
revocation has not been threatened; and no amendment to such Provident
Pension Plan as to which the remedial amendment period has expired would
adversely affect its qualification or materially increase its cost.
Provident has made available to UNUM a copy of the most recent determination
letter received with respect to each Provident Pension Plan for which such a
letter has been issued, as well as a copy of any pending application for a
determination letter. Schedule 3.01(j) lists all Provident Pension Plan
amendments as to which a favorable determination letter has not yet been
received.
(v) No employee of Provident will be entitled to any additional benefits
or any acceleration of the time of payment, funding or vesting of any
benefits under any Provident Benefit Plan as a result of the transactions
contemplated by this Agreement.
(vi) Since the date of the most recent audited financial statements
included in the Provident Filed SEC Documents, there has not been any
adoption or amendment in any material respect by Provident or any of its
subsidiaries of any collective bargaining agreement or any Provident Benefit
Plans (whether or not legally binding).
(k) TAXES. (i) Each of Provident and its subsidiaries has filed all tax
returns and reports required to be filed by it or requests for extensions to
file such returns or reports have been timely filed, granted and have not
expired, except to the extent that all such failures to file, taken together,
are not reasonably likely to have a material adverse effect on Provident. All
returns filed by Provident and each of its subsidiaries are complete and
accurate in all material respects to the knowledge of Provident. Provident and
each of its subsidiaries has paid (or Provident has paid on its behalf) all
taxes shown as due on such returns, and the most recent financial statements
contained in the Provident Filed SEC Documents reflect an adequate reserve for
all taxes payable by Provident and its subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against Provident or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that, individually or in
the aggregate, are not reasonably likely to have a material adverse effect
on Provident, and no requests for waivers of the time to assess any such
taxes have been granted or are pending (other than with respect to years
that are currently under examination by the Internal Revenue Service or
other applicable taxing authorities). The statute of limitations on
assessment or collection of any taxes due from Provident or any of its
subsidiaries has expired for all taxable years of Provident or any of its
subsidiaries through 1985. The Federal income tax returns of Provident and
each of its subsidiaries have been examined by and settled with the United
States Internal Revenue Service for all years through 1985.
(iii) Neither Provident nor any of its subsidiaries has taken any action
or has any knowledge of any fact or circumstance that is reasonably likely
to prevent the transactions contemplated hereby, including the Merger, from
qualifying as a reorganization within the meaning of Section 368 of the
Code.
(iv) Neither Provident nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" (within
the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (i) in the
two years prior to the date of this Agreement or (ii) in a distribution
which could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
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(v) The amount of gain to be recognized by Provident or any of its
subsidiaries as a result of the Merger due to "intercompany transactions"
(as defined under Treasury Regulation Section 1.1502-13) will not exceed $75
million.
(l) NO EXCESS PARACHUTE PAYMENTS. No amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement, either alone or together with
other events, by any employee, officer or director of Provident or any of its
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Provident Benefit
Plan currently in effect would be characterized as an "excess parachute payment"
(as such term is defined in Section 280G(b)(1) of the Code).
(m) COMPLIANCE WITH APPLICABLE LAWS. (i) Each of Provident and its
subsidiaries has in effect all Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or operate its
assets and to carry on its business as now conducted, and there has occurred no
default under or limitation with respect to any such Permit, except for the lack
of Permits and for defaults or limitations under Permits which, individually or
in the aggregate, are not reasonably likely to have a material adverse effect on
Provident. To the knowledge of Provident, Provident and its subsidiaries are,
and have been, in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity, including Insurance
Laws, except for instances of noncompliance which, individually or in the
aggregate, are not reasonably likely to have a material adverse effect on
Provident. To the knowledge of Provident, the businesses and operations of each
of Provident and its subsidiaries are being and have been conducted in
compliance in all respects with all applicable Insurance Laws, except for
instances of noncompliance which, individually or in the aggregate, are not
reasonably likely to have a material adverse effect on Provident. No
investigation, examination or review by any Governmental Entity with respect to
Provident or any of its subsidiaries is pending or, to the knowledge of
Provident, threatened, nor has any Governmental Entity indicated an intention to
conduct the same, except for those the outcome of which, individually or in the
aggregate, are not reasonably likely to have a material adverse effect on
Provident.
(ii) To the knowledge of Provident, the businesses of each of Provident
and its subsidiaries are being and have been conducted in compliance in all
respects with all applicable statutes, laws, ordinances, rules, orders and
regulations which are administered, interpreted or enforced by the U.S.
Environmental Protection Agency and state and local agencies with
jurisdiction over pollution or protection of the environment (collectively,
"Environmental Laws"), except for instances of noncompliance which,
individually or in the aggregate, are not reasonably likely to have a
material adverse effect on Provident.
(iii) There is no suit, action, proceeding or inquiry pending or, to the
knowledge of Provident, threatened before any court, governmental agency or
authority or other forum in which Provident or any of its subsidiaries has
been or, with respect to threatened suits, actions and proceedings, may be
named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material (as hereinafter defined), whether
or not occurring at, on, under or involving a site owned, leased or operated
by Provident or any of its subsidiaries, except for any such suits, actions,
proceedings and inquiries which, individually or in the aggregate, are not
reasonably likely to have a material adverse effect on Provident.
(iv) During the period of ownership or operation by Provident and its
subsidiaries of any of their respective current properties, there have been
no releases of Hazardous Material in, on, under or affecting such properties
or, to the knowledge of Provident, any surrounding site, except in each case
for those which, individually or in the aggregate, are not reasonably likely
to have a material adverse effect on Provident. Prior to the period of
ownership or operation by Provident and its subsidiaries of
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any of their respective current properties, to the knowledge of Provident,
there were no releases of Hazardous Material in, on, under or affecting any
such property or any surrounding site, except in each case for those which,
individually or in the aggregate, are not reasonably likely to have a
material adverse effect on Provident. "Hazardous Material" shall mean any
waste or other substance regulated under any Environmental Law including any
hazardous substance within the meaning of the Comprehensive Environmental
Response, Compensation, and Liability Act, or any similar Federal, state or
local law.
(v) Provident is not subject to any order, decree, injunction or other
arrangement with any Governmental Entity or any indemnity or other agreement
with any third party relating to liability under any Environmental Law or
relating to any Hazardous Substance except for any such order, decree,
injunction, arrangement, indemnity or other agreement which, individually or
in the aggregate, is not reasonably likely to have a material adverse effect
on Provident.
(n) VOTING REQUIREMENTS. The affirmative vote at the Provident
stockholders meeting (the "Provident Stockholder Approval") of (i) the holders
of sixty six and two-thirds percent of the voting power of all outstanding
shares of Provident Common Stock at the Provident Stockholders Meeting (A) to
adopt this Agreement is the only vote of the holders of any class or series of
Provident's capital stock necessary to approve and adopt this Agreement, the
Option Agreements and, other than the Reverse Stock Split and the transaction
contemplated by clause (ii) below, the transactions contemplated hereby and
thereby and (B) to adopt an amendment to the Provident Amended and Restated
Certificate of Incorporation to effect a reclassification of the Provident
Common Stock (the "Reverse Stock Split") such that, immediately prior to the
Effective Time, each issued and outstanding share of Provident Common Stock
shall be automatically reclassified and converted into (assuming the
effectiveness of the Merger) 0.730 (the "Ratio") of a validly issued, fully paid
and nonassessable share of Surviving Corporation Common Stock (with the
resulting number of shares of each registered holder of Provident Common Stock
being rounded down to the nearest whole number and with each such registered
holder being entitled to receive from Provident in lieu of any fractional shares
of Surviving Corporation Common Stock prior to such rounding down an amount in
cash (without interest) equal to the product obtained by multiplying (x) the
fraction of a share of Surviving Corporation Common Stock to which such holder
(after taking into account all shares of Provident Common Stock held immediately
prior to the effective time of the Reverse Stock Split by such holder) would
otherwise be entitled to and (y) the closing price per share of UNUM Common
Stock on the NYSE on the last trading day prior to the date on which the
effective time of the Reverse Stock Split occurs) and (ii) the holders of a
majority of all shares of Provident Common Stock casting votes (PROVIDED that
the total vote cast represents more than fifty percent in interest of all
capital stock of Provident entitled to vote) is the only vote of the holders of
any class or series of Provident's capital stock necessary to approve, in
accordance with the applicable rules of the NYSE, the issuance of Surviving
Corporation Common Stock in the Merger.
(o) STATE TAKEOVER STATUTES. Provident has caused Section 203 of the DGCL
not to be applicable to Provident by opting out of the provisions of such
Section 203 in its Amended and Restated Certificate of Incorporation in
accordance with the DGCL. To the knowledge of Provident, no other state takeover
statute, and no anti-takeover provision in Provident's Amended and Restated
Certificate of Incorporation and By-laws, is applicable to the Merger or the
other transactions contemplated by this Agreement, the Option Agreements and the
Stockholders Agreement.
(p) BROKERS. No broker, investment banker, financial adviser or other
person, other than Salomon Smith Barney Inc., the fees and expenses of which
will be paid by Provident, is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Provident. Provident has delivered to UNUM true and complete copies of all
agreements under which any such fees or expenses are payable and all
indemnification and other agreements related to the engagement of the persons to
whom such fees are payable.
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(q) OPINION OF FINANCIAL ADVISOR. Provident has received an opinion of
Salomon Smith Barney Inc., dated as of the date hereof, that the Ratio (taking
into account the Merger) is fair, from a financial point of view, to the holders
of shares of Provident Common Stock, a copy of which opinion has been, or
promptly upon receipt thereof will be, delivered to UNUM.
(r) ACCOUNTING MATTERS. Provident has disclosed to its independent public
accountants all actions taken by it, its subsidiaries or its affiliates that
would impact the accounting of the business combination to be effected by the
Merger as a pooling of interests. As of the date hereof, Provident, based on
advice from its independent public accountants, believes that the Merger will
qualify for "pooling of interests" accounting.
(s) MATERIAL CONTRACTS. Other than contracts or amendments thereto that
are required to be filed and have been filed as an Exhibit to the Provident Form
10-K, there are no contracts or agreements that are material to the business,
financial position or results of operations of Provident, including (A) any
employment, severance, termination, consulting or retirement contract providing
for aggregate payments to any individual in any calendar year in excess of
$250,000, (B) any contract relating to the borrowing of money or the guarantee
of any such obligation (other than contracts evidencing fully secured repurchase
agreements, trade payables, and contracts relating to borrowings or guarantees
made in the ordinary course of business), (C) any agency, third party
administrator, management or other service contracts and (D) any material
contract or agreement between or among Provident and its subsidiaries.
(t) INTELLECTUAL PROPERTY. (i) Except as, individually or in the
aggregate, is not reasonably likely to have a material adverse effect on
Provident: Provident does not have knowledge of any valid grounds for any bona
fide claims (A) to the effect that the manufacture, sale, licensing or use of
any product as now used, sold or licensed or proposed for use, sale or license
by Provident or any of its subsidiaries, infringes on any copyright, patent,
trademark, trade name, service mark or trade secret; (B) against the use by
Provident or any of its subsidiaries, of any copyrights, patents, trademarks,
trade names, service marks, trade secrets, technology, know-how or computer
software programs and applications used in the business of Provident or any of
its subsidiaries as currently conducted or as proposed to be conducted; (C)
challenging the ownership, validity or effectiveness of any of the Provident
Intellectual Property Rights or other trade secret material to Provident; or (D)
challenging the license or legally enforceable right to use of the Third-Party
Intellectual Rights by Provident or any of its subsidiaries.
(ii) As used in this Agreement, the term (x) "Intellectual Property"
means all patents, trademarks, trade names, service marks, copyrights and
any applications, therefor, technology, know-how, computer software programs
or applications, and tangible or intangible proprietary information or
materials, trademarks, trade names, service marks and copyrights; and (y)
"Third-Party Intellectual Property Rights" means Intellectual Property owned
by any third party; and (z) "Provident Intellectual Property Rights" means
the Intellectual Property owned by Provident or any of its subsidiaries.
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(u) NO REGULATORY DISQUALIFICATIONS. To the knowledge of Provident, no
event has occurred or condition exists or, to the extent it is within the
reasonable control of Provident, will occur or exist with respect to Provident
that, in connection with obtaining any regulatory consents required for the
Merger, would cause Provident to fail to satisfy any applicable statute or
written regulation of any applicable insurance regulatory authority that,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on Provident.
(v) REINSURANCE, ETC. Provident has no reason to believe that any material
amount recoverable pursuant to any material reinsurance, coinsurance, excess
insurance, ceding of insurance, assumption of insurance or indemnification with
respect to insurance or similar material arrangements (collectively,
"Reinsurance Agreements") applicable to the Provident Insurance Subsidiaries or
their properties or assets reflected in the Provident SAP Statements is not
fully collectible in due course. Each Provident Insurance Subsidiary is entitled
to take full credit in its SAP Statements pursuant to Insurance Laws, rules and
regulations for such reinsurance, coinsurance or excess insurance ceded pursuant
to any such Reinsurance Agreement. There are no assumption reinsurance contracts
or arrangements entered into by any Provident Insurance Subsidiary in which such
Provident Insurance Subsidiary has ceded risk to any other person which are
material individually or in the aggregate to Provident and its subsidiaries
taken as a whole.
(w) YEAR 2000. All computer systems and computer software used by
Provident or any of its subsidiaries (i) recognize or are being adapted so that,
prior to December 31, 1999, they shall recognize the advent of the year A.D.
2000 without any adverse change in operation associated with such recognition,
(ii) can correctly recognize or are being adapted so that they can correctly
recognize and manipulate date information relating to dates before, on or after
January 1, 2000, including but not limited to accepting date input, performing
calculations on dates or portion of dates and providing date output, and the
operation and functionality of such computer systems and such computer software
will not be adversely affected by the advent of the year A.D. 2000 or any
manipulation of data featuring information relating to dates before, on or after
January 1, 2000, and (iii) can suitably interact with other computer systems and
computer software in a way that does not compromise (y) its ability to correctly
recognize the advent of the year A.D. 2000 or (z) its ability to correctly
recognize and manipulate date information relating to dates before, on or after
January 1, 2000 (the operations of clauses (i), (ii) and (iii) together,
"Millennium Functionality"), except in each case for such computer systems and
computer software, the failure of which to achieve Millennium Functionality,
individually or in the aggregate, is not reasonably likely to have a material
adverse effect on Provident. To the knowledge of Provident as of the date
hereof, the costs of the adaptions necessary to achieve Millennium Functionality
are not reasonably likely to have a material adverse effect on Provident.
Provident is in compliance with all applicable state insurance department
requests for "Year 2000" filings.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF UNUM. Except as disclosed
in the UNUM Filed SEC Documents (as defined in Section 3.02(g)) or as set forth
on the Disclosure Schedule dated the date hereof and delivered by UNUM to
Provident in connection with the execution of this Agreement (the "UNUM
Disclosure Schedule"), UNUM represents and warrants to Provident as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of UNUM and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of UNUM and its subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, is not reasonably likely to have a material
adverse effect on UNUM. UNUM has made available to Provident prior to the date
hereof complete and correct copies of its Certificate of Incorporation and
By-laws and the certificates of incorporation and by-laws of its subsidiaries,
in each case as amended to the date hereof.
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(b) SUBSIDIARIES. Exhibit 21 to UNUM's Annual Report on Form 10-K for the
year ended December 31, 1997 (the "UNUM Form 10-K"), lists each subsidiary of
UNUM which as of the date of this Agreement is a Significant Subsidiary (as
defined in Rule 1-02 of Regulation S-X of the SEC). All the outstanding shares
of capital stock of, or other ownership interests in, each such Significant
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned directly or indirectly by UNUM, free and clear of all liens and free of
any other restriction (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or such other ownership interest).
Except for the capital stock of, or other ownership interests in, its
Significant Subsidiaries noted above, UNUM does not own, directly or indirectly,
any capital stock or other ownership interest in any corporation, partnership,
limited liability company, joint venture or other entity constituting a
Significant Subsidiary.
(c) CAPITAL STRUCTURE. The authorized capital stock of UNUM consists of
240,000,000 shares of UNUM Common Stock and 10,000,000 shares of preferred
stock, par value $.10 per share. At the close of business on November 17, 1998,
(i) 138,510,774 shares of UNUM Common Stock and no shares of preferred stock
were issued and outstanding, (ii) 61,465,142 shares of UNUM Common Stock were
held by UNUM in its treasury, and (iii) 1,000,000 shares of Junior Participating
Preferred Stock, Series A, were reserved for issuance in connection with the
rights (the "UNUM Rights") to purchase shares of Junior Participating Preferred
Stock, Series A, issued pursuant to the Rights Agreement dated as of March 13,
1992, as amended (the "UNUM Rights Agreement"), between UNUM and First Chicago
Trust Company of New York, as Right Agent. As of November 17, 1998,
collectively, 10,242,262 shares of UNUM Common Stock were subject to options
("UNUM Stock Options") granted under the 1998 Goals Stock Option Plan, 1996
Long-Term Stock Incentive Plan, 1990 Long-Term Stock Incentive Plan and the 1987
Executive Stock Option Plan of UNUM (collectively, the "UNUM Stock Plans"). As
of November 17, 1998, there were 15,857,738 shares of UNUM Common Stock reserved
for issuance under the UNUM Stock Plans. Except as set forth above, at the close
of business on November 17, 1998, no shares of capital stock or other voting
securities of UNUM were issued, reserved for issuance or outstanding. There are
no outstanding SARs or rights (other than the UNUM Stock Options) to receive
shares of UNUM Common Stock on a deferred basis granted under the UNUM Stock
Plans or otherwise. Schedule 3.02(c) of the UNUM Disclosure Schedule sets forth
a true and complete list, as of November 17, 1998, of all UNUM Stock Options,
the number of shares subject to each such option, the grant dates and the
exercise prices thereof. All outstanding shares of capital stock of UNUM are,
and all shares which may be issued pursuant to the UNUM Stock Plans will be,
when issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of UNUM having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of UNUM may vote are issued or outstanding.
Except as set forth above, as of the date of this Agreement, there are no
preemptive or other outstanding securities, options, warrants, calls, rights,
conversion rights, redemption rights, repurchase rights, commitments,
agreements, arrangements or undertakings of any kind to which UNUM or any of its
subsidiaries is a party or by which any of them is bound obligating UNUM or any
of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other voting securities of UNUM
or any of its subsidiaries, or giving any person a right to subscribe for or
acquire, any securities of UNUM or any of its subsidiaries, or obligating UNUM
or any of its subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, conversion right, redemption right,
repurchase right, commitment, agreement, arrangement or undertaking. There are
no outstanding contractual obligations of UNUM or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of UNUM or
any of its subsidiaries. There are no outstanding contractual obligations of
UNUM to vote or to dispose of any shares of the capital stock of any of its
subsidiaries.
(d) AUTHORITY; NONCONTRAVENTION. (i) UNUM has all requisite corporate
power and authority to enter into this Agreement, the Option Agreements and the
Stockholders Agreement and, subject to
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receipt of the UNUM Stockholder Approval (as defined in Section 3.02(n)), to
consummate the transactions contemplated by this Agreement, the Option
Agreements and the Stockholders Agreement. The execution and delivery of this
Agreement, the Option Agreements and the Stockholders Agreement by UNUM and the
consummation of the transactions contemplated by this Agreement, the Option
Agreements and the Stockholders Agreement have been duly authorized by all
necessary corporate action on the part of UNUM, subject to receipt of the UNUM
Stockholder Approval in the case of this Agreement. This Agreement, the Option
Agreements and the Stockholders Agreement have been duly executed and delivered
by UNUM, and, assuming the due execution and delivery of each such agreement by
the counterparties thereto, each such agreement constitutes a valid and binding
obligation of UNUM as to obligations therein, enforceable against UNUM in
accordance with its terms. The execution and delivery of this Agreement, the
Option Agreements and the Stockholders Agreement do not, and the consummation of
the transactions contemplated by this Agreement, the Option Agreements and the
Stockholders Agreement and compliance with the provisions of this Agreement, the
Option Agreements and the Stockholders Agreement by UNUM will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any lien upon any of the properties or assets of UNUM or any
of its subsidiaries under, (A) the Certificate of Incorporation or By-laws of
UNUM or the comparable charter or organizational documents of any of its
subsidiaries, (B) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to UNUM or any of its subsidiaries or their respective properties or
assets or (C) subject to the governmental filings and other matters referred to
in the following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to UNUM or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (B) and (C),
any such conflicts, violations, defaults, obligations, losses, rights, liens,
judgments, orders, decrees, statutes, laws, ordinances, rules or regulations
that, individually or in the aggregate, are not reasonably likely to have a
material adverse effect on UNUM. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to UNUM or any of its subsidiaries in connection
with the execution and delivery of this Agreement, the Option Agreements and the
Stockholders Agreement by UNUM or the consummation by UNUM of any of the
transactions contemplated by this Agreement, the Option Agreements or the
Stockholders Agreement, except for (A) the filing of a premerger notification
and report form by UNUM under the HSR Act; (B) the filing with the SEC of (x)
the Joint Proxy Statement relating to the UNUM Stockholders Meeting and (y) such
reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be
required in connection with this Agreement, the Option Agreements, the
Stockholders Agreement and the transactions contemplated hereby and thereby; (C)
the filing with the Delaware Secretary of State of (x) an amendment to the
Amended and Restated Certificate of Incorporation of Provident to effect the
Reverse Stock Split immediately prior to the occurrence of the Effective Time
and (y) the Certificate of Merger, and the filing of appropriate documents with
the relevant authorities of other states in which UNUM is qualified to do
business and such filings with Governmental Entities to satisfy the applicable
requirements of state securities or "blue sky" laws; (D) the State Insurance
Approvals; (E) filings with and approvals of the Insurance Directorate of the
Treasury of the United Kingdom (the "UK Insurance Approval"), and filings or
other approvals, if any, required by any Japanese Governmental Entity (the
"Japanese Insurance Approval, and together with the UK Insurance Approval and
the Designated State Insurance Approvals, the "Designated Insurance Approvals");
(F) notification under the Competition Act (Canada) and other relevant Canadian
approvals and (G) such consents, approvals, orders or authorizations the failure
of which to be made or obtained, individually or in the aggregate, is not
reasonably likely to have a material adverse effect on UNUM.
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(ii) As of the date hereof, the Board of Directors of UNUM has approved
and declared advisable this Agreement and the Merger, and has approved the
Option Agreements, the Stockholders Agreement and the other transactions
contemplated by this Agreement, the Option Agreements and the Stockholders
Agreement.
(e) SEC DOCUMENTS; UNDISCLOSED LIABILITIES; SAP STATEMENTS. (i) UNUM has
filed all required reports, schedules, forms, statements and other documents
with the SEC since January 1, 1997 (including all filed reports, schedules,
forms, statements and other documents whether or not required, the "UNUM SEC
Documents"). As of their respective dates, the UNUM SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such UNUM SEC Documents, and none of the
UNUM SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except to the extent that information contained in any
UNUM SEC Document has been revised or superseded by a later filed UNUM SEC
Document, none of the UNUM SEC Documents contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of UNUM included in the UNUM SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with U.S. generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of UNUM
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end adjustments). Except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since the date of the most recent consolidated
balance sheet included in the UNUM SEC Documents, neither UNUM nor any of its
subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by U.S. generally accepted
accounting principles to be recognized or disclosed on a consolidated balance
sheet of UNUM and its consolidated subsidiaries or in the notes thereto.
(ii) UNUM conducts its material insurance operations through UNUM Life
Insurance Company of America, First UNUM Life Insurance Company and Colonial
Life and Accident Insurance Company (collectively, the "UNUM Insurance
Subsidiaries"). Each of the UNUM Insurance Subsidiaries has filed all annual
and quarterly statements, together with all exhibits, interrogatories,
notes, schedules and any actuarial opinions, affirmations or certifications
or other supporting documents in connection therewith, required to be filed
with or submitted to the appropriate regulatory authorities of the
jurisdiction in which it is domiciled or commercially domiciled on forms
prescribed or permitted by such authority (collectively, the "UNUM SAP
Statements"). UNUM has delivered or made available to Provident all UNUM SAP
Statements for each UNUM Insurance Subsidiary for the periods beginning
January 1, 1996, each in the form (including exhibits, annexes and any
amendments thereto) filed with the applicable state insurance regulatory
agency. Financial statements included in the UNUM SAP Statements and
prepared on a statutory basis, including the notes thereto, were prepared in
conformity with statutory accounting practices prescribed or permitted by
the applicable insurance regulatory authority consistently applied for the
periods covered thereby and present fairly the statutory financial position
of such UNUM Insurance Subsidiaries as at the respective dates thereof and
the results of operations of such UNUM Insurance Subsidiaries for the
respective periods then ended. The UNUM SAP Statements complied in all
material respects with all applicable laws, rules and regulations when
filed, and no material deficiency has been asserted with respect to any UNUM
SAP Statements by the applicable insurance regulatory body or any other
governmental agency or body. Except as indicated therein, all assets that
are reflected on UNUM SAP Statements
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comply with the Insurance Laws with respect to admitted assets and are in an
amount at least equal to the minimum amounts required by the Insurance Laws.
The statutory balance sheets and income statements included in the UNUM SAP
Statements have been audited by PricewaterhouseCoopers LLP and UNUM has
delivered or made available to Provident true and complete copies of all
audit opinions related thereto for periods beginning January 1, 1996. As
promptly as practicable following the date of this Agreement, UNUM will
deliver or make available to Provident true and complete copies of all
examination reports of insurance departments and any insurance regulatory
agencies received by UNUM on or after January 1, 1996 relating to UNUM
Insurance Subsidiaries.
(f) INFORMATION SUPPLIED. No statement, certificate, instrument or other
writing furnished or to be furnished by UNUM or any affiliate thereof to
Provident pursuant to this Agreement or any other document, agreement or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by UNUM for
inclusion or incorporation by reference in (i) the Form S-4 will, at the time
the Form S-4 is filed with the SEC, at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Joint Proxy Statement will, at the date the Joint Proxy Statement is
first mailed to UNUM's stockholders or at the time of the UNUM Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty is made by
UNUM with respect to statements made or incorporated by reference therein based
on information supplied by Provident specifically for inclusion or incorporation
by reference in the Joint Proxy Statement.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the UNUM
SEC Documents filed and publicly available prior to the date of this Agreement
(as amended to the date of this Agreement, the "UNUM Filed SEC Documents"),
since the date of the most recent audited financial statements included in the
UNUM Filed SEC Documents, UNUM has conducted its business only in the ordinary
course, and there has not been (i) since such date, any material adverse change
in UNUM, (ii) except for regular quarterly cash dividends not in excess of
$.14 3/4 per share declared on UNUM Common Stock and subject to Section 4.01(c),
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of UNUM's capital
stock, (iii) any split, combination or reclassification of any of its capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock, (iv) (x) any granting by UNUM or any of its subsidiaries to any
director, executive officer or key employee of UNUM or any of its subsidiaries
of any award or incentive payment or increase in compensation or benefits,
except in the ordinary course of business consistent with past practice or as
was required under employment agreements in effect as of the date of this
Agreement (copies of which have been made available to Provident), (y) any
granting by UNUM or any of its subsidiaries to any such director, executive
officer or key employee of any increase in severance or termination pay, except
as was required under any employment, severance or termination agreements in
effect as of the date of this Agreement (copies of which have been made
available to Provident), or (z) any entry by UNUM or any of its subsidiaries
into any employment, severance or termination agreement with any such director,
executive officer or key employee or (v) any change in accounting methods,
principles or practices by UNUM materially affecting its assets, liabilities or
business, except insofar as may have been required by a change in U.S. generally
accepted accounting principles.
(h) LITIGATION. There is no suit, action or proceeding pending or, to the
knowledge of UNUM, threatened against or affecting UNUM or any of its
subsidiaries that, individually or in the aggregate, is
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reasonably likely to have a material adverse effect on UNUM nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against UNUM or any of its subsidiaries having, or which
is reasonably likely to have, individually or in the aggregate, a material
adverse effect on UNUM; PROVIDED that, for purposes of this paragraph (h), any
such suit, action, proceeding, judgment, decree, injunction, rule or order
arising after the date hereof shall not be deemed to have a material adverse
effect on UNUM if and to the extent such suit, action, proceeding, judgment,
decree, injunction, rule or order (or any relevant part thereof) is based on
this Agreement, the Option Agreements or the Stockholders Agreement or the
transactions contemplated hereby or thereby.
(i) LABOR RELATIONS. Neither UNUM nor any of its subsidiaries is the
subject of any suit, action or proceeding which is pending or, to the knowledge
of UNUM, threatened, asserting that UNUM or any of its subsidiaries has
committed an unfair labor practice (within the meaning of the National Labor
Relations Act or applicable state statutes) or is seeking to compel it to
bargain with any labor union or labor organization, nor is there pending or, to
the knowledge of UNUM, threatened, nor has there been for the past five years,
any labor strike, dispute, walk-out, work stoppage, slow-down, lockout or
organizational effort involving UNUM or any of its subsidiaries that,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on UNUM.
(j) BENEFIT PLANS. (i) Schedule 3.02(j) contains a list and brief
description of all "employee pension benefit plans" (as defined in Section 3(2)
of ERISA) (sometimes collectively referred to herein as "UNUM Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(l) of ERISA,
hereinafter a "Welfare Plan"), severance, termination, change in control,
incentive compensation profit sharing stock option, stock purchase, stock
ownership, phantom stock, deferred compensation plans, and other employee fringe
benefit plans or arrangements maintained, contributed to or required to be
maintained or contributed to by UNUM or its subsidiaries for the benefit of any
present or former officers, employees, directors or independent contractors of
UNUM or any of its subsidiaries (all the foregoing being herein called "UNUM
Benefit Plans"). UNUM has made available to Provident true, complete and correct
copies of (1) each UNUM Benefit Plan (or, in the case of any unwritten Benefit
Plans, descriptions thereof), (2) the most recent annual report on Form 5500
filed with the Internal Revenue Service with respect to each UNUM Benefit Plan
(if any such report was required by applicable law), (3) the most recent summary
plan description for each UNUM Benefit Plan for which such a summary plan
description is required by applicable law and (4) each currently effective trust
agreement and insurance or annuity contract relating to any UNUM Benefit Plan.
(ii) Each UNUM Benefit Plan has been administered in accordance with its
terms except for any failure so to administer as, individually or in the
aggregate, is not reasonably likely to have a material adverse effect on
UNUM. UNUM, its subsidiaries and all the UNUM Benefit Plans are in
compliance with the applicable provisions of ERISA, the Code and other
applicable laws as to the UNUM Benefit Plans except for any failure so to be
in compliance as, individually or in the aggregate, is not reasonably likely
to have a material adverse effect on UNUM.
(iii) With respect to the UNUM Benefit Plans, individually and in the
aggregate, no event has occurred and, to the knowledge of UNUM, there exists
no condition or set of circumstances, in connection with which UNUM or any
of its subsidiaries could be subject to any liability that is reasonably
likely to have a material adverse effect on UNUM under ERISA, the Code or
any other applicable law.
(iv) Each UNUM Pension Plan that is intended to comply with the
provisions of Section 401(a) of the Code has been the subject of a
determination letter from the Internal Revenue Service to the effect that
such UNUM Pension Plan is qualified and exempt from Federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code; no such
determination letter has been revoked, and, to the knowledge of UNUM,
revocation has not been threatened; and no amendment to such UNUM Pension
Plan as to which the remedial amendment period has expired would adversely
affect
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its qualification or, materially increase its cost. UNUM has made available
to Provident a copy of the most recent determination letter received with
respect to each UNUM Pension Plan for which such a letter has been issued,
as well as a copy of any pending application for a determination letter.
Schedule 3.02(j) lists all UNUM Pension Plan amendments as to which a
favorable determination letter has not yet been received.
(v) No employee of UNUM will be entitled to any additional benefits or
any acceleration of the time of payment, funding or vesting of any benefits
under any UNUM Benefit Plan as a result of the transactions contemplated by
this Agreement.
(vi) Since the date of the most recent audited financial statements
included in the UNUM Filed SEC Documents, there has not been any adoption or
amendment in any material respect by UNUM or any of its subsidiaries of any
collective bargaining agreement or any UNUM Benefit Plans (whether or not
legally binding).
(k) TAXES. (i) Each of UNUM and its subsidiaries has filed all tax returns
and reports required to be filed by it or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired, except
to the extent that all such failures to file, taken together, are not reasonably
likely to have a material adverse effect on UNUM. All returns filed by UNUM and
each of its subsidiaries are complete and accurate in all material respects to
the knowledge of UNUM. UNUM and each of its subsidiaries has paid (or UNUM has
paid on its behalf) all taxes shown as due on such returns, and the most recent
financial statements contained in the UNUM Filed SEC Documents reflect an
adequate reserve for all taxes payable by UNUM and its subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements.
(ii) No deficiencies for any taxes have been proposed, asserted or
assessed against UNUM or any of its subsidiaries that are not adequately
reserved for, except for deficiencies that, individually or in the
aggregate, are not reasonably likely to have a material adverse effect on
UNUM, and no requests for waivers of the time to assess any such taxes have
been granted or are pending (other than with respect to years that are
currently under examination by the Internal Revenue Service or other
applicable taxing authorities). The statute of limitations on assessment or
collection of any taxes due from UNUM or any of its subsidiaries has expired
for all taxable years of UNUM or any of its subsidiaries through 1991. The
Federal income tax returns of UNUM and each of its subsidiaries have been
examined by and settled with the United States Internal Revenue Service for
all years through 1991.
(iii) Neither UNUM nor any of its subsidiaries has taken any action or
has any knowledge of any fact or circumstance that is reasonably likely to
prevent the transactions contemplated hereby, including the Merger, from
qualifying as a reorganization within the meaning of Section 368 of the
Code.
