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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
UnumProvident Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
UnumProvident Corporation
April 19, 2000
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
UnumProvident Stockholders:
We cordially invite you to the Annual Meeting of Stockholders. It will be
held at 10:00 a.m. on Friday, May 19, 2000 at the offices of the Company at
2211 Congress Street, Portland, Maine.
The purpose of the meeting is to consider and vote upon the following
matters:
1. The election of four directors for terms expiring in 2003;
2. The transaction of any other business that may properly come before the
meeting.
The Board of Directors recommends that you vote in favor of Item 1, which is
described in the attached Proxy Statement.
You can vote by proxy any one of three ways: mail, telephone or Internet. You
can also vote in person at the meeting. Detailed proxy voting instructions are
provided both in the proxy statement and on the enclosed proxy card. Even if
you plan to attend the meeting, we encourage you to vote promptly by proxy
using one of the three ways provided.
For those of our stockholders, including our many employee-owners, who will
be unable to attend the Annual Meeting in Portland, we will hold an
informational meeting in the Atrium of the West Building at 1 Fountain Square,
Chattanooga, Tennessee, on Monday, May 22, 2000 beginning at 10:00 a.m.
Although voting in person or by proxy will have concluded at the Annual Meeting
on May 19, the informational meeting will provide management and shareholders
the opportunity to discuss 1999 and the Company's business strategy.
Sincerely,
/s/ J. Harold Chandler
-----------------------
J. Harold Chandler
Chairman, President and
Chief Executive Officer
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Susan N. Roth
- ------------------
Susan N. Roth, Corporate Secretary
<PAGE>
PROXY STATEMENT
On June 30, 1999, Unum Corporation ("UNUM") merged into Provident Companies,
Inc. ("Provident") and the name of the merged corporation was changed to
UnumProvident Corporation. Provident had previously reorganized in a share
exchange with its predecessor, Provident Life and Accident Insurance Company
of America ("America") on December 29, 1995.
This statement is being furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of UnumProvident Corporation (the
"Company") to be voted at the Annual Meeting of Stockholders (the "Meeting")
to be held on May 19, 2000, and any adjournment thereof. Stockholders will be
asked to vote upon: ITEM 1. Election of Directors. The 1999 Annual Report to
Stockholders, including audited financial statements of the Company for the
fiscal year ended December 31, 1999, and the proxy card enclosed with this
Proxy Statement are being mailed to stockholders on or about April 19, 2000.
Shares eligible to be voted and for which a proxy card is properly signed
and returned prior to the beginning of the Meeting will be voted as directed.
If directions are not given or directions are not in accordance with the
options listed on a signed and returned proxy card, such shares will be voted
FOR each proposition for which the Board of Directors recommends a vote FOR.
Unsigned or unreturned proxies, including those not returned by banks,
brokers, or other record holders, will not be counted for quorum or voting
purposes. You may revoke your proxy at any time prior to the exercise of
authority granted in the proxy by giving written notice of revocation to the
Corporate Secretary, by submitting a subsequent validly executed proxy, or by
voting in person. If you attend the Meeting and intend to vote in person,
please notify the tellers prior to the beginning of the meeting of your
intent.
As of March 20, 2000, the record date for determination of stockholders
entitled to vote at the Meeting, there were outstanding 240,583,007 shares of
common stock of the Company. Each share of common stock entitles the holder to
one vote. The common stock has a par value of $0.10 per share and is the only
outstanding class of equity securities of the Company entitled to vote at this
meeting.
The Company will bear the cost of soliciting proxies from its stockholders.
Proxies will be solicited by mail and may also be solicited personally or by
telephone by directors, officers and employees of the Company. The Company has
also retained the services of Corporate Investor Communication, Inc. ("CIC"),
a proxy soliciting firm, for the purpose of assisting the Company in the
solicitation of proxies for the Meeting. The Company's arrangements with CIC
provide that CIC will (1) assist in distributing proxy materials and
collecting proxies held by holders of the Company's common stock, (2)
telephone stockholders as the Company may determine and (3) advise the Company
regarding additional soliciting material, if any, that may be used. The
Company estimates the fees of CIC for these services, not counting expenses of
distributing proxy materials which the Company will pay, will be approximately
$7,500. The Company will make appropriate arrangements with brokerage houses,
banks and other custodians, nominees and fiduciaries to facilitate
solicitation of proxies from their principals.
You may vote by submitting 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
by calling 1-877-PRXVOTE (1-877-779-8683), or from outside the U.S. call
direct (201) 536-8073, or through the internet at
http://www.eproxyvote.com/unm in accordance with the instructions on the proxy
card.
<PAGE>
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
The Board of Directors is divided into three classes. Generally, at each
annual meeting, one Class of directors, or approximately one-third of the
total number of directors, will be elected and the term of that Class is three
years. As a result of the merger of UNUM Corporation with Provident Companies,
Inc. which was approved by the stockholders and became effective on June 30,
1999 (the "Merger"), there were five Class I directors, five Class II
directors, and five Class III directors, designated to serve terms expiring in
2000, 2001, and 2002 respectively. The term of the Class I directors expires
with this Meeting. One Class I director, James F. Orr, III, retired from the
Board on November 1, 1999. His position was eliminated and the number of
directors was reduced to fourteen by action of the Board in accordance with
the Bylaws of the Company. Steven S Reinemund, a Class II director whose term
expires in 2001, has advised the Board that due to the demands of his position
as Chief Operating Officer of PepsiCo, he will resign from the Board effective
at the Meeting on May 19, 2000.
The Board of Directors proposes the election of William L. Armstrong, A.S.
"Pat" MacMillan, George J. Mitchell and Cynthia A. Montgomery as Class I
directors, to hold office for a term of three years expiring at the close of
the Annual Meeting of Stockholders to be held in 2003 and until their
successors are elected and qualified. Each nominee is currently serving as a
member of the Board of Directors of the Company.
If any nominee should become unable to serve, the persons named as proxies
on the proxy card will vote for the person or persons the Board of Directors
recommends, if any. The Board of Directors has no reason to believe that any
of the named nominees is not available or would be unable to serve if elected.