(iv) Neither UNUM nor any of its subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning
of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying
for tax-free treatment under Section 355 of the Code (i) in the two years
prior to the date of this Agreement or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
(l) NO EXCESS PARACHUTE PAYMENTS. No amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement, either alone or together with
other events, by any employee, officer or director of UNUM or any of its
affiliates
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who is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or UNUM Benefit Plan currently in
effect would be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
(m) COMPLIANCE WITH APPLICABLE LAWS. (i) Each of UNUM and its subsidiaries
has in effect all Permits necessary for it to own, lease or operate its assets
and to carry on its business as now conducted, and there has occurred no default
under or limitation with respect to any such Permit, except for the lack of
Permits and for defaults or limitations under Permits which, individually or in
the aggregate, are not reasonably likely to have a material adverse effect on
UNUM. To the knowledge of UNUM, UNUM and its subsidiaries are, and have been, in
compliance with all applicable statutes, laws, ordinances, rules, orders and
regulations of any Governmental Entity, including Insurance Laws, except for
instances of noncompliance which, individually or in the aggregate, are not
reasonably likely to have a material adverse effect on UNUM. To the knowledge of
UNUM, the businesses and operations of each of UNUM and its subsidiaries are
being and have been conducted in compliance in all respects with all applicable
Insurance Laws, except for instances of noncompliance which, individually or in
the aggregate, are not reasonably likely to have a material adverse effect on
UNUM. No investigation, examination or review by any Governmental Entity with
respect to UNUM or any of its subsidiaries is pending or, to the knowledge of
UNUM, threatened, nor has any Governmental Entity indicated an intention to
conduct the same, except for those the outcome of which, individually or in the
aggregate, are not reasonably likely to have a material adverse effect on UNUM.
(ii) To the knowledge of UNUM, the businesses of each of UNUM and its
subsidiaries are being and have been conducted in compliance in all respects
with all applicable Environmental Laws, except for instances of
noncompliance which, individually or in the aggregate, are not reasonably
likely to have a material adverse effect on UNUM.
(iii) There is no suit, action, proceeding or inquiry pending or, to the
knowledge of UNUM, threatened before any court, governmental agency or
authority or other forum in which UNUM or any of its subsidiaries has been
or, with respect to threatened suits, actions and proceedings, may be named
as a defendant (i) for alleged noncompliance (including by any predecessor)
with any Environmental Law or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on,
under or involving a site owned, leased or operated by UNUM or any of its
subsidiaries, except for any such suits, actions, proceedings and inquiries
which, individually or in the aggregate, are not reasonably likely to have a
material adverse effect on UNUM.
(iv) During the period of ownership or operation by UNUM and its
subsidiaries of any of their respective current properties, there have been
no releases of Hazardous Material in, on, under or affecting such properties
or, to the knowledge of UNUM, any surrounding site, except in each case for
those which, individually or in the aggregate, are not reasonably likely to
have a material adverse effect on UNUM. Prior to the period of ownership or
operation by UNUM and its subsidiaries of any of their respective current
properties, to the knowledge of UNUM, there were no releases of Hazardous
Material in, on, under or affecting any such property or any surrounding
site, except in each case for those which, individually or in the aggregate,
are not reasonably likely to have a material adverse effect on UNUM.
(v) UNUM is not subject to any order, decree, injunction or other
arrangement with any Governmental Entity or any indemnity or other agreement
with any third party relating to liability under any Environmental Law or
relating to any Hazardous Substance except for any such order, decree,
injunction, arrangement, indemnity or other agreement which, individually or
in the aggregate, is not reasonably likely to have a material adverse effect
on UNUM.
(n) VOTING REQUIREMENTS. The affirmative vote at the UNUM Stockholders
Meeting (the "UNUM Stockholder Approval") of the holders of a majority of the
voting power of all outstanding shares of
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UNUM Common Stock is the only vote of the holders of any class or series of
UNUM's capital stock necessary to approve and adopt this Agreement, the Option
Agreements, the Stockholders Agreement and the transactions contemplated hereby
and thereby.
(o) STATE TAKEOVER STATUTES; CERTIFICATE OF INCORPORATION. The Board of
Directors of UNUM (including the disinterested directors thereof (as defined in
Article EIGHTH of the UNUM Certificate of Incorporation)) has unanimously
approved the terms of this Agreement, the Option Agreements and the Stockholders
Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement, the Option Agreements and the Stockholders
Agreement and, assuming the accuracy of Provident's representation and warranty
contained in Section 3.01(n), such approval constitutes approval of the Merger
and the other transactions contemplated by this Agreement, the Option Agreements
and the Stockholders Agreement by the UNUM Board of Directors under the
provisions of Section 203 of the DGCL and Article EIGHTH of the UNUM Certificate
of Incorporation, and represents all the actions necessary to ensure that such
Section 203 and the provisions of Article EIGHTH of the UNUM Certificate of
Incorporation do not apply to Provident in connection with the Merger and the
other transactions contemplated by this Agreement, by the Option Agreements and
by the Stockholders Agreement. To the knowledge of UNUM, no other state takeover
statute, and no other anti-takeover provision in the UNUM Certificate of
Incorporation or By-laws is applicable to the Merger or the other transactions
contemplated by this Agreement, the Option Agreements and the Stockholders
Agreement.
(p) BROKERS. No broker, investment banker, financial adviser or other
person, other than Morgan Stanley Dean Witter & Co., the fees and expenses of
which will be paid by UNUM, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
UNUM. UNUM has delivered to Provident true and complete copies of all agreements
under which any such fees or expenses are payable and all indemnification and
other agreements related to the engagement of the persons to whom such fees are
payable.
(q) OPINION OF FINANCIAL ADVISOR. UNUM has received an opinion of Morgan
Stanley Dean Witter & Co., dated as of the date hereof, that the Ratio (taking
into account the Merger), is fair, from a financial point of view, to the
holders of shares of UNUM Common Stock, a copy of which opinion has been, or
promptly upon receipt thereof will be, delivered to Provident.
(r) ACCOUNTING MATTERS. UNUM has disclosed to its independent public
accountants all actions taken by it, its subsidiaries or its affiliates that
would impact the accounting of the business combination to be effected by the
Merger as a pooling of interests. As of the date hereof, UNUM, based on advice
from its independent public accountants, believes that the Merger will qualify
for "pooling of interests" accounting.
(s) MATERIAL CONTRACTS. Other than contracts or amendments thereto that
are required to be filed and have been filed as an Exhibit to the UNUM Form
10-K, there are no contracts or agreements that are material to the business,
financial position or results of operations of UNUM, including (A) any
employment, severance, termination, consulting or retirement contract providing
for aggregate payments to any individual in any calendar year in excess of
$250,000, (B) any contract relating to the borrowing of money or the guarantee
of any such obligation (other than contracts evidencing fully secured repurchase
agreements, trade payables, and contracts relating to borrowings or guarantees
made in the ordinary course of business), (C) any agency, third party
administrator, management or other service contracts and (D) any material
contract or agreement between or among UNUM and its subsidiaries.
(t) INTELLECTUAL PROPERTY. (i) Except as, individually or in the
aggregate, is not reasonably likely to have a material adverse effect on UNUM:
UNUM does not have knowledge of any valid grounds for any bona fide claims (A)
to the effect that the manufacture, sale, licensing or use of any product as now
used, sold or licensed or proposed for use, sale or license by UNUM or any of
its subsidiaries, infringes on any copyright, patent, trademark, trade name,
service mark or trade secret; (B) against the use by UNUM or any of its
subsidiaries, of any copyrights, patents, trademarks, trade names, service
marks, trade secrets,
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technology, know-how or computer software programs and applications used in the
business of UNUM or any of its subsidiaries as currently conducted or as
proposed to be conducted; (C) challenging the ownership, validity or
effectiveness of any of the UNUM Intellectual Property Rights or other trade
secret material to UNUM; or (D) challenging the license or legally enforceable
right to use of the Third-Party Intellectual Rights by UNUM or any of its
subsidiaries.
(ii) As used in this Agreement, "UNUM Intellectual Property Rights"
means the Intellectual Property owned by UNUM or any of its subsidiaries.
(u) NO REGULATORY DISQUALIFICATIONS. To the knowledge of UNUM, no event
has occurred or condition exists or, to the extent it is within the reasonable
control of UNUM, will occur or exist with respect to UNUM that, in connection
with obtaining any regulatory consents required for the Merger, would cause UNUM
to fail to satisfy any applicable statute or written regulation of any
applicable insurance regulatory authority that, individually or in the
aggregate, is reasonably likely to have a material adverse effect on UNUM.
(v) REINSURANCE, ETC. UNUM has no reason to believe that any material
amount recoverable pursuant to any Reinsurance Agreement applicable to the UNUM
Insurance Subsidiaries is not fully collectible in due course. Each UNUM
Insurance Subsidiary is entitled to take full credit in the UNUM SAP Statements
pursuant to Insurance Laws, rules and regulations for such reinsurance,
coinsurance or excess insurance ceded pursuant to any such Reinsurance
Agreement. There are no assumption reinsurance contracts or arrangements entered
into by any UNUM Insurance Subsidiary in which such UNUM Insurance Subsidiary
has ceded risk to any other person which are material individually or in the
aggregate to UNUM and its subsidiaries taken as a whole.
(w) UNUM RIGHTS AGREEMENT. The UNUM Rights Agreement has been amended (the
"UNUM Rights Plan Amendment") (i) to render the UNUM Rights Agreement
inapplicable to the Merger and the other transactions contemplated by this
Agreement, the Option Agreements and the Stockholders Agreement and (ii) to
ensure that (1) Provident is not deemed to be an Acquiring Person (as defined in
the UNUM Rights Agreement) pursuant to the UNUM Rights Agreement and (2) a
Distribution Date, a Triggering Event or Stock Acquisition Date (as such terms
are defined in the UNUM Rights Agreement) does not occur solely by reason of the
execution and delivery of this Agreement, the Option Agreements, the
Stockholders Agreement, the consummation of the Merger, or the consummation of
the other transactions contemplated by this Agreement, the Option Agreements and
the Stockholders Agreement, and such amendment may not be further amended by
UNUM without the prior consent of Provident.
(x) YEAR 2000. All computer systems and computer software used by UNUM or
any of its subsidiaries have achieved or are being adapted so as to achieve
Millennium Functionality, except in each case for such computer systems and
computer software, the failure of which to achieve Millennium Functionality,
individually or in the aggregate, is not reasonably likely to have a material
adverse effect on UNUM. To the knowledge of UNUM as of the date hereof, the
costs of the adaptions necessary to achieve Millennium Functionality are not
reasonably likely to have a material adverse effect on UNUM. UNUM is in
compliance with all applicable state insurance department requests for "Year
2000" filings.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY PROVIDENT.
During the period from the date of this Agreement to the Effective Time,
Provident shall, and shall cause its subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent therewith, use all
reasonable efforts to preserve intact their current business organizations,
licenses and authorizations, keep available the services of their current
officers and employees and preserve their relationships with policyholders,
customers, suppliers, licensors, licensees, distributors, brokers, agents,
reinsurers, managers and others having business dealings with them to the end
that their goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, except as set forth on
the Provident Disclosure Schedule, as otherwise expressly contemplated by this
Agreement or the Provident Option Agreement or as consented to by UNUM in
writing, during the period from the date of this Agreement to the Effective
Time, Provident shall not, and shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends payable in cash, stock
or property on, or make any other distributions in respect of, any of its
capital stock, other than dividends and distributions by a direct or
indirect wholly owned subsidiary of Provident to its parent and except that
Provident may continue (1) the declaration and payment of regular quarterly
cash dividends not in excess of $.10 per share of Provident Common Stock,
with usual record and payment dates and in accordance with Provident's past
dividend policy, subject to Section 4.01(c) and (2) the declaration, and
payment of dividends on participating policies, (y) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of or in substitution for shares of its
capital stock or (z) purchase, redeem or otherwise acquire any shares of
capital stock of Provident or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, other than, in accordance with the
terms thereof, the issuance of Provident Common Stock upon the exercise of
Provident Stock Options or otherwise pursuant to equity stock-based awards,
in each case outstanding on the date of this Agreement and in accordance
with their present terms;
(iii) amend its certificate of incorporation, by-laws or other comparable
charter or organizational documents;
(iv) acquire (x) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, joint venture, association or other
business organization or division thereof or (y) any assets that, in the
case of clause (x) or (y), are material, individually or in the aggregate,
to Provident;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets, except
sales of investment securities or other assets in the ordinary course of
business consistent with past practice;
(vi) (x) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Provident or any
of its subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business (or to refund existing or
maturing indebtedness) consistent with past practice and except for
intercompany indebtedness between
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Provident and any of its subsidiaries or between such subsidiaries, or (y)
make any loans, advances or capital contributions to, or investments in, any
other person, other than to Provident or any direct or indirect wholly owned
subsidiary of Provident and other than investments made in the ordinary
course of business consistent with past practice as part of Provident's
investment portfolio and, in the case of any long-term investments, as to
which Provident has previously consulted with UNUM;
(vii) make or agree to make any new capital expenditure or expenditures,
or enter into any agreement or agreements providing for payments which,
individually, are in excess of $10,000,000 or, in the aggregate, are in
excess of $100,000,000;
(viii) make any tax election that, individually or in the aggregate, is
reasonably likely to have a material adverse effect on the tax liability of
Provident or settle or compromise any material income tax liability;
(ix) pay, discharge, settle or satisfy any claims, liabilities,
obligations or litigation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities recognized or
disclosed in the most recent consolidated financial statements (or the notes
thereto) of Provident included in the Provident Filed SEC Documents or
incurred since the date of such financial statements, or waive the benefits
of, or agree to modify in any manner, any confidentiality, standstill or
similar agreement to which Provident or any of its subsidiaries is a party;
(x) take any action that (without giving effect to any action taken or
agreed to be taken by UNUM or any of its affiliates) would prevent Provident
from accounting for the business combination to be effected by the Merger as
a pooling of interests or from treating the Merger as a "reorganization"
under Section 368 of the Code;
(xi) except as required by law or contemplated hereby and except for
labor agreements negotiated in the ordinary course, enter into, adopt or
amend in any material respect or terminate any Provident Benefit Plan or any
other agreement, plan or policy involving Provident or its subsidiaries, and
one or more of its directors, officers or employees, or materially change
any actuarial or other assumption used to calculate funding obligations with
respect to any pension plan, or change the manner in which contributions to
any pension plan are made or the basis on which such contributions are
determined;
(xii) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of Provident or its subsidiaries,
or as contemplated hereby or by the terms of any contract the existence of
which does not constitute a violation of this Agreement, increase the
compensation of any director, executive officer or other key employee or pay
any benefit or amount not required by a plan or arrangement as in effect on
the date of this Agreement to any such person; or
(xiii) authorize, or commit or agree to take, any of the foregoing
actions.
(b) CONDUCT OF BUSINESS BY UNUM. During the period from the date of this
Agreement to the Effective Time, UNUM shall, and shall cause its subsidiaries
to, carry on their respective businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, licenses and authorizations, keep available the
services of their current officers and employees and preserve their
relationships with policyholders, customers, suppliers, licensors, licensees,
distributors, brokers, agents, reinsurers, managers and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Without limiting the generality of the
foregoing, except as set forth on the UNUM Disclosure Schedule, as otherwise
expressly contemplated by this Agreement or the UNUM Option Agreement or as
consented to by Provident in writing,
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during the period from the date of this Agreement to the Effective Time, UNUM
shall not, and shall not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends payable in cash, stock
or property on, or make any other distributions in respect of, any of its
capital stock, other than dividends and distributions by a direct or
indirect wholly owned subsidiary of UNUM to its parent and except that UNUM
may continue (1) the declaration and payment of regular quarterly cash
dividends not in excess of $.14 3/4 per share of UNUM Common Stock, with
usual record and payment dates and in accordance with UNUM's past dividend
policy, subject to Section 4.01(c) and (2) the declaration on and payment of
dividends on participating policies, (y) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of its capital stock or (z)
purchase, redeem or otherwise acquire any shares of capital stock of UNUM or
any of its subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities other than (x) upon the exercise of the
UNUM Rights or (y) in accordance with the terms thereof, the issuance of
UNUM Common Stock upon the exercise of UNUM Stock Options or otherwise
pursuant to equity stock-based awards, in each case outstanding on the date
of this Agreement and in accordance with their present terms;
(iii) amend its certificate of incorporation, by-laws or other comparable
charter or organizational documents;
(iv) acquire (x) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, joint venture, association or other
business organization or division thereof or (y) any assets that, in the
case of clause (x) or (y), are material, individually or in the aggregate,
to UNUM;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any lien or otherwise dispose of any of its properties or assets, except
sales of investment securities or other assets in the ordinary course of
business consistent with past practice;
(vi) (x) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of UNUM or any of
its subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business (or to refund existing or
maturing indebtedness) consistent with past practice and except for
intercompany indebtedness between UNUM and any of its subsidiaries or
between such subsidiaries, or (y) make any loans, advances or capital
contributions to, or investments in, any other person, other than to UNUM or
any direct or indirect wholly owned subsidiary of UNUM and other than
investments made in the ordinary course of business consistent with past
practice as part of UNUM's investment portfolio and, in the case of any
long-term investments, as to which UNUM has previously consulted with
Provident;
(vii) make or agree to make any new capital expenditure or expenditures,
or enter into any agreement or agreements providing for payments which,
individually, are in excess of $10,000,000 or, in the aggregate, are in
excess of $100,000,000;
(viii) make any tax election that, individually or in the aggregate, is
reasonably likely to have a material adverse effect on the tax liability of
UNUM or settle or compromise any material income tax liability;
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(ix) pay, discharge, settle or satisfy any claims, liabilities,
obligations or litigation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities recognized or
disclosed in the most recent consolidated financial statements (or the notes
thereto) of UNUM included in the UNUM Filed SEC Documents or incurred since
the date of such financial statements or waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill or similar agreement
to which UNUM or any of its subsidiaries is a party;
(x) take any action that (without giving effect to any action taken or
agreed to be taken by Provident or any of its affiliates) would prevent
Provident from accounting for the business combination to be effected by the
Merger as a pooling of interests or from treating the Merger as a
"reorganization" under Section 368 of the Code;
(xi) except as required by law or contemplated hereby and except for
labor agreements negotiated in the ordinary course, enter into, adopt or
amend in any material respect or terminate any UNUM Benefit Plan or any
other agreement, plan or policy involving UNUM or its subsidiaries, and one
or more of its directors, officers or employees, or materially change any
actuarial or other assumption used to calculate funding obligations with
respect to any pension plan, or change the manner in which contributions to
any pension plan are made or the basis on which such contributions are
determined;
(xii) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of UNUM or its subsidiaries, or
as contemplated hereby or by the terms of any contract the existence of
which does not constitute a violation of this Agreement, increase the
compensation of any director, executive officer or other key employee or pay
any benefit or amount not required by a plan or arrangement as in effect on
the date of this Agreement to any such person;
(xiii) amend the UNUM Rights Agreement; or
(xiv) authorize, or commit or agree to take, any of the foregoing
actions.
(c) COORDINATION OF DIVIDENDS. Each of UNUM and Provident shall coordinate
with the other regarding the declaration and payment of dividends in respect of
the UNUM Common Stock and the Provident Common Stock and the record dates and
payment dates relating thereto, it being the intention of UNUM and Provident
that any holder of UNUM Common Stock or Provident Common Stock shall not receive
two dividends, or fail to receive one dividend, for any single calendar quarter
with respect to its shares of UNUM Common Stock or Provident Common Stock and/or
any shares of Surviving Corporation Common Stock any such holder receives in
exchange therefor pursuant to the Merger.
(d) OTHER ACTIONS. Except as required by law, Provident and UNUM shall
not, and shall not permit any of their respective subsidiaries to, voluntarily
take any action that would, or that is reasonably likely to, result in any of
the conditions to the Merger set forth in Article VI not being satisfied.
(e) ADVICE OF CHANGES. Provident and UNUM shall promptly advise the other
party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it contained in this Agreement, the Option
Agreements or, in the case of UNUM, the Stockholders Agreement becoming untrue
or inaccurate in any respect where the failure of such representation to be so
true and correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), individually or in the aggregate,
has had or is reasonably likely to have a material adverse effect on it, (ii)
the failure by it to comply in any material respect with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, the Option Agreements or, in the case of
UNUM, the Stockholders Agreement and (iii) any change or event having, or which,
insofar as can reasonably be foreseen, is reasonably likely to have a material
adverse effect on
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such party or on the truth of their respective representations and warranties or
the ability of the conditions set forth in Article VI to be satisfied; PROVIDED,
HOWEVER, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement, the Option
Agreements or, in the case of UNUM, the Stockholders Agreement.
SECTION 4.02. NO SOLICITATION BY PROVIDENT. (a) Provident shall not, nor
shall it permit any of its subsidiaries to, nor shall it authorize or permit any
of its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Provident Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any Provident Takeover
Proposal; PROVIDED, HOWEVER, that, at any time prior to the publicly announced
date of the Provident Stockholders Meeting (the "Provident Applicable Period"),
Provident may, in response to a Provident Superior Proposal (as defined in
Section 4.02(b)) which was not solicited by it and which did not otherwise
result from a breach of this Section 4.02(a), and subject to providing prior
written notice of its decision to take such action to UNUM (the "Provident
Notice") and compliance with Section 4.02(c), following delivery of the
Provident Notice (x) furnish information with respect to Provident and its
subsidiaries to any person making a Provident Superior Proposal pursuant to a
customary confidentiality agreement (as determined by Provident after
consultation with its outside counsel) and (y) participate in discussions or
negotiations regarding such Provident Superior Proposal. For purposes of this
Agreement, "Provident Takeover Proposal" means any inquiry, proposal or offer
from any person relating to any direct or indirect acquisition or purchase of a
business that constitutes 15% or more of the net revenues, net income or the
assets of Provident and its subsidiaries, taken as a whole, or 15% or more of
any class of equity securities of Provident or any of its subsidiaries, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class of equity securities of Provident
or any of its subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Provident or any of its subsidiaries, other than the transactions contemplated
by this Agreement.
(b) Except as expressly permitted by this Section 4.02, neither the Board of
Directors of Provident nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to UNUM, the
approval or recommendation by such Board of Directors or such committee of this
Agreement, the Reverse Stock Split, the Merger or the issuance of Surviving
Corporation Common Stock in the Merger unless in the good faith judgment of the
Board of Directors of Provident, after consultation with outside counsel, the
failure to take the foregoing actions would be inconsistent with its obligations
under applicable law, (ii) approve or recommend, or propose publicly to approve
or recommend, any Provident Takeover Proposal or (iii) cause Provident to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Provident Takeover Proposal (each, a
"Provident Acquisition Agreement"). Notwithstanding the foregoing, in response
to a Provident Superior Proposal which was not solicited by Provident and which
did not otherwise result from a breach of Section 4.02(a), the Board of
Directors of Provident may (subject to this and the following sentences)
terminate this Agreement (and concurrently with or after such termination, if it
so chooses, cause Provident to enter into any Provident Acquisition Agreement
with respect to any Provident Superior Proposal), but only at a time that is
during the Provident Applicable Period and is after the fifth business day
following UNUM's receipt of written notice advising UNUM that the Board of
Directors of Provident is prepared to accept a Provident Superior Proposal,
specifying the material terms and conditions of such Provident Superior Proposal
and identifying the person making such Provident Superior Proposal. For purposes
of this Agreement, a "Provident Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer,
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merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the shares of
Provident Common Stock then outstanding or all or substantially all the assets
of Provident and its subsidiaries taken together and otherwise on terms which
the Board of Directors of Provident determines in its good faith judgment (based
on the advice of a financial advisor of nationally recognized reputation) to be
more favorable to Provident's stockholders than the Merger and for which
financing, to the extent required, is then committed or which, in the good faith
judgment of the Board of Directors of Provident, is reasonably capable of being
obtained by such third party.
(c) In addition to the obligations of Provident set forth in paragraphs (a)
and (b) of this Section 4.02, Provident shall immediately advise UNUM orally and
in writing of any request for information or of any Provident Takeover Proposal,
the material terms and conditions of such request or Provident Takeover Proposal
and the identity of the person making such request or Provident Takeover
Proposal. Provident will keep UNUM reasonably informed of the status and details
(including amendments or proposed amendments) of any such request or Provident
Takeover Proposal.
(d) Nothing contained in this Section 4.02 shall prohibit Provident from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
Provident's stockholders if, in the good faith judgment of the Board of
Directors of Provident, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
PROVIDED, HOWEVER, that neither Provident nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement, the Reverse Stock Split,
the Merger or the issuance of Surviving Corporation Common Stock in the Merger
unless in the good faith judgment of the Board of Directors of Provident, after
consultation with outside counsel, the failure to take the foregoing actions
would be inconsistent with its obligations under applicable law, or approve or
recommend, or propose publicly to approve or recommend, a Provident Takeover
Proposal.
SECTION 4.03. NO SOLICITATION BY UNUM. (a) UNUM shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any of its
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes any UNUM Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any UNUM Takeover
Proposal; PROVIDED, HOWEVER, that, at any time prior to the publicly announced
date of the UNUM Stockholders Meeting (the "UNUM Applicable Period"), UNUM may,
in response to a UNUM Superior Proposal (as defined in Section 4.03(b)) which
was not solicited by it and which did not otherwise result from a breach of this
Section 4.03(a), and subject to providing prior written notice of its decision
to take such action to Provident (the "UNUM Notice") and compliance with Section
4.03(c), following delivery of the UNUM Notice (x) furnish information with
respect to UNUM and its subsidiaries to any person making a UNUM Superior
Proposal pursuant to a customary confidentiality agreement (as determined by
UNUM after consultation with its outside counsel) and (y) participate in
discussions or negotiations regarding such UNUM Superior Proposal. For purposes
of this Agreement, "UNUM Takeover Proposal" means any inquiry, proposal or offer
from any person relating to any direct or indirect acquisition or purchase of a
business that constitutes 15% or more of the net revenues, net income or the
assets of UNUM and its subsidiaries, taken as a whole, or 15% or more of any
class of equity securities of UNUM or any of its subsidiaries, any tender offer
or exchange offer that if consummated would result in any person beneficially
owning 15% or more of any class of equity securities of UNUM or any of its
subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving UNUM
or any of its subsidiaries, other than the transactions contemplated by this
Agreement.
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(b) Except as expressly permitted by this Section 4.03, neither the Board of
Directors of UNUM nor any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Provident, the
approval or recommendation by such Board of Directors or such committee of this
Agreement or the Merger unless in the good faith judgment of the Board of
Directors of UNUM, after consultation with outside counsel, the failure to take
the foregoing actions would be inconsistent with its obligations under
applicable law, (ii) approve or recommend, or propose publicly to approve or
recommend, any UNUM Takeover Proposal, or (iii) cause UNUM to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement related to any UNUM Takeover Proposal (each, a "UNUM Acquisition
Agreement"). Notwithstanding the foregoing, in response to a UNUM Superior
Proposal which was not solicitated by UNUM and which did not otherwise result
from a breach of Section 4.03(a), the Board of Directors of UNUM may (subject to
this and the following sentences) terminate this Agreement (and concurrently
with or after such termination, if it so chooses, cause UNUM to enter into any
UNUM Acquisition Agreement with respect to any UNUM Superior Proposal), but only
at a time that is during the UNUM Applicable Period and is after the fifth
business day following Provident's receipt of written notice advising Provident
that the Board of Directors of UNUM is prepared to accept a UNUM Superior
Proposal, specifying the material terms and conditions of such UNUM Superior
Proposal and identifying the person making such UNUM Superior Proposal. For
purposes of this Agreement, a "UNUM Superior Proposal" means any proposal made
by a third party to acquire, directly or indirectly, including pursuant to a
tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of UNUM Common Stock then outstanding or all
or substantially all the assets of UNUM and its subsidiaries taken together and
otherwise on terms which the Board of Directors of UNUM determines in its good
faith judgment (based on the advice of a financial advisor of nationally
recognized reputation) to be more favorable to UNUM's stockholders than the
Merger and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Board of Directors of UNUM, is
reasonably capable of being obtained by such third party.
(c) In addition to the obligations of UNUM set forth in paragraphs (a) and
(b) of this Section 4.03, UNUM shall immediately advise Provident orally and in
writing of any request for information or of any UNUM Takeover Proposal, the
material terms and conditions of such request or UNUM Takeover Proposal and the
identity of the person making such request or UNUM Takeover Proposal. UNUM will
keep Provident reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or UNUM Takeover
Proposal.
(d) Nothing contained in this Section 4.03 shall prohibit UNUM from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to UNUM's
stockholders if, in the good faith judgment of the Board of Directors of UNUM,
after consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law; PROVIDED, HOWEVER, that
neither UNUM nor its Board of Directors nor any committee thereof shall withdraw
or modify, or propose publicly to withdraw or modify, its position with respect
to this Agreement or the Merger unless in the good faith judgment of the Board
of Directors of UNUM, after consultation with outside counsel, the failure to
take the foregoing actions would be inconsistent with its obligations under
applicable law, or approve or recommend, or propose publicly to approve or
recommend, a UNUM Takeover Proposal.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PREPARATION OF THE FORM S-4 AND THE JOINT PROXY STATEMENT;
STOCKHOLDERS MEETINGS.
(a) As soon as practicable following the date of this Agreement, Provident
and UNUM shall prepare and file with the SEC a preliminary joint proxy statement
relating to the Merger and use all reasonable efforts to obtain and furnish the
information required to be included by the SEC in the Joint Proxy Statement and
to respond promptly to any comments made by the SEC with respect to the
preliminary joint proxy statement. Provident shall prepare and file with the SEC
the Form S-4, in which the Joint Proxy Statement will be included as a
prospectus of Provident with respect to the Surviving Corporation Common Stock
to be issued in the Merger. Each of Provident and UNUM shall use reasonable
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. Provident will use all reasonable
efforts to cause the Joint Proxy Statement to be mailed to Provident's
stockholders, and UNUM will use all reasonable efforts to cause the Joint Proxy
Statement to be mailed to UNUM's stockholders, in each case as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
Provident shall also take any action (other than qualifying to do business in
any jurisdiction in which it is not now so qualified or filing a general consent
to service of process) required to be taken under any applicable state
securities laws in connection with the issuance of Surviving Corporation Common
Stock in the Merger and UNUM shall furnish all information concerning UNUM and
the holders of UNUM Common Stock as may be reasonably requested in connection
with any such action. No filing of, or amendment or supplement to, the Form S-4
or the Joint Proxy Statement will be made by either party without providing the
other party the opportunity to review and comment thereon. Provident will advise
UNUM, promptly after it receives notice thereof, of the time when the Form S-4
has become effective or any supplement or amendment has been filed, the issuance
of any stop order, the suspension of the qualification of the Surviving
Corporation Common Stock issuable in connection with the Merger for offering or
sale in any jurisdiction, or any request by the SEC for amendment of the Joint
Proxy Statement or the Form S-4 or comments thereon and responses thereto or
requests by the SEC for additional information. If at any time prior to the
Effective Time any information relating to Provident or UNUM, or any of their
respective affiliates, officers or directors, should be discovered by Provident
or UNUM which should be set forth in an amendment or supplement to either the
Form S-4 or the Joint Proxy Statement, so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers such information
shall promptly notify the other party hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by law, disseminated to the stockholders of Provident and
UNUM.
(b) Provident (i) shall, as soon as practicable following the Form S-4 being
declared effective by the SEC, duly call, give notice of, convene and hold a
meeting of its stockholders (the "Provident Stockholders Meeting") for the
purpose of obtaining the Provident Stockholder Approval and (ii) shall, through
its Board of Directors, recommend to its stockholders the approval and adoption
of this Agreement, the Reverse Stock Split, the Merger, the issuance of
Surviving Corporation Common Stock in the Merger and the other transactions
contemplated hereby unless, in the case of this clause (ii), in the good faith
judgment of the Board of Directors of Provident, after consultation with outside
counsel, the failure to take the foregoing action would be inconsistent with its
obligations under applicable law. Without limiting the generality of the
foregoing but subject to its rights to terminate this Agreement pursuant to
Section 4.02(b), Provident agrees that its obligations pursuant to clause (i) of
this Section 5.01(b) shall not be affected by the commencement, public proposal,
public disclosure or communication to Provident of any Provident Takeover
Proposal or by the withdrawal or modification by the Board of Directors of
Provident, in accordance with clause (ii) above, of its recommendation to the
stockholders of Provident that such
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stockholders approve and adopt this Agreement, the Reverse Stock Split, the
Merger, the issuance of Surviving Corporation Common Stock in the Merger and the
other transactions contemplated hereby.
(c) UNUM (i) shall, as soon as practicable following the Form S-4 being
declared effective by the SEC, duly call, give notice of, convene and hold a
meeting of its stockholders (the "UNUM Stockholders Meeting") for the purpose of
obtaining the UNUM Stockholder Approval and (ii) shall, through its Board of
Directors, recommend to its stockholders the approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby unless, in
the case of this clause (ii), in the good faith judgment of the Board of
Directors of UNUM, after consultation with outside counsel, the failure to take
the foregoing action would be inconsistent with its obligations under applicable
law. Without limiting the generality of the foregoing but subject to its rights
to terminate this Agreement pursuant to Section 4.03(b), UNUM agrees that its
obligations pursuant to clause (i) of this Section 5.01(c) shall not be affected
by the commencement, public proposal, public disclosure or communication to UNUM
of any UNUM Takeover Proposal or by the withdrawal or modification by the Board
of Directors of UNUM, in accordance with clause (ii) above, of its
recommendation to the stockholders of UNUM that such stockholders approve and
adopt this Agreement, the Merger and the other transactions contemplated hereby.
(d) UNUM and Provident will use all reasonable efforts to hold the Provident
Stockholders Meeting and the UNUM Stockholders Meeting on the same date and as
soon as practicable after the date hereof.