Set forth below is information about each nominee and continuing director,
including age, position(s) held with the Company, principal occupation,
business history for at least five years and other directorships held. The
terms of office for each of the remaining directors continue until the close
of the Annual Meeting of Stockholders in the year shown along with each
director's name.
<TABLE>
<CAPTION>
Director Term
Name Age Since Position(s) Held Expires
- ---- --- -------- ------------------------ -------
<S> <C> <C> <C> <C>
J. Harold Chandler.............. 50 1993(1) Chairman, President, & 2002
Chief Executive Officer
William L. Armstrong............ 63 1991(1) Director 2000
Ronald E. Goldsberry............ 57 1999(2) Director 2001
Hugh O. Maclellan, Jr........... 60 1975(1) Director 2001
A.S. (Pat) MacMillan............ 56 1995(1) Director 2000
George J. Mitchell.............. 66 1999(2) Director 2000
Cynthia A. Montgomery........... 47 1999(2) Director 2000
James L. Moody, Jr.............. 68 1999(2) Director 2002
C. William Pollard.............. 61 1992(1) Director 2001
Lawrence R. Pugh................ 67 1999(2) Director 2002
Lois Dickson Rice............... 67 1999(2) Director 2002
John W. Rowe.................... 54 1999(2) Director 2001
Burton E. Sorensen.............. 70 1985(1) Director 2002
</TABLE>
- --------
(1) Year became a director of the Company's predecessor America. Each became a
director of the Company on December 29, 1995, the effective date of the
share exchange between the Company and America.
(2) Became a director of the Company upon Merger of the Company and UNUM
Corporation on June 30, 1999. Served on the Unum Corporation Board from
year indicated: Goldsberry--1993, Mitchell--1995, Montgomery--1990,
Moody--1988, Pugh--1988, Rice--1993 and Rowe--1988.
2
<PAGE>
NOMINEES FOR ELECTION FOR TERM EXPIRING IN 2003
William L. Armstrong
From 1979-1991, Senator Armstrong served in the United States Senate
representing Colorado. He has been 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 since 1994, and Chairman of Transland Financial Services, Inc.
since 1996. He is also a director of Storage Technology Corporation, the
Denver-based Oppenheimer funds and Helmerich and Payne, Inc.
A.S. (Pat) MacMillan
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.
George J. Mitchell
George J. Mitchell associated with the firm of Verner, Liipfert, Bernhard,
McPherson & Hand, Washington, D.C. as special counsel in January 1995 and
associated with the firm of Preti, Flaherty, Beliveau & Pachios, Portland,
Maine as senior counsel in April 1997. At the request of the British and Irish
Governments, he has served as chairman of the peace negotiations in Northern
Ireland from 1996 to 1998. Previously Senator Mitchell served as a United
States Senator from Maine from 1980 to 1995, during which time he served as
Senate Majority Leader from 1989-1995. Senator Mitchell also serves as a
director or trustee of Federal Express Corporation, Starwood Hotels and
Resorts, The Walt Disney Company, Xerox Corporation, Unilever, Staples, Inc.
and Casella Waste Systems, Inc.
Cynthia A. Montgomery
Cynthia A. Montgomery is a professor of competition and strategy at Harvard
University Graduate School of Business Administration, a post she has held
since 1989. She was named Timken Professor of Business Administration in June
1998. Professor Montgomery also serves as director of Newell Rubbermaid and
certain Merrill Lynch mutual funds.
CONTINUING DIRECTORS
J. Harold Chandler
Mr. Chandler became Chairman of the Company April 28, 1996, and President
and Chief Executive Officer and a Director of the Company's predecessor,
America, and its principal subsidiaries effective November 8, 1993.
Immediately prior to his employment, 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 (now part of Bank of America). He formerly served as
President of Citizens and Southern National Bank of South Carolina, a
predecessor company of NationsBank. He is a director of AmSouth
Bancorporation, and Herman Miller, Inc.
Ronald E. Goldsberry
Dr. Goldsberry has served as Chief Executive Officer and Chairman of
Carstation.com since November 1999. He served as Global Vice President and
General Manager of Global Ford Customer Service Operations at Ford Motor
Company from January 1997 to November 1999. Prior to that time, Dr. Goldsberry
served as General Manager of the Customer Service Division of Ford Motor
Company from February 1994 to December 1996 and General Sales and Marketing
Manager for the Parts and Service Division from October 1991 to February 1994.
He is also Chairman of UNC Ventures, Inc., a venture capital firm.
3
<PAGE>
Hugh O. Maclellan, Jr.
Mr. Maclellan, Jr. is President of The Maclellan Foundation and a director
of SunTrust Bank, Chattanooga, N.A., and Covenant Transport.
James L. Moody, Jr.
James L. Moody, Jr. retired as Chairman of Hannaford Bros. Co.
("Hannaford"), a Maine-based food retailing company, in May 1997, a post he
had held since 1984. Mr. Moody joined Hannaford in 1959. He is also a director
of Empire Company Limited, IDEXX Laboratories, Inc., Staples, Inc. and several
funds of the Liberty Colonial Group of mutual funds.
C. William Pollard
Mr. Pollard has served as Chairman of the Board of Directors of The
ServiceMaster Company since January 1994 and reassumed the position of Chief
Executive Officer in October 1999. From June 1990 to December 1993, he served
as Chairman and Chief Executive Officer of The ServiceMaster Company.
ServiceMaster provides professional cleaning, termite and pest control, maid
service, lawn care, and appliance and other home equipment and 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 also a director of Herman Miller, Inc.
Lawrence R. Pugh
Mr. Pugh retired as Chairman of VF Corporation, an apparel company in
Pennsylvania in October, 1998, a post he had held since 1983. Additionally,
Mr. Pugh served as Chief Executive Officer from 1983 to 1995.
Lois Dickson Rice
Ms. Rice is a guest scholar at The Brookings Institution, a post she has
held since October 1991. She is a member of the President's Foreign
Intelligence Board (PFIAB), a director of the Center for Naval Analysis and a
trustee of the Public Agenda Foundation Reading is Fundamental and is co-chair
of Management Leadership for Tomorrow. Ms. Rice serves as director of the IHSB
Group, Inc., International Multifoods Corporation and the McGraw-Hill
Companies.