SECTION 5.02. LETTERS OF PROVIDENT'S ACCOUNTANTS. Provident shall use
reasonable efforts to cause to be delivered to UNUM two letters from Provident's
independent accountants, one dated a date within two business days before the
date on which the Form S-4 shall become effective and one dated a date within
two business days before the Closing Date, each addressed to UNUM, in form and
substance reasonably satisfactory to UNUM and customary in scope and substance
for comfort letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
SECTION 5.03. LETTERS OF UNUM'S ACCOUNTANTS. UNUM shall use reasonable
efforts to cause to be delivered to Provident two letters from UNUM's
independent accountants, one dated a date within two business days before the
date on which the Form S-4 shall become effective and one dated a date within
two business days before the Closing Date, each addressed to Provident, in form
and substance reasonably satisfactory to Provident and customary in scope and
substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.04. ACCESS TO INFORMATION; CONFIDENTIALITY. Subject to the
Confidentiality Agreement dated as of September 21, 1998, between UNUM and
Provident (the "Confidentiality Agreement") and as otherwise required by
applicable law, including, without limitation, any applicable antitrust laws,
each of Provident and UNUM shall, and shall cause each of its respective
subsidiaries to, afford to the other party and to the officers, directors,
employees, accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours during the
period prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, each of
Provident and UNUM shall, and shall cause each of its respective subsidiaries
to, furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws (b) all
Provident SAP Statements or UNUM SAP Statements, as the case may be, and (c) all
other information concerning its business, properties and personnel as such
other party may reasonably request. No review pursuant to this Section 5.04
shall have an effect for the purpose of determining the accuracy of any
representation or warranty given by either party hereto to the other party
hereto. Each of Provident and UNUM will hold, and will cause its respective
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information in accordance
with the terms of the Confidentiality Agreement.
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SECTION 5.05. FILINGS; OTHER ACTION. Subject to the terms and conditions
provided in this Agreement, UNUM and Provident shall (a) promptly make their
respective filings and thereafter make any other required submissions under the
HSR Act and other regulatory filings with any relevant Governmental Entity with
respect to the Merger and the transactions contemplated by this Agreement, the
Option Agreements and, in the case of UNUM, the Stockholders Agreement; and (b)
use their respective reasonable efforts to promptly take, or cause to be taken,
all other action and do, or cause to be done, all other things necessary, proper
or appropriate under this Agreement and applicable laws and regulations to
obtain as promptly as practicable all consents, approvals, orders,
authorizations, registrations and permits required to be obtained from any
Governmental Entity or third party in connection with the execution and delivery
of this Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement, the Option Agreements and, in the case of UNUM,
the Stockholders Agreement as soon as practicable after the date hereof;
PROVIDED, HOWEVER, that neither Provident nor UNUM will be required to agree to,
or proffer to, (i) divest or hold separate any of Provident's, UNUM's or any of
their respective affiliates' businesses or assets or (ii) cease to conduct
business or operations in any jurisdiction in which Provident, UNUM or any of
their respective subsidiaries conducts business or operations as of the date of
this Agreement.
SECTION 5.06. STOCK OPTIONS AND RESTRICTED STOCK UNITS. (a) As soon as
practicable following the date of this Agreement, the Board of Directors of UNUM
(or, if appropriate, any committee administering the UNUM Stock Plans) shall
adopt such resolutions or take such other actions as may be required to effect
the following:
(i) adjust the terms of all outstanding UNUM Stock Options granted under
the UNUM Stock Plans, whether vested or unvested, as necessary to provide
that, at the Effective Time, each such UNUM Stock Option outstanding
immediately prior to the Effective Time shall be amended and converted,
subject to the prior effectiveness of the Reverse Stock Split, into an
option to acquire one share of Surviving Corporation Common Stock for each
share of UNUM Common Stock subject to such UNUM Stock Option (each, as so
adjusted, an "Adjusted Option"); and
(ii) make such other changes to the UNUM Stock Plans as Provident and
UNUM may agree are appropriate to give effect to the Merger, including as
provided in Section 5.07.
(b) As soon as practicable following the date of this Agreement, the Board
of Directors of Provident (or, if appropriate, any committee administering the
Provident Stock Plans) shall adopt such resolutions or take such other actions
as may be required to effect the following:
(i) all outstanding Provident Stock Options granted under the Provident
Stock Plans, whether vested or unvested, shall be adjusted in accordance
with their terms to provide that at the effectiveness of the Reverse Stock
Split each such Provident Stock Option outstanding immediately prior to the
effectiveness of the Reverse Stock Split shall be converted into an option
to acquire a number of shares of Provident Common Stock giving effect to the
Reverse Stock Split at an exercise price that is correspondingly adjusted;
and
(ii) make such other changes to the Provident Stock Plans as Provident
and UNUM may agree are appropriate to give effect to the Merger, including
as provided in Section 5.07.
(c) As soon as practicable after the Effective Time, the Surviving
Corporation shall deliver to the holders of UNUM Stock Options appropriate
notices setting forth such holders' rights pursuant to the respective UNUM Stock
Plans and the agreements evidencing the grants of such UNUM Stock Options and
that such UNUM Stock Options and agreements shall be assumed by the Surviving
Corporation and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 5.06 after giving effect to
the Merger).
(d) A holder of an Adjusted Option may exercise such Adjusted Option in
whole or in part in accordance with its terms by delivering a properly executed
notice of exercise to the Surviving Corporation,
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together with the consideration therefor and the Federal withholding tax
information, if any, required in accordance with the related UNUM Stock Plan.
(e) Except as otherwise contemplated by this Section 5.06 and except to the
extent required under the respective terms of the UNUM Stock Options, all
restrictions or limitations on transfer and vesting with respect to the UNUM
Stock Options awarded under the UNUM Stock Plans or any other plan, program or
arrangement of UNUM or any of its subsidiaries, to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in full
force and effect with respect to such options after giving effect to the Merger
and the assumption by the Surviving Corporation as set forth above.
SECTION 5.07. UNUM STOCK PLANS AND CERTAIN EMPLOYEE MATTERS. (a) At the
Effective Time, by virtue of the Merger, the UNUM Stock Plans shall be assumed
by the Surviving Corporation, with the result that all obligations of UNUM under
the UNUM Stock Plans, including with respect to awards outstanding at the
Effective Time under each UNUM Stock Plan, shall be obligations of the Surviving
Corporation following the Effective Time. Prior to the Effective Time, Provident
shall take all necessary actions (including, if required, to comply with Section
162(m) of the Code (and the regulations thereunder) or applicable law or rule of
the NYSE, obtaining the approval of its stockholders at the Provident
Stockholders Meeting) for the assumption of the UNUM Stock Plans, including the
reservation, issuance and listing of shares of Surviving Corporation Common
Stock in a number at least equal to the number of shares of Surviving
Corporation Common Stock that will be subject to Adjusted Options. No later than
the Effective Time, Provident shall prepare and file with the SEC a registration
statement on Form S-8 (or another appropriate form) registering a number of
shares of Surviving Corporation Common Stock determined in accordance with the
preceding sentence. Such registration statement shall be kept effective (and the
current status of the prospectus or prospectuses required thereby shall be
maintained) at least for so long as Adjusted Options or any unsettled awards
granted under the UNUM Stock Plans after the Effective Time remain outstanding.
(b) Following the Effective Time, Provident, as the Surviving Corporation in
the Merger, will assume and honor all obligations under employment agreements of
UNUM the existence of which does not constitute a violation of this Agreement in
accordance with the terms thereof.
(c) UNUM and Provident agree to take or cause to be taken all other actions
described in Schedule 5.07.
SECTION 5.08. INDEMNIFICATION, EXCULPATION AND INSURANCE. (a) Provident
agrees that all rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time now existing in
favor of the current or former directors or officers of UNUM or Provident and
their respective subsidiaries as provided in their respective certificates of
incorporation or by-laws (or comparable organizational documents) and any
indemnification agreements of UNUM or Provident, the existence of which does not
constitute a breach of this Agreement, shall be assumed by the Surviving
Corporation in the Merger, without further action, as of the Effective Time and
shall survive the Merger and shall continue in full force and effect in
accordance with their terms. In addition, from and after the Effective Time,
directors and officers of UNUM or Provident who become directors or officers of
the Surviving Corporation will be entitled to the same indemnity rights and
protections as are afforded to other directors and officers of the Surviving
Corporation.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision will be made so
that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 5.08.
(c) For six years after the Effective Time, the Surviving Corporation shall
maintain in effect the better of UNUM's and Provident's respective current
directors' and officers' liability insurance covering acts or
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omissions occurring prior to the Effective Time with respect to those persons
who are currently covered by either UNUM's or Provident's respective directors'
and officers' liability insurance policy on terms with respect to such coverage
and amount no less favorable than those of such policy in effect on the date
hereof; PROVIDED that the Surviving Corporation may substitute therefor policies
of the Surviving Corporation or its subsidiaries containing terms with respect
to coverage and amount no less favorable to such directors or officers; PROVIDED
FURTHER, that if the existing or substituted directors' and officers' liability
insurance expires, is terminated or canceled during such six-year period, the
Surviving Corporation will obtain as much directors' and officers' liability
insurance as can be obtained for the remainder of such period for a premium not
in excess of 150% of the higher of (x) the aggregate premiums paid by UNUM in
1998 and (y) the aggregate premiums paid by Provident in 1998, in each case on
an annualized basis for such purpose and that in no event shall the Surviving
Corporation be required to pay aggregate premiums for insurance under this
Section 5.08(c) in excess of 150% of the higher of the two amounts of aggregate
premiums paid by UNUM and Provident in 1998 on an annualized basis for such
purpose.
(d) The provisions of this Section 5.08 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.09. FEES AND EXPENSES. (a) Except as provided in this Section
5.09, all fees and expenses incurred in connection with the Merger, this
Agreement, the Option Agreements, the Stockholders Agreement and the
transactions contemplated by this Agreement, the Option Agreements and the
Stockholders Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated, except that each of UNUM and
Provident shall bear and pay one-half of the costs and expenses incurred in
connection with (1) the filing, printing and mailing of the Form S-4 and the
Joint Proxy Statement (including SEC filing fees) and (2) the filings of the
premerger notification and report forms under the HSR Act (including filing
fees). Provident shall file any return with respect to, and shall pay, any state
or local taxes (including any penalties or interest with respect thereto), if
any, which are attributable to the transfer of the beneficial ownership of
UNUM's real property (collectively, the "Real Estate Transfer Taxes") as a
result of the Merger. UNUM shall cooperate with Provident in the filing of such
returns including, in the case of UNUM, supplying in a timely manner a complete
list of all real property interests held by UNUM and any information with
respect to such property that is reasonably necessary to complete such returns.
The fair market value of any real property of UNUM subject to the Real Estate
Transfer Taxes shall be as agreed to between UNUM and Provident.
(b) In the event that (1) a Provident Takeover Proposal shall have been made
known to Provident or any of its subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly announced an intention
(whether or not conditional) to make a Provident Takeover Proposal and
thereafter this Agreement is terminated by either UNUM or Provident pursuant to
Section 7.01(b)(i) or (ii) or (2) this Agreement is terminated (x) by Provident
pursuant to Section 7.01(h) or (y) by UNUM pursuant to Section 7.01(e) or
Section 7.01(f), then Provident shall promptly, but in no event later than the
date of such termination, pay UNUM a fee equal to $150 million (the "Termination
Fee"), payable by wire transfer of same day funds; PROVIDED, HOWEVER, that no
Termination Fee shall be payable to UNUM pursuant to clause (1) of this
paragraph (b) or pursuant to a termination by UNUM pursuant to Section 7.01(e)
or Section 7.01(f) unless and until within 18 months of such termination
Provident or any of its subsidiaries enters into any Provident Acquisition
Agreement or consummates any Provident Takeover Proposal (for the purposes of
the foregoing proviso the terms "Provident Acquisition Agreement" and "Provident
Takeover Proposal" shall have the meanings assigned to such terms in Section
4.02 except that the references to "15%" in the definition of "Provident
Takeover Proposal" in Section 4.02(a) shall be deemed to be references to "35%"
and "Provident Takeover Proposal" shall only be deemed to refer to a transaction
involving Provident, or with respect to assets (including the shares of any
subsidiary) of Provident and its subsidiaries, taken as a whole, and not any of
its subsidiaries alone), in which event the
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Termination Fee shall be payable upon the first to occur of such events.
Provident acknowledges that the agreements contained in this Section 5.09(b) are
an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, UNUM would not enter into this Agreement; accordingly,
if Provident fails promptly to pay the amount(s) due pursuant to this Section
5.09(b), and, in order to obtain such payment, UNUM commences a suit which
results in a judgment against Provident for the fee set forth in this Section
5.09(b), Provident shall pay to UNUM its costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee(s) at the prime rate of Citibank N.A. in
effect on the date such payment was required to be made.
(c) In the event that (1) a UNUM Takeover Proposal shall have been made
known to UNUM or any of its subsidiaries or has been made directly to its
stockholders generally or any person shall have publicly announced an intention
(whether or not conditional) to make a UNUM Takeover Proposal and thereafter
this Agreement is terminated by either UNUM or Provident pursuant to Section
7.01(b)(i) or (iii) or (2) this Agreement is terminated (x) by UNUM pursuant to
Section 7.01(d) or (y) by Provident pursuant to Section 7.01(i) or Section
7.01(j), then UNUM shall promptly, but in no event later than the date of such
termination, pay Provident the Termination Fee, payable by wire transfer of same
day funds; PROVIDED, HOWEVER, that no Termination Fee shall be payable to
Provident pursuant to clause (1) of this paragraph (c) or pursuant to a
termination by Provident pursuant to Section 7.01(i) or Section 7.01(j) unless
and until within 18 months of such termination UNUM or any of its subsidiaries
enters into any UNUM Acquisition Agreement or consummates any UNUM Takeover
Proposal (for the purposes of the foregoing proviso the terms "UNUM Acquisition
Agreement" and "UNUM Takeover Proposal" shall have the meanings assigned to such
terms in Section 4.03 except that the references to "15%" in the definition of
"UNUM Takeover Proposal" in Section 4.03(a) shall be deemed to be references to
"35%" and "UNUM Takeover Proposal" shall only be deemed to refer to a
transaction involving UNUM, or with respect to assets (including the shares of
any subsidiary) of UNUM and its subsidiaries, taken as a whole, and not any of
its subsidiaries alone), in which event the Termination Fee shall be payable
upon the first to occur of such events. UNUM acknowledges that the agreements
contained in this Section 5.09(c) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Provident
would not enter into this Agreement; accordingly, if UNUM fails promptly to pay
the amount(s) due pursuant to this Section 5.09(c), and, in order to obtain such
payment, Provident commences a suit which results in a judgment against UNUM for
the fee set forth in this Section 5.09(c), UNUM shall pay to Provident its costs
and expenses (including attorneys' fees and expenses) in connection with such
suit, together with interest on the amount of the fee(s) at the prime rate of
Citibank N.A. in effect on the date such payment was required to be made.
SECTION 5.10. PUBLIC ANNOUNCEMENTS. UNUM and Provident will consult with
each other before issuing, and provide each other the opportunity to review,
comment upon and concur with, any press release or other public statements with
respect to the transactions contemplated by this Agreement, including the
Merger, the Option Agreements and the Stockholders Agreement, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as either party may determine is required by applicable
law, court process or by obligations pursuant to any listing agreement with any
national securities exchange. The parties agree that the initial press release
to be issued with respect to the transactions contemplated by this Agreement and
the Stockholders Agreement shall be in the form heretofore agreed to by the
parties.
SECTION 5.11. AFFILIATES. As soon as practicable after the date hereof,
and, in any event no later than 40 days prior to the Closing Date, UNUM shall
deliver to Provident a letter identifying all persons who are, in the opinion of
UNUM, at the time this Agreement is submitted for adoption by the stockholders
of UNUM, "affiliates" of UNUM for purposes of Rule 145 under the Securities Act
or for purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board ("APB No. 16") and
applicable SEC rules, regulations and interpretations thereunder. UNUM shall use
reasonable efforts to cause each such person to deliver to Provident 30 days
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prior to the Closing Date, a written agreement substantially in the form
attached as Exhibit C-1 hereto. As soon as practicable after the date hereof,
and, in any event no later than 40 days prior to the Closing Date, Provident
shall deliver to UNUM a letter identifying all persons who are, in the opinion
of Provident, at the time this Agreement is submitted for adoption by the
stockholders of Provident, "affiliates" of Provident for purposes of qualifying
the Merger for pooling of interests accounting treatment under APB No. 16 and
applicable SEC rules, regulations and interpretations thereunder. Provident
shall use reasonable efforts to cause each such person to deliver to UNUM 30
days prior to the Closing Date, a written agreement substantially in the form
attached hereto as Exhibit C-2.
SECTION 5.12. NYSE LISTING AND DE-LISTING. Provident shall use reasonable
efforts to cause the Surviving Corporation Common Stock to be issued in the
Merger to be approved for listing on the NYSE, subject to official notice of
issuance, as promptly as practicable after the date hereof, and in any event
prior to the Closing Date. The Surviving Corporation shall use its best efforts
to cause the UNUM Common Stock to be de-listed from the NYSE and de-registered
under the Exchange Act as soon as practicable following the Effective Time.
SECTION 5.13. STOCKHOLDER LITIGATION. Each of Provident and UNUM shall
give the other the reasonable opportunity to participate in the defense of any
stockholder litigation against Provident or UNUM, as applicable, and its
directors relating to the transactions contemplated by this Agreement, the
Option Agreements and the Stockholders Agreement.
SECTION 5.14. TAX TREATMENT. Each of UNUM and Provident shall use
reasonable efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368 of the Code and to obtain the opinions of counsel
referred to in Sections 6.02(c) and 6.03(c).
SECTION 5.15. POOLING OF INTERESTS. Each of Provident and UNUM shall use
reasonable efforts to cause the transactions contemplated by this Agreement,
including the Merger, the Option Agreements and the Stockholders Agreement to be
accounted for as a pooling of interests under APB No. 16 and applicable SEC
rules, regulations and interpretations thereunder, and such accounting treatment
to be accepted by each of Provident's and UNUM's independent certified public
accountants, and by the SEC, respectively, and each of Provident and UNUM agrees
that it shall voluntarily take no action that would cause such accounting
treatment not to be obtained.
SECTION 5.16. RIGHTS AGREEMENT. The Board of Directors of UNUM shall take
all further action (in addition to that referred to in Section 3.02(w))
reasonably requested in writing by Provident in order to render UNUM's Rights
Agreement inapplicable to the Merger and the other transactions contemplated by
this Agreement, the Option Agreements, and the Stockholders Agreement. Except as
provided above with respect to the Merger and the other transactions
contemplated by this Agreement, the Option Agreements, and the Stockholders
Agreement, UNUM's Board of Directors shall not, without the prior written
consent of Provident, (a) amend the UNUM Rights Agreement or (b) take any action
with respect to, or make any determination under, the UNUM Rights Agreement,
including, a redemption of the UNUM Rights or any action to facilitate a UNUM
Takeover Proposal.
SECTION 5.17. STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS. During
the period from the date of this Agreement through the Effective Time, neither
Provident nor UNUM shall terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its respective
subsidiaries is a party. During such period, Provident or UNUM, as the case may
be, shall enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement, including by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court of the United States of America or of any state
having jurisdiction.
SECTION 5.18. STOCKHOLDER AGREEMENT LEGEND. Provident will inscribe upon
any certificate representing Subject Shares (as defined in the Stockholders
Agreement) tendered by a Stockholder (as defined
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in the Stockholders Agreement) in connection with any proposed transfer of any
Subject Shares by such Stockholder in accordance with the terms of the
Stockholders Agreement the following legend: "THE SHARES OF COMMON STOCK, PAR
VALUE $1.00 PER SHARE, OF PROVIDENT, INC., REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AS OF NOVEMBER 22, 1998, AND ARE
SUBJECT TO THE TERMS THEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT THE
PRINCIPAL EXECUTIVE OFFICES OF PROVIDENT COMPANIES, INC."; and Provident will
return such certificate containing such inscription to such Stockholder within
three business days following Provident's receipt thereof.
SECTION 5.19. REVERSE STOCK SPLIT. Provident shall take all actions
necessary to cause the Reverse Stock Split to become effective immediately prior
to the Effective Time (provided that Provident's obligation to cause the Reverse
Stock Split to become effective shall be subject to the prior satisfaction or
waiver, as applicable, of each of the conditions to the respective obligation of
each party to effect the Merger set forth in Article VI (other than Section
6.01(h)) shall have been satisfied or waived), including arranging for the
exchange of certificates representing Provident Common Stock for certificates
representing Surviving Corporation Common Stock following the effectiveness of
the Reverse Stock Split.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVALS. Each of the Provident Stockholder Approval and
the UNUM Stockholder Approval shall have been obtained.
(b) HSR ACT. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) CERTAIN OTHER APPROVALS. Each of the Designated Insurance Approvals
and the Other State Insurance Approvals shall have been made or obtained,
except, in the case of the Other State Insurance Approvals, those Other State
Insurance Approvals the failure of which to obtain, individually or in the
aggregate, are not reasonably likely to have a material adverse effect on the
combined businesses of UNUM and Provident (and their subsidiaries), assuming for
purposes of this Section 6.01(c) that the Merger is closed and consummated as
contemplated by this Agreement, and each such State Insurance Approval shall
have been obtained free of any conditions (other than those conditions that,
individually or in the aggregate, are not reasonably likely to have a material
adverse effect on such combined businesses).
(d) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, decree, statute,
law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or
issued by any court or other Governmental Entity of competent jurisdiction or
other legal restraint or prohibition (collectively, "Restraints") shall be in
effect (i) preventing the consummation of the Merger or the other transactions
contemplated by this Agreement or (ii) which otherwise, individually or in the
aggregate, is reasonably likely to have a material adverse effect on the
combined businesses of UNUM and Provident (and their subsidiaries) assuming for
the purpose of this Section 6.01(d) that the Merger is closed and consummated as
contemplated by this Agreement; PROVIDED, HOWEVER, that each of the parties
shall have used its reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as practicable any such Restraints that may
be entered.
(e) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
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(f) NYSE LISTING. The shares of Surviving Corporation Common Stock
issuable to the holders of UNUM Common Stock as contemplated by this Agreement
shall have been approved for listing on the NYSE, subject to official notice of
issuance.
(g) POOLING LETTERS. UNUM and Provident shall have each received (i) from
UNUM's independent accountants a letter, dated as of the Closing Date and
addressed to Provident and UNUM, to the effect that, subject to customary
qualifications, UNUM meets the requirements to be a party to a pooling of
interests transaction for financial reporting purposes under APB No. 16 and
applicable SEC rules, regulations and interpretations thereunder and (ii) from
Provident's independent accountants a letter, dated as of the Closing Date and
addressed to Provident and UNUM, to the effect that, subject to customary
qualifications, the Merger qualifies for pooling of interests treatment for
financial reporting purposes under APB No. 16 and applicable SEC rules,
regulations and interpretations thereunder.
(h) REVERSE STOCK SPLIT. The Reverse Stock Split shall have become
effective.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF UNUM. The obligation of UNUM to
effect the Merger is further subject to satisfaction or waiver by UNUM of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Provident set forth herein shall be true and correct both when made and at and
as of the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), individually or in the aggregate,
does not have, and is not reasonably likely to have, a material adverse effect
on Provident, and UNUM shall have received a certificate signed on behalf of
Provident by an executive officer of Provident to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PROVIDENT. Provident shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and UNUM shall have
received a certificate signed on behalf of Provident by an executive officer of
Provident to such effect.
(c) TAX OPINIONS. UNUM shall have received from Cravath, Swaine & Moore,
counsel to UNUM, on a date immediately prior to the mailing of the Joint Proxy
Statement and on the Closing Date, opinions, in each case dated as of such
respective dates and stating that the Merger will be treated for Federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code and that UNUM and Provident will each be a party to that reorganization
within the meaning of Section 368(b) of the Code. In rendering such opinions,
counsel for UNUM shall be entitled to rely upon representations of officers of
UNUM and Provident substantially in the form of Exhibits D and E hereto.
SECTION 6.03. CONDITIONS TO OBLIGATIONS OF PROVIDENT. The obligation of
Provident to effect the Merger is further subject to satisfaction or waiver by
Provident of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
UNUM set forth herein shall be true and correct both when made and at and as of
the Closing Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), individually or in the aggregate,
does not have, and is not reasonably likely to have, a material adverse effect
on UNUM, and Provident shall have received a certificate signed on behalf of
UNUM by an executive officer of UNUM to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF UNUM. UNUM shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and
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Provident shall have received a certificate signed on behalf of UNUM by an
executive officer of UNUM to such effect.
(c) TAX OPINIONS. Provident shall have received from Sullivan & Cromwell,
counsel to Provident, on a date immediately prior to the mailing of the Joint
Proxy Statement and on the Closing Date, opinions, in each case dated as of such
respective dates and stating that the Merger will be treated for Federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code and that UNUM and Provident will each be a party to that reorganization
within the meaning of Section 368(b) of the Code. In rendering such opinions,
counsel for Provident shall be entitled to rely upon representations of officers
of UNUM and Provident substantially in the form of Exhibits D and E hereto.
SECTION 6.04. FRUSTRATION OF CLOSING CONDITIONS. Neither UNUM nor
Provident may rely on the failure of any condition set forth in Section 6.01,
6.02 or 6.03, as the case may be, to be satisfied if such failure was caused by
such party's failure to use reasonable efforts to consummate the Merger and the
other transactions contemplated by this Agreement, the Option Agreements and the
Stockholders Agreement, as required by and subject to Section 5.05.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Provident Stockholder
Approval or the UNUM Stockholder Approval:
(a) by mutual written consent of UNUM and Provident;
(b) by either UNUM or Provident:
(i) if the Merger shall not have been consummated by November 30, 1999;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to
this Section 7.01(b)(i) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the failure
of the Merger to be consummated by such time;
(ii) if the Provident Stockholder Approval shall not have been obtained
at the Provident Stockholders Meeting duly convened therefor or at any
adjournment or postponement thereof at which a proper vote on such matters
was taken;
(iii) if the UNUM Stockholder Approval shall not have been obtained at
the UNUM Stockholders Meeting duly convened therefor or at any adjournment
or postponement thereof at which a proper vote on such matters was taken; or
(iv) if any Restraint having any of the effects set forth in Section
6.01(d) shall be in effect and shall have become final and nonappealable;
PROVIDED that the party seeking to terminate this Agreement pursuant to this
Section 7.01(b)(iv) shall have used reasonable efforts to prevent the entry
of and to remove such Restraint;
(c) by UNUM, if Provident shall have breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (A)
would give rise to the failure of a condition set forth in Section 6.02(a) or
(b) and (B) is incapable of being cured by Provident;
(d) by UNUM in accordance with Section 4.03(b); PROVIDED that, in order for
the termination of this Agreement pursuant to this paragraph (d) to be deemed
effective, UNUM shall have complied with all provisions contained in Section
4.03, including the notice provisions therein, and with applicable requirements,
including the payment of the Termination Fee, of Section 5.09(c);
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(e) by UNUM, if Provident or any of its directors or officers shall
participate in discussions or negotiations in breach of Section 4.02;
(f) by UNUM, if the Board of Directors of Provident or any committee thereof
shall have withdrawn or modified in a manner adverse to UNUM its approval or
recommendation of the Merger or this Agreement;
(g) by Provident, if UNUM shall have breached or failed to perform in any
material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (A)
would give rise to the failure of a condition set forth in Section 6.03(a) or
(b) and (B) is incapable of being cured by UNUM;
(h) by Provident in accordance with Section 4.02(b); PROVIDED that, in order
for the termination of this Agreement pursuant to this subparagraph (h) to be
deemed effective, Provident shall have complied with all provisions of Section
4.02, including the notice provisions therein, and with applicable requirements,
including the payment of the Termination Fee, of Section 5.09(b);
(i) by Provident, if UNUM or any of its directors or officers shall
participate in discussions or negotiations in breach of Section 4.03; or
(j) by Provident, if the Board of Directors of UNUM or any committee thereof
shall have withdrawn or modified in a manner adverse to Provident its approval
or recommendation of the Merger or this Agreement.
SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Provident or UNUM as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of UNUM or Provident, other than the provisions of
Section 3.01(p), Section 3.02(p), the last sentence of Section 5.04, Section
5.09, this Section 7.02, Article VIII, the Confidentiality Agreement and the
letter agreement, dated as of October 13, 1998 between UNUM and Provident (the
"Letter Agreement") which provisions and agreements survive such termination,
and termination of this Agreement will not relieve a breaching party from
liability for any wilful and material breach by such party of any of its
representations, warranties, covenants or agreements set forth in this Agreement
giving rise to such termination.
SECTION 7.03. AMENDMENT. This Agreement may be amended by the parties at
any time before or after the Provident Stockholder Approval or the UNUM
Stockholder Approval; PROVIDED, HOWEVER, that after any such approval, there
shall not be made any amendment that by law requires further approval by the
stockholders of Provident or UNUM without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 7.04. EXTENSION; WAIVER. At any time prior to the Effective Time,
a party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the proviso of Section
7.03, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 7.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to Section
7.04 shall, in order to be effective, require, in the case of UNUM or Provident,
action by its Board of Directors or, with respect to any amendment to this
Agreement, the duly authorized committee of its Board of Directors to the extent
permitted by law.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit (a) any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time or (b) the survival of Section
3.01(p), Section 3.02(p), the last sentence of Section 5.04, Section 5.09,
Section 7.02, this Article VIII, the Confidentiality Agreement and the Letter
Agreement, as set forth in Section 7.02.
SECTION 8.02. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to UNUM, to
UNUM Corporation
2211 Congress Street
Portland, Maine 04122
Telecopy No.: (207) 770-4377
Attention: Kevin J. Tierney
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Telecopy No.: (212) 474-3700
Attention: Robert A. Kindler; and
(b) if to Provident, to
Provident Companies, Inc.
1 Fountain Square
Chattanooga, Tennessee 37402
Telecopy No.: (423) 755-5036
Attention: F. Dean Copeland
with copies to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopy No.: (212) 558-3588
Attention: H. Rodgin Cohen
SECTION 8.03. DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person, where
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"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of a person, whether through
the ownership of voting securities, by contract, as trustee or executor, or
otherwise;
(b) "knowledge" of any person which is not an individual means the knowledge
of such person's executive officers after reasonable inquiry;
(c) "material adverse change" or "material adverse effect" means, when used
in connection with Provident or UNUM, any change, effect, event, occurrence or
state of facts that (x) is, or is reasonably likely to be, materially adverse to
the business, financial condition or results of operations of such party and its
subsidiaries taken as a whole, (y) materially impairs the ability of such party
to perform its obligations under this Agreement or the Option Agreements or (z)
prevents the consummation of any of the transactions contemplated by this
Agreement, the Option Agreements or, in the case of UNUM, the Stockholders
Agreement other than any (1) change, effect, event, occurrence or state of facts
(I) that occurs as a result of any act or omission of either party hereto that
has been previously consented to in writing by the other party hereto or (II)
relating to (i) the United States economy or securities markets in general, (ii)
this Agreement or the transactions contemplated hereby or the announcement
thereof, (iii) to the insurance industry in general, and not specifically
relating to Provident or UNUM or their respective subsidiaries, or (iv) any
decline in the share price of either Provident Common Stock or UNUM Common Stock
(but, with respect to either party, excluding any change or effect underlying
such decline to the extent such change or effect would otherwise constitute a
material adverse effect on such party) or (2) mandated change in U.S. generally
accepted accounting principles or interpretations thereof or statutory
accounting practices prescribed or permitted by the applicable insurance
regulatory authorities or interpretations thereof not applying specifically to
Provident and UNUM;
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(e) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which is owned directly or indirectly by such first
person).
SECTION 8.04. INTERPRETATION. When a reference is made in this Agreement
to an Article, Section or Exhibit, such reference shall be to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings for this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
SECTION 8.05. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
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SECTION 8.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein), the
Option Agreements, the Stockholders Agreement, the Confidentiality Agreement and
the Letter Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and (b) except for the
provisions of Article II, Section 5.06 and Section 5.08, are not intended to
confer upon any person other than the parties any rights or remedies.
SECTION 8.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the laws that might otherwise govern under applicable principles of conflict
of laws thereof.
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.09. ENFORCEMENT; WAIVER OF JURY TRIAL. (a) The parties agree
that irreparable damage would occur and that the parties would not have any
adequate remedy at law in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal court
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (ii) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, and (iii) agrees that it will not bring
any action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a Federal court sitting in the State of
Delaware or a Delaware state court.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT OR THE OPTION AGREEMENTS IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE OPTION AGREEMENTS, OR THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR THE OPTION AGREEMENTS. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT AND THE OPTION AGREEMENTS BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.09(b).
SECTION 8.10. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.11. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, unless the effects of such invalidity, illegality or
unenforceability would prevent the parties from realizing the major portion of
the economic benefits of the Merger that they currently anticipate obtaining
therefrom, all other conditions and
A-43
<PAGE>
provisions of this Agreement shall nevertheless remain in full force and effect.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
IN WITNESS WHEREOF, UNUM and Provident have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
<TABLE>
<S> <C> <C>
UNUM CORPORATION,
By: /s/ JAMES F. ORR III
-----------------------------------------
Name: James F. Orr III
Title: Chairman and Chief
Executive Officer
PROVIDENT COMPANIES, INC.,
By: /s/ J. HAROLD CHANDLER
-----------------------------------------
Name: J. Harold Chandler
Title: Chairman, President
and Chief Executive
</TABLE>
A-44
<PAGE>
ANNEX I
TO THE MERGER AGREEMENT
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------- -----
<S> <C>
Adjusted Option.................................. 54
affiliate........................................ 71
APB No.16........................................ 61
Certificate of Merger............................ 3
Closing.......................................... 2
Closing Date..................................... 2
Code............................................. 1
Confidentiality Agreement........................ 53
Designated Insurance Approvals................... 25
Designated State Insurance Approvals............. 9
DGCL............................................. 2
Effective Time................................... 3
Environmental Laws............................... 17
ERISA............................................ 14
Exchange Act..................................... 8
Form S-4......................................... 8
Governmental Entity.............................. 8
Hazardous Material............................... 18
HSR Act.......................................... 8
Insurance Laws................................... 11
Intellectual Property............................ 21
Joint Proxy Statement............................ 8
knowledge........................................ 71
Letter Agreement................................. 68
UNUM............................................. 1
UNUM Acquisition Agreement....................... 49
UNUM Applicable Period........................... 48
UNUM Benefit Plans............................... 30
UNUM Common Stock................................ 1
UNUM Disclosure Schedule......................... 22
UNUM Filed SEC Documents......................... 29
UNUM Form 10-K................................... 23
UNUM Insurance Subsidiaries...................... 27
UNUM Intellectual Property Rights................ 37
UNUM Notice...................................... 48
UNUM Option...................................... 2
UNUM Pension Plans............................... 30
UNUM Rights...................................... 23
UNUM Rights Agreement............................ 23
UNUM Rights Plan Amendment....................... 37
UNUM SAP Statements.............................. 27
UNUM SEC Documents............................... 26
UNUM Stock Options............................... 23
UNUM Stock Option Agreement...................... 2
UNUM Stock Plans................................. 23
UNUM Stockholder Approval........................ 35
UNUM Stockholders Meeting........................ 52
UNUM Superior Proposal........................... 49
<CAPTION>
TERM PAGE
- ------------------------------------------------- -----
<S> <C>
UNUM Takeover Proposal........................... 48
material adverse change.......................... 71
material adverse effect.......................... 71
Merger........................................... 1
Millennium Functionality......................... 22
NYSE............................................. 9
Option Agreements................................ 2
Other State Insurance Approvals.................. 9
Permits.......................................... 17
person........................................... 72
Ratio............................................ 19
Real Estate Transfer Taxes....................... 58
Reinsurance Agreements........................... 21
Restraints....................................... 64
Reverse Stock Split.............................. 18
SARs............................................. 6
SEC.............................................. 5
Securities Act................................... 8
State Insurance Approvals........................ 9
Stockholders Agreement........................... 2
subsidiary....................................... 72
Surviving Corporation............................ 1
Third-Party Intellectual Property Rights......... 21
UK Insurance Approval............................ 26
Provident........................................ 1
Provident Acquisition Agreement.................. 46
Provident Applicable Period...................... 46
Provident Benefit Plans.......................... 14
Provident Common Stock........................... 1
Provident Disclosure Schedule.................... 5
Provident Filed SEC Documents.................... 12
Provident Form 10-K.............................. 5
Provident Insurance Subsidiaries................. 10
Provident Intellectual Property Rights........... 21
Provident Notice................................. 46
Provident Option................................. 2
Provident Pension Plans.......................... 14
Provident SAP Statements......................... 10
Provident SEC Documents.......................... 9
Provident Stock Options.......................... 6
Provident Stock Option Agreement................. 2
Provident Stock Plans............................ 6
Provident Stockholder Approval................... 18
Provident Stockholders Meeting................... 51
Provident Superior Proposal...................... 47
Provident Takeover Proposal...................... 46
Welfare Plan..................................... 14
</TABLE>
<PAGE>
EXHIBIT A-1
TO THE MERGER AGREEMENT
RESTATED
CERTIFICATE OF INCORPORATION
OF
UNUMPROVIDENT CORPORATION
FIRST: The name of the Corporation is UNUMProvident Corporation.
SECOND: The address of the registered office of the Corporation in the state
of Delaware is 1209 Orange Street, in the city of Wilmington, county of New
Castle. The name of the Corporation's registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware as set forth in Title 8 of the Delaware Code (the "GCL").
FOURTH: A. The total number of shares of capital stock which the Corporation
shall have authority to issue is 750,000,000 shares, consisting of 725,000,000
shares of Common Stock, par value $.10 per share (the "Common Stock") and
25,000,000 shares of Preferred Stock, par value $.10 per share (the "Preferred
Stock").
B. Shares of Preferred Stock may be issued from time to time in one or more
classes or series as may be determined from time to time by the Board of
Directors of the Corporation (the "Board of Directors"), each such class or
series to be distinctly designated. Except in respect of the particulars fixed
by the Board of Directors for classes or series provided for by the Board of
Directors as permitted hereby, all shares of Preferred Stock shall be of equal
rank and shall be identical. All shares of any one series of Preferred Stock so
designated by the Board of Directors shall be alike in every particular, except
that shares of any one series issued at different times may differ as to the
dates from which dividends thereon shall be cumulative. The voting rights, if
any, of each such class or series and the preferences and relative,
participating, optional and other special rights of each such class or series
and the qualifications, limitations and restrictions thereof, if any, may differ
from those of any and all other classes or series at any time outstanding; and
the Board of Directors of the Corporation is hereby expressly granted authority
to fix, by resolutions duly adopted prior to the issuance of any shares of a
particular class or series of Preferred Stock so designated by the Board of
Directors, the voting powers of stock of such class or series, if any, and the
designations, preferences and relative, participating, optional and other
special rights and the qualifications, limitations and restrictions of such
class or series, including, but without limiting the generality of the
foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute, such class or series, and such
number may be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof then
outstanding) from time to time by like action of the Board of Directors;
(2) The rate and time at which, and the terms and conditions upon which,
dividends, if any, on Preferred Stock of such class or series shall be paid,
the extent of the preference or relation, if any, of such dividends to the
dividends payable on any other class or classes, or series of the same or
other classes of stock and whether such dividends shall be cumulative or
non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such class
or series to convert the same into, or exchange the same for, shares of any
other class or classes or of any series of the same or any other class or
classes of stock and the terms and conditions of such conversion or
exchange;
(4) Whether or not Preferred Stock of such class or series shall be
subject to redemption, and the redemption price or prices and the time or
times at which, and the terms and conditions upon which, Preferred Stock of
such class or series may be redeemed;
<PAGE>
(5) The rights, if any, of the holders of Preferred Stock of such class
or series upon the voluntary or involuntary liquidation of the Corporation;
(6) The terms of the sinking fund or redemption or purchase account, if
any, to be provided for the Preferred Stock of such class or series; and
(7) The voting powers, if any, of the holders of such class or series of
Preferred Stock.
C. Except as otherwise provided in this Certificate of Incorporation, the
Board of Directors shall have authority to authorize the issuance, from time to
time without any vote or other action by the stockholders, of any or all shares
of stock of the Corporation of any class or series at any time authorized, and
any securities convertible into or exchangeable for any such shares, and any
options, rights or warrants to purchase or acquire any such shares, in each case
to such persons and on such terms (including as a dividend or distribution on or
with respect to, or in connection with a split or combination of, the
outstanding shares of stock of the same or any other class) as the Board of
Directors from time to time in its discretion lawfully may determine; PROVIDED,
HOWEVER, that the consideration for the issuance of shares of stock of the
Corporation having par value (unless issued as such a dividend or distribution
or in connection with such a split or combination) shall not be less than such
par value. Shares so issued shall be fully paid stock, and the holders of such
stock shall not be liable to any further call or assessments thereon.
D. Except as provided in this Certificate of Incorporation, each holder of
Common Stock shall be entitled to one vote for each share of Common Stock held
by him.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
the Board of Directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) The Board of Directors shall consist of not less than three nor more
than fifteen directors. The exact number of directors shall be determined
from time to time by resolution adopted by the affirmative vote of a
majority of the Board of Directors, subject to Article III, Section 11 of
the By-laws of the Corporation. The Directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
Directors constituting the entire Board of Directors.
(3) Upon, or as soon as practicable following, the filing of the
Certificate of Merger to which this Certificate of Incorporation is
attached, Class I Directors shall be elected for a one-year term, Class II
Directors for a two-year term and Class III Directors for a three-year term.
At each succeeding annual meeting of stockholders, successors to the class
of Directors whose term expires at that annual meeting shall be elected for
a three-year term. If the number of Directors is changed in accordance with
the terms of this Certificate of Incorporation or the By-laws, any increase
or decrease shall be apportioned among the classes so as to maintain the
number of Directors in each class as nearly equal as possible, and any
additional Director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the
number of Directors shorten the term of any incumbent Director. A Director
shall hold office until the annual meeting for the year in which his term
expires and until his successor shall be elected and shall qualify, subject,
however, to the Director's prior death, resignation, disqualification or
removal from office. The stockholders shall not have the right to remove any
one or all of the Directors except for cause and in that event only by the
affirmative vote of the holders of eighty percent (80%) of the votes
entitled to be cast by the holders of all outstanding shares of Voting Stock
(as hereinafter defined) voting together as a single class. Any vacancy on
the Board of Directors that results from a newly created Directorship shall
only be filled by the affirmative vote of a majority of the Board of
Directors then in office, and any other vacancy occurring on the Board of
Directors shall only be filled by a majority of the Directors then in
office, although less than a quorum,
A-1-2
<PAGE>
or by a sole remaining Director. Any Director elected to fill a vacancy not
resulting from an increase in the number of Directors shall have the same
remaining term as that of his predecessor.
(4) Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect Directors at
an annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such Directorships shall be
governed by the terms of this Certificate of Incorporation applicable
thereto (including the resolutions adopted by the Board of Directors
pursuant to Section B of Article FOURTH), and such Directors so elected
shall not be divided into classes pursuant to Paragraph (2) of this Article
FIFTH unless expressly provided by such terms. Election of Directors need
not be by written ballot unless the By-Laws so provide.
(5) The Board of Directors may from time to time determine whether, to
what extent, at what times and places and under what conditions and
regulations the accounts, books and papers of the Corporation, or any of
them, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account, book or document of
the Corporation, except as and to the extent expressly provided by law with
reference to the right of stockholders to examine the original or duplicate
stock ledger, or otherwise expressly provided by law, or except as expressly
authorized by resolution of the Board of Directors.
(6) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the Directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised
or done by the Corporation, subject, nevertheless, to the provisions of the
statutes of Delaware, this Certificate of Incorporation, and the By-laws.
(7) Except as may be otherwise determined by the Board of Directors in
fixing the terms of any class or series of Preferred Stock pursuant to
Article FOURTH hereof, no action shall be taken by stockholders of the
Corporation except at an annual or special meeting of stockholders of the
Corporation and the right of stockholders to act by written consent in lieu
of a meeting is specifically denied.
SIXTH: A. The Board of Directors shall have concurrent power with the
stockholders as set forth in this Certificate of Incorporation to make, alter,
amend, change, add to or repeal the By-Laws of the Corporation.
B. Subject to Article III, Section 11 of the By-laws, the Board of Directors
may amend the By-Laws of the Corporation upon the affirmative vote of the number
of directors which shall constitute, under the terms of the By-Laws, the action
of the Board of Directors. Stockholders may not amend the By-Laws of the
Corporation except upon the affirmative vote of at least eighty percent (80%) of
the votes entitled to be cast by the holders of all outstanding shares of Voting
Stock voting together as a single class.
SEVENTH: A. In addition to any affirmative vote required by law, this
Certificate of Incorporation, the By-Laws of the Corporation or otherwise,
except as otherwise expressly provided in Section B of this Article SEVENTH, the
Corporation shall not engage, directly or indirectly, in any Business
Combination (as hereinafter defined) with an Interested Stockholder (as
hereinafter defined) without the affirmative vote of (i) not less than eighty
percent (80%) of the votes entitled to be cast by the holders of all outstanding
shares of Voting Stock voting together as a single class, and (ii) not less than
a majority of the votes entitled to be cast by the holders of all outstanding
shares of Voting Stock which are beneficially owned by persons other than such
Interested Stockholder voting together as a single class. Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or that
a lesser percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
B. The provisions of Section A of this Article SEVENTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law, this
Certificate of Incorporation, the By-Laws of the Corporation, or otherwise, if
such Business Combination shall have been approved by a majority (whether such
approval is made prior to or
A-1-3
<PAGE>
subsequent to the acquisition of beneficial ownership of Voting Stock that
caused the Interested Stockholder to become an Interested Stockholder) of the
Continuing Directors (as hereinafter defined).
C. For the purposes of this Certificate of Incorporation:
(1) The term "Business Combination" shall mean:
(a) any merger or consolidation of this Corporation or any Subsidiary
(as hereinafter defined) with (i) any Interested Stockholder or (ii) any
other corporation (whether or not itself an Interested Stockholder) which
is or after such merger or consolidation would be an Affiliate or
Associate of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) between the
Corporation or any Subsidiary and any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder involving any assets
or securities of the Corporation, any Subsidiary or any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder
the value of which would constitute, immediately prior to such
transaction, a Substantial Part (as hereinafter defined) of the assets of
the Corporation; or
(c) the adoption of any plan or proposal for the liquidation or
dissolution of, or similar transaction involving, the Corporation
proposed by or on behalf of an Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(d) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or otherwise involving an
Interested Stockholder) that has the effect, directly or indirectly, of
increasing the proportionate share of any class or series of Capital
Stock, or any securities convertible into Capital Stock or into equity
securities of any Subsidiary, that is beneficially owned by any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
(e) any agreement, contract or other arrangement providing for any
one or more of the actions specified in the foregoing clauses (a) to (d).
(2) The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article FOURTH
of this Certificate of Incorporation, and the term "Voting Stock" shall mean
all Capital Stock which by its terms may be voted on all matters submitted
to stockholders of the Corporation generally.
(3) The term "person" shall mean any individual, firm, corporation or
other entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of
Capital Stock.
(4) The term "Interested Stockholder" shall mean any person (other than
the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation
or any Subsidiary or any trustee of or fiduciary with respect to any such
plan or any trust or any other entity formed for the purposes of holding
Voting Stock for the purpose of funding any such plan or funding other
employee benefits for employees of the Corporation or any Subsidiary, in
each case when acting in such capacity) who (a) is the beneficial owner of
Voting Stock representing fifteen percent (15%) or more of the votes
entitled to be cast by the holders of all then outstanding shares of Voting
Stock; or (b) is an Affiliate or Associate of the Corporation and at any
time within the two-year period immediately prior to the date in question
was the beneficial owner of Voting Stock representing fifteen percent (15%)
or more of the votes entitled to be cast by the holders of all then
outstanding share of Voting Stock.
(5) A person shall be a "beneficial owner" of any Capital Stock (a)
which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its
A-1-4
<PAGE>
Affiliates or Associates has, directly or indirectly, (i) the right to
acquire (whether such right is exercisable immediately or subject only to
the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote pursuant to any
agreement, arrangement or understanding; or (c) which are beneficially
owned, directly or indirectly, by any other person with which such person or
any of its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
any shares of Capital Stock. For the purposes of determining whether a
person is an Interested Stockholder pursuant to Paragraph 4 of this Section
C, the number of shares of Capital Stock deemed to be outstanding shall
include shares deemed beneficially owned by such person through application
of Paragraph 5 of this Section C, but shall not include any other shares of
Capital Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options,
or otherwise.
(6) The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "Act"), (the term "registrant" in Rule 12b-2
meaning in this case the Corporation).
(7) The term "Subsidiary" means any corporation of which a majority of
any class of equity security is beneficially owned by the Corporation;
PROVIDED, HOWEVER, that for the purposes of the definition of Interested
Stockholder set forth in Paragraph 4 of this Section C, the term
"Subsidiary" shall mean only a corporation of which a majority of each class
of equity security is beneficially owned by the Corporation.
(8) The term "Continuing Director" means any member of the Board of
Directors, while such person is a member of the Board of Directors, who is
not an Affiliate or Associate or representative of the Interested
Stockholder and was a member of the Board prior to the time that the
Interested Stockholder became an Interested Stockholder, and any successor
of a Continuing Director, while such successor is a member of the Board of
Directors, who is not an Affiliate or Associate or representative of the
Interested Stockholder and is recommended or elected to succeed the
Continuing Director by a majority of Continuing Directors. In order for a
Business Combination or other action to be approved, or a fact or other
matter to be determined, "by a majority of the Continuing Directors"
hereunder, there must be one or more Continuing Directors then serving on
the Board of Directors.
(9) The term "Substantial Part" means assets having an aggregate Fair
Market Value (as hereinafter defined) in excess of ten percent (10%) of the
book value of the total consolidated assets of the Corporation and its
Subsidiaries as of the end of the Corporation's most recent fiscal year
ending prior to the time the stockholders of the Corporation would be
required to approve or authorize the Business Combination involving assets
constituting any such Substantial Part.
(10) The term "Fair Market Value" means (a) in the case of cash, the
amount of such cash; (b) in the case of stock, the highest closing sale
price, during the 30-day period immediately preceding the date in question,
of a share of such stock on the Composite Tape for New York Stock Exchange,
Inc. Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, Inc., or, if such stock is not listed on
such exchange, on the principal United States securities exchange registered
under the Act on which such stock is listed, or if such stock is not listed
on any such exchange, the highest closing bid quotation with respect to a
share of such stock, during the 30-day period preceding the date in
question, on the National Association of Securities Dealers, Inc. Automated
Quotation System or any similar system then in use, or if no such quotations
are available, the fair market value on the date in question of a share of
such stock as determined by a majority of the Continuing Directors in good
faith; and (c) in the case of property other than cash or stock, the fair
market value of such property on the date in question as determined in good
faith by a majority of the Continuing Directors.
A-1-5
<PAGE>
D. A majority of the Continuing Directors shall have the power and duty to
determine for the purposes of this Article SEVENTH, on the basis of information
known to them after reasonable inquiry, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another and (d) whether the assets that are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by this Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value in excess of the amount set
forth in Paragraph 1(b) of Section C of this Article SEVENTH. Any such
determination made in good faith shall be binding and conclusive on all parties.
E. Nothing contained in this Article SEVENTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
EIGHTH: When considering a merger, consolidation, Business Combination or
similar transaction, the Board of Directors, committees of the Board, individual
directors and individual officers may, in considering the best interests of the
Corporation and its stockholders, consider the effects of any such transaction
upon the employees, customers and suppliers of the Corporation, and upon
communities in which offices of the Corporation are located.
NINTH: Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, this
Certificate of Incorporation or the By-Laws of the Corporation), (i) the
affirmative vote of the holders of not less than eighty percent (80%) of the
votes entitled to be cast by the holders of all outstanding shares of Voting
Stock, voting together as a single class, shall be required to amend or repeal,
or adopt any provisions inconsistent with, Articles FIFTH and SIXTH, and (ii)
the affirmative vote of the holders of (x) not less than eighty percent (80%) of
the votes entitled to be cast by the holders of all outstanding shares of Voting
Stock voting together as a single class, and (y) not less than a majority of the
votes entitled to be cast by the holders of all outstanding shares of Voting
Stock which are beneficially owned by persons other than Interested
Stockholders, if any, voting together as a single class, shall be required to
amend or repeal, or adopt any provisions inconsistent with, Articles SEVENTH and
NINTH; PROVIDED, HOWEVER, that, with respect to Articles FIFTH, SIXTH, SEVENTH
and NINTH such special voting requirements shall not apply to, and such special
votes shall not be required for, any amendment, repeal or adoption recommended
by the Board if a majority of the directors then in office are persons who would
be eligible to serve as Continuing Directors.
TENTH: No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derived an improper personal
benefit. Any repeal of modification of this Article TENTH by the stockholders of
the Corporation shall not adversely affect any right of protection of a director
of the Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or modification.
ELEVENTH: Subject to the provisions of this Certificate of Incorporation,
the Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
thereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
A-1-6
<PAGE>
EXHIBIT A-2
TO THE MERGER AGREEMENT
AMENDED AND RESTATED BYLAWS
OF
UNUMPROVIDENT CORPORATION
(HEREINAFTER CALLED THE "CORPORATION")
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meetings, at which
meetings the stockholders shall elect by a plurality vote the directors to be
elected at such meetings, and transact such other business as may properly be
brought before the meetings. Written notice of the Annual Meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten nor more than sixty days before the
date of the meeting.
SECTION 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of Stockholders, for any purpose
or purposes, may be called by either (i) the Chairman, if there be one, (ii) the
Chief Executive Officer or (iii) the President, and shall be called by any such
officer at the request in writing of a majority of the Board of Directors. Such
request shall state the purpose or purposes of the proposed meeting. Written
notice of a Special Meeting stating the place, date and hour of the meeting and
the purpose or purposes for which the meeting is called shall be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
SECTION 4. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting. The foregoing provisions shall be subject to the voting rights of
holders of any Preferred Stock of the Corporation and any quorum requirements
relating thereto.
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SECTION 5. VOTING. Unless otherwise required by law, applicable stock
exchange rules or regulations, the Certificate of Incorporation or these
By-Laws, any question brought before any meeting of stockholders shall be
decided by a majority of the votes entitled to be cast by the holders of stock
represented and entitled to vote thereat and each stockholder represented at a
meeting of stockholders shall be entitled to cast one vote for each share of the
capital stock entitled to vote thereat held by such stockholder. Such votes may
be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
SECTION 6. PROPER BUSINESS AT ANNUAL MEETINGS. At any annual meeting of
the stockholders, only such business shall be conducted as shall have been
properly brought before such meeting. To be properly brought before an annual
meeting, business must be specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, or otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or otherwise properly brought before the meeting by a stockholder.
For business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation, must be a stockholder of the Corporation of record
at the time of the delivery of said notice and must be entitled to vote at the
meeting. To be timely, a stockholder's notice must be delivered to, or mailed
and received at, the principal executive offices of the Corporation, not less
than 60 days nor more than 90 days prior to the annual meeting; PROVIDED,
HOWEVER, that in the event that less than 75 days' notice or prior public
disclosure of the date of such meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was first made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting, including the
complete text of any resolutions to be presented at the meeting with respect to
such business, and the reasons for conducting such business at the annual
meeting, (ii) the name and address of record of the stockholder proposing such
business and the beneficial owner, if any, on whose behalf the proposal is made,
(iii) the class and number of shares of the Corporation which are beneficially
owned by the stockholder and such beneficial owner, (iv) any material interest
of the stockholder and such beneficial owner in such business and (v) a
representation that the stockholder is a holder of record of shares of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to propose such business. The chairman of an annual
meeting shall, if the facts warrant, determine and declare to the meeting that
such business was not properly brought before the meeting in accordance with
these provisions, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
SECTION 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 8. STOCK LEDGER. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
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SECTION 9. (a) ORGANIZATION. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence by the Vice
Chairman of the Board, if any, or in his absence by the Chief Executive Officer,
or in his absence by the President, or in his absence by a Vice President, or in
the absence of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
(b) CONDUCT OF MEETINGS. The date and time of the opening and the closing of
the polls for each matter upon which the stockholders will vote at a meeting
shall be announced at the meeting by the person presiding over the meeting. The
Board of Directors may adopt by resolution such rules and regulations for the
conduct of the meeting of stockholders as it shall deem appropriate. Except to
the extent inconsistent with such rules and regulations as adopted by the Board
of Directors, the chairman of any meeting of stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to stockholders of record of the
corporation, their duly authorized and constituted proxies or such other persons
as the chairman of the meeting shall determine; (iv) restrictions on entry to
the meeting after the time fixed for the commencement thereof and (v)
limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the Board of Directors or the chairman of
the meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS. Subject to Article III,
Section 11 of these By-laws, the number of directors constituting the Board of
Directors shall be fixed from time to time by the Board of Directors in the
manner prescribed in the Certificate of Incorporation and shall initially be 15,
eight of whom shall be designated by UNUM Corporation and seven of whom shall be
designated by Provident Companies, Inc. Except as provided in Section 3 of this
Article, the directors to be elected at each Annual Meeting of Stockholders
shall be elected by a plurality of the votes cast at such Annual Meeting of
Stockholders, and each director so elected shall hold office until the third
Annual Meeting following such election and until his successor is duly elected
and qualified, or until his earlier resignation, retirement or removal. No
person elected or re-elected a director shall, after such person's
seventy-second birthday, serve as a director of the Corporation beyond the date
of the Corporation's annual meeting ending the term for which such person has
been elected; PROVIDED, that, no person shall be required to retire because of
their age prior to such date. Any director may resign at any time upon notice to
the Corporation. Directors need not be stockholders.
SECTION 2. NOMINATION PROCEDURES. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors, by any nominating committee or person appointed by the
Board of Directors or by any stockholder of the Corporation entitled to vote for
the election of Directors at the meeting. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation by a stockholder of
the Corporation of record at the time of the delivery of said notice who is
entitled to vote at the meeting. To be timely, a stockholder's notice shall be
delivered to, or mailed and received at, the principal executive
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offices of the Corporation not less than 60 days nor more than 90 days prior to
the meeting; PROVIDED, HOWEVER, that in the event that less than 75 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was first
made. Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of the Corporation which are beneficially owned by the person, (iv) a
description of all arrangements, understandings or relationships between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder and (v) any other information relating to the person that is
required to be disclosed in solicitations of proxies for election of Directors
pursuant to Rule 14(a) under the Securities Exchange Act of 1934, as amended
(the "Act"), and any other applicable laws or rules or regulations of any
governmental authority or of any national securities exchange or similar body
overseeing any trading market on which shares of the Corporation are traded, and
(b) as to the stockholder giving the notice (i) the name and address of record
of the stockholder and the beneficial owner, if any, on whose behalf the
nomination is made, and (ii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder and such beneficial owner and
(iii) a representation that the stockholder is a holder of record of shares of
the Corporation entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons specified in the
notice. No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth herein.
The chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
SECTION 3. VACANCIES. Subject to the provisions of the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of directors, which increase shall be subject
to Article III, Section 11, shall only be filled by a majority of the directors
then in office, though less than a quorum, or by a sole remaining director, and
the directors so chosen shall hold office until the next annual election and
until their successors are duly elected and qualified, or until their earlier
resignation or removal.
SECTION 4. DUTIES AND POWERS. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
SECTION 5. MEETINGS. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the state of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, the Chief Executive Officer, the President, or
any three directors. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than forty-eight
(48) hours before the date of the meeting, by telephone or telegram on
twenty-four (24) hours' notice, or on much shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
SECTION 6. QUORUM. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may
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adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
SECTION 7. ACTIONS OF BOARD. Unless otherwise provided by the Certificate
of Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 8. MEETINGS BY MEANS OF CONFERENCE TELEPHONE OR SIMILAR
COMMUNICATIONS EQUIPMENT. Unless otherwise provided by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee by means of
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 8 shall constitute presence in person at such
meeting.
SECTION 9. COMMITTEES. (a) The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee shall
keep regular minutes and report to the Board of Directors when required.
(b) The Corporation shall have an Executive Committee which, among any other
powers which shall from time to time be granted to such committee by resolution
of the Board of Directors, shall have the sole power and authority to recommend
nominees on behalf of the Corporation to the Board of Directors (i) for election
to the Board of Directors at the stockholders meetings at which directors are to
be elected, (ii) to fill vacancies on the Board of Directors of the Corporation
in between such stockholders meetings and (iii) to serve on, and fill vacancies
in, any committee of the Board of Directors.
(c) Notwithstanding anything to the contrary contained in these By-laws,
until July 1, 2001, the Executive Committee will consist of three directors
which were initially designated by UNUM Corporation, which will include the
Chief Executive Officer initially serving the Corporation (who will serve as
Chairman of such committee), and three directors which were initially designated
by Provident Companies, Inc., which will include the President initially serving
the Corporation, in each case in accordance with the Agreement and Plan of
Merger, dated as of November 22, 1998, between UNUM Corporation and Provident
Companies, Inc. (the "Merger Agreement").
SECTION 10. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or
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committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
SECTION 11. CERTAIN MODIFICATIONS. Notwithstanding anything to the
contrary contained in these By-laws, until July 1, 2001, the following actions
taken either directly or indirectly by the Board of Directors shall, when a
quorum is present, require the affirmative vote of not less than seventy-five
percent of the directors voting at a meeting for which proper notice of the
actions taken was duly given: (i) any change in the size of the Board of
Directors or in the size of any class of directors; (ii) any change in the
composition or power and authority of the Executive Committee of the Board of
Directors or the chairmanship thereof; (iii) any change or amendment to these
By-laws; and (iv) any proposals to be submitted to the stockholders of the
Corporation by the Board of Directors. From and after July 1, 2001, any of the
actions set forth in clauses (i) through (iv) of the immediately preceding
sentence may be taken upon the affirmative vote of the number of directors which
shall constitute, under the terms of these By-laws, the action of the Board of
Directors.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chief Executive Officer, a President, a
Secretary and a Treasurer. The Board of Directors, in its discretion, may also
choose a Chairman of the Board of Directors (who must be a director) and one or
more Vice-Presidents, Assistant Secretaries, Assistant Treasurers and other
officers. Any number of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these By-Laws. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.
SECTION 2. ELECTION. The Board of Directors shall elect the officers of
the Corporation who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Directors; and all officers of the Corporation shall hold office
until their successors are chosen and qualified, or until their earlier
resignation or removal. Any officer elected by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the Chief Executive Officer, the President or any
Vice-President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors, if there be one, shall preside at all meetings of the stockholders
and of the Board of Directors. Except where by law
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the signature of the Chief Executive Officer or the President is required, the
Chairman of the Board of Directors shall possess the same power as the Chief
Executive Officer or the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or disability of the Chief Executive Officer and
the President, the Chairman of the Board of Directors shall exercise all the
powers and discharge all the duties of the Chief Executive Officer or the
President. The Chairman of the Board of Directors shall also perform such other
duties and may exercise such other powers as from time to time may be assigned
to him by these By-Laws or by the Board of Directors.
SECTION 5. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall,
subject to the control of the Board of Directors, have general supervision of
the business of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. He shall execute all bonds,
mortgages, contracts and other instruments of the Corporation requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these By-Laws,
the Board of Directors, the Chief Executive Officer or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the Chief Executive Officer shall preside at all meetings of the
stockholders and the Board of Directors. The Chief Executive Officer shall also
perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws or by the Board of Directors.
SECTION 6. PRESIDENT. The President shall, subject to the control of the
Board of Directors and the Chief Executive Officer (provided that until July 1,
2000, the President and the Chief Executive Officer will participate equally in
setting the overall strategic direction of the Corporation), have general
supervision of the business of the Corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall execute
all bonds, mortgages, contracts and other instruments of the Corporation
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except that the other
officers of the Corporation may sign and execute documents when so authorized by
these By-Laws, the Board of Directors, the Chief Executive Officer or the
President. In the absence or disability of the Chairman of the Board of
Directors and the Chief Executive Officer, or if neither shall exist, the
President shall preside at all meetings of the stockholders and the Board of
Directors. The President shall also perform such other duties and may exercise
such other powers as from time to time may be assigned to him by these By-Laws
or by the Board of Directors. From the Effective Time until July 1, 2000, the
President initially serving the Corporation shall also be the Chief Operating
Officer.
SECTION 7. VICE-PRESIDENTS. At the request of the Chief Executive Officer
or the President or in the event of either of their absences or inability or
refusal to act (and if there be no Chairman of the Board of Directors), the
Vice-President or the Vice-Presidents if there is more than one (in the order
designated by the Board of Directors) shall perform the duties of the Chief
Executive Officer and President, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the Chief Executive Officer and
President. Each Vice-President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If there
be no Chairman of the Board of Directors and no Vice-President, the Board of
Directors shall designate the officer of the Corporation who, in the absence of
the Chief Executive Officer and President or in the event of the inability or
refusal of the Chief Executive Officer and President to act, shall perform the
duties of the Chief Executive Officer and President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the Chief
Executive Officer and President.
SECTION 8. SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of
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the Board of Directors, and shall perform such other duties as may be prescribed
by the Board of Directors, the Chief Executive Officer or President, under whose
supervision he shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, then
either the Board of Directors, the Chief Executive Officer or the President may
choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest the affixing by his signature. The Secretary
shall see that all books, reports, statements, certificates and other documents
and records required by law to be kept or filed are properly kept or filed, as
the case may be.
SECTION 9. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer, the President
and the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as Treasurer and of
the financial condition of the Corporation. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
SECTION 10. ASSISTANT SECRETARIES. Except as may be otherwise provided in
these By-Laws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the Chief Executive Officer, the President, any Vice-President, if
there be one, or the Secretary, and in the absence of the Secretary or in the
event of his disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
SECTION 11. ASSISTANT TREASURERS. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer, the
President, any Vice-President, if there be one, or the Treasurer, and in the
absence of the Treasurer or in the event of his disability or refusal to act,
shall perform the duties of the Treasurer, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Treasurer. If
required by the Board of Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
SECTION 12. OTHER OFFICERS. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
SECTION 13. CERTAIN ACTIONS. Notwithstanding anything to the contrary
contained in these By-laws and other than in accordance with their respective
employment contracts, until July 1, 2001, the removal of the current Chairman
and Chief Executive Officer or the current President and Chief
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Operating Officer as of the effective date of the merger contemplated by the
Merger Agreement, any modification to the provisions of either of their
respective employment contracts which provide their respective terms of office
or any modification to either of their respective roles, duties or authority
shall, when a quorum is present, require the affirmative vote of seventy-five
percent of the directors voting at a meeting for which proper notice of the
actions taken was duly given. From and after July 1, 2001, any of the actions
set forth in the immediately preceding sentence may be taken upon the
affirmative vote of the number of directors which shall constitute, under the
terms of these By-laws, the action of the Board of Directors.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board of Directors, the Chief Executive Officer, the
President or a Vice-President and (ii) by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation.
SECTION 2. SIGNATURES. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.