John W. Rowe
Mr. Rowe is Chairman, President and Chief Executive Officer of Unicom
Corporation and its principal subsidiary, Commonwealth Edison Company, a post
he assumed in March 1998. Previously, Mr. Rowe was President and Chief
Executive Officer of New England Electric System from 1989 to February 1998.
Mr. Rowe is also a director of Fleet Boston Corporation and Wisconsin Central
Transportation.
Burton E. Sorensen
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.
BOARD OF DIRECTORS AND COMMITTEES
During 1999, there were ten meetings of the Board of Directors. No director
attended fewer than 75% of the aggregate of (a) total number of meetings of
the 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 on
which a director served (during the periods that such director served), with
the exception of Mr. Reinemund.
4
<PAGE>
In 1999, the Board of Directors of the Company had five standing committees:
Audit, Compensation, Executive, Finance and Nominating. Following the Merger
with UNUM, the Company established the Governance Committee and eliminated the
Nominating Committee. In addition to the duties described below, each
committee may be assigned additional duties by the Board of Directors from
time to time and each is charged with reporting its activities to the Board of
Directors. Membership of the Committees is given as of December 31, 1999.
Audit Committee
Members were John W. Rowe (Chairman), William L. Armstrong, George J.
Mitchell, James L. Moody, Jr., C. William Pollard and Steve S Reinemund. The
committee met seven times in 1999. The committee's duties included
recommending independent public accountants for selection by the Board of
Directors and reviewing and approving the audit plans of the independent
public accountants and the Company'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 monitored progress on
the Company's Year 2000 project.
Compensation Committee
Members were C. William Pollard (Chairman), Ronald E. Goldsberry, A.S.
MacMillan, Cynthia A. Montgomery, Lawrence R. Pugh, and Steven S Reinemund.
The committee met five times during 1999. The committee is responsible for
oversight with regard to the compensation and benefit strategies of the
Company. This responsibility includes monitoring development, adoption and
implementation of compensation and incentive programs, as well as compensation
philosophy, compensation for the Chief Executive Officer, reviewing and
approving recommendations for long term and annual incentive awards for senior
management, reviewing and approving employment agreements, change in control
agreements, severance agreements or plans, or similar agreements for officers.
The committee's duties also include reviewing and approving new incentive or
performance plans for officers, equity based incentive plans for officers and
employers and approval of new benefit plans or material changes to existing
benefit plans that are material to the Company.
Executive Committee
Members were J. Harold Chandler (Chairman), Burton E. Sorensen, James L.
Moody, Jr., C. William Pollard and John W. Rowe. The committee met one time
during 1999. Prior to the merger, the duties of the committee included review
of strategic plans, issues and direction, and of the operating results of the
Company. The committee might also review significant financial issues
including dividend policy, mergers, acquisitions and divestitures and report
to the Board of Directors. After June 30, 1999, the Executive Committee was
given responsibility for recommending nominees to the Board and to serve on
committees of the Board. These responsibilities currently reside with the full
Board but are expected to be delegated to the Governance Committee in 2000.
Subject to certain procedural guidelines, the Executive Committee is
authorized to act between meetings of the Board.
Finance Committee
Members were Burton E. Sorensen (Chairman), William L. Armstrong, Ronald E.
Goldsberry, Hugh O. Maclellan, Jr., Cynthia A. Montgomery, Lois D. Rice, and
John W. Rowe. The committee met four times during 1999. The committee develops
and monitors appropriate policy and strategies to guide and govern the lending
and investment of funds held by the Company. In accordance with state
insurance statutes, the committee has established and oversees an Investment
Subcommittee to carry out the daily activities required to authorize and
oversee the loans and investments of its insurance subsidiaries.
5
<PAGE>
Governance Committee
Members were James L. Moody, Jr. (Chairman), Hugh O. Maclellan, Jr., A.S.
MacMillan, George J. Mitchell, Lawrence R. Pugh, Lois D. Rice, and Burton E.
Sorensen. The committee met two times during 1999. The committee is generally
responsible for recommending guidelines for corporate governance, recommending
committee composition, developing qualifications for Board members and
conducting periodic evaluations of the Board and the contributions of
individual Board members. Although recommendation of candidates for the Board
was the responsibility of the Nominating Committee until June 30, 1999, the
Executive Committee until December 17, 1999, and the full Board after that
date, the Company expects that this function will be delegated to the
Governance Committee in 2000.
Compensation of Directors
The Company 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 the
Company'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
directors in cash. No fees are typically paid for attendance at meetings,
although if the number of meetings is high in a given year, an attendance fee
of $1,000 may be paid for meetings in excess of the regularly scheduled
meetings. In 1999, due to the Merger with UNUM, the directors of the Company
who were Company directors prior to the Merger received a $1,000 attendance
fee for special meetings of the Board and Committees following the Merger due
to the high number of meetings. The directors of the Company who were former
UNUM directors continued to be paid under the UNUM director compensation plan
following the merger until December 31, 1999. Under this plan, the former UNUM
directors received (i) quarterly retainers of $6,875 for the third and fourth
quarters of 1999, (ii) additional quarterly retainers of $1,000 for committee
chairpersons, (iii) an attendance fee of $1,000 for each Board and committee
meeting attended, and (iv) 2,333 options for the period from May through
December 1999 as a proportional grant of the normal annual 4,000 options. The
former UNUM directors could defer their compensation pursuant to a
Nonqualified Deferred Compensation Plan, including an opportunity to invest in
phantom common stock of the Company.
As of January 1, 2000, all directors of the Company, including the former
UNUM Directors are compensated under the Company's Non-Employee Director
Compensation Plan. Employees of the Company are not compensated for their
services as directors of the Company or any of its direct or indirect
subsidiaries.