SECTION 5. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty days nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED,
HOWEVER, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
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ARTICLE VI
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 4. CORPORATE SEAL. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
SECTION 1. INDEMNIFICATION IN ACTIONS, SUITS, OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify each person who is or was, or is
threatened to be made, a party to or witness in any threatened, pending or
completed action, suit, proceeding or claim, whether civil, criminal,
administrative or investigative (other than one by or in the right of the
Corporation), by reason of the fact that he is or was a director, officer or
employee of the Corporation or of Union Mutual Life Insurance Company, a Maine
mutual insurance company (the "Mutual Company"), or is or was serving at the
request of the Corporation or the Mutual Company as a director, officer,
employee or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorney's fees and expenses), judgments,
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fines, penalties, and amounts paid in settlement, incurred by him in connection
with defending, investigating, preparing to defend, or being or preparing to be
a witness in, such action, suit, proceeding or claim, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
SECTION 2. INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify each person who is or was, or is threatened to be
made, a party to or witness in any threatened, pending or completed action,
suit, proceeding or claim by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer or employee of the Corporation or of the Mutual Company or is or was
serving at the request of the Corporation or the Mutual Company as a director,
officer, employee or trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorney's fees and expenses), and, if and to the extent permitted by applicable
law, judgments, penalties and amounts paid in settlement, incurred by him in
connection with defending, investigating, preparing to defend, or being or
preparing to be a witness in, such action, suit, proceeding or claim, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation; PROVIDED, HOWEVER, that no
indemnification shall be made in respect of any such claim or any issue or
matter in any such action, suit or proceeding as to which such person shall have
been adjudged to be liable to the Corporation unless (and only to the extent
that) the Court of Chancery or the court in which such claim, action, suit or
proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
and amounts which the Court of Chancery or such other court shall deem proper.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. (a) Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the person seeking indemnification is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or 2 of this Article VIII, as the case may be. Such determination (and
determinations under Sections 5 and 6 of this Article VIII) shall be made (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to the action, suit, proceeding or claim with respect to
which indemnification is sought ("disinterested directors"), or (ii) if such a
quorum is not obtainable, or if a quorum of disinterested directors so directs,
in a written opinion of independent legal counsel chosen by the Board of
Directors, or (iii) by the stockholders; PROVIDED, HOWEVER, that if a Change in
Control (as defined in this Section 3) has occurred and the person seeking
indemnification so requests, such determination (and determination under
Sections 5 and 6 of this Article VIII) shall be made in a written opinion
rendered by independent legal counsel chosen by the person seeking
indemnification and not reasonably objected to by the Board of Directors (whose
fees and expenses shall be paid by the Corporation). To the extent, however,
that a director, officer, employee or trustee or former director, officer,
employee or trustee has been successful on the merits or otherwise in defense of
any action, suit, proceeding or claim described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorney's fees and expenses) incurred by him in connection
therewith, without the necessity of authorization in the specific case.
(b) For purposes of the proviso to the second sentence of Section 3(a),
"independent legal counsel" shall mean legal counsel other than an attorney, or
a firm having associated with it an attorney, who has been retained by or who
has performed services for the Corporation, the Mutual Company or the person
seeking indemnification within the previous three years.
(c) A "Change in Control" shall mean a change in control of the Corporation
of a nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A promulgated under the Act, whether or not the
Corporation is then subject to such reporting requirement; provided that,
without limitation, such a change in control shall be deemed to have occurred if
(i) any "person" (as such
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term is used in sections 13(d) and 14(d) of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Corporation representing 35% or more of the
combined voting power of the Corporation's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board of
Directors in office immediately prior to such acquisition, or (ii) the
Corporation is a party to a merger, consolidation, sale of assets or other
reorganization, or proxy contest, as a consequence of which members of the Board
of Directors in office immediately prior to such transaction or event constitute
less than a majority of the Board of Directors thereafter, or (iii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any new director
whose election or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period) cease for any reason to
constitute at least a majority of the Board of Directors.
SECTION 4. GOOD FAITH DEFINED, ETC. (a) For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if such person relied on the records or books of account of the Corporation, the
Mutual Company or another enterprise, or on information supplied to him by the
officers of the Corporation, the Mutual Company or another enterprise, or on
information or records given or reports made to the Corporation, the Mutual
Company or another enterprise by an independent certified public accountant or
by an appraiser or other expert selected with reasonable care by the
Corporation, the Mutual Company or another enterprise. The term "another
enterprise" as used in this Section 4(a) shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation or the
Mutual Company as a director, officer, employee or trustee.
(b) The termination of any action, suit, proceeding or claim by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, that he had no reasonable cause to believe that
his conduct was unlawful.
(c) References in this Article VIII to "penalties" include any excise taxes
assessed on a person with respect to an employee benefit plan; references in
this Article VIII to "serving at the request of the Corporation or the Mutual
Company" include any service as a director, officer or employee or former
director, officer or employee of the Corporation or the Mutual Company which
imposes duties on, or involves services by, such person with respect to an
employee benefit plan or its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the participants or beneficiaries of such an
employee benefit plan shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation.
(d) The provisions of this Section 4 shall not be deemed to be exclusive or
to limit in any way the circumstances in which a person may be deemed to have
met the applicable standard of conduct set forth in Section 1 or 2 of this
Article VIII, as the case may be.
SECTION 5. RIGHT TO INDEMNIFICATION UPON APPLICATION; PROCEDURE UPON
APPLICATION; ETC. Except as otherwise provided in the proviso to Section 2 of
this Article VIII:
(a) Any indemnification under Section 1 or 2 of this Article VIII shall be
made no later than 45 days after receipt by the Corporation of the written
request of the director, officer, employee or trustee or former director,
officer, employee or trustee unless a determination is made within said 45-day
period in accordance with Section 3 of this Article VIII that such person has
not met the applicable standard of conduct set forth in Section 1 or 2 of this
Article VIII.
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(b) The right to indemnification under Section 1 or 2 of this Article VIII
or advances under Section 6 of this Article VIII shall be enforceable by the
director, officer, employee or trustee or former director, officer, employee or
trustee in any court of competent jurisdiction. Following a Change in Control,
the burden of proving that indemnification is not appropriate shall be on the
Corporation. Neither the absence of any prior determination that indemnification
is proper in the circumstances, nor a prior determination that indemnification
is not proper in the circumstances, shall be a defense to the action or create a
presumption that the director, officer, employee or trustee or former director,
officer, employee or trustee has not met the applicable standard of conduct. The
expenses (including attorney's fees and expenses) incurred by the director,
officer, employee or trustee or former director, officer, employee or trustee in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such action (or in any action or claim brought by him to
recover under any insurance policy or policies referred to in Section 9 of this
Article VIII) shall also be indemnified by the Corporation.
(c) If any person is entitled under any provision of this Article VIII to
indemnification by the Corporation for some or a portion of expenses, judgments,
fines, penalties or amounts paid in settlement incurred by him, but not,
however, for the total amount thereof, the Corporation shall nevertheless
indemnify such person for the portion of such expenses, judgments, fines,
penalties and amounts to which he is entitled.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses (including attorney's
fees and expenses) incurred by a director, officer, employee or trustee or a
former director, officer, employee or trustee in defending, investigating,
preparing to defend, or being or preparing to be a witness in, a threatened or
pending action, suit, proceeding or claim against him, whether civil or
criminal, may be paid by the Corporation in advance of the final disposition of
such action, suit, proceeding or claim upon receipt by the Corporation of a
written request therefor and a written undertaking by or on behalf of the
director, officer, employee or trustee or former director, officer, employee or
trustee to repay such amounts if it shall be determined in accordance with
Section 3 of this Article VIII that he is not entitled to be indemnified by the
Corporation; PROVIDED, HOWEVER, that if he seeks to enforce his rights in a
court of competent jurisdiction pursuant to Section 5(b) of this Article VIII,
said undertaking to repay shall not be applicable or enforceable unless and
until there is a final court determination that he is not entitled to
indemnification as to which all rights of approval have been exhausted or have
expired.
SECTION 7. CERTAIN PERSONS NOT ENTITLED TO
INDEMNIFICATION. Notwithstanding any other provision of this Article VIII, no
person shall be entitled to indemnification under this Article VIII or to
advances under Section 6 of this Article VIII with respect to any action, suit,
proceeding or claim brought or made by him against the Corporation or the Mutual
Company, other than an action, suit, proceeding or claim seeking, or defending
such person's right to, indemnification and/or expense advances pursuant to this
Article VIII or otherwise.
SECTION 8. NON-EXCLUSIVITY AND SURVIVAL OF INDEMNIFICATION. The provisions
of this Article VIII shall not be deemed exclusive of any other rights to which
the person seeking indemnification or expense advances may be entitled under any
agreement, contract, or vote of stockholders or disinterested directors, or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. Except as otherwise
provided in Section 7 of this Article VIII, but notwithstanding any other
provision of this Article VIII, it is the policy of the Corporation that
indemnification of and expense advances to the persons specified in Sections 1
and 2 of this Article VIII shall be made to the fullest extent permitted by law,
and, accordingly, in the event of any change in law, by legislation or
otherwise, permitting greater indemnification of and/or expense advances to any
such person, the provisions of this Article VIII shall be construed so as to
require such greater indemnification and/or expense advances. The provisions of
this Article VIII shall not be deemed to preclude the indemnification of any
person who is not specified in Section 1 or 2 of this Article VIII but whom the
Corporation has the power to indemnify under the provisions of the General
Corporation Law of the State of Delaware or otherwise. The provisions of this
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Article VIII shall continue as to a person who has ceased to be a director,
officer, employee or trustee and shall inure to the benefit of the heirs,
executors and administrators of such person.
SECTION 9. INSURANCE. The Corporation may purchase and maintain at its
expense insurance on behalf of any person who is or was a director, officer or
employee of the Corporation or the Mutual Company or is or was serving at the
request of the Corporation or the Mutual Company as a director, officer,
employee or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any liability or expense
asserted against or incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power or the
obligation to indemnify him against such liability or expense under the
provisions of this Article VIII or the provisions of Section 145 of the General
Corporation Law of the State of Delaware. The Company shall not be obligated
under this Article VIII to make any payment in connection with any claim made
against any person if and to the extent that such person has actually received
payment therefor under any insurance policy or policies.
SECTION 10. SUCCESSORS; MEANING OF "CORPORATION". This Article VIII shall
be binding upon and enforceable against any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of the Corporation. For purposes of this Article VIII,
but subject to the provisions of any agreement relating to any merger or
consolidation of the kind referred to in clause (i) below or of any agreement
relating to the acquisition of any corporation of the kind referred to in clause
(ii) below, references to "the Corporation" shall include (i) any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger with the Corporation which, if its separate existence
had continued, would have had power and authority to indemnify its directors,
officers and employees, so that any person who is or was a director, officer or
employee of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, shall stand in the same position under the provisions of this
Article VIII with respect to the Corporation as he would have with respect to
such constituent corporation if its separate existence had continued; and (ii)
any corporation of which at least a majority of the voting power (as represented
by its outstanding stock having voting power generally in the election of
directors) is owned directly or indirectly by the Corporation.
SECTION 11. SEVERABILITY. The provisions of this Article VIII shall be
severable in the event that any provision hereof (including any provision within
a single section, subsection, clause, paragraph or sentence) is held invalid,
void or otherwise unenforceable on any ground by any court of competent
jurisdiction. In the event of any such holding, the remaining provisions of this
Article VIII shall continue in effect and be enforceable to the fullest extent
permitted by law.
ARTICLE IX
AMENDMENTS
SECTION 1. POWER TO AMEND. The Board of Directors shall have concurrent
power with the stockholders as set forth in the By-Laws and the Certificate of
Incorporation to make, alter, amend, change, add to or repeal the By-Laws.
SECTION 2. REQUIRED VOTE. The Board of Directors may amend the By-Laws
upon the affirmative vote of the number of directors which shall constitute,
under the terms of the By-Laws, the action of the Board of Directors.
Notwithstanding anything to the contrary contained in these By-laws including,
without limitation, the last preceding sentence, until July 1, 2001, the
amendment of Article III, Section 11 or Article IV, Section 13 of these By-laws,
shall, when a quorum is present, require the affirmative vote of seventy-five
percent of the directors voting at a meeting for which proper notice of the
actions taken was duly given. Stockholders may not amend the By-Laws except upon
the affirmative vote of at least eighty percent (80%) of the votes entitled to
be cast by the holders of all outstanding shares of Voting Stock (as such term
is defined in the Certificate of Incorporation) voting together as a single
class.
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EXHIBIT B
TO THE MERGER AGREEMENT
CORPORATE GOVERNANCE OF THE SURVIVING CORPORATION
FOLLOWING THE EFFECTIVE TIME
BOARD OF DIRECTORS
COMPOSITION. The By-laws of the Surviving Corporation will provide that the
Board of Directors of the Surviving Corporation will consist of 15 members,
eight of whom shall be designated by UNUM and seven of whom shall be designated
by Provident and no more than one member appointed by each party shall be an
"inside" director (I.E., any individual currently employed by such party or
employed by such party within the past three years). Provident shall be deemed
to have designated any director which Zurich Insurance Company shall have the
right to designate pursuant to the Amended and Restated Relationship Agreement
between Provident and Zurich Insurance Company, dated as of May 31, 1996. The
current Chairman and Chief Executive Officer of UNUM will serve as Chairman of
the Board of Directors of the Surviving Corporation. The current Chairman and
the Chief Executive Officer of Provident will serve as President and Chief
Operating Officer of the Surviving Corporation and will be a member of the Board
of Directors of the Surviving Corporation. Prior to the mailing of the Joint
Proxy Statement, each party will designate in writing the individual directors
that it is entitled to designate to the Board of Directors and will designate
the class to which each is to be assigned understanding that UNUM will designate
three directors, two directors and three directors to classes one, two and
three, respectively, and Provident will designate two directors, three directors
and two directors to classes one, two and three, respectively. Such written
designation shall be included as Annex I to this Exhibit B to the Merger
Agreement to be incorporated as part of the Joint Proxy Statement.
NOMINATION OF DIRECTORS. The By-Laws of the Surviving Corporation will
provide that the Executive Committee of the Board of Directors will recommend
nominees to the Board of Directors (i) for election to the Board of Directors at
the stockholder meetings at which directors are to be elected, (ii) to fill
vacancies on the Board of Directors of the Surviving Corporation in between such
stockholders meetings and (iii) to serve on, and fill vacancies in, any
Committee of the Board of Directors. The By-Laws will also provide that if a
director reaches mandatory retirement age (not less than 70) during the term of
a directorship, such director may complete the term of the class to which he or
she is elected.
COMPOSITION OF THE EXECUTIVE COMMITTEE. The By-Laws of the Surviving
Corporation will provide that, until July 1, 2001, the Executive Committee will
consist of three UNUM directors, including the Chief Executive Officer initially
serving the Surviving Corporation, and three Provident directors, including the
President initially serving the Surviving Corporation. The Chief Executive
Officer initially serving the Surviving Corporation will also serve as the
Chairman of the Executive Committee as provided in his employment contract.
EXECUTIVE OFFICERS
COMPOSITION. The Executive Officers of the Surviving Corporation will
initially be the following:
<TABLE>
<CAPTION>
NAME TITLE
- ---------------------------------------------- ----------------------------------------------
<S> <C>
James F. Orr III.............................. Chairman of the Board and Chief Executive
Officer
J. Harold Chandler............................ President and Chief Operating Officer
F. Dean Copeland.............................. Executive Vice President
Robert W. Crispin............................. Executive Vice President
Elaine D. Rosen............................... Executive Vice President
Thomas R. Watjen.............................. Executive Vice President
</TABLE>
<PAGE>
The employment contracts for each of Mr. Orr and Mr. Chandler will provide
that, from the Effective Time until July 1, 2000, Mr. Orr and Mr. Chandler will
participate equally in setting the overall strategic direction of the Company.
From the Effective Time until July 1, 2000, Mr. Orr will be Chief Executive
Officer and Chairman of the Board of Directors, and during the same period Mr.
Chandler will be President and Chief Operating Officer. During the period Mr.
Chandler is serving as Chief Operating Officer, the operating and staff units of
the Surviving Corporation shall report to Mr. Chandler and he shall be
responsible for their staffing and performance. From and after July 1, 2000, Mr.
Chandler will succeed Mr. Orr as the Chief Executive Officer and continue to
serve as President, and Mr. Orr will thereafter serve as executive Chairman of
the Board of Directors. As to each individual the positions will be held in
accordance with the terms of their respective employment contracts.
MANAGEMENT COMMITTEES. At the Effective Time a Corporate Policy Committee
and an Operating Committee will be established. The Corporate Policy Committee
will consist of Ms. Rosen and Messrs. Orr, Chandler, Copeland, Watjen, and
Crispin with Mr. Orr as Chairman. Subject to the authority of the Board of
Directors, this committee will assist the Chief Executive Officer and the
President in setting the overall strategic direction for the Surviving
Corporation. In addition, during the integration period immediately following
the Effective Time this committee will serve as the transition committee.
Subject to the foregoing, Mr. Watjen will direct the transition and integration
team.
The Operating Committee will consist of Ms. Rosen and Messrs. Orr, Chandler,
Copeland, Watjen, and Crispin and may include certain other officers of the
Surviving Corporation with Mr. Chandler as Chairman. Subject to the authority of
the Board of Directors and the Chief Executive Officer, this committee will
assist the President in managing the Surviving Corporation.
AMENDMENTS
The By-Laws of the Surviving Corporation will provide that, until July 1,
2001, the following actions will require the approval of at least 75% of the
directors voting at a meeting for which proper notice of the actions taken was
duly given (assuming for the purposes of such approval that a quorum is
present):
(i) the removal of Mr. Orr or Mr. Chandler from their executive positions,
including the successorship arrangements other than in accordance with
their respective employment contracts, or any breach of their respective
employment agreements;
(ii) any change in the size of the Board of Directors;
(iii) any change in the composition or power and authority of the Executive
Committee of the Board of Directors or the chairmanship thereof;
(iv) any change or amendment to the By-Laws; and
(v) any proposals to be submitted to the stockholders of the Surviving
Corporation by the Board of Directors.
B-2
<PAGE>
EXHIBIT C-1
TO THE MERGER AGREEMENT
FORM OF AFFILIATE LETTER
FOR UNUM AFFILIATES
Dear Sirs:
The undersigned, a holder of shares of common stock, par value $.10 per
share ("UNUM Common Stock"), of UNUM Corporation, a Delaware corporation
("UNUM"), is entitled to receive in connection with the merger (the "Merger") of
UNUM with and into Provident Companies, Inc., a Delaware corporation
("Provident"), securities of Provident, as the surviving corporation in the
Merger (the "Surviving Corporation Securities"). The undersigned acknowledges
that the undersigned may be deemed an "affiliate" of UNUM within the meaning of
Rule 145 ("Rule 145") promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), by the Securities and Exchange Commission (the "SEC")
and may be deemed an "affiliate" of UNUM for purposes of qualifying the Merger
for pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, although nothing
contained herein should be construed as an admission of either such fact.
If in fact the undersigned were an affiliate under the Securities Act, the
undersigned's ability to sell, assign or transfer the Surviving Corporation
Securities received by the undersigned in exchange for any shares of UNUM Common
Stock in connection with the Merger may be restricted unless such transaction is
registered under the Securities Act or an exemption from such registration is
available. The undersigned understands that such exemptions are limited and the
undersigned has obtained or will obtain advice of counsel as to the nature and
conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d) promulgated
under the Securities Act. The undersigned understands that Provident will not be
required to maintain the effectiveness of any registration statement under the
Securities Act for the purposes of resale of Surviving Corporation Securities by
the undersigned.
The undersigned hereby represents to and covenants with Provident that the
undersigned will not sell, assign or transfer any of the Surviving Corporation
Securities received by the undersigned in exchange for shares of UNUM Common
Stock in connection with the Merger except (i) pursuant to an effective
registration statement under the Securities Act, (ii) in conformity with the
volume and other limitations of Rule 145 or (iii) in a transaction which, in the
opinion of the general counsel of Provident or other counsel reasonably
satisfactory to Provident or as described in a "no-action" or interpretive
letter from the Staff of the SEC specifically issued with respect to a
transaction to be engaged in by the undersigned, is not required to be
registered under the Securities Act; PROVIDED, HOWEVER, that in any such case,
such sale, assignment or transfer shall only be permitted if, in the opinion of
counsel of Provident, such transaction would not have, directly or indirectly,
any adverse consequences for Provident with respect to the treatment of the
Merger for tax purposes.
The undersigned hereby further represents to and covenants with Provident
that the undersigned has not, within the preceding 30 days, sold, transferred or
otherwise disposed of any shares of UNUM Common Stock held by the undersigned
and that the undersigned will not sell, transfer or otherwise dispose of any
Surviving Corporation Securities received by the undersigned in connection with
the Merger until after such time as results covering at least 30 days of
post-Merger combined operations of UNUM and Provident have been published by
Provident, in the form of a quarterly earnings report, an effective registration
statement filed with the SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or
any other public filing or announcement which includes such combined results of
operations, except as would not otherwise reasonably be expected to adversely
affect the qualification of the Merger as a pooling-of-interests.
In the event of a sale or other disposition by the undersigned of Surviving
Corporation Securities pursuant to Rule 145, the undersigned will supply
Provident with evidence of compliance with such Rule, in the form of a letter in
the form of Annex I hereto and the opinion of counsel or no- action letter
<PAGE>
referred to above. The undersigned understands that Provident may instruct its
transfer agent to withhold the transfer of any Surviving Corporation Securities
disposed of by the undersigned, but that (provided such transfer is not
prohibited by any other provision of this letter agreement) upon receipt of such
evidence of compliance, Provident shall cause the transfer agent to effectuate
the transfer of the Surviving Corporation Securities sold as indicated in such
letter.
Provident covenants that it will take all such actions as may be reasonably
available to it to permit the sale or other disposition of Surviving Corporation
Securities by the undersigned under Rule 145 in accordance with the terms
thereof.
The undersigned acknowledges and agrees that the legends set forth below
will be placed on certificates representing Surviving Corporation Securities
received by the undersigned in connection with the Merger or held by a
transferee thereof, which legends will be removed by delivery of substitute
certificates upon receipt of an opinion in form and substance reasonably
satisfactory to Provident from independent counsel reasonably satisfactory to
Provident to the effect that such legends are no longer required for purposes of
the Securities Act.
There will be placed on the certificates for Surviving Corporation
Securities issued to the undersigned, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is being accounted for as a pooling of interests,
in a transaction to which Rule 145 promulgated under the Securities Act of
1933 applies. The shares have not been acquired by the holder with a view
to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act of 1933. The shares may not be sold, pledged
or otherwise transferred (i) until such time as UNUMProvident Corporation
shall have published financial results covering at least 30 days of combined
operations after the Effective Time and (ii) except in accordance with an
exemption from the registration requirements of the Securities Act of 1933."
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of Surviving
Corporation Securities and (ii) the receipt by Provident of this letter is an
inducement to Provident's obligations to consummate the Merger.
Very truly yours,
Dated:
C-1-2
<PAGE>
ANNEX I
TO EXHIBIT C-1
[Name] [Date]
On , the undersigned sold the securities of Provident
Companies, Inc. ("Provident"), described below in the space provided for that
purpose (the "Securities"). The Securities were received by the undersigned in
connection with the merger of UNUM Corporation, a Delaware corporation, with and
into Provident.
Based upon the most recent report or statement filed by Provident with the
Securities and Exchange Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The undersigned hereby represents that the Securities were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Securities Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of the Securities.]
<PAGE>
EXHIBIT C-2
TO THE MERGER AGREEMENT
FORM OF AFFILIATE LETTER
FOR PROVIDENT AFFILIATES
Dear Sirs:
The undersigned is a holder of shares of common stock, par value $1.00 per
share ("Provident Common Stock"), of Provident Companies, Inc., a Delaware
corporation ("Provident"). The undersigned acknowledges that the undersigned may
be deemed an "affiliate" of Provident for purposes of qualifying the merger of
UNUM Corporation, a Delaware corporation ("UNUM"), and Provident (the "Merger")
for pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, although nothing
contained herein should be construed as an admission of such fact.
The undersigned hereby represents to and covenants with Provident that the
undersigned has not, within the preceding 30 days, sold, transferred or
otherwise disposed of any shares of Provident Common Stock held by the
undersigned and that the undersigned will not sell, transfer or otherwise
dispose of any Provident Common Stock held by the undersigned until after such
time as results covering at least 30 days of post-Merger combined operations of
Provident and UNUM have been published by Provident, in the form of a quarterly
earnings report, an effective registration statement filed with the SEC, a
report to the SEC on Form 10-K, 10-Q or 8-K, or any other public filing or
announcement which includes such combined results of operations, except as would
not otherwise reasonably be expected to adversely affect the qualification of
the Merger as a pooling-of-interests.
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of Provident Common
Stock and (ii) the receipt by UNUM of this letter is an inducement to UNUM's
obligations to consummate the Merger.
Very truly yours,
Dated:
<PAGE>
EXHIBIT D
TO THE MERGER AGREEMENT
[LETTERHEAD OF UNUM CORPORATION]
[ ], 1999
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections 6.02(c)
and 6.03(c) of the Agreement and Plan of Merger (the "Merger Agreement"), dated
November 22, 1998, as amended as of May 25, 1999, among Provident Companies,
Inc., a Delaware corporation ("Provident"), and UNUM Corporation, a Delaware
corporation ("UNUM"), and in connection with the filing with the Securities and
Exchange Commission (the "SEC") of the registration statement on Form S-4 (the
"Registration Statement"), which includes the Proxy Statement Prospectus of UNUM
and Provident, the undersigned certifies and represents on behalf of UNUM and as
to UNUM, after due inquiry and investigation, as follows (any capitalized term
used but not defined herein shall have the meaning given to such term in the
Merger Agreement):
1. The facts relating to the contemplated merger of UNUM with and into
Provident (the "Merger") as described in the Registration Statement and the
documents described in the Registration Statement are, insofar as such facts
pertain to UNUM, true, correct and complete in all material respects. The Merger
will be consummated in accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which each
issued and outstanding share of common stock, par value $.10 per share, of UNUM
(the "UNUM Common Stock") will be converted into common stock, par value $.10
per share, of Provident ("UNUMProvident, the Surviving Corporation ("Surviving
Corporation Common Stock"), is the result of arm's length bargaining.
3. (i) Neither UNUM nor any corporation related to UNUM has acquired or has
any present plan or intention to acquire any UNUM Common Stock in contemplation
of the Merger, or otherwise as part of a plan of which the Merger is a part. To
the best knowledge of the management of UNUM, neither Provident nor any
corporation that is related to Provident has a present plan or intention to
purchase any UNUM Common Stock or any Surviving Corporation Common Stock.
(ii) For purposes of this representation letter, two corporations shall be
treated as related to one another if immediately prior to or immediately after
the Merger (a) the corporations are members of the same affiliated group (within
the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended
(the "Code"), but determined without regard to Section 1504(b) of the Code) or
(b) one corporation owns 50% or more of the total combined voting power of all
classes of stock of the other corporation that are entitled to vote or 50% or
more of the total value of shares of all classes of stock of the other
corporation (applying the attribution rules of Section 318 of the Code, as
modified pursuant to Section 304(c)(3)(B) of the Code).
<PAGE>
4. UNUM has not made and does not have any present plan or intention to make
any distributions (other than dividends made in the ordinary course of business)
prior to, in contemplation of or otherwise in connection with, the Merger.
5. Provident, UNUM and holders of UNUM Common Stock will each pay their
respective expenses, if any, incurred in connection with the Merger. UNUM has
not agreed to assume, nor will it directly or indirectly assume, any expense or
other liability, whether fixed or contingent, of any holder of UNUM Common
Stock. Except to the extent specifically contemplated under the Merger Agreement
and the Stockholders Agreement, UNUM has not entered into any arrangement
pursuant to which Provident has agreed to assume, directly or indirectly, any
expense or other liability, whether fixed or contingent, of any holder of UNUM
Common Stock.
6. The liabilities of UNUM assumed by Provident and the liabilities to which
the transferred assets of UNUM are subject were incurred by UNUM in the ordinary
course of its business.
7. UNUM is not an investment company as defined in Section 368(a)(2)(F)(iii)
and (iv) of the Code.
8. UNUM will not take, and to the best knowledge of the management of UNUM
there is no present plan or intention by other stockholders of UNUM to take, any
position on any Federal, state or local income or franchise tax return, or to
take any other tax reporting position, that is inconsistent with the treatment
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code, unless otherwise required by a "determination" (as defined in Section
1313(a)(1) of the Code) or by applicable state or local tax law (and then only
to the extent required by such applicable state or local tax law).
9. None of the compensation received by any stockholder-employee of UNUM in
respect of periods at or prior to the Effective Time represents separate
consideration for any of its UNUM Common Stock. None of the Surviving
Corporation Common Stock that will be received by stockholder-employees of UNUM
in the Merger represents separately bargained for consideration which is
allocable to any employment agreement or arrangement. The compensation paid to
any stockholder-employees will be for services actually rendered and will be
determined by bargaining at arm's-length.
10. There is no intercorporate indebtedness existing between Provident (or
any of its subsidiaries) and UNUM (or any of its subsidiaries) that was issued
or acquired, or will be settled, at a discount (other than indebtedness of UNUM
(or any of its subsidiaries) acquired by Provident pursuant to the express terms
of the Merger Agreement or the Stockholders Agreement).
11. UNUM is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
12. The Merger Agreement, the Registration Statement and the other documents
described in the Registration Statement represent the entire understanding of
UNUM with respect to the Merger.
13. No assets of UNUM have been sold, transferred or otherwise disposed of
which would prevent Provident from continuing the "historic business" of UNUM or
from using a significant portion of the "historic business assets" of UNUM in a
business following the Merger (as such terms are defined in Treasury regulation
Section 1.368-1(d)).
14. On the date of the Merger, the fair market value of the assets of UNUM
will exceed the sum of its liabilities, plus the amount of liabilities, if any,
to which such assets are subject.
15. The undersigned is authorized to make all the representations set forth
herein on behalf of UNUM.
The undersigned acknowledges that (i) your respective opinions will be based
on the accuracy of the representations set forth herein and on the accuracy of
the representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your respective opinions will be subject to certain
limitations and
D-2
<PAGE>
qualifications including that they may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
The undersigned acknowledges that your respective opinions will not address
any tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
<TABLE>
<S> <C> <C>
Very truly yours,
UNUM CORPORATION
by
----------------------------------------
Name:
Title:
</TABLE>
D-3
<PAGE>
EXHIBIT E
TO THE MERGER AGREEMENT
[LETTERHEAD OF PROVIDENT COMPANIES, INC.]
[ ], 1999
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections 6.02(c)
and 6.03(c) of the Agreement and Plan of Merger (the "Merger Agreement"), dated
November 22, 1998, as amended as of May 25, 1999, among Provident Companies,
Inc., a Delaware corporation ("Provident"), and UNUM Corporation, a Delaware
corporation ("UNUM"), and in connection with the filing with the Securities and
Exchange Commission (the "SEC") of the registration statement on Form S-4 (the
"Registration Statement"), which includes the Proxy Statement Prospectus of
Provident and UNUM, the undersigned certifies and represents on behalf of
Provident and as to Provident, after due inquiry and investigation, as follows
(any capitalized term used but not defined herein shall have the meaning given
to such term in the Merger Agreement):
1. The facts relating to the contemplated merger of Provident with and into
UNUM (the "Merger") as described in the Registration Statement and the documents
described in the Registration Statement are, insofar as such facts pertain to
Provident, true, correct and complete in all material respects. The Merger will
be consummated in accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which each
issued and outstanding share of common stock, par value $.10 per share, of UNUM
(the "UNUM Common Stock") will be converted into common stock, par value $.10
per share, of UNUMProvident, the Surviving Corporation ('Surviving Corporation
Common Stock"), is the result of arm's length bargaining.
3. (i) Provident has no present plan or intention, following the Merger, to
reacquire, or to cause any corporation that is related to Provident to acquire,
any Surviving Corporation Common Stock. To the best knowledge of the management
of Provident, no corporation that is related to Provident has a present plan or
intention to purchase any Surviving Corporation Common Stock.
(ii) For purposes of this representation letter, two corporations shall be
treated as related to one another if immediately prior to or immediately after
the Merger (a) the corporations are members of the same affiliated group (within
the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended
(the "Code"), but determined without regard to Section 1504(b) of the Code) or
(b) one corporation owns 50% or more of the total combined voting power of all
classes of stock of the other corporation that are entitled to vote or 50% or
more of the total value of shares of all classes of stock of the other
corporation (applying the attribution rules of Section 318 of the Code, as
modified pursuant to Section 304(c)(3)(B) of the Code).
<PAGE>
4. Provident has no present plan or intention, following the Merger to sell
or otherwise dispose of more than 20% of the assets held by UNUM immediately
prior to the Merger, except for dispositions of such assets in the ordinary
course of business and transfers described in Section 368(a)(2)(C) of the Code.
5. Provident, UNUM and holders of UNUM Common Stock will each pay their
respective expenses, if any, incurred in connection with the Merger. Except to
the extent specifically contemplated under the Merger Agreement and the
Stockholders Agreement, Provident has not paid (directly or indirectly) or has
not agreed to assume any expenses or other liabilities, whether fixed or
contingent, incurred or to be incurred, by any stockholder of UNUM in connection
with or as part of the Merger or any related transactions.
6. Following the Merger, Provident or Provident's "qualified group," as
defined in Treasury regulation 1.368-1(d)(4)(ii), intends to continue its
"historic business" or to use a significant portion of its "historic business
assets" in a business (as such terms are defined in Treasury regulation Section
1.368-1(d)).
7. Provident is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
8. Provident will not take any position on any Federal, state or local
income or franchise tax return, or take any other tax reporting position, that
is inconsistent with the treatment of the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code, unless otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code) or by applicable
state or local tax law (and then only to the extent required by such applicable
state or local tax law).