In 1998, directors of the Company 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 issued
under the Non-Employee Director Compensation Plan. Upon leaving the Board, the
directors who were formerly directors of UNUM will be entitled to receive an
annual consulting fee fixed at $27,500 for the number of full years each
director had served as of May 31, 1997, under a former UNUM plan.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, all of whom are also executive
officers of certain principal subsidiaries, were elected to serve 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........ 45 Executive Vice President--Finance and Risk Management
Elaine D. Rosen......... 47 Executive Vice President--Customer Development
F. Dean Copeland........ 61 Executive Vice President--Legal and Administrative Affairs
and General Counsel
Peter Madeja............ 41 President and Chief Executive Officer of GENEX Services, Inc.
</TABLE>
6
<PAGE>
Mr. Chandler originally became Chairman of the Company on April 28, 1996,
and President and Chief Executive Officer of the Company's predecessor,
America, effective November 8, 1993. On June 30, 1999, in connection with the
Merger with UNUM, he became President and Chief Operating Officer of the
Company, relinquishing the offices of Chairman and CEO. He reassumed the
offices of Chairman and CEO of the Company on November 1, 1999 following the
retirement of James F. Orr, III.
Mr. Watjen became Executive Vice President-Finance of the Company on June
30, 1999 and assumed the additional Risk Management responsibilities on
November 1, 1999. Prior to the Merger with UNUM, he was Vice Chairman and
Chief Financial Officer of the Company, positions he assumed 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.
Ms. Rosen became Executive Vice President-Customer Development of the
Company on November 1, 1999. As of June 30, 1999 she became Executive Vice
President-Products and Risk Management. Prior to that time she had served as
Executive Vice President of UNUM Corporation since May 1998 and President of
UNUM Life Insurance Company of America ("UNUM America") since January 1997.
Previously she served as Executive Vice President of UNUM America from May
1995 to December 1996.
Mr. Copeland became Executive Vice President-Legal and Administrative
Affairs on June 30, 1999 and General Counsel of the Company on May 12, 1997.
Prior to joining the Company in May 1997, he was 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 Senior Vice President of the Company following the Merger
with UNUM on June 30, 1999. Prior to that time he had served as Executive Vice
President of the Company since May 7, 1997. He became Senior Vice President of
the Company in February 1997 when the Company acquired Genex Services, Inc. He
continues to serve as President and Chief Executive Officer of GENEX Services,
Inc. which he joined in 1982.
Compliance With Section 16(a)
Under Section 16(a) of the Exchange Act, the Company'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 the Company by each such person, the Company believes that each of
its directors and officers and 10% beneficial owners filed all required
reports on a timely basis during the last fiscal year.
REPORT OF THE BOARD COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed entirely of
non-employee directors. The Compensation Committee is responsible for
establishing and administering the Company's executive compensation programs.
This report addresses the Company's compensation policies and practices, and
the Compensation Committee's decisions regarding 1999 compensation as they
affected the Chief Executive Officers and the four other most highly paid
executive officers of the Company at year end 1999 and two other individuals,
Robert O. Best and Robert W. Crispin, who would have been among the four most
highly compensated executive officers but for the fact they were not serving
as executive officers at year end. These individuals are collectively referred
to as the "named executive officers". These policies and practices also
generally affect the compensation of the Company's other officers and high
level executives.
7
<PAGE>
Compensation Philosophy
The Company merged with UNUM Corporation on June 30, 1999. As a result of
the Merger, the Company reviewed the prior compensation policies and practices
of both corporations and worked to maintain and develop compensation practices
and policies that recognized important principles from prior years, while
taking into account the needs of the new organization going forward. The
Committee establishes compensation, including executive compensation,
according to the following principles of the Company's compensation
philosophy:
. Emphasize a performance culture by providing all employees with
competitive base pay and incentive opportunities. Annual incentive
opportunities, for those eligible, will be based on achievement of
Company and individual performance targets, while long term incentives
will be equity-based and will therefore be dependent on Company
performance.
. Consider roles, skills, abilities and performance expectations on an
individual level so that total pay levels will reflect both the
competitive market and individual performance.
. Reinforce an ownership culture in the Company, and accomplish this by
making equity-based compensation vehicles available to employees at all
levels in the organization, and requiring executives to achieve
specified ownership levels.
Stock Ownership Requirement
Alignment of the interests of executives with the Company's shareholders is
a foundation of the Company's executive compensation programs. Executive
officers are expected to own an amount of the Company's stock currently
expressed as a multiple of the executive's salary depending on the officer's
level. This stock ownership requirement can be met with shares beneficially
owned by the executive through the purchase of shares, including purchases
through the Employee Stock Purchase Plan, the exercise of stock options,
shares allocated to the executive through the Company's 401K retirement plan,
phantom shares or restricted stock issued under the Performance Shares
Subplan, constituting a part of the Management Incentive Compensation Plan of
1994, and restricted stock awards. Unexercised stock options do not apply
toward the ownership requirement.
Peer Group
For purposes of benchmarking compensation for executive officers, the
Committee has developed, with the assistance of a compensation consultant, a
peer group comprised of a mix of insurance and financial services companies.
The following methodology was used to develop the peer group.
. The companies formerly included in the peer groups used by UNUM and
Provident were analyzed to determine their continuing suitability. A
number of companies were removed because they had been involved in
transactions that made them too large (in terms of market
capitalization, revenue or asset size) to be considered suitable
comparators.
. A limited number of diversified financial services companies were added
to the peer group based on market capitalization, asset size and
revenue, with emphasis on market capitalization.
. Information on performance was gathered for the companies included in
the peer group. The performance indicators analyzed included: total
return to shareholders for a five year period, return on equity for the
most recent one year period and increase in market capitalization over a
three year period.
The peer group is reviewed periodically with the Compensation Committee. The
companies in the peer group include those that the Company has determined are
its primary competitors for key executives. This is a different group of
companies than is included in the "Insurance Index" used for "Comparison of
Five Year Cumulative Total Return", as set forth on page 20.
8
<PAGE>
Overview
Compensation for executive officers for 1999 consisted of the following
components: (1) an annual base salary which was adjusted in connection with
the Merger; (2) a bonus targeted under the Company's Management Incentive
Compensation Plan under which bonus amounts were determined by the extent to
which actual performance of the Company achieved thresholds and targets with
respect to goals established and approved by the Compensation Committee and
individual performance; (3) non-qualified stock options granted under the
Stock Plan of 1999; and (4) an award in recognition of the completion of the
Merger under the Executive Deferral Plan which was adopted by the Board in
June 1999. Certain of the executive officers also received compensation under
employment agreements entered into with the Company effective at the time of
the Merger, or employment agreements between the executives and UNUM, the
obligations of which the Company assumed at the time of the Merger.
Base Salary
Under the guidelines approved by the committee in November 1999, base
salaries for executive officers generally are established based on 50th
percentile market data. These salaries were reflected in new employment
agreements entered into in connection with the Merger with each of the named
executive officers except Mr. Broatch and Mr. Best.
Annual Incentive Compensation
Annual incentive target opportunity is generally established above the 60th
percentile based on market data.
Based on 1999 results of the Company, there were no annual incentive awards
to executive officers for 1999. In general, annual incentive awards for all
officers are based on performance measures included in the Amended and
Restated Management Incentive Compensation Plan of 1994, which includes the
Corporate Performance Subplan and the Individual Performance Subplan.
The Corporate Performance Subplan is based solely on the achievement of
objective corporate performance goals. In the first quarter of each plan year,
the Compensation Committee establishes performance goals based on one or more
corporate performance criteria, and establishes target awards based on the
achievement of these goals. Target awards are set as a percentage of base
salary. The three performance measures for 1999 were sales, return on equity
and relative stock performance.
The Individual Performance Subplan is based on an individual's contribution
to the business of the Company, as determined by the Compensation Committee.
This contribution may be assessed on non-objective as well as objective
measures. No payment may be made under either component of the Management
Incentive Compensation Plan if earnings thresholds established by the
Compensation Committee in the first quarter of the plan year are not achieved.
In 1999, these thresholds were not met.
Long-Term Incentive Compensation
Stock Plan of 1999
The Stock Plan of 1999 permits the grant to executive officers, employees,
producers, and directors of the Company of stock options, restricted stock,
stock appreciation rights, and dividend equivalent awards.
Generally, the Company makes annual stock option grants in the first quarter
of the year to employees at the officer level. The Committee establishes the
terms and conditions of the options at the time of grant. Following the
Merger, a number of employees at the Senior Vice President level received
additional option grants in recognition of their efforts in connection with
the Merger and to assure post-merger transition.
9
<PAGE>
For grants in 1999 following the Merger the options were for terms of ten
years and, except for options granted to Messrs. Chandler, Orr, Watjen, and
Copeland and Ms. Rosen, were subject to a vesting schedule under which 1/3 of
the options become exercisable on each anniversary of the grant date. For
grants in 1999 prior to the Merger, options vested two years from the grant
date. All options were granted with an exercise price equal to the fair market
value of the underlying shares of common stock on the date of the grant.
Although no regular annual grant of stock options was made to the named
executive officers in 1999 prior to the Merger, Messrs. Watjen and Copeland
and Ms. Rosen, received option grants that vest ratably over a four year
period and were issued at an exercise price of $55.1799. The total number of
options granted under the Stock Plan of 1999, to executive officers, employees
and producers was 1,840,802. Stock options were granted to Mr. Chandler and
Mr. Orr as discussed in Chief Executive Officer Compensation below.
Special Merger Awards
Messrs. Chandler, Watjen and Copeland received awards of $5,000,000;
$1,500,000; and $750,000 respectively in recognition of their efforts in
completing the merger. These awards were made by the Provident Board of
Directors on June 30, 1999, prior to the effectiveness of the Merger, under
the Executive Deferral Plan, and were consistent with Provident's past
practice of granting awards for completion of major transactions.
Historically, Provident made transaction awards in the form of equity. Both
the Committee and the executive officers would have preferred to have had
these awards made in the form of equity. However, the Company's accountants
advised that cash awards would be consistent with meeting pooling of interests
criteria. Messrs. Orr, Broatch and Crispin and Ms. Rosen also received awards
from UNUM in recognition of their efforts in connection with the Merger
immediately prior to the completion of the Merger.
The Executive Deferral Plan is a non-qualified, unfunded plan of deferred
compensation for a select group of management or highly compensated
individuals. Under the plan, payment of portions of awards designated by the
Committee are automatically deferred 50% for a period of three years and 50%
for a period of four years. The plan also permits voluntary deferral of
compensation designated by the Committee. The plan contains provisions which
allow the Compensation Committee to permit withdrawals from the deferred
account under certain conditions. Vesting occurs at the end of the deferral
period, upon a change in control, death, disability, involuntary termination,
or other termination with Committee approval.
CEO Compensation
Compensation of the Chief Executive Officer follows the compensation
philosophy for executive compensation described above. In 1999, Mr. Chandler
served as Chief Executive Officer of the Company until June 30, 1999 and
reassumed the position on November 1, 1999. Mr. Orr became Chief Executive
Officer on June 30, 1999 and retired on November 1, 1999. The components of
executive compensation for the post-merger period were established in
employment agreements with Messrs. Orr and Chandler, entered into when the
Merger agreement was signed and became effective at the time of the Merger.
Base Salary
Prior to the Merger, Mr. Chandler's base salary was $800,000. Pursuant to
the employment agreement, his annual base salary following the Merger was
$900,000.
Annual Incentive Compensation
Under the terms of the employment agreement, Mr. Chandler is eligible to
receive an annual bonus with a target level not less than 100% of his annual
base salary. There was no payment of an annual bonus for 1999 to Mr. Chandler,
because as discussed above, target thresholds under the Management Incentive
Compensation Plan were not achieved.
10
<PAGE>
Long Term Incentive Compensation
Under the terms of the employment agreement, on June 30, 1999, Mr. Chandler
was granted options to purchase 500,000 shares of the Company's common stock
pursuant to the terms of the Stock Plan of 1999. The options have an exercise
price of $55.1799 and vest in four equal installments on the first, second,
third and fourth anniversaries of the date of grant.
Special Merger Award
As discussed above, Mr. Chandler received a bonus of $5,000,000 in
recognition of the successful completion of the Merger.