9. None of the compensation to be received by any stockholder-employee of
UNUM in respect of periods after the Effective Time represents separate
consideration for any of its UNUM Common Stock. None of the Surviving
Corporation Common Stock that will be received by any stockholder-employee of
UNUM in the Merger represents separately bargained for consideration which is
allocable to any employment agreement or arrangement. The compensation paid to
any stockholder-employees will be for services actually rendered and will be
determined by bargaining at arm's-length.
10. There is no intercorporate indebtedness existing between Provident (or
any of its subsidiaries) and UNUM (or any of its subsidiaries) that was issued
or acquired, or will be settled, at a discount (other than indebtedness of UNUM
(or any of its subsidiaries) acquired by Provident pursuant to the express terms
of the Merger Agreement or the Stockholders Agreement).
11. Provident is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
12. The Merger Agreement, the Registration Statement and the other documents
described in the Registration Statement represent the entire understanding of
Provident and UNUM with respect to the Merger.
The undersigned acknowledges that (i) your respective opinions will be based
on the accuracy of the representations set forth herein and on the accuracy of
the representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your respective opinions will be subject to certain
limitations and qualifications including that they may not be relied upon if any
such representations or warranties are not accurate or if any of such covenants
or obligations are not satisfied in all material respects.
E-2
<PAGE>
The undersigned acknowledges that your respective opinions will not address
any tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinions.
<TABLE>
<S> <C> <C>
Very truly yours,
PROVIDENT COMPANIES, INC.
by
----------------------------------------
Name:
Title:
</TABLE>
E-3
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT dated as of November 22, 1998 (the
"Agreement"), by and between PROVIDENT COMPANIES, INC., a Delaware
corporation ("Issuer"), and UNUM CORPORATION, a Delaware corporation
("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"; defined terms used but not
defined herein have the meanings set forth in the Merger Agreement), providing
for, among other things, the merger of Grantee with and into Issuer with Issuer
as the surviving corporation in the Merger;
B. As a condition and inducement to Grantee's willingness to enter into the
Merger Agreement, the Stockholders Agreement and the UNUM Stock Option
Agreement, Grantee has requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below); and
C. As a condition and inducement to Issuer's willingness to enter into the
Merger Agreement and this Agreement, Issuer has requested that Grantee agree,
and Grantee has agreed, to grant Issuer an option to purchase shares of
Grantee's common stock on substantially the same terms as the Option;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option", which term
shall, as applicable, be deemed to refer to an option with respect to Issuer
Preferred Stock (as defined in Section 2(b)) to purchase up to 26,945,874 (as
adjusted as set forth herein) shares (the "Option Shares", which term shall, as
applicable, be deemed to refer to Issuer Preferred Option Shares (as defined in
Section 2(b)), of Common Stock, par value $1.00 per share ("Issuer Common
Stock"), of Issuer at a purchase price of $35.131 (as adjusted as set forth
herein) per Option Share (the "Purchase Price").
2. EXERCISE OF OPTION. (a) Grantee may exercise the Option, with respect to
any or all of the Option Shares at any time, subject to the provisions of
Section 2(c), after the occurrence of any event as a result of which the Grantee
is entitled to receive the Termination Fee pursuant to Section 5.09(b) of the
Merger Agreement (a "Purchase Event"); PROVIDED, HOWEVER, that (i) except as
provided in the last sentence of this Section 2(a), the Option will terminate
and be of no further force and effect upon the earliest to occur of (A) the
Effective Time, (B) 18 months after the first occurrence of a Purchase Event,
and (C) termination of the Merger Agreement in accordance with its terms prior
to the occurrence of a Purchase Event, unless, in the case of this clause (C),
the Grantee has the right to receive a Termination Fee following such
termination upon the occurrence of certain events, in which case the Option will
not terminate until the later of (x) six months following the time such
Termination Fee becomes payable and (y) the expiration of the period in which
the Grantee has such right to receive a Termination Fee, and (ii) any purchase
of Option Shares upon exercise of the Option will be subject to compliance with
the HSR Act and the obtaining or making of any consents, approvals, orders,
notifications, filings, expiration of applicable waiting periods or
authorizations, the failure of which to have obtained or made would have the
effect of making the issuance of Option Shares to Grantee illegal (the
"Regulatory Approvals"). Notwithstanding the termination of the Option, Grantee
will be entitled to purchase the Option Shares if it has exercised the Option in
accordance with the terms hereof prior to the termination of the Option and the
termination of the Option will not affect any rights hereunder which by their
terms do not terminate or expire prior to or as of such termination.
(b) In the event that Grantee is entitled to and wishes to exercise the
Option, it will send to Issuer a written notice (an "Exercise Notice"; the date
of which being herein referred to as the "Notice Date") to that effect which
Exercise Notice also specifies the number of Option Shares, if any, Grantee
wishes to purchase pursuant to this Section 2(b), the number of Option Shares,
if any, with respect to which Grantee wishes to exercise its Cash-Out Right (as
defined herein) pursuant to Section 6(c), the denominations of
<PAGE>
the certificate or certificates evidencing the Option Shares which Grantee
wishes to purchase pursuant to this Section 2(b) and a date (an "Option Closing
Date"), subject to the following sentence, not earlier than three business days
nor later than 20 business days from the Notice Date for the closing of such
purchase (an "Option Closing"); PROVIDED, HOWEVER, that in the event a
sufficient number of shares of Issuer Common Stock are not authorized to permit
the issuance by the Issuer of the number of Option Shares subject to such
Exercise Notice, the Issuer shall use its best efforts to cause such number of
shares of Issuer Common Stock to become authorized for issuance prior to the
Option Closing Date, or, in lieu thereof, a number of shares of preferred stock,
par value $1.00 per share, authorized and designated by the Issuer in accordance
with the DGCL ("Issuer Preferred Stock"), which shares (or units thereof) of
preferred stock shall be equal (in number and voting power) to the number of
Option Shares issuable pursuant to such Exercise Notice and otherwise have terms
that make such preferred stock substantially similar to Issuer Common Stock (the
"Issuer Preferred Option Shares"). Any Option Closing will be at an agreed
location and time in New York, New York on the applicable Option Closing Date or
at such later date as may be necessary so as to comply with the first sentence
of Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the purchase of all the
Option Shares specified in the Exercise Notice without first obtaining or making
certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b) and Grantee shall acquire the maximum
number of Option Shares specified in the Exercise Notice that Grantee is then
permitted to acquire under the applicable laws and regulations, and if Grantee
thereafter obtains the Regulatory Approvals to acquire the remaining balance of
the Option Shares specified in the Exercise Notice, then Grantee shall be
entitled to acquire such remaining balance. Issuer agrees to use its reasonable
efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory Approval
required for the purchase of any Option Shares will not be issued or granted or
(ii) such Regulatory Approval has not been issued or granted within six months
of the date of the Exercise Notice, Grantee shall have the right to exercise its
Cash-Out Right pursuant to Section 6(c) with respect to the Option Shares for
which such Regulatory Approval will not be issued or granted or has not been
issued or granted.
3. PAYMENT AND DELIVERY OF CERTIFICATES. (a) At any Option Closing, Grantee
will pay to Issuer in immediately available funds by wire transfer to a bank
account designated in writing by Issuer an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased at such Option
Closing.
(b) At any Option Closing, simultaneously with the delivery of immediately
available funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Option Closing, which Option Shares will be free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER
22, 1998, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF PROVIDENT
COMPANIES, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES."
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It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend will be removed by delivery of substitute
certificate(s) without such reference if such Option Shares have been registered
pursuant to the Securities Act, such Option Shares have been sold in reliance on
and in accordance with Rule 144 under the Securities Act or Grantee has
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act and (ii) the reference to restrictions pursuant to this Agreement
in the above legend will be removed by delivery of substitute certificate(s)
without such reference if the Option Shares evidenced by certificate(s)
containing such reference have been sold or transferred in compliance with the
provisions of this Agreement under circumstances that do not require the
retention of such reference.
4. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
AUTHORIZED STOCK. Issuer has taken all necessary corporate and other
action to authorize and reserve and, subject to the expiration or
termination of any required waiting period under the HSR Act, to permit it
to issue, and, at all times from the date hereof until the obligation to
deliver Option Shares upon the exercise of the Option terminates, shall have
reserved for issuance, upon exercise of the Option, shares of Issuer Common
Stock or, to the extent of any deficiency in the amount of authorized Issuer
Common Stock, Issuer Preferred Option Shares necessary for Grantee to
exercise the Option, and Issuer will take all necessary corporate action to
authorize and reserve for issuance all additional shares of Issuer Common
Stock and/or Issuer Preferred Option Shares or other securities which may be
issued pursuant to Section 6 upon exercise of the Option. The shares of
Issuer Common Stock and/or Issuer Preferred Option Shares to be issued upon
due exercise of the Option, including all additional shares of Issuer Common
Stock and/or Issuer Preferred Option Shares or other securities which may be
issuable upon exercise of the Option or any other securities which may be
issued pursuant to Section 6, upon issuance pursuant hereto, will be duly
and validly issued, fully paid and nonassessable, and will be delivered free
and clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever, including without limitation any preemptive rights of any
stockholder of Issuer.
5. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
PURCHASE NOT FOR DISTRIBUTION. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be transferred or
otherwise disposed of except in a transaction registered, or exempt from
registration, under the Securities Act.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. (a) In the event of any
change in the Issuer Common Stock by reason of a stock dividend, split-up,
reverse stock split, merger, recapitalization, combination, exchange of shares,
or similar transaction, the type and number of shares or securities subject to
the Option, and the Purchase Price thereof, will be adjusted appropriately, and
proper provision will be made in the agreements governing such transaction, so
that Grantee will receive upon exercise of the Option the number and class of
shares or other securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such event or the record date therefor, as applicable. Subject to
Section 1, and without limiting the parties' relative rights and obligations
under the Merger Agreement, if any additional shares of Issuer Common Stock are
issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 6(a)), the number of shares of
Issuer Common Stock subject to the Option will be adjusted so that, after such
issuance, it equates 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Issuer enters into an agreement (i) to
consolidate with or merge into any person, other than
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Grantee or one of its subsidiaries, and Issuer will not be the continuing or
surviving corporation in such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its subsidiaries, to merge into Issuer and
Issuer will be the continuing or surviving corporation, but in connection with
such merger, the shares of Issuer Common Stock outstanding immediately prior to
the consummation of such merger will be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property, or
the shares of Issuer Common Stock outstanding immediately prior to the
consummation of such merger will, after such merger, represent less than 50% of
the outstanding voting securities of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction will make proper provision so that the
Option will, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class of
shares or other securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such consolidation, merger, sale, or transfer, or the record date
therefor, as applicable and make any other necessary adjustments.
(c) Notwithstanding that the Issuer may at any such time not have sufficient
authorized shares of Issuer Common Stock or may not have authorized and
designated the Issuer Preferred Option Shares in accordance with the DGCL, in
each case issuable pursuant to exercise of the Option, if, at any time during
the period commencing on a Purchase Event and ending on the termination of the
Option in accordance with Section 2, Grantee sends to Issuer an Exercise Notice
indicating Grantee's election to exercise its right (the "Cash-Out Right")
pursuant to this Section 6(c), then Issuer shall pay to Grantee, on the Option
Closing Date, in exchange for the cancellation of the Option with respect to
such number of Option Shares as Grantee specifies in the Exercise Notice, an
amount in cash equal to such number of Option Shares multiplied by the
difference between (i) the average closing price, for the 10 NYSE trading days
commencing on the 12th NYSE trading day immediately preceding the Notice Date,
per share of Issuer Common Stock as reported on the NYSE Composite Transaction
Tape (or, if not listed on the NYSE, as reported on any other national
securities exchange or national securities quotation system on which the Issuer
Common Stock is listed or quoted, as reported in THE WALL STREET JOURNAL
(Northeast edition), or, if not reported thereby, any other authoritative
source) (the "Closing Price") and (ii) the Purchase Price. Notwithstanding the
termination of the Option, Grantee will be entitled to exercise its rights under
this Section 6(c) if it has exercised such rights in accordance with the terms
hereof prior to the termination of the Option.
7. REGISTRATION RIGHTS. Issuer will, if requested by Grantee at any time
and from time to time within three years of the exercise of the Option, as
expeditiously as possible prepare and file up to three registration statements
under the Securities Act if such registration is necessary in order to permit
the sale or other disposition of any or all shares of securities that have been
acquired by or are issuable to Grantee upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Grantee,
including a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision, and Issuer will use its best efforts to qualify
such shares or other securities under any applicable state securities laws.
Grantee agrees to use reasonable efforts to cause, and to cause any underwriters
of any sale or other disposition to cause, any sale or other disposition
pursuant to such registration statement to be effected on a widely distributed
basis so that upon consummation thereof no purchaser or transferee will own
beneficially more than 4.9% of the then-outstanding voting power of Issuer.
Issuer will use reasonable efforts to cause each such registration statement to
become effective, to obtain all consents or waivers of other parties which are
required therefor, and to keep such registration statement effective for such
period not in excess of 180 calendar days from the day such registration
statement first becomes effective as may be reasonably necessary to effect such
sale or other disposition. The obligations of Issuer hereunder to file a
registration statement and to maintain its effectiveness may be suspended for up
to 60 calendar days in the aggregate if the Board of Directors of Issuer shall
have determined that the filing of such registration statement or the
maintenance of its effectiveness would
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<PAGE>
require premature disclosure of material nonpublic information that would
materially and adversely affect
Issuer or otherwise interfere with or adversely affect any pending or proposed
offering of securities of Issuer or any other material transaction involving
Issuer. Any registration statement prepared and filed under this Section 7, and
any sale covered thereby, will be at Issuer's expense except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto. Grantee will provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If, during the time periods referred to in the first sentence
of this Section 7, Issuer effects a registration under the Securities Act of
Issuer Common Stock for its own account or for any other stockholders of Issuer
(other than on Form S-4 or Form S-8, or any successor form), it will allow
Grantee the right to participate in such registration, and such participation
will not affect the obligation of Issuer to effect demand registration
statements for Grantee under this Section 7; provided that, if the managing
underwriters of such offering advise Issuer in writing that in their opinion the
number of shares of Issuer Common Stock requested to be included in such
registration exceeds the number which can be sold in such offering, Issuer will
include the shares requested to be included therein by Grantee pro rata with the
shares intended to be included therein by Issuer. In connection with any
registration pursuant to this Section 7, Issuer and Grantee will provide each
other and any underwriter of the offering with customary representations,
warranties, covenants, indemnification, and contribution in connection with such
registration.
8. LIMITATION ON PROFIT. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as defined below) plus
any Termination Fee paid to Grantee pursuant to Section 5.09(b) of the Merger
Agreement exceed in the aggregate $250 million and, if the total amount that
otherwise would be received by Grantee would exceed such amount, the Grantee, at
its sole election, shall either (i) reduce the number of shares of Issuer Common
Stock or Issuer Preferred Stock, as the case may be, subject to the Option, (ii)
deliver to the Issuer for cancellation Option Shares previously purchased by
Grantee against the refund of the Purchase Price therefore, (iii) pay cash to
the Issuer or (iv) any combination thereof, so that Grantee's actually realized
Total Profit, when aggregated with such Termination Fee so paid to Grantee,
shall not exceed $250 million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Option Shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) which, together
with any Termination Fee theretofore paid to Grantee, would exceed $250 million;
PROVIDED, that nothing in this sentence shall restrict any exercise of the
Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section
6(c), (ii)(x) the net cash amounts or the fair market value of any property
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, but in no case less than the fair market value of such
Option Shares, less (y) the Grantee's purchase price of such Option Shares, and
(iii) the net cash amounts received by Grantee on the transfer (in accordance
with Section 12(g) hereof) of the Option (or any portion thereof) to any
unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of such proposal assuming
for such purpose that the Option were exercised on such date for such number of
Option Shares and assuming that such Option Shares (including any units of
Issuer Preferred Stock intended to equate to Issuer Common Stock), together with
all other Option Shares (including any units of Issuer Preferred Stock intended
to equate to Issuer Common Stock) held by Grantee and its affiliates as of such
date, were sold for cash at the closing market price on the NYSE for the Issuer
Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions.)
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<PAGE>
9. TRANSFERS. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) in an underwritten public offering as provided
in Section 7 or (ii) to any purchaser or transferee who would not, to the
knowledge of the Grantee after reasonable inquiry, immediately following such
sale, assignment, transfer or disposal beneficially own more than 4.9% of the
then-outstanding voting power of the Issuer; PROVIDED, HOWEVER, that Grantee
shall be permitted to sell any Option Shares if such sale is made pursuant to a
tender or exchange offer that has been approved or recommended by a majority of
the members of the Board of Directors of Issuer (which majority shall include a
majority of directors who were directors as of the date hereof).
10. LISTING. If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on the NYSE (or any other national
securities exchange or national securities quotation system), Issuer, upon the
request of Grantee, will promptly file an application to list the shares of
Issuer Common Stock or other securities to be acquired upon exercise of the
Option on the NYSE (and any such other national securities exchange or national
securities quotation system) and will use reasonable efforts to obtain approval
of such listing as promptly as practicable.
11. LOSS OR MUTILATION. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered will constitute an
additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed, or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS. (a) EXPENSES. Except as otherwise provided in the
Merger Agreement, each of the parties hereto will bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants, and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an instrument
in writing signed on behalf of each of the parties.
(c) EXTENSION; WAIVER. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, the
UNUM Stock Option Agreement, the Merger Agreement (including the documents and
instruments attached thereto as exhibits or schedules or delivered in connection
therewith), the Stockholders Agreement, the Confidentiality Agreement and the
Letter Agreement (i) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement, and (ii) except as provided in
Section 8.06 of the Merger Agreement, are not intended to confer upon any person
other than the parties any rights or remedies.
(e) GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to the laws
that might otherwise govern under applicable principles of conflict of laws
thereof.
(f) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed given
if delivered personally, telecopied (which is confirmed),
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or sent by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to Issuer to:
Provident Companies, Inc.
1 Fountain Square
Chattanooga, Tennessee 37402
Telecopy No.: (423) 755-5036
Attention: F. Dean Copeland
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: H. Rodgin Cohen
Fax: (212) 558-3588; and
If to Grantee to:
UNUM Corporation
2211 Congress Street
Portland, Maine 04122
Telecopy No.: (207) 770-4377
Attention: Kevin J. Tierney
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler
Fax: (212) 474-3700
(g) ASSIGNMENT. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by Issuer or Grantee without
the prior written consent of the other. Any assignment or delegation in
violation of the preceding sentence will be void. Subject to the first and
second sentences of this Section 12(g), this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
(h) FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other actions that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(i) ENFORCEMENT. The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties will be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of
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<PAGE>
Delaware or in Delaware state court, the foregoing being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit itself to the personal jurisdiction
of any Federal court located in the State of Delaware or any Delaware state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (iii) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a Federal court sitting in the State of
Delaware or a Delaware state court.
13. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Amendment so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
<TABLE>
<S> <C> <C>
PROVIDENT COMPANIES, INC.,
By: /s/ J. HAROLD CHANDLER
-----------------------------------------
Name: J. Harold Chandler
Title: Chairman, President
and Chief Executive Officer
UNUM CORPORATION,
By: /s/ JAMES F. ORR III
-----------------------------------------
Name: James F. Orr III
Title: Chairman and Chief
Executive Officer
</TABLE>
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<PAGE>
APPENDIX C
STOCK OPTION AGREEMENT dated as of November 22, 1998 (the
"Agreement"), by and between UNUM CORPORATION, a Delaware corporation
("Issuer"), and PROVIDENT COMPANIES, INC., a Delaware corporation
("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"; defined terms used but not
defined herein have the meanings set forth in the Merger Agreement), providing
for, among other things, the merger of Issuer with and into Grantee with Grantee
as the surviving corporation in the Merger;
B. As a condition and inducement to Grantee's willingness to enter into the
Merger Agreement and the Provident Stock Option Agreement, Grantee has requested
that Issuer agree, and Issuer has agreed, to grant Grantee the Option (as
defined below); and
C. As a condition and inducement to Issuer's willingness to enter into the
Merger Agreement, the Stockholders Agreement and this Agreement, Issuer has
requested that Grantee agree, and Grantee has agreed, to grant Issuer an option
to purchase shares of Grantee's common stock on substantially the same terms as
the Option;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 27,563,644 (as adjusted as set forth herein) shares (the "Option Shares")
of Common Stock, par value $.10 per share ("Issuer Common Stock"), of Issuer at
a purchase price of $50.657 (as adjusted as set forth herein) per Option Share
(the "Purchase Price").
2. EXERCISE OF OPTION. (a) Grantee may exercise the Option, with respect
to any or all of the Option Shares at any time, subject to the provisions of
Section 2(c), after the occurrence of any event as a result of which the Grantee
is entitled to receive the Termination Fee pursuant to Section 5.09(c) of the
Merger Agreement (a "Purchase Event"); PROVIDED, HOWEVER, that (i) except as
provided in the last sentence of this Section 2(a), the Option will terminate
and be of no further force and effect upon the earliest to occur of (A) the
Effective Time, (B) 18 months after the first occurrence of a Purchase Event,
and (C) termination of the Merger Agreement in accordance with its terms prior
to the occurrence of a Purchase Event, unless, in the case of this clause (C),
the Grantee has the right to receive a Termination Fee following such
termination upon the occurrence of certain events, in which case the Option will
not terminate until the later of (x) six months following the time such
Termination Fee becomes payable and (y) the expiration of the period in which
the Grantee has such right to receive a Termination Fee, and (ii) any purchase
of Option Shares upon exercise of the Option will be subject to compliance with
the HSR Act and the obtaining or making of any consents, approvals, orders,
notifications, filings, expiration of applicable waiting periods or
authorizations, the failure of which to have obtained or made would have the
effect of making the issuance of Option Shares to Grantee illegal (the
"Regulatory Approvals"). Notwithstanding the termination of the Option, Grantee
will be entitled to purchase the Option Shares if it has exercised the Option in
accordance with the terms hereof prior to the termination of the Option and the
termination of the Option will not affect any rights hereunder which by their
terms do not terminate or expire prior to or as of such termination.
(b) In the event that Grantee is entitled to and wishes to exercise the
Option, it will send to Issuer a written notice (an "Exercise Notice"; the date
of which being herein referred to as the "Notice Date") to that effect which
Exercise Notice also specifies the number of Option Shares, if any, Grantee
wishes to purchase pursuant to this Section 2(b), the number of Option Shares,
if any, with respect to which Grantee wishes to exercise its Cash-Out Right (as
defined herein) pursuant to Section 6(c), the denominations of the certificate
or certificates evidencing the Option Shares which Grantee wishes to purchase
pursuant to this Section 2(b) and a date (an "Option Closing Date"), subject to
the following sentence, not earlier than
<PAGE>
three business days nor later than 20 business days from the Notice Date for the
closing of such purchase (an "Option Closing"). Any Option Closing will be at an
agreed location and time in New York, New York on the applicable Option Closing
Date or at such later date as may be necessary so as to comply with the first
sentence of Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the purchase of all the
Option Shares specified in the Exercise Notice without first obtaining or making
certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b) and Grantee shall acquire the maximum
number of Option Shares specified in the Exercise Notice that Grantee is then
permitted to acquire under the applicable laws and regulations, and if Grantee
thereafter obtains the Regulatory Approvals to acquire the remaining balance of
the Option Shares specified in the Exercise Notice, then Grantee shall be
entitled to acquire such remaining balance. Issuer agrees to use its reasonable
efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory Approval
required for the purchase of any Option Shares will not be issued or granted or
(ii) such Regulatory Approval has not been issued or granted within six months
of the date of the Exercise Notice, Grantee shall have the right to exercise its
Cash-Out Right pursuant to Section 6(c) with respect to the Option Shares for
which such Regulatory Approval will not be issued or granted or has not been
issued or granted.
3. PAYMENT AND DELIVERY OF CERTIFICATES. (a) At any Option Closing,
Grantee will pay to Issuer in immediately available funds by wire transfer to a
bank account designated in writing by Issuer an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased at such Option
Closing.
(b) At any Option Closing, simultaneously with the delivery of immediately
available funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Option Closing, which Option Shares will be free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever. If at the time of
issuance of Option Shares pursuant to an exercise of the Option hereunder,
Issuer shall not have redeemed the UNUM Rights, or shall have issued any similar
securities, then each Option Share issued pursuant to such exercise will also
represent a corresponding UNUM Right or new rights with terms substantially the
same as and at least as favorable to Grantee as are provided under the UNUM
Rights Agreement or any similar agreement then in effect.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF NOVEMBER
22, 1998, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF UNUM
CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend will be removed by delivery of substitute
certificate(s) without such reference if such Option Shares have been registered
pursuant to the Securities Act, such Option Shares have been sold in reliance on
and in accordance with Rule 144 under the Securities Act or Grantee has
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel in form and substance reasonably satisfactory to
C-2
<PAGE>
Issuer and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and (ii) the reference to restrictions pursuant
to this Agreement in the above legend will be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the provisions of this Agreement under circumstances that do not
require the retention of such reference.
4. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
AUTHORIZED STOCK. Issuer has taken all necessary corporate and other
action to authorize and reserve and, subject to the expiration or
termination of any required waiting period under the HSR Act, to permit it
to issue, and, at all times from the date hereof until the obligation to
deliver Option Shares upon the exercise of the Option terminates, shall have
reserved for issuance, upon exercise of the Option, shares of Issuer Common
Stock necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 6 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option, including
all additional shares of Issuer Common Stock or other securities which may
be issuable upon exercise of the Option or any other securities which may be
issued pursuant to Section 6, upon issuance pursuant hereto, will be duly
and validly issued, fully paid and nonassessable, and will be delivered free
and clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever, including without limitation any preemptive rights of any
stockholder of Issuer.
5. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
PURCHASE NOT FOR DISTRIBUTION. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be transferred or
otherwise disposed of except in a transaction registered, or exempt from
registration, under the Securities Act.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. (a) In the event of any
change in the Issuer Common Stock by reason of a stock dividend, split-up,
reverse stock split, merger, recapitalization, combination, exchange of shares,
or similar transaction, the type and number of shares or securities subject to
the Option, and the Purchase Price thereof, will be adjusted appropriately, and
proper provision will be made in the agreements governing such transaction, so
that Grantee will receive upon exercise of the Option the number and class of
shares or other securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such event or the record date therefor, as applicable. Subject to
Section 1, and without limiting the parties' relative rights and obligations
under the Merger Agreement, if any additional shares of Issuer Common Stock are
issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 6(a)), the number of shares of
Issuer Common Stock subject to the Option will be adjusted so that, after such
issuance, it equates 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Issuer enters into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer will be the continuing
or surviving corporation, but in connection with such merger, the shares of
Issuer Common Stock outstanding immediately prior to the consummation of such
merger will be changed into or exchanged for stock or other securities of Issuer
or any other person or cash or any other property, or the shares of Issuer
Common Stock outstanding immediately prior to the consummation of such merger
will, after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person,
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other than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction will make proper provision so that the
Option will, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class of
shares or other securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such consolidation, merger, sale, or transfer, or the record date
therefor, as applicable and make any other necessary adjustments.
(c) If, at any time during the period commencing on a Purchase Event and
ending on the termination of the Option in accordance with Section 2, Grantee
sends to Issuer an Exercise Notice indicating Grantee's election to exercise its
right (the "Cash-Out Right") pursuant to this Section 6(c), then Issuer shall
pay to Grantee, on the Option Closing Date, in exchange for the cancellation of
the Option with respect to such number of Option Shares as Grantee specifies in
the Exercise Notice, an amount in cash equal to such number of Option Shares
multiplied by the difference between (i) the average closing price, for the 10
NYSE trading days commencing on the 12th NYSE trading day immediately preceding
the Notice Date, per share of Issuer Common Stock as reported on the NYSE
Composite Transaction Tape (or, if not listed on the NYSE, as reported on any
other national securities exchange or national securities quotation system on
which the Issuer Common Stock is listed or quoted, as reported in THE WALL
STREET JOURNAL (Northeast edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the Purchase Price.
Notwithstanding the termination of the Option, Grantee will be entitled to
exercise its rights under this Section 6(c) if it has exercised such rights in
accordance with the terms hereof prior to the termination of the Option.
7. REGISTRATION RIGHTS. Issuer will, if requested by Grantee at any time
and from time to time within three years of the exercise of the Option, as
expeditiously as possible prepare and file up to three registration statements
under the Securities Act if such registration is necessary in order to permit
the sale or other disposition of any or all shares of securities that have been
acquired by or are issuable to Grantee upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Grantee,
including a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision, and Issuer will use its best efforts to qualify
such shares or other securities under any applicable state securities laws.
Grantee agrees to use reasonable efforts to cause, and to cause any underwriters
of any sale or other disposition to cause, any sale or other disposition
pursuant to such registration statement to be effected on a widely distributed
basis so that upon consummation thereof no purchaser or transferee will own
beneficially more than 4.9% of the then-outstanding voting power of Issuer.
Issuer will use reasonable efforts to cause each such registration statement to
become effective, to obtain all consents or waivers of other parties which are
required therefor, and to keep such registration statement effective for such
period not in excess of 180 calendar days from the day such registration
statement first becomes effective as may be reasonably necessary to effect such
sale or other disposition. The obligations of Issuer hereunder to file a
registration statement and to maintain its effectiveness may be suspended for up
to 60 calendar days in the aggregate if the Board of Directors of Issuer shall
have determined that the filing of such registration statement or the
maintenance of its effectiveness would require premature disclosure of material
nonpublic information that would materially and adversely affect Issuer or
otherwise interfere with or adversely affect any pending or proposed offering of
securities of Issuer or any other material transaction involving Issuer. Any
registration statement prepared and filed under this Section 7, and any sale
covered thereby, will be at Issuer's expense except for underwriting discounts
or commissions, brokers' fees and the fees and disbursements of Grantee's
counsel related thereto. Grantee will provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. If, during the time periods referred to in the first sentence of this
Section 7, Issuer effects a registration under the Securities Act of Issuer
Common Stock for its own account or for any other stockholders of Issuer (other
than on Form S-4 or Form S-8, or any successor form), it will allow Grantee the
right to participate in such registration, and such participation will not
affect the obligation of Issuer to effect demand registration statements for
Grantee under this Section 7;
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PROVIDED that, if the managing underwriters of such offering advise Issuer in
writing that in their opinion the number of shares of Issuer Common Stock
requested to be included in such registration exceeds the number which can be
sold in such offering, Issuer will include the shares requested to be included
therein by Grantee pro rata with the shares intended to be included therein by
Issuer. In connection with any registration pursuant to this Section 7, Issuer
and Grantee will provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification, and
contribution in connection with such registration.
8. LIMITATION ON PROFIT. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as defined below) plus
any Termination Fee paid to Grantee pursuant to Section 5.09(c) of the Merger
Agreement exceed in the aggregate $250 million and, if the total amount that
otherwise would be received by Grantee would exceed such amount, the Grantee, at
its sole election, shall either (i) reduce the number of shares of Issuer Common
Stock subject to the Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee against the refund of the Purchase Price
therefore, (iii) pay cash to the Issuer or (iv) any combination thereof, so that
Grantee's actually realized Total Profit, when aggregated with such Termination
Fee so paid to Grantee, shall not exceed $250 million after taking into account
the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Option Shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) which, together
with any Termination Fee theretofore paid to Grantee, would exceed $250 million;
provided, that nothing in this sentence shall restrict any exercise of the
Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section
6(c), (ii)(x) the net cash amounts or the fair market value of any property
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party, but in no case less than the fair market value of the Option
Shares, less (y) the Grantee's purchase price of such Option Shares, and (iii)
the net cash amounts received by Grantee on the transfer (in accordance with
Section 12(g)) of the Option (or any portion thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of such proposal assuming
for such purpose that the Option were exercised on such date for such number of
Option Shares and assuming that such Option Shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price on the NYSE for the Issuer Common Stock as of
the close of business on the preceding trading day (less customary brokerage
commissions.)
9. TRANSFERS. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) in an underwritten public offering as provided
in Section 7 or (ii) to any purchaser or transferee who would not, to the
knowledge of the Grantee after reasonable inquiry, immediately following such
sale, assignment, transfer or disposal beneficially own more than 4.9% of the
then-outstanding voting power of the Issuer; PROVIDED, HOWEVER, that Grantee
shall be permitted to sell any Option Shares if such sale is made pursuant to a
tender or exchange offer that has been approved or recommended by a majority of
the members of the Board of Directors of Issuer (which majority shall include a
majority of directors who were directors as of the date hereof).
10. LISTING. If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on the NYSE (or any other national
securities exchange or national securities quotation system), Issuer, upon the
request of Grantee, will promptly file an application to list the shares of
Issuer Common Stock or other securities to be acquired upon exercise of the
Option on the NYSE (and
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any such other national securities exchange or national securities quotation
system) and will use reasonable efforts to obtain approval of such listing as
promptly as practicable.
11. LOSS OR MUTILATION. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered will constitute an
additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed, or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS. (A) EXPENSES. Except as otherwise provided in the
Merger Agreement, each of the parties hereto will bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants, and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an instrument
in writing signed on behalf of each of the parties.
(c) EXTENSION; WAIVER. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, the
Provident Stock Option Agreement, the Merger Agreement (including the documents
and instruments attached thereto as exhibits or schedules or delivered in
connection therewith), the Stockholders Agreement, the Confidentiality Agreement
and the Letter Agreement (i) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement, and (ii) except as
provided in Section 8.06 of the Merger Agreement, are not intended to confer
upon any person other than the parties any rights or remedies.
(e) GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to the laws
that might otherwise govern under applicable principles of conflict of laws
thereof.
(f) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed given
if delivered personally, telecopied (which is confirmed), or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
If to Issuer to:
UNUM Corporation
2211 Congress Street
Portland, Maine 04122
Telecopy No.: (207) 770-4377
Attention: Kevin J. Tierney
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler
Fax: (212) 474-3700; and
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If to Grantee to:
Provident Companies, Inc.