Mr. Orr's Compensation
The employment agreement with Mr. Orr provided for an annual base salary of
$900,000, a target annual bonus of not less than 100% of annual base salary,
and an incentive award of 500,000 stock options and 250,000 shares of
restricted stock. The employment agreement also included provisions for
payments to Mr. Orr if his employment terminated without cause or for good
reason as described in the agreement. The employment agreement initially
contemplated that Mr. Orr would serve as Chief Executive Officer until June
30, 2001 and Chairman of the Board until June 30, 2005. The agreement was
amended to shorten the period to June 30, 2000. In October 1999, the Company
and Mr. Orr agreed that he would retire from all positions effective November
1, 1999 and entered into an agreement which provided that Mr. Orr would
receive payment of $9,000,000 spread over a period from April 2000 to April
2001, payment of retirement benefits primarily in March 2000 totaling
$11,444,786 (a substantial portion of which represented vested benefits for
years of service with UNUM), continuation of medical benefits with a premium
cap of $1,000,000 and that the stock options granted on June 30, 1999 at
$55.1799 per share would remain exercisable for the balance of their ten year
term. The restricted stock granted under the employment agreement was
forfeited, and all other obligations under the original employment agreement
terminated.
Million Dollar Deduction Limitation (IRC Section 162(m))
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the Company's ability to deduct compensation in excess of
$1,000,000 paid during a tax year to the Chief Executive Officer and the four
other highest paid executive officers at year end. Certain performance-based
compensation is not subject to such deduction limit. Annual bonuses under the
Corporate Performance Subplan of the Management Incentive Compensation Plan
are designed to meet the criteria of "performance-based" compensation that is
fully deductible under Code Section 162(m), as are awards of stock options
under the Company's Stock Plan of 1999. It is the Committee's intent to
maximize the deductibility of executive compensation while retaining the
discretion necessary to compensate executive officers in a manner commensurate
with performance and the competitive market for executive talent.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists solely of independent members of the
Board of Directors. There are no interlocking arrangements involving service
by any executive officer on the Compensation Committee of another entity and
an executive officer of such other entity serving on the Company's
Compensation Committee.
C. William Pollard, Chairman
Ronald E. Goldsberry
A.S. MacMillan
Cynthia A. Montgomery
Lawrence R. Pugh
Steven S Reinemund
11
<PAGE>
COMPENSATION TABLES
The following table summarizes the compensation of persons serving as Chief
Executive Officer and the four other most highly compensated executive
officers at year end 1999, plus two officers whose compensation would have
been reported if they were serving as executive officers at the end of the
year, for the years 1997, 1998 and 1999;
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
- --------------------------------------------------------------- ------------------------------------------------
Awards Payouts
------------------------- --------------------
Restricted Securities LTIP
Salary Bonus Other Annual Stock Awards Underlying Payouts All Other
Name & Position Year ($) ($) Compensation ($)(3) Options(#) $ Compensation
--------------- ---- ------- --------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Harold Chandler ..... 1999 850,000 5,000,000(2) 0 0 500,000 0 3,648(5)
Chairman, President 1998 828,846 960,000 0 368,571 0 2,917
and Chief Executive
Officer 1997 736,539 922,500 0 4,590,670 876,000(4) 1,615
James F. Orr, III(1).... 1999 303,461 0 0 (6) 500,000 0 21,203,894(7)
Chief Executive Officer
Thomas R. Watjen........ 1999 500,000 1,500,000(2) 0 170,000 3,648(5)
Executive Vice
President-- 1998 519,231 550,000 0 129,576(4) 0 2,400
Finance and Risk
Management 1997 461,539 500,000 0 1,559,152(4) 365,000 0
Elaine D. Rosen(1)...... 1999 250,000 0 0 0 170,000 0 400(8)
Executive Vice
President--Customer
Development
F. Dean Copeland........ 1999 324,039 750,000(2) 0 0 110,000 0 3,472(5)
Executive Vice
President--Legal 1998 272,116 300,000 63,348 2,063
and Administrative, and
General 1997 153,846 151,875 55,938 146,000(4) 0
Counsel
Robert E. Broatch(1).... 1999 180,000 0 0 0 0 0 3,991(8)
Senior Vice President 0
and Chief Financial
Officer(9)
Robert W. Crispin(1).... 1999 235,513 0 0 0 160,000 0 3,564,273(10)
Executive Vice
President--Distribution
Robert O. Best(11)...... 1999 266,154 25,000 0 0 10,000 0 3,648
1998 259,616 187,875 18,141 0 0 3,160
1997 230,962 150,000 80,045 109,500(4) 0 2,375
</TABLE>
- --------
(1) For those executive officers who were formerly executive officers of UNUM
Corporation, information in the table is only given for that portion of
1999 following the Merger. The compensation received by these officers
from UNUM in 1999 prior to the Merger was as follows:
<TABLE>
<C> <C> <S>
Mr. Orr: $ 430,000 Salary
$1,006,201 Bonus (Annual Incentive Plan payment for 1998
performance)
$ 600,000 Bonus (Special Merger Award)
$ 20,000 All other compensation
Ms. Rosen: $ 225,000 Salary
$ 265,000 Bonus (Annual Incentive Plan payment for 1998
performance)
$ 300,000 Bonus (Special Merger Award)
$ 19,600 All other compensation
Mr. Broatch: $ 180,000 Salary
$ 235,223 Bonus (Annual Incentive Plan payment for 1998
performance)
$ 360,000 Bonus (Special Merger Award)
$ 16,009 All other compensation
$ 28,400 Stock options
Mr. Crispin: $ 275,000 Salary
$ 426,937 Bonus (Annual Incentive Plan payment for 1998
performance)
$ 300,000 Bonus (Special Merger Award)
$ 20,000 All other Compensation
</TABLE>
12
<PAGE>
(2) Special bonus awarded in connection with the successful completion of the
Merger award under Executive Deferral Plan. See "Special Merger Awards"
above.
(3) As of June 30, 1999, in accordance with the terms of the plans under
which granted, all shares of restricted stock of the Company owned by the
named executive officers vested as a result of the Merger. Since each of
the named executive officers was prohibited from selling the stock by
virtue of being an "affiliate" under the pooling of interests accounting
rules, the restricted stock was deemed to vest on November 2, 1999, the
first date the pooling restrictions on sale of the stock were lifted. On
November 2, 1999, the respective aggregate shares of restricted stock was
deemed to have the following values:
Mr. Chandler, 109,500 shares valued at $3,565,594;
Mr. Watjen, 36,500 shares valued at $1,188,531;
Mr. Best, 1,460 shares valued at $47,541.
All numbers of shares reflect the .73 reverse stock split effected in
connection with the Merger.
(4) Number of options reflect 2 for 1 stock split on September 30, 1997,
which was in the form of a 100% stock dividend, and the .73 reverse stock
split effected in connection with the Merger.
(5) The amounts reported for Messrs. Chandler, Watjen, Copeland and Best
include the Company's match of their respective contributions to the
Money Maker, a long-term 401(k) retirement plan, along with a
supplemental match of $1,248, $1,248, $1,073 and $1,248 respectively,
based on the Company's performance in 1998.
(6) Mr. Orr was granted 250,000 shares of restricted stock at the effective
time of the Merger under his employment agreement. Upon his retirement in
November 1999, the restricted stock was forfeited.
(7) In connection with Mr. Orr's retirement November 1, 1999, he received a
$9,000,000 resignation payment (payment of $3,000,000 of which is
deferred), $11,444,786 for retirement benefits (a substantial portion of
which represented vested benefits for years of service with UNUM),
$689,791 value of forgiveness of split dollar life insurance policy and
$69,314 for premiums for medical and dental insurance.
(8) Employer match to non-qualified retirement plan.
(9) Mr. Broatch resigned from the Company on March 3, 2000.
(10) Includes payment pursuant to change in control provisions of employment
agreement of $3,564,273. Mr. Crispin ceased being an executive officer of
the Company in September 1999, and resigned effective December 3, 1999.
(11) Mr. Best served as EVP and Chief Information Officer/Client Services
until June 30, 1999. Following the merger, Mr. Best's duties were divided
and he became Senior Vice President-Customer Service, reporting to EVP
Elaine Rosen. In April 2000, Mr. Best again became Chief Information
Officer. Bonus was special merger award in cash, not made under Executive
Deferral Plan.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------
% of Total
Number of Options Granted Grant Date
Securities Underlying to Employees Exercise Expiration Present
Name Options Granted (#)(1) in Fiscal Year Price ($/sh) Date Value $(2)
- ---- ---------------------- --------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
J. Harold Chandler...... 500,000(3) 22.08 $55.1799 06/30/09 8,860,000
285,253 12.59 $37.1875 01/04/02 2,062,379
12,530 .55 $36.2813 01/04/02 86,081
65,365 2.89 $36.2813 01/03/06 705,942
James F. Orr............ 500,000(4) 22.08 $55.1799 06/30/09 8,860,000
Thomas R. Watjen........ 21,765 .96 $57.5771 06/01/99 25,683
170,000(3) 7.51 $55.1799 06/30/09 3,012,400
Elaine D. Rosen......... 170,000(3) 7.51 $55.1799 06/30/09 3,012,400
F. Dean Copeland........ 110,000(3) 4.86 $55.1799 06/30/09 1,949,200
Robert O. Best.......... 10,000(5) .44 $29.5000 09/30/09 84,100
</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 granted
were for Company common stock. Share totals have been adjusted to reflect
the .73 stock split effected in connection with the Merger on June 30,
1999. To encourage increased ownership, the Plan 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 entitles the optionee to a new stock option grant
equal to the number of shares delivered. The new option grant has terms
equal to the remaining term of to the options that were exercised and the
option price is the then-current fair market value of the common stock.
(2) The grant date present value of options granted in 1999 was determined
using the Black-Scholes option pricing model. The underlying assumptions
were as follows:
Volatility. Volatility for the Company's common stock was calculated using
72 monthly stock prices for all grants except certain reload grants to
Messrs. Chandler and Watjen in which 29 months and 20 days respectively were
used. The volatility was 23.3% for all grants except reload grants to
Messrs. Chandler and Watjen for which the volatility was 25.7% and 28.9%
respectively.
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 defined below). The rate for the grants
ranged from 4.6% to 6.1%.
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 6 years from the
date of grant on all grants except for the certain reload grants to Messrs.
Chandler and Watjen in which the time of exercise was assumed to be the time
to expiration.
(3) The options granted to Messrs. Chandler, Copeland, and Watjen and Ms.
Rosen vest as follows: 25% on June 30, 2000, 25% on June 30, 2001, 25% on
June 30, 2002 and 25% on June 30, 2003, with the exception of the reload
grants of Messrs. Chandler and Watjen, which vested immediately. If a
change of control (as defined) occurs, the options vest immediately.
(4) The options granted to Mr. Orr vested upon his retirement on November 1,
1999.
(5) The options granted to Mr. Best vest 33 1/3% on September 30, 2000, 33
1/3% on September 30, 2001 and 33 1/3% on September 30, 2002.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUE
The following table shows information concerning options for the Company's
common stock exercised by the named executive officers individuals during 1999
and the value of unexercised options held by the named executive officers
individuals at December 31, 1999:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at FY-
Acquired on Value Options at FY-End (#) End ($)
Name Exercise (#) Realized($) Exercisable/Unexercisable(1) Exercisable/Unexercisable(2)
- ---- ----------- ----------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
J. Harold Chandler...... 842,600 17,770,934 1,418,548/500,000 1,816,586/0
James F. Orr............ 0 0 1,454,500/0 4,726,739/0
Thomas R. Watjen........ 73,000 2,949,996 511,000/170,000 1,909,629/0
Elaine D. Rosen......... 0 0 91,800/170,000 145,844/0
F. Dean Copeland........ 0 0 146,000/110,000 0/0
Robert E. Broatch....... 0 0 82,910/28,400 36,375/0
Robert Crispin.......... 0 0 212,290/0 1,123,655/0
Robert O. Best.......... 0 0 183,230/10,000 1,009,643/16,875
</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 and the
.73 reverse stock split on June 30, 1999 in connection with the Merger.