1 Fountain Square
Chattanooga, Tennessee 37402
Telecopy No.: (423) 755-5036
Attention: F. Dean Copeland
with copies to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: H. Rodgin Cohen
Fax: (212) 558-3588
(g) ASSIGNMENT. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by Issuer or Grantee without
the prior written consent of the other. Any assignment or delegation in
violation of the preceding sentence will be void. Subject to the first and
second sentences of this Section 12(g), this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
(h) FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other actions that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(i) ENFORCEMENT. The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties will be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, the foregoing being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court.
13. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Amendment so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
<TABLE>
<S> <C> <C>
UNUM CORPORATION,
By: /s/ JAMES F. ORR III
-----------------------------------------
Name: James F. Orr III
Title: Chairman and Chief
Executive Officer
PROVIDENT COMPANIES, INC.,
By: /s/ J. HAROLD CHANDLER
-----------------------------------------
Name: J. Harold Chandler
Title: Chairman, President
and Chief Executive Officer
</TABLE>
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APPENDIX D
STOCKHOLDERS AGREEMENT dated as of November 22, 1998 (this
"Agreement"), among UNUM Corporation, a Delaware corporation ("UNUM"),
and the individuals and other parties listed on Schedule A attached
hereto (each, a "Stockholder" and, collectively, the "Stockholders").
WHEREAS UNUM and Provident Companies, Inc., a Delaware corporation (the
"Company"), propose to enter into an Agreement and Plan of Merger dated as of
the date hereof (as the same may be amended or supplemented, the "Merger
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), providing for the merger of UNUM
with and into the Company, with the Company as the surviving corporation in the
merger (the "Merger"), upon the terms and subject to the conditions set forth in
the Merger Agreement;
WHEREAS each Stockholder owns the number of shares of common stock, par
value $1.00 per share, of the Company (the "Common Stock"), set forth opposite
his, her or its name on Schedule A attached hereto (such shares of Common Stock,
together with any other shares of capital stock of the Company acquired by such
Stockholder after the date hereof and during the term of this Agreement
(including through the exercise of any stock options, warrants or similar
instruments), being collectively referred to herein as the "Subject Shares");
and
WHEREAS as a condition to its willingness to enter into the Merger
Agreement, UNUM has requested that each Stockholder enter into this Agreement.
NOW, THEREFORE, to induce UNUM to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the promises and
the representations, warranties and agreements contained herein, the parties
agree as follows:
1. AGREEMENT TO VOTE SHARES. (a) Subject to Section 1(b) hereof, each of
the Stockholders agrees during the term of this Agreement to vote the Subject
Shares as to which it has voting power or control, in person or by proxy, in
favor of the Merger, the adoption and approval of the Merger Agreement and the
approval of the transactions contemplated by the Merger Agreement at every
meeting of the stockholders of the Company at which such matters are considered
and at every adjournment thereof (each, a "Stockholder Meeting").
(b) Notwithstanding anything to the contrary contained herein, the
obligations of the Stockholders pursuant to Section 1(a) hereof with respect to
matters to be considered at any Stockholder Meeting are subject to the following
conditions:
(i) the Form S-4 (as defined in the Merger Agreement) to be filed with
the Securities and Exchange Commission (the "SEC") by the Company under the
Securities Act of 1933, as amended (the "Securities Act"), to register the
shares of Common Stock to be issued by the Company in the Merger shall have
become effective under the Securities Act and, as of the date of such
Stockholder Meeting, shall not be the subject of any stop order or
proceeding by the SEC seeking a stop order;
(ii) neither the Board of Directors of the Company nor any committee
thereof shall have withdrawn or modified, in a manner adverse to UNUM, its
approval or recommendation of the Merger or the Merger Agreement pursuant to
Section 4.02(b) of the Merger Agreement; and
(iii) no amendment or modification of the Merger Agreement shall have
been effected which reduces the Ratio.
2. NO OTHER GRANT OF PROXY. The Stockholder will not, directly or
indirectly, grant any proxies or powers of attorney with respect to the Subject
Shares (other than in connection with matters proposed by the Company at an
annual meeting of the Company) to any individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity (each, a "person") other than UNUM or any person
designated in writing by UNUM.
3. NO VOTING TRUSTS. Each of the Stockholders agrees that such Stockholder
will not, nor will such Stockholder permit any entity under such Stockholder's
control to, deposit any of such Stockholder's
<PAGE>
Subject Shares in a voting trust or subject any of its Subject Shares to any
arrangement with respect to the voting of the Subject Shares inconsistent with
this Agreement.
4. AFFILIATE AGREEMENT. If, at the time the Merger Agreement is submitted
for approval to the stockholders of the Company, a Stockholder is an "affiliate"
of the Company for purposes of qualifying the Merger for pooling-of-interests
accounting treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules, regulations and interpretations thereunder, such
Stockholder shall deliver to UNUM at least 30 days prior to the Closing Date a
written agreement substantially in the form attached as Exhibit C-2 to the
Merger Agreement.
5. ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity, and
neither party will oppose the granting of such relief on the basis that the
other party has an adequate remedy at law.
6. TERM AND TERMINATION. Subject to Section 11(f), the term of this
Agreement shall commence on the date hereof, and such term and this Agreement
shall terminate upon the earliest to occur of (i) the Effective Time, (ii) the
date on which the Merger Agreement is terminated in accordance with its terms
and (iii) the date of any amendment or modification of the Merger Agreement, or
other agreement entered into in connection therewith, or action taken (including
any waiver of the terms of the Merger Agreement) by the Company or UNUM which
(A) reduces the Ratio or otherwise alters the Ratio in a manner adverse to the
Stockholders or holders of Company Common Stock generally, (B) grants to the
stockholders of UNUM any securities or other rights or requires UNUM or the
Company to take any action which would have the effect of altering the relative
interests of the stockholders of UNUM and the stockholders of the Company
implied by the Ratio, (C) alters the provisions of Section 5.16 of the Merger
Agreement, (D) extends the date set forth in Section 7.01(b)(i) of the Merger
Agreement or (E) waives, amends or modifies the provisions of Section 6.03(c) of
the Merger Agreement. Upon any such termination, no party shall have any further
obligations or liabilities hereunder.
7. CERTAIN EVENTS. (a) Except as provided for by Section 7(b) hereof, each
Stockholder agrees that this Agreement and the obligations hereunder shall
attach to such Stockholder's Subject Shares and shall be binding upon any person
to which legal or beneficial ownership of such Subject Shares shall pass,
whether by operation of law or otherwise, including such Stockholder's heirs,
guardians, administrators or successors. In the event of any stock split, stock
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock, or the acquisition
of additional shares of Common Stock or other voting securities of the Company
by any Stockholder, the number of Subject Shares listed in Schedule A beside the
name of such Stockholder shall be adjusted appropriately and this Agreement and
the obligations hereunder shall attach to any additional shares of Common Stock
or other voting securities of the Company issued to or acquired by such
Stockholder.
(b) Notwithstanding the foregoing, Section 7(a) shall not apply, and the
obligations of Section 1(a) shall not continue, with respect to Subject Shares
that are the subject of charitable contributions or bona fide gifts (as
described in Section 2522 of the Internal Revenue Code of 1986, as amended) made
by (i) The Maclellan Foundation, Inc. in an amount not to exceed 350,000, (ii)
The R.J. Maclellan Trust For The Maclellan Foundation, Inc. in an amount not to
exceed 250,000 and (iii) Hugh O. Maclellan, Jr., Kathrina H. Maclellan and
Charlotte M. Heffner, in amounts for each such person not to exceed .05% of the
total outstanding number of shares of Common Stock as of the date hereof (such
Subject Shares are collectively referred to herein as the "Excluded Charitable
Shares").
(c) Each Stockholder agrees that such Stockholder will tender to the
Company, prior to any transfer, offer to transfer or agreement to transfer any
Subject Shares (other than Excluded Charitable Shares), by
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<PAGE>
sale, gift or otherwise, any and all certificates representing such Subject
Shares in order that the Company may inscribe upon such certificates the legend
in accordance with Section 5.18 of the Merger Agreement and the Company shall
thereafter cause such certificates to be returned to such Stockholder within
three business days of the Company's receipt thereof in accordance with such
Section 5.18.
8. STOCKHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company (or who has
been designated to the Board of Directors of the Company by a Stockholder) makes
(or shall be deemed to have made) any agreement or understanding herein in his
or her capacity as such director or officer. Without limiting the generality of
the foregoing, each Stockholder signs solely in its, his or her capacity as the
record and/or beneficial owner, as applicable, of such Stockholder's Subject
Shares and nothing herein shall limit or affect any actions taken by a
Stockholder (or a designee of a Stockholder) in his or her capacity as an
officer or director of the Company in exercising its rights under the Merger
Agreement.
9. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; AMENDMENT; WAIVER. This
Agreement (including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, written or oral, among the parties with respect to the subject
matter hereof and (ii) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder. This Agreement may not be
amended, supplemented or modified, and no provisions hereof may be modified or
waived, except by an instrument in writing signed by each of the parties hereto.
No waiver of any provisions hereof by any party shall be deemed a waiver of any
other provisions hereof by any such party, nor shall any such waiver be deemed a
continuing waiver of any provision hereof by such party.
10. NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be in writing and shall be deemed
to have been duly given if mailed, by first class or registered mail, three (3)
business days after deposit in the United States Mail, or if telexed or
telecopied, sent by telegram, or delivered by hand or reputable overnight
courier, when confirmation is received, in each case as follows:
If to the Stockholders, to the addresses listed on Schedule A hereto.
With a copy to:
King & Spalding
1185 Avenue of the Americas
New York, New York 10036-4003
Attention: E. William Bates, II, Esq.
Telephone: (212) 556-2240
Facsimile: (212) 556-2222
And a copy to:
Carter Ledyard & Milburn
2 Wall Street
New York, New York 10003
Attention: Richard Covey, Esq.
Telephone: (212) 732-3200
Facsimile: (212) 944-9738
If to UNUM, in accordance with Section 8.02 of the Merger Agreement;
or to such other persons or addresses as may be designated in writing by
the party to receive such notice. Nothing in this Section 10 shall be
deemed to constitute consent to the manner and address for service of
process in connection with any legal proceeding (including litigation
arising
D-3
<PAGE>
out of or in connection with this Agreement), which service shall be
effected as required by applicable law.
11. MISCELLANEOUS. (a) When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
(b) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws.
(c) If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner and to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
(d) This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when
one or more of the counterparts have been signed by each of the parties and
delivered to the other party, it being understood that each party need not sign
the same counterpart.
(e) Except as provided for by Section 7 hereof, neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
Stockholder, on the one hand, without the prior written consent of UNUM, nor by
UNUM, on the other hand, without the prior written consent of the Stockholders,
except that UNUM may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to any direct or indirect wholly owned
subsidiary of UNUM; provided that notwithstanding such assignment UNUM shall
remain liable for performance of its obligations hereunder. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
(f) The obligations of the Stockholders set forth in this Agreement shall
not be effective or binding upon the Stockholders until after such time as the
Merger Agreement is executed and delivered by UNUM and the Company. Nothing
contained in this Agreement shall be construed as containing any liability on
the part of the Stockholders under the Merger Agreement.
IN WITNESS WHEREOF, UNUM has caused this Agreement to be signed by its
officer thereunto duly authorized and each Stockholder has signed this
Agreement, all as of the date first written above.
<TABLE>
<S> <C> <C>
UNUM CORPORATION
By: /s/ JAMES F. ORR III
-----------------------------------------
</TABLE>
D-4
<PAGE>
<TABLE>
<S> <C> <C>
STOCKHOLDERS:
/s/ HUGH O. MACLELLAN, JR.
---------------------------------------------
Hugh O. Maclellan, Jr.
/s/ KATHRINA H. MACLELLAN
---------------------------------------------
Kathrina H. Maclellan
/s/ CHARLOTTE M. HEFFNER
---------------------------------------------
Charlotte M. Heffner
THE MACLELLAN FOUNDATION, INC.
By: /s/ HUGH O. MACLELLAN, JR.
-----------------------------------------
Hugh O. Maclellan, Jr.
PRESIDENT
THE R.J. MACLELLAN TRUST FOR THE MACLELLAN
FOUNDATION, INC.
By: /s/ HUGH O. MACLELLAN, JR.
-----------------------------------------
Hugh O. Maclellan, Jr.
TRUSTEE
By: /s/ KATHRINA H. MACLELLAN
-----------------------------------------
Kathrina H. Maclellan
TRUSTEE
By: /s/ DUDLEY PORTER, JR.
-----------------------------------------
Dudley Porter, Jr.
TRUSTEE
THE HELEN M. TIPTON FOUNDATION, INC.
By: /s/ HUGH O. MACLELLAN, JR.
-----------------------------------------
Hugh O. Maclellan, Jr.
PRESIDENT
</TABLE>
D-5
<PAGE>
<TABLE>
<S> <C> <C>
THE R.J. MACLELLAN TRUST FOR THE R.L. MACLELLAN
FAMILY
By: /s/ KATHRINA H. MACLELLAN
-----------------------------------------
Kathrina H. Maclellan
TRUSTEE
By: /s/ DUDLEY PORTER, JR.
-----------------------------------------
Dudley Porter, Jr.
DUDLEY PORTER, JR.
THE CORA L. MACLELLAN TRUST FOR THE R.L.
MACLELLAN FAMILY
By: /s/ KATHRINA H. MACLELLAN
-----------------------------------------
Kathrina H. Maclellan
TRUSTEE
By: /s/ DUDLEY PORTER, JR.
-----------------------------------------
Dudley Porter, Jr.
TRUSTEE
THE R.J. MACLELLAN TRUST FOR THE HUGH O.
MACLELLAN, SR. FAMILY
By: /s/ HUGH O. MACLELLAN, JR.
-----------------------------------------
Hugh O. Maclellan, Jr.
TRUSTEE
THE CORA L. MACLELLAN TRUST FOR THE HUGH O.
MACLELLAN, SR. FAMILY
By: /s/ HUGH O. MACLELLAN, JR.
-----------------------------------------
Hugh O. Maclellan, Jr.
TRUSTEE
</TABLE>
D-6
<PAGE>
<TABLE>
<S> <C> <C>
TRUST U/A HUGH O. MACLELLAN, SR. DATED 11/19/66
FOR THE BENEFIT OF CATHERINE H. MACLELLAN
By: /s/ HUGH O. MACLELLAN, JR.
-----------------------------------------
Hugh O. Maclellan, Jr.
TRUSTEE
TRUST U/A HUGH O. MACLELLAN, SR. DATED 7/8/68
FOR THE BENEFIT OF DANIEL O. MACLELLAN
By: /s/ HUGH O. MACLELLAN, JR.
-----------------------------------------
Hugh O. Maclellan, Jr.
TRUSTEE
TRUST U/A HUGH O. MACLELLAN, SR. DATED 3/12/64
FOR THE BENEFIT OF CHRISTOPHER H. MACLELLAN
By: /s/ HUGH O. MACLELLAN, JR.
-----------------------------------------
Hugh O. Maclellan, Jr.
TRUSTEE
</TABLE>
D-7
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
OUTSTANDING VOTING POWER OF
STOCKHOLDER SHARES OWNED THE COMPANY(1)
- ------------------------------------------------------------------------------- ------------- -------------------
<S> <C> <C>
Hugh O. Maclellan, Jr.......................................................... 1,544,054 1.14%
Kathrina H. Maclellan.......................................................... 2,756,283 2.04%
Charlotte M. Heffner........................................................... 915,390 0.68%
The Maclellan Foundation, Inc.................................................. 15,484,693 11.44%
The R.J. Maclellan Trust For The Maclellan Foundation, Inc..................... 6,583,160 4.86%
The Helen M. Tipton Foundation, Inc............................................ 3,327,454 2.46%
The R.J. Maclellan Trust For The R.L. Maclellan Family......................... 1,076,690 0.80%
The Cora L. Maclellan Trust For The R.L. Maclellan Family...................... 1,071,640 0.80%
The R.J. Maclellan Trust For The Hugh O. Maclellan, Sr. Family................. 1,045,230 0.77%
The Cora L. Maclellan Trust For The Hugh O. Maclellan, Sr. Family.............. 1,037,390 0.77%
Trust U/A Hugh O. Maclellan, Sr. Dated 11/19/66 For The Benefit Of Catherine H.
Maclellan.................................................................... 102,182 0.08%
Trust U/A Hugh O. Maclellan, Sr. Dated 7/6/68 For The Benefit Of Daniel O.
Maclellan.................................................................... 102,120 0.08%
Trust U/A Hugh O. Maclellan, Sr. Dated 3/12/64 For The Benefit Of Christopher
H. Maclellan................................................................. 94,870 0.07%
</TABLE>
- ------------------------
(1) Based on 135,406,403 total shares outstanding as of November 17, 1998.
<PAGE>
APPENDIX E
[LETTERHEAD OF SALOMON SMITH BARNEY]
November 22, 1998
Board of Directors
Provident Companies, Inc.
One Fountain Square
Chattanooga, TN 37402
Members of the Board of Directors:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the holders of issued and outstanding shares
(the "Shares") of common stock, par value $1.00 per share (the "Company Common
Stock"), of Provident Companies, Inc. (the "Company"), of the Exchange Ratio (as
defined below) in connection with the proposed merger of UNUM Corporation
("UNUM") and the Company (the "Merger") and the related UNUM Conversion (as
defined below) pursuant to the Agreement and Plan of Merger, dated as of
November 22, 1998, (including the exhibits and schedules thereto, the
"Agreement"), between UNUM and the Company. The company resulting from the
Merger will be named UNUMProvident Corporation ("UNUMProvident").
As more specifically set forth in the Agreement, and subject to the terms
and conditions thereof, pursuant to the Merger and the other transactions
contemplated by the Agreement, (1) each issued and outstanding share of common
stock, par value $.10 per share (the "UNUM Common Stock"), of UNUM (other than
shares owned by the Company or UNUM), will be converted into one share of common
stock, par value $.10 per share (the "UNUMProvident Common Stock"), of
UNUMProvident (the "UNUM Conversion") and (2) each Share will be reclassified
(assuming the effectiveness of the Merger and the UNUM Conversion) into 0.7300
of a validly issued, fully paid and nonassessable share of UNUMProvident Common
Stock (the "Exchange Ratio").
In connection with rendering our opinion, we have reviewed (i) a draft of
the Agreement; a draft of the Company Stock Option Agreement, dated as of
November 22, 1998, between the Company and UNUM; a draft of the UNUM Stock
Option Agreement, dated as of November 22, 1998 between UNUM and the Company;
and a draft of the Stockholders Agreement, dated as of November 22, 1998, among
UNUM and certain stockholders of the Company (collectively, the "Transaction
Agreements"), in each case that you have advised us is substantially in the form
to be executed by the parties; (ii) certain publicly available information
concerning the Company and UNUM; (iii) certain other financial information with
respect to the Company and UNUM, including both companies' estimates of the cost
savings expected to be derived from the Merger, that were provided to us by the
Company and UNUM, respectively; (iv) certain publicly available information,
prepared by third-parties, including equity research analysts, concerning the
business, operations and financial prospects of the Company and UNUM and the
sectors in which they operate; (v) certain publicly available information
concerning the trading of, and the trading market for, the Company Common Stock
and the UNUM Common Stock; (vi) certain publicly available information with
respect to certain other companies that we believe to be comparable to the
Company or UNUM and the trading markets for certain of such other companies'
securities; and (vii) certain publicly available information concerning the
nature and terms of certain other transactions that we consider relevant to our
inquiry. We also have considered such other information, financial studies,
analyses, investigations and financial, economic and market criteria that we
deemed relevant. We have discussed that past and current business operations and
financial conditions of the Company and UNUM as well as other matters we believe
relevant to our inquiry with certain officers and employees of the Company and
UNUM, respectively.
<PAGE>
Board of Directors
Provident Companies, Inc.
November 22, 1998
Page 2
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have neither attempted
independently to verify nor assumed any responsibility for verifying any of such
information and have further relied upon the assurances of management of the
Company that they are not aware of any facts that would make any of such
information inaccurate or misleading. We have not conducted a physical
inspection of any of the properties or facilities of the Company or UNUM, nor
have we made or obtained or assumed any responsibility for making or obtaining
any independent evaluations or appraisals of any of such properties or
facilities, nor have we been furnished with any such evaluations or appraisals.
We are not actuaries and our services did not include any actuarial
determinations or evaluations by us or an attempt to evaluate actuarial
assumptions. In that regard, we have made no analyses of, and express no opinion
as to, the adequacy of the loss and loss adjustment expense reserves of the
Company or UNUM. With respect to financial forecasts regarding the Company and
UNUM, we have relied on publicly available third-party equity research
forecasts, and we express no view with respect to such forecasts or the
assumptions on which they were based. We also have assumed that the Transaction
Agreements, when executed and delivered, will not contain any terms or
conditions that differ materially from the drafts of such documents which we
have reviewed, that the Merger will be accounted for as a pooling-of-interests
under generally accepted accounting principles and will qualify as a tax-free
reorganization for United States federal income tax purposes, and that the
Merger will be consummated in accordance with the terms of the Agreement,
without waiver of any of the conditions precedent to the Merger contained in the
Agreement.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial position and results of operations of the
Company and UNUM; (ii) the business prospects of the Company and UNUM; (iii) the
historical and current market for the Company Common Stock, the UNUM Common
Stock and for the equity securities of certain other companies that we believe
to be comparable to the Company or UNUM; and (iv) the nature and terms of
certain other merger transactions that we believe to be relevant. We have also
taken into account our assessment of general economic, market and financial
conditions as well as our experience in connection with similar transactions and
securities valuation generally. We have not been asked to consider, and our
opinion does not address, the relative merits of the Merger as compared to any
alternative business strategy that might exist for the Company. We were not
asked to, and did not, solicit other proposals to merge with or acquire the
Company. Our opinion necessarily is based upon conditions as they exist and can
be evaluated on the date hereof and we assume no responsibility to update or
revise our opinion based upon circumstances or events occurring after the date
hereof. Our opinion is, in any event, limited to the fairness, from a financial
point of view, of the Exchange Ratio and does not address the Company's
underlying business decision to effect the Merger or constitute a recommendation
of the Merger to the Company or a recommendation to any holder of Shares as to
how such holder should vote with respect to the Merger. Our opinion also does
not constitute an opinion or imply any conclusion as to the price at which the
Company Common Stock or the UNUM Common Stock will trade following announcement
of the Merger or the price at which the UNUMProvident Common Stock will trade
following the consummation of the Merger.
As you are aware, Salomon Smith Barney Inc. is acting as financial advisor
to the Company in connection with the Merger and will receive a fee for such
services, a substantial portion of which is contingent upon consummation of the
Merger. Additionally, Salomon Smith Barney Inc. or its predecessors or
affiliates have previously rendered certain investment banking and financial
advisory services to the
E-2
<PAGE>
Board of Directors
Provident Companies, Inc.
November 22, 1998
Page 3
Company and UNUM, for which we or our predecessors or affiliates received
customary compensation. In addition, in the ordinary course of business, Salomon
Smith Barney Inc. may actively trade the securities of the Company and UNUM for
its own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities. Salomon Smith Barney Inc.
and its affiliates (including Citigroup Inc.) may have other business
relationships with the Company and UNUM.
This opinion is intended for the benefit and use of the Company (including
its management and directors) in considering the transaction to which it relates
and may not be used by the Company for any other purpose or reproduced,
disseminated, quoted or referred to by the Company at any time, in any manner or
for any purpose, without the prior written consent of Salomon Smith Barney Inc.,
except that this opinion may be reproduced in full in, and references to the
opinion and to Salomon Smith Barney Inc. and its relationship with the Company
(in each case in such form as Salomon Smith Barney Inc. shall approve) may be
included in, the proxy statement the Company distributes to holders of Shares in
connection with the Merger and in the registration statement on Form S-4 filed
by the Company of which such proxy statement forms a part.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of Shares.
Very truly yours,
/s/ Salomon Smith Barney
E-3
<PAGE>
APPENDIX F
[LETTERHEAD OF MORGAN STANLEY DEAN WITTER]
November 22, 1998
Board of Directors
UNUM Corporation
2211 Congress Street
Portland, Maine 04122
Members of the Board:
We understand that Provident Companies, Inc. ("Provident" or the "Company")
and UNUM Corporation ("UNUM"), have entered into an Agreement and Plan of
Merger, dated November 22, 1998 (the "Merger Agreement"), which provides, among
other things, for the merger (the "Merger") of UNUM and Provident. The company
resulting from the Merger will be named UNUM Provident. Pursuant to the Merger
and the other transactions contemplated by the Merger Agreement (collectively,
the "Transactions"), (i) each issued and outstanding share of common stock, par
value $.10 per share (the "UNUM Common Stock") of UNUM, other than shares held
in treasury by UNUM or held by Provident, will be converted into the right to
receive one share of common stock of UNUM Provident (the "UNUM Provident Common
Stock") and (ii) each issued and outstanding share of common stock, par value
$1.00 per share, of Provident will be converted into the right to receive 0.730
shares (the "Exchange Ratio") of UNUM Provident Common Stock. The terms and
conditions of the Transactions are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Transactions contemplated by the Merger Agreement is fair from a financial
point of view to the holders of shares of UNUM Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and UNUM, respectively;
(ii) analyzed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
(iii) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(iv) reviewed certain internal financial statements and other financial and
operating data concerning UNUM prepared by the management of UNUM;
(v) discussed with the senior managements of the Company and UNUM the
strategic objectives of the Merger and their estimates of the synergies,
cost savings and other benefits expected to result from the Merger.
(vi) discussed the past and current operations and financial condition and
the prospects of UNUM with senior executives of UNUM, and analyzed the
pro forma impact of the Merger on UNUM's earnings per share, consolidated
capitalization and financial ratios;
F-1
<PAGE>
(vii) reviewed the reported prices and trading activity for the Provident
Common Stock and the UNUM Common Stock;
(viii)compared the financial performance of the Company and UNUM and the
prices and trading activity of the Provident Common Stock and the UNUM
Common Stock with that of certain other comparable publicly-traded
companies and their securities;
(ix) reviewed the financial terms, to the extent publicly available of
certain comparable transactions;
(x) participated in discussions and negotiations among representatives of
the Company and UNUM and their financial and legal advisors;
(xi) reviewed the Merger Agreement and certain related documents; and
(xii) performed such other analysis and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial information, including estimates of
the synergies, cost savings and other benefits expected to result from the
Merger, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of the Company and UNUM, respectively. In addition, we
have assumed that the Transactions will be consummated in accordance with the
terms set forth in the Merger Agreement, including, among other things, that the
Transactions will be accounted for as a "pooling-of-interests" business
combination in accordance with U.S. Generally Accepted Accounting Principles and
the Merger will be treated as a tax-free reorganization and/or exchange, each
pursuant to the Internal Revenue Code of 1986, as amended. We have not made any
independent valuation or appraisal of the assets or liabilities of the Company
or UNUM, nor have we been furnished with any such appraisals. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of UNUM in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for Provident and UNUM and their
affiliates and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of UNUM, except that this opinion may be included in its entirety in
any filing made by UNUM with the Securities and Exchange Commission with respect
to the Transaction. In addition, this opinion does not in any manner address the
prices at which UNUM Common Stock or Provident Common Stock will trade following
consummation of the Transaction, and Morgan Stanley expresses no opinion or
recommendation as to how the shareholders of UNUM or the Company should vote at
the shareholders' meetings held in connection with the Transaction.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Transactions contemplated by the
Merger Agreement is fair from a financial point of view to holders of shares of
UNUM Common Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Gary W. Parr
Gary W. Parr
Managing Director
F-2
<PAGE>
APPENDIX G
FORM OF CERTIFICATE OF AMENDMENT OF
THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
PROVIDENT COMPANIES, INC.
Provident Companies, Inc., a Delaware corporation, hereby certifies as
follows:
FIRST. The Board of Directors of said corporation duly adopted a resolution
setting forth, approving and declaring advisable an amendment to Article IV of
the amended and restated certificate of incorporation of said corporation to
reclassify the shares of common stock, par value $1.00 per share, by adding
thereto a Section which shall read in its entirety as follows:
"SECTION 4.4. RECLASSIFICATION OF COMMON STOCK. Upon this Certificate of
Amendment to the Amended and Restated Certificate of Incorporation of the
Corporation becoming effective in accordance with the General Corporation
Law of the State of Delaware (the "Effective Time"), each share of Common
Stock, par value $1.00 per share, of the Corporation ("Old Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
automatically reclassified as and converted into 0.730 of a validly issued,
fully paid and nonassessable share of Common Stock, par value $1.00 per
share, of the Corporation ("New Common Stock").
Notwithstanding the immediately preceding sentence, no fractional shares
of New Common Stock shall be issued in connection with the foregoing
reclassification of shares of Old Common Stock. In lieu thereof, upon
surrender after the Effective Time of a certificate formerly representing
shares of Old Common Stock, the Corporation shall pay to the holder of the
certificate an amount in cash (without interest) equal to the product
obtained by multiplying (a) the fraction of a share of New Common Stock to
which such holder (after taking into account all shares of Old Common Stock
held immediately prior to the Effective Time by such holder) would otherwise
be entitled to, by (b) the closing price per share of UNUM Common Stock on
the New York Stock Exchange, Inc. on the last trading date prior to the date
on which the Effective Time occurs.
Each stock certificate that, immediately prior to the Effective Time,
represented shares of Old Common Stock shall, from and after the Effective
Time, automatically and without the necessity of presenting the same for
exchange, represent that number of shares of New Common Stock into which the
shares of Old Common Stock represented by such certificate shall have been
reclassified (as well as the right to receive cash in lieu of fractional
shares of New Common Stock), provided, however, that each person of record
holding a certificate that represented shares of Old Common Stock shall
receive, upon surrender of such certificate, a new certificate evidencing
and representing the number of shares of New Common Stock into which the
shares of Old Common Stock represented by such certificate shall have been
reclassified."
and declaring that simultaneously with the effectiveness of said amendment of
Article IV each of the issued and outstanding shares of common stock, par value
$1.00 per share, shall be reclassified and converted into 0.730 shares of common
stock, par value, $1.00 per share.
SECOND. The foregoing amendment has been duly adopted by the favorable vote
of the holders of the requisite majority of the outstanding stock entitled to
vote thereon in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Provident Companies, Inc. has caused this certificate to
be signed by , its , on the day of , 1999.
PROVIDENT COMPANIES, INC.
By
----------------------------------------------------------------------------
Name:
Office:
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Provident certificate of incorporation provides that Provident will
indemnify any person who was or is a party or is threatened to be made a party
to or otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (including any action or suit by or in
the right of Provident) by reason of the fact that such person is or was a
director or officer of Provident or, being at the time a director or officer of
Provident, is or was serving at the request of Provident as a director, trustee,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan, whether in an official capacity or any other capacity related to
Provident, or such other enterprise, to the fullest extent not prohibited by
Section 145 of the Delaware General Corporation Law against all expenses,
liability and loss (including without limitation attorneys' fees and expenses,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such person in connection
therewith. Notwithstanding the foregoing, except as may be provided in the
Provident bylaws or by the Provident board of directors, Provident shall not
indemnify any such person in connection with a proceeding (or portion thereof)
initiated by such person (but this prohibition shall not apply to a
counterclaim, cross-claim or third-party claim brought by such person in any
proceeding) unless such proceeding (or portion thereof) was authorized by the
Provident board of directors.
The Provident certificate of incorporation further states that the
indemnification provided therein will not be deemed exclusive of any other right
which any person may have or may thereafter acquire, and will continue as to a
person who has ceased to be a director or officer of Provident, or a director,
officer, employee or agent of such other enterprise and will inure to the
benefit of the heirs, executives and administrators of such a person.
Section 145 of the Delaware General Corporation Law permits a corporation to
indemnify its directors and officers against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties, if such directors or officers acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. In a derivative action,
I.E., one by or in the right of the corporation, indemnification may be made
only for expenses actually and reasonably incurred by directors and officers in
connection with the defense or settlement of an action or suit, and only with
respect to a matter as to which they have acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification will be made if such person will
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought will determine upon
application that the defendant officers or directors are fairly and reasonably
entitled to indemnity for such expenses despite such adjudication of liability.
The Provident certificate of incorporation provides that no director of
Provident will be personally liable to Provident or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty of loyalty to Provident or
its stockholders; (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of the law; (3) under Section 174 of
the Delaware General Corporation Law; or (4) for any transaction from which a
director derived an improper benefit.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, among Provident and UNUM, dated as of November 22, 1998, as amended as of
May 25, 1999 (included as Appendix A to the Joint Proxy Statement/Prospectus contained in this
Registration Statement).
3.1 Amended and Restated Certificate of Incorporation of Provident, as amended on February 10, 1997
(incorporated herein by reference to Exhibit 3.1 to Provident's Form 10-K for the fiscal year ended
December 31, 1995 (file No. 1-11834), dated April 1, 1996,) as amended by Certificate of Amendment
(incorporated herein by reference to Exhibit 3.1 to Provident's Form 10-K for the fiscal year ended
December 31, 1996 (file No. 1-11834).
3.2 Certificate of Incorporation of UNUM (incorporated herein by reference to Exhibit 3.1 to UNUM's Form
10-K for the fiscal year ended December 31, 1997 (file No. 1-9254), dated March 10, 1998).
3.3 By-Laws of Provident, as amended on October 28, 1998 (incorporated herein by reference to Exhibit 3.2 to
Provident's Form 10-Q for the quarter ended September 30, 1998 (file No. 1-11834), dated November 12,
1998).
3.4 By-Laws of UNUM (incorporated herein by reference to Exhibit 3.2 to UNUM's Form 10-K for the fiscal year
ended December 31, 1996 (file No. 1-9254), dated March 25, 1997).
3.5 Restated Certificate of Incorporation of UNUMProvident Corporation (included as Exhibit A-1 to the
Merger Agreement filed as Exhibit 2.1 to this Registration Statement).
3.6 Amended and Restated Bylaws of UNUMProvident Corporation (included as Exhibit A-2 to the Merger
Agreement filed as Exhibit 2.1 to this Registration Statement).
4.1 See Exhibits 3.1 and 3.3 for provisions of the Provident Restated Certificate of Incorporation and the
Provident By-Laws defining rights of holders of Provident common stock.
4.2 Rights Agreement, dated as of March 13, 1992, as amended, between UNUM and First Chicago Trust Company
of New York, as Rights Agent including the form of rights certificate attached as Exhibit B thereto
(incorporated herein by reference to Exhibit 1 to UNUM's Registration Statement on Form 8-A (file No.
1-9254), dated March 18, 1992, Exhibit 2 to Amendment No. 1 to the Registration Statement on Form
8-A/A, dated June 21, 1996 and Exhibit 3 to Amendment No. 2 to the Registration Statement on Form
8-A/A, dated November 25, 1998).
5.1 Opinion of F. Dean Copeland, General Counsel of Provident, regarding validity of securities being
registered.
8.1 Opinion of Sullivan & Cromwell regarding material federal income tax consequences.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
8.2 Opinion of Cravath, Swaine & Moore regarding material federal income tax consequences.
9.1 Stockholders Agreement, dated as of November 22, 1998, among UNUM and the individuals and other parties
listed on Schedule A attached thereto (included as Appendix D to the Joint Proxy Statement/Prospectus
contained in this Registration Statement).
10.1 Stock Option Agreement, dated as of November 22, 1998, between Provident, as Issuer, and UNUM, as
Grantee (included as Appendix B to the Joint Proxy Statement/Prospectus contained in this Registration
Statement).
10.2 Stock Option Agreement, dated as of November 22, 1998, between UNUM, as Issuer, and Provident, as
Grantee (included as Appendix C to the Joint Proxy Statement/Prospectus contained in this Registration
Statement).
10.3 Provident Companies, Inc. Stock Plan of 1999 (incorporated herein by reference to Appendix B to the
Proxy Statement on Schedule 14A (file No. 1-11834), dated May 6, 1998).
23.1 Consent and Acknowledgement of Ernst & Young LLP.
23.2 Consent and Awareness Letter of PricewaterhouseCoopers LLP.
23.3 Consent of F. Dean Copeland, General Counsel of Provident (included in the opinion filed as Exhibit 5.1
to this Registration Statement).
23.4 Consent of Sullivan & Cromwell (included in the opinion filed as Exhibit 8.1 to this Registration
Statement).
23.5 Consent of Cravath, Swaine & Moore (included in the opinion filed as Exhibit 8.2 to this Registration
Statement).
23.6 Consent of Salomon Smith Barney Inc.
23.7 Consent of Morgan Stanley & Co. Incorporated.
24.1 Powers of Attorney.
99.1 Form of Proxy Card of UNUM.
99.2 Form of Proxy Card of Provident.
99.3 Opinion of Salomon Smith Barney Inc. (included as Appendix E to the Joint Proxy Statement/ Prospectus
contained in this Registration Statement).
99.4 Opinion of Morgan Stanley & Co. Incorporated (included as Appendix F to the Joint Proxy
Statement/Prospectus contained in this Registration Statement).
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
II-3
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
(c)(1) The undersigned registrant undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The undersigned registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) immediately preceding, or (ii)
that purports to meet the requirements of Section 10(a)(3) of the Securities
Act of 1933 and is used in connection with an offering of securities subject
to Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time will be deemed to be the initial BONA FIDE
offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such
II-4
<PAGE>
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chattanooga state of Tennessee on the 2nd day of
June, 1999.
<TABLE>
<S> <C> <C>
Provident Companies, Inc.
(Registrant)
By: /s/ J. HAROLD CHANDLER
-----------------------------------------
J. Harold Chandler
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<S> <C> <C>
Principal Executive Officer By: /s/ J. HAROLD CHANDLER
and Director: -----------------------------------------
J. Harold Chandler
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Principal Financial Officer By: /s/ THOMAS R. WATJEN
and Director: -----------------------------------------
Thomas R. Watjen
EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Principal Accounting Officer: By: /s/ RALPH A. ROGERS, JR.
-----------------------------------------
Ralph A. Rogers, Jr.
SENIOR VICE PRESIDENT AND TREASURER
</TABLE>
II-6
<PAGE>
<TABLE>
<S> <C> <C>
By: /s/ SUSAN N. ROTH
-----------------------------------------
SUSAN N. ROTH, AS ATTORNEY-IN-FACT FOR THE
DIRECTORS
DIRECTORS:
William L. Armstrong *
William H. Bolinder *
Charlotte M. Heffner *
Huge B. Jacks *
Hugh O. Maclellan, Jr.*
A.S. MacMillan *
C. William Pollard *
Scott L. Probasco, Jr.*
Steven S Reinemund *
Burton E. Sorensen*
</TABLE>
- ------------------------
* By power-of-attorney
June 2, 1999
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBITS DESCRIPTION PAGE
- ---------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
2.1 Agreement and Plan of Merger, among Provident and UNUM, dated as of November 22,
1998, as amended as of May 25, 1999 (included as Appendix A to the Joint Proxy
Statement/Prospectus contained in this Registration Statement).
3.1 Amended and Restated Certificate of Incorporation of Provident, as amended on
February 10, 1997 (incorporated herein by reference to Exhibit 3.1 to Provident's
Form 10-K for the fiscal year ended December 31, 1995 (file No. 1-11834), dated
April 1, 1996,) as amended by Certificate of Amendment (incorporated herein by
reference to Exhibit 3.1 to Provident's Form 10-K for the fiscal year ended
December 31, 1996 (file No. 1-11834).
3.2 Certificate of Incorporation of UNUM (incorporated herein by reference to Exhibit
3.1 to UNUM's Form 10-K for the fiscal year ended December 31, 1997 (file No.
1-9254), dated March 10, 1998).
3.3 By-Laws of Provident, as amended on October 28, 1998 (incorporated herein by
reference to Exhibit 3.2 to Provident's Form 10-Q for the quarter ended September
30, 1998 (file No. 1-11834), dated November 12, 1998).
3.4 By-Laws of UNUM (incorporated herein by reference to Exhibit 3.2 to UNUM's Form
10-K for the fiscal year ended December 31, 1996 (file No. 1-9254), dated March
25, 1997).
3.5 Restated Certificate of Incorporation of UNUMProvident Corporation (included as
Exhibit A-1 to the Merger Agreement filed as Exhibit 2.1 to this Registration
Statement).
3.6 Amended and Restated Bylaws of UNUMProvident Corporation (included as Exhibit A-2
to the Merger Agreement filed as Exhibit 2.1 to this Registration Statement).
4.1 See Exhibits 3.1 and 3.3 for provisions of the Provident Restated Certificate of
Incorporation and the Provident By-Laws defining rights of holders of Provident
common stock.
4.2 Rights Agreement, dated as of March 13, 1992, as amended, between UNUM and First
Chicago Trust Company of New York, as Rights Agent including the form of rights
certificate attached as Exhibit B thereto (incorporated herein by reference to
Exhibit 1 to UNUM's Registration Statement on Form 8-A (file No. 1-9254), dated
March 18, 1992, Exhibit 2 to Amendment No. 1 to the Registration Statement on
Form 8-A/A, dated June 21, 1996 and Exhibit 3 to Amendment No. 2 to the
Registration Statement on Form 8-A/A, dated November 25, 1998).
5.1 Opinion of F. Dean Copeland, General Counsel of Provident, regarding validity of
securities being registered.
8.1 Opinion of Sullivan & Cromwell regarding material federal income tax
consequences.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBITS DESCRIPTION PAGE
- ---------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
8.2 Opinion of Cravath, Swaine & Moore regarding material federal income tax
consequences.
9.1 Stockholders Agreement, dated as of November 22, 1998, among UNUM and the
individuals and other parties listed on Schedule A attached thereto (included as
Appendix D to the Joint Proxy Statement/Prospectus contained in this Registration
Statement).
10.1 Stock Option Agreement, dated as of November 22, 1998, between Provident, as
Issuer, and UNUM, as Grantee (included as Appendix B to the Joint Proxy
Statement/Prospectus contained in this Registration Statement).
10.2 Stock Option Agreement, dated as of November 22, 1998, between UNUM, as Issuer,
and Provident, as Grantee (included as Appendix C to the Joint Proxy
Statement/Prospectus contained in this Registration Statement).
10.3 Provident Companies, Inc. Stock Plan of 1999 (incorporated herein by reference to
Appendix B to the Proxy Statement on Schedule 14A (file No. 1-11834), dated May
6, 1998).
23.1 Consent and Acknowledgement of Ernst & Young LLP.
23.2 Consent and Awareness Letter of PricewaterhouseCoopers LLP.
23.3 Consent of F. Dean Copeland, General Counsel of Provident (included in the
opinion filed as Exhibit 5.1 to this Registration Statement).
23.4 Consent of Sullivan & Cromwell (included in the opinion filed as Exhibit 8.1 to
this Registration Statement).
23.5 Consent of Cravath, Swaine & Moore (included in the opinion filed as Exhibit 8.2
to this Registration Statement).
23.6 Consent of Salomon Smith Barney Inc.
23.7 Consent of Morgan Stanley & Co. Incorporated.
24.1 Powers of Attorney.
99.1 Form of Proxy Card of UNUM.
99.2 Form of Proxy Card of Provident.
99.3 Opinion of Salomon Smith Barney Inc. (included as Appendix E to the Joint Proxy
Statement/Prospectus contained in this Registration Statement).
99.4 Opinion of Morgan Stanley & Co. Incorporated (included as Appendix F to the Joint
Proxy Statement/Prospectus contained in this Registration Statement).
</TABLE>
<PAGE>
EXHIBIT 5.1
[Letterhead of Provident]
June 2, 1999
Provident Companies, Inc.,
1 Fountain Square,
Chattanooga, Tennessee 37402
Dear Sirs:
In connection with the registration under the Securities Act of 1933 (the
"Act") of 150,285,223 shares (the "Securities") of Common Stock, par value $.10
per share, of Provident Companies, Inc., a Delaware corporation (the "Company"),
to be issued in connection with the Agreement and Plan of Merger, dated as of
November 22, 1998, as amended as of May 25, 1999, between UNUM Corporation, a
Delaware corporation and the Company (the "Merger Agreement"), I, as General
Counsel, have examined such corporate records, certificates and other documents,
and such questions of law, as I have considered necessary or appropriate for the
purposes of this opinion. Upon the basis of such examination, I am of the
opinion that, when the registration statement relating to the Securities (the
"Registration Statement") has become effective under the Act and the Securities
have been duly issued and delivered in connection with the Merger Agreement as
contemplated by the Registration Statement, the Securities will be validly
issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United States
and the General Corporation Law of the State of Delaware, and I am expressing no
opinion as to the effect of the laws of any other jurisdiction.
I have relied as to certain matters on information obtained from public
officials, officers of the Company and other sources believed by me to be
responsible.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the heading "Validity of
Shares" in the Registration Statement. In giving such consent, I do not thereby
admit that I am in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
/s/ F. Dean Copeland
<PAGE>
EXHIBIT 8.1
[Letterhead of Sullivan & Cromwell]
June 2, 1999
Provident Companies, Inc.,
1 Fountain Square,
Chattanooga Tennessee 37402.
Ladies and Gentlemen:
We have acted as counsel to Provident Companies, Inc., a Delaware
corporation ("Provident"), in connection with the planned merger (the "Merger")
of UNUM Corporation, a Delaware corporation ("UNUM"), with and into Provident,
pursuant to the Agreement and Plan of Merger, dated as of November 22, 1998, as
amended as of May 25, 1999 (the "Agreement"), by and between Provident and UNUM.
Capitalized terms used but not defined herein shall have the meanings specified
in the Registration Statement pertaining to the Merger or the appendices thereto
(including the Agreement).
We have assumed with your consent that (1) the Merger will be effected in
accordance with the Agreement and pursuant to the corporation laws of the State
of Delaware; (2) the representations contained in the letters of representation
from Provident and UNUM to us dated June 2, 1999 were true and correct when made
and will be true and correct at the Effective Time and (3) Provident
stockholders hold their shares as capital assets.
On the basis of the foregoing, and our consideration of such other matters
of fact and law as we have deemed necessary or appropriate, it is our opinion,
under presently applicable federal income tax law, that:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code");
(ii) Provident and UNUM will each be a party to the reorganization within
the meaning of Section 368(b) of the Code;
(iii) no gain or loss will be recognized by Provident stockholders on the
exchange of their shares of Provident common stock for UNUMProvident
common stock pursuant to an amendment to the Amended and Restated
Certificate of Incorporation of Provident (the "Provident
Reclassification Amendment") and the Merger, except with respect to
cash received instead of fractional shares;
(iv) the aggregate tax basis of the shares of UNUMProvident common stock
held by the Provident stockholders in connection with the Provident
Reclassification Amendment and the Merger, including any fractional
shares of UNUMProvident common stock deemed received, will be the same
as the aggregate tax basis of the shares of Provident common stock held
prior to the Provident Reclassification Amendment; and
(v) the holding period of the shares of UNUMProvident common stock held by
the Provident stockholders as a result of the Provident Reclassification
Amendment and the Merger, including any fractional shares deemed
received, will include the holding period of the shares of Provident
common stock held prior to the Provident Reclassification Amendment and
the Merger.
We express no opinion as to the tax consequences to Provident stockholders
that are dealers in securities, traders in securities that elect to use a
mark-to-market method of accounting, tax-exempt organizations, foreign persons,
persons that hold Provident common stock as part of a straddle or conversion
transaction and persons who acquired shares of Provident common stock through
the
<PAGE>
exercise of employee stock options or rights or otherwise as compensation or
through a tax-qualified retirement plan.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and all amendments thereto and to the references to this
opinion in the Registration Statement (and all amendments thereto). In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ SULLIVAN & CROMWELL
2
<PAGE>
Exhibit 8.2
[Letterhead of]
CRAVATH, SWAINE & MOORE
[New York Office]
June 2, 1999
Agreement and Plan of Merger
Dated as of November 22, 1998,
As amended as of May 25, 1999
By and Between UNUM Corporation and
Provident Companies, Inc.
Dear Sirs:
We have acted as counsel for UNUM Corporation, a Delaware corporation
("UNUM"), in connection with the proposed merger (the "Merger") of UNUM with and
into Provident Companies, Inc., a Delaware corporation ("Provident") under the
name UNUMProvident Corporation ("UNUMProvident") pursuant to an Agreement and
Plan of Merger, dated as of November 22, 1998, as amended as of May 25, 1999, by
and between UNUM and Provident (the "Merger Agreement").
In that connection, you have requested our opinion regarding certain U.S.
Federal income tax consequences of the Merger. In providing our opinion, we have
examined the Merger Agreement, the registration statement on Form S-4 (the
"Registration Statement"), which includes the Joint Proxy Statement and
Prospectus of UNUM and Provident (the "Proxy Statement/Prospectus"), filed with
the Securities and Exchange Commission (the "SEC") on June 2, 1999, and such
other documents and corporate records as we have deemed necessary or appropriate
for purposes of our opinion. In addition, we have assumed that (i) the Merger
will be consummated in accordance with the provisions of the Merger Agreement
and the Registration Statement, (ii) the statements concerning the Merger set
forth in the Merger Agreement and the Registration Statement are true, complete
and correct, (iii) the representations made by UNUM and Provident, in their
respective letters delivered to us for purposes of this opinion (the
"Representation Letters") are true, complete and correct and will remain true,
complete and correct at all times up to and including the Effective Time (as
defined in the Merger Agreement) and (iv) any representations made in the
Representation Letters "to the best knowledge of" or similarly qualified are
correct without such qualification. If any of the above described assumptions
are untrue for any reason or if the Merger is consummated in a manner that is
different from the manner in which it is described in the Merger Agreement or
the Proxy Statement/ Prospectus, our opinions as expressed below may be
adversely affected and may not be relied upon.
Based upon the foregoing, for U.S. Federal income tax purposes, we are of
opinion that (i) the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
(ii) UNUM and Provident will each be a party to such reorganization within the
meaning of Section 368(b) of the Code, (iii) no gain or loss will be recognized
by UNUM stockholders as a result of the conversion of shares of UNUM common
stock into shares of UNUMProvident common stock pursuant to the Merger, (iv) the
aggregate tax basis of the shares of UNUMProvident common stock received by UNUM
stockholders in the Merger will be the same as the aggregate tax basis of the
shares of UNUM common stock converted, and (v) the holding period of the shares
of UNUMProvident common stock received by UNUM stockholders will include the
holding period of shares of UNUM common stock converted.
<PAGE>
Our opinions are based on current provisions of the Code, Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or the facts and circumstances
surrounding the Merger, or any inaccuracy in the statements, facts, assumptions
or representations upon which we have relied, may affect the continuing validity
of our opinions as set forth herein. We assume no responsibility to inform you
of any such change or inaccuracy that may occur or come to our attention.
Finally, our opinions are limited to the tax matters specfically covered hereby,
and we have not been asked to address, nor have we addressed, any other tax
consequences of the Merger.
This opinion is being provided for the benefit of UNUM so that UNUM may
comply with its obligation under the Federal securities laws. We consent to the
filing of this opinion as Exhibit 8.2 to the Registration Statement and to the
reference to our firm name therein. In giving this consent, we do not admit that
we are within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules or regulations of the
SEC promulgated thereunder.
Very truly yours,
/s/ CRAVATH, SWAINE & MOORE
UNUM Corporation
2211 Congress Street
Portland, Maine 04122
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Joint Proxy Statement/Prospectus
of Provident Companies, Inc. and UNUM Corporation and to the incorporation by
reference therein of our report dated February 9, 1999 with respect to the
consolidated financial statements of Provident Companies, Inc. included in its
Annual Report (Form 10-K/A) for the year ended December 31, 1998 and the related
financial statement schedules included therein, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Chattanooga, Tennessee
June 2, 1999
<PAGE>
ACKNOWLEDGEMENT
Board of Directors and Shareholders
Provident Companies, Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-4) and related Joint Proxy Statement/Prospectus of Provident Companies,
Inc. and UNUM Corporation of our reports dated August 12, 1998 and May 12, 1999
relating to the unaudited condensed consolidated interim financial statements of
Provident Companies, Inc. that are included in its Form 10-Q for the quarter
ended June 30, 1998 and the Form 10-Q/A Amendment No. 2 for the quarter ended
March 31, 1999.
Pursuant to Rule 436(c) of the Securities Act of 1933, our reports are not a
part of the registration statement prepared or certified by accountants within
the meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ ERNST & YOUNG LLP
Chattanooga, Tennessee
June 2, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Provident Companies, Inc. of our report dated February 2, 1999,
relating to the consolidated financial statements and the financial statement
schedules appearing in UNUM Corporation and subsidiaries Annual Report on Form
10-K/A as of December 31, 1998 and 1997, and for the years ended December 31,
1998, 1997, and 1996. We also consent to the reference to our firm under the
heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
Portland, Maine
June 2, 1999
<PAGE>
June 2, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated April 27, 1999 on our review of interim
financial information of UNUM Corporation and subsidiaries for the period ended
March 31, 1999 and 1998 and included in the Company's quarterly report on Form
10-Q/A for the quarter ended March 31, 1999 is incorporated by reference in this
registration statement. Pursuant to Rule 436(c) under the Securities Act of
1933, this report should not be considered a part of the registration statement
prepared or certified by us within the meaning of Sections 7 and 11 of that Act.
/s/ PRICEWATERHOUSECOOPERS LLP
<PAGE>
EXHIBIT 23.6
CONSENT OF SALOMON SMITH BARNEY INC.
We hereby consent to the use of our name and to the description of our
opinion letter, dated November 22, 1998, under the captions "Summary", "The
Merger--Background to the Merger", "The Merger--Provident's Reasons for the
Merger; Recommendation of the Provident Board of Directors" and "The
Merger--Opinion of Provident's Financial Advisor" in, and to the inclusion of
such opinion letter as Appendix E to, the Joint Proxy Statement/Prospectus of
Provident Companies, Inc. and UNUM Corporation, which Joint Proxy
Statement/Prospectus is part of the Registration Statement on Form S-4 (File
Number 1-11834) of Provident Companies, Inc. By giving such consent we do not
thereby admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "expert" as used in, or that we come
within the category of persons whose consent is required under, the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
/s/ SALOMON SMITH BARNEY INC.
New York, New York
June 2, 1999
<PAGE>
EXHIBIT 23.7
[LETTERHEAD OF MORGAN STANLEY DEAN WITTER]
June 2, 1999
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We hereby consent to the inclusion in the Joint Registration Statement of UNUM
Corporation and Provident Companies, Inc. (together "UNUMProvident") on Form
S-4, of our opinion letter appearing as Appendix F to the Joint Proxy
Statement/Prospectus which is part of the Joint Registration Statement, and to
the references of our firm name therein. In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations adopted by the Securities and Exchange Commission thereunder,
nor do we admit that we are experts with respect to any part of the Joint
Registration Statement within the meaning of the term "experts" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
MORGAN STANLEY DEAN WITTER & CO.
By: /s/ Stephen Fromm
--------------------------------------
Stephen Fromm
Principal
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 29, 1999.
/s/ William L. Armstrong
------------------------
William L. Armstrong
<PAGE>
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 30, 1999.
/s/William H. Bolinder
----------------------
William H. Bolinder
<PAGE>
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 28, 1999.
/s/Charlotte M. Heffner
-----------------------
Charlotte M. Heffner
<PAGE>
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 28, 1999.
/s/Hugh B. Jacks
----------------
Hugh B. Jacks
<PAGE>
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 28, 1999.
/s/Hugh O. Maclellan, Jr.
-------------------------
Hugh O. Maclellan, Jr.
<PAGE>
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 29, 1999.
/s/ A. S. (Pat) MacMillan
-------------------------
A. S. (Pat) MacMillan
<PAGE>
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 29, 1999.
/s/C. William Pollard
---------------------
C. William Pollard
<PAGE>
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 31, 1999.
/s/Scott L. Probasco, Jr.
-------------------------
Scott L. Probasco, Jr.
<PAGE>
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 30, 1999.
/s/Steven S Reinemund
---------------------
Steven S Reinemund
<PAGE>
POWER OF ATTORNEY OF DIRECTOR OF
PROVIDENT COMPANIES, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Provident Companies, Inc., a Delaware corporation, which proposes to file with
the Securities and Exchange Commission, a Form S-4 Registration Statement under
the provisions of the Securities Exchange Act of 1933, hereby constitutes and
appoints J. Harold Chandler, F. Dean Copeland, or Susan N. Roth, as his/her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution to do any and all acts and things and execute, for him/her and in
his/her name, place and stead, said form and any and all amendments thereto and
to file the same, with all exhibits thereto, and any and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he/she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
as of March 29, 1999.
/s/Burton E. Sorensen
---------------------
Burton E. Sorensen
<PAGE>
[LOGO OF UNUM]
SPECIAL MEETING OF STOCKHOLDERS
JUNE 30, 1999
8:30 A.M., EASTERN STANDARD TIME
PORTLAND MARRIOTT, 200 SABLE OAKS DRIVE, PORTLAND, MAINE
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UNUM CORPORATION
The undersigned hereby appoints James F. Orr III, Robert E.
Broatch and Kevin J. Tierney proxies, each with full power of substitution,
acting jointly, to vote and act with respect to all of the shares of common
stock of the undersigned in UNUM Corporation, which the undersigned is
entitled in any capacity to vote if personally present at the Special
Meeting, upon all matters that may properly come before the meeting,
including the matters described in the Joint Proxy Statement/Prospectus
furnished herewith, subject to the directions indicated on the reverse side
of this card or through the telephone or Internet proxy procedures, and at
the discretion of the proxies on any other matters that may properly come
before the meeting.
THIS PROXY REVOKES ALL PRIOR PROXIES GIVEN BY THE UNDERSIGNED AND,
WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF SPECIFIC VOTING INSTRUCTIONS ARE NOT GIVEN WITH
RESPECT TO THE MATTERS TO BE ACTED UPON AND THE SIGNED CARD IS RETURNED, THE
PROXIES WILL VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTOR'S RECOMMENDATION
INDICATED BELOW, AND AT THEIR DISCRETION ON ANY MATTERS THAT MAY PROPERLY
COME BEFORE THE MEETING.
The Board of Directors recommends a vote "FOR" the proposal listed
on the reverse side of this card. The Board of Directors knows of no other
matters that are to be presented at the meeting.
Please sign on the reverse of this card and return promptly in the
envelope provided; or if you choose, you can submit your proxy by calling
1-800-OK2-VOTE (1-800-652-8683), or through the Internet at
http://www.vote-by-net.com in accordance with the instructions on the reverse
side of this card. If you do not sign and return a proxy, submit a proxy by
telephone or through the Internet, or attend the meeting and vote by ballot,
shares you hold directly will not be voted.
- ------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE PROPOSAL BELOW. IF OTHER BUSINESS IS PROPERLY
BROUGHT BEFORE THE MEETING, THE PROXIES WILL VOTE IN ACCORDANCE WITH THEIR
BEST JUDGMENT.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
1. To adopt the Agreement and Plan of Merger, dated as of November 22, 1998 (as amended as of
May 25, 1999, the "Merger Agreement"), between UNUM Corporation ("UNUM") and Provident
Companies, Inc. ("Provident") pursuant to which UNUM and Provident will merge (the "Merger") / / / / / /
under the name "UNUMProvident Corporation." As a result of the reclassification discussed
in the Joint Proxy Statement/Prospectus and the Merger, each outstanding share of UNUM
common stock will be converted into one share of UNUMProvident common stock and each share
of Provident common stock will be reclassified and converted into 0.73 of a share of
UNUMProvident common stock.
</TABLE>
SIGNATURE(S) DATE
---------------------- ------------------
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME OR NAMES APPEARS
HEREON, IF STOCK IS HELD JOINTLY, SIGNATURES SHOULD APPEAR FOR
BOTH NAMES. WHEN SIGNING AS AN ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN OR CUSTODIAN, PLEASE INDICATE THE CAPACITY IN
WHICH YOU ARE ACTING.
- ------------------------------------------------------------------------------
-DETACH PROXY CARD HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL
[LOGO OF UNUM]
Dear Stockholder:
UNUM Corporation encourages you to take advantage of new and convenient ways
by which you can submit your proxy. You can submit your proxy through the
Internet or the telephone. This eliminates the need to return the proxy card.
To submit your proxy through the Internet or the telephone you must use the
control number printed in the box above, just below the perforation. The
series of numbers that appear in the box above must be used to access the
system.
1. To submit your proxy through the Internet:
- Log on to the Internet and go to the Web site http://www.vote-by-net.com
2 To submit your proxy over the telephone:
- On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683)
24 hours a day, 7 days a week
Your Internet or telephone proxy authorizes the named proxies in the same
manner as if you marked, signed, dated and returned the proxy card.
IF YOU CHOOSE TO VOTE YOUR SHARES THROUGH THE INTERNET OR TELEPHONE, THERE IS
NO NEED TO MAIL BACK YOUR PROXY CARD.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
-------------------------------------
IF YOU SUBMIT YOUR PROXY BY TELEPHONE
OR THROUGH THE INTERNET THERE IS
NO NEED FOR YOU TO MAIL BACK
YOUR PROXY. THANK YOU FOR VOTING!
-------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[LOGO OF PROVIDENT]
ANNUAL MEETING OF STOCKHOLDERS
JUNE 30, 1999
8:30 A.M., EASTERN STANDARD TIME
ATRIUM OF THE WEST BUILDING OF PROVIDENT'S HOME OFFICE AT
1 FOUNTAIN SQUARE, CHATTANOOGA, TENNESSEE
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PROVIDENT COMPANIES, INC.
The undersigned hereby appoints J. Harold Chandler and Hugh O. Maclellan,
Jr., or either of them, proxies, each with full power of substitution, acting
jointly or by either of them if only one be present and acting, to vote and
act with respect to all of the shares of common stock of the undersigned in
Provident, at the Annual Meeting, upon all matters that may properly come
before the meeting, including the matters described in the Joint Proxy
Statement/Prospectus furnished herewith, subject to the directions indicated
on the reverse side of this card or through the telephone or Internet proxy
procedures, and at the discretion of the proxies on any other matters that
may properly come before the meeting. IF SPECIFIC VOTING INSTRUCTIONS ARE NOT
GIVEN WITH RESPECT TO THE MATTERS TO BE ACTED UPON AND THE SIGNED CARD IS
RETURNED, THE PROXIES WILL VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTOR'S
RECOMMENDATIONS PROVIDED ON THE REVERSE SIDE OF THIS CARD, AND AT THEIR
DISCRETION ON ANY MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
The Board of Directors recommends a vote "FOR" each of the proposals listed
on the reverse side of this card. The Board of Directors knows of no other
matters that are to be presented at the meeting.
Please sign on the reverse of this card and return promptly in the envelope
provided; or if you choose, you can submit your proxy by calling
1-800-OK2-VOTE (1-800-652-8683), or through the Internet at
http://www.vote-by-net.com in accordance with the instructions on the reverse
side of this card. If you do not sign and return a proxy, submit a proxy by
telephone or through the Internet, or attend the meeting and vote by ballot,
shares you own directly will not be voted.
This proxy card, when signed and returned will also constitute voting
instructions to the trustee for shares held in The MoneyMaker, a long-term
401(k) Retirement Savings Plan or to the broker-dealer for shares held in the
Provident Employee Stock Purchase Plan. If voting instructions representing
shares in the foregoing employee benefit plans are not received, those shares
will not be voted.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
- --------------------------------------------------------------------------------
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" PROPOSALS 1, 2, 3, AND 4 BELOW. IF OTHER BUSINESS IS
PROPERLY BROUGHT BEFORE THE MEETING, THE PROXIES WILL VOTE IN ACCORDANCE WITH
THEIR BEST JUDGMENT
FOR WITHHELD
1. Election of Directors. / / / /
For, except vote withheld from the following nominee(s):
- ------------------------------------------------------------------------------
William L. Armstrong; William H. Bolinder; J. Harold Chandler; Charlotte M.
Heffner; Hugh B. Jacks; Hugh O. Maclellan, Jr.; A.S. (Pat) MacMillan; C.
William Pollard; Steven S Reinemund; Burton E. Sorensen; Thomas R. Watjen
FOR AGAINST ABSTAIN
2. To adopt the Agreement and Plan of Merger, dated / / / / / /
as of November 22, 1998 (as amended as of May 25,
1999, the "Merger Agreement"), between Provident and
UNUM Corporation ("UNUM"), pursuant to which UNUM and
Provident will merge (the "Merger") under the name
"UNUMProvident Corporation." As a result of the
reclassification discussed in Proposal 3 and the
Merger, each outstanding share of UNUM common stock
will be converted into one share of UNUMProvident
common stock and each outstanding share of Provident
common stock will be reclassified and converted into
0.73 of a share of UNUMProvident common stock.
Adoption of the Merger Agreement by Provident
stockholders will also constitute approval of the
transactions contemplated thereby, including, among
others, the Merger, the issuance of UNUMProvident
common stock to UNUM stockholders pursuant to the
Merger Agreement, the amendment of the Amended and
Restated Certificate of Incorporation of Provident,
including the change of Provident's name to
"UNUMProvident Corporation," and the amendment of
Provident's bylaws, as more fully described in the
accompanying Joint Proxy Statement/Prospectus.
3. To approve an amendment (the "Provident / / / / / /
Reclassification Amendment") to the Amended
and Restated Certificate of Incorporation of
Provident which provides that each share of
Provident common stock issued and outstanding
immediately prior to the effective time of
the amendment will be automatically
reclassified and converted into 0.73 of a
share of Provident common stock, and an
amount in cash will be paid instead
fractional shares, as more fully described in
the accompanying Joint Proxy
Statement/Prospectus.
4. To approve the amendments to the Provident / / / / / /
Companies, Inc. Stock Plan of 1999, as more
fully described in the accompanying Joint
Proxy Statement/Prospectus.
SIGNATURE(S) DATE
-------------------------------------------- -----------------
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME OR NAMES APPEARS HEREON. IF STOCK
IS HELD JOINTLY, SIGNATURES SHOULD APPEAR FOR BOTH NAMES. WHEN SIGNING AS AN
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR CUSTODIAN, PLEASE
INDICATE THE CAPACITY IN WHICH YOU ARE ACTING.
- -------------------------------------------------------------------------------
^ DETACH PROXY CARD HERE IF YOU ARE NOT SUBMITTING ^
YOUR PROXY BY TELEPHONE OR INTERNET
[LOGO OF PROVIDENT]
Dear Stockholder:
Provident Companies, Inc. encourages you to take advantage of new and
convenient ways by which you can submit your proxy. You can submit your proxy
through the Internet or the telephone. This eliminates the need to return the
proxy card.
To submit your proxy through the Internet or the telephone you must use the
control number printed in the box above, just below the perforation. The
series of numbers that appear in the box above must be used to access the
system.
1. To submit your proxy over the Internet:
- Log on to the Internet and go to the Web site HTTP://WWW.VOTE-BY-NET.COM
2 To submit your proxy over the telephone:
- On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683) 24 hours a
day, 7 days a week
Your Internet or telephone proxy authorizes the named proxies in the same
manner as if you marked, signed, dated and returned the proxy card.
IF YOU CHOOSE TO VOTE YOUR SHARES THROUGH THE INTERNET OR TELEPHONE, THERE IS
NO NEED TO MAIL BACK YOUR PROXY CARD.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING
-----------------------------------------
IF YOU SUBMIT YOUR PROXY BY TELEPHONE
OR THROUGH THE INTERNET THERE IS NO
NEED FOR YOU TO MAIL BACK YOUR PROXY.
THANK YOU FOR VOTING!
-----------------------------------------