(2) Calculated as the difference between the fair market value of a share the
Company's common stock on December 31, 1999 and the exercise price of the
options.
PENSION PLAN TABLE
The following tables show the estimated annual aggregate benefits payable at
normal retirement date under the tax-qualified, defined benefit Retirement
Plan for Salaried Employees and the Supplemental Executive Retirement Plans I
and II, for various combinations of compensation and years of service:
<TABLE>
<CAPTION>
Provident Retirement Plan for Salaried Employees and Supplemental
Executive Retirement Plan II
- --------------------------------------------------------------------------------------
Estimated Annual Benefits for Representative Years of
Service Credit
Avg Base Salary -----------------------------------------------------------------
in 5 Consecutive 15 20 25
Highest Pd Yrs 10 Years Years Years Years 30 Years
- ---------------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
$ 150,000 $ 19,908 35,208 50,508 58,308 $ 66,108
175,000 24,900 42,708 60,504 69,552 78,600
200,000 29,904 50,208 70,500 80,808 91,104
225,000 34,908 57,708 80,508 92,052 103,608
250,000 39,900 65,208 90,504 103,308 116,100
300,000 49,908 80,208 110,508 125,808 141,108
350,000 59,904 95,208 130,500 148,308 166,104
400,000 69,900 110,208 150,504 170,808 191,100
450,000 79,908 125,208 170,508 193,308 216,108
500,000 89,904 140,208 190,500 215,808 241,104
600,000 109,908 170,208 230,508 260,808 291,108
700,000 129,900 200,208 270,504 305,808 341,100
800,000 149,904 230,208 310,500 350,808 391,104
900,000 169,908 260,208 350,508 395,808 441,108
1,100,000 209,904 320,208 430,500 485,808 541,104
</TABLE>
15
<PAGE>
Benefits for the Provident Retirement Plan for Salaried Employees and the
Supplemental Executive Retirement Plan II are based on the average base salary
earned during the five consecutive years of highest compensation preceding
retirement date plus $5 for 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. The Supplemental Executive Retirement Plan II provides a benefit to
the participant without the limitations on annual benefits imposed by Section
415 and 401(a)(17) of the Internal Revenue Code of 1986, which for 1999 was
$160,000. As of December 31, 1999, Messrs. Chandler and Copeland had
approximately 6 and 3 years of credited service, respectively. Mr. Chandler
will be covered under the Provident Retirement Plan for Salaried Employees,
the Supplemental Executive Retirement Plan II, and the Supplement benefit
described in his employment agreement, which is described below.
<TABLE>
<CAPTION>
Provident Retirement Plan for Salaried Employees and Supplemental
Executive Retirement Plan
- ------------------------------------------------------------------------------------
Estimated Annual Benefits for Representative Years
of Service Credit
Avg Base Salary ---------------------------------------------------------------
in 5 Consecutive 10 15 20 25 30
Highest Pd Yrs Years Years Years Years Years
- ---------------- ----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 150,000 34,908 50,208 65,508 65,808 66,108
175,000 42,408 60,204 78,000 78,300 78,600
200,000 49,908 70,200 90,504 90,804 91,104
225,000 57,408 80,208 103,008 103,308 103,608
250,000 64,908 90,204 115,500 115,800 116,100
300,000 79,908 110,208 140,508 140,808 141,108
350,000 94,908 130,200 165,504 165,804 166,104
400,000 109,908 150,204 190,500 190,800 191,100
450,000 124,908 170,208 215,508 215,808 216,108
500,000 139,908 190,200 240,504 240,804 241,104
600,000 169,908 230,208 290,508 290,808 291,108
700,000 199,908 270,204 340,500 340,800 341,100
800,000 229,908 310,200 390,504 390,804 391,104
900,000 259,908 350,208 440,508 440,808 441,108
1,100,000 319,908 430,200 540,504 540,804 541,104
</TABLE>
The Company also provides a Supplemental Executive Retirement Plan pursuant
to which certain highly compensated key executive employee of the Company may
be entitled to retirement benefits in addition to those that may be funded or
paid through a tax-qualified plan such as the Provident Retirement Plan for
Salaried Employees. 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 the Company (which will be achieved when the participant has 20 years of
service), plus $1800, offset by the benefits payable under the Provident
Retirement Plan for Salaried Employees and certain Social Security benefits;
or (b) the difference between the benefits which are payable under the
Provident Retirement Plan for Salaried Employees and the benefits which would
be payable under the Provident Retirement Plan for Salaried Employees to the
participant without the limitations on annual benefits imposed by Section 415
and 401(a)(17) of the Internal Revenue Code of 1986, which for 1999 was
$160,000. Proportionately smaller supplemental retirement benefits are payable
under the Supplemental Executive Retirement Plan upon retirement before age
62. As of December 31, 1999, Messrs. Best and Watjen both had approximately 5
years of credited service.
The following table illustrates the combined estimated annual benefits
payable under the UNUM Employees Pension Plan and Trust (the "Pension Plan")
and the Supplemental Retirement Plan (the "Supplemental Plan") upon normal
retirement of participants with varying Final Average Earnings (as defined
below) and years of Credited Service. The amounts shown are annual payments
for the life of a participant who retires at age 65.
16
<PAGE>
Specific variations from the table for the named executives are discussed
below. As of December 31, 1999, Messrs. Orr, Crispin, Broatch and Ms. Rosen
had 13, 8, 6 and 24 years of credited service respectively. If each of the
above were to continue his or her employment until age 65, the respective
years of service would be 21, 27, 23, and 42 for purposes of computing
benefits.
<TABLE>
<CAPTION>
UNUM Employees Pension and Supplemental Plans
- ------------------------------------------------------------------------------------
Estimated Annual Benefits by Years of Credited Service
Final Average ---------------------------------------------------------------------
Earnings 10 15 20 25 30 35 40 45
- ------------- ------- ------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
500,000 75,300 114,700 155,100 196,700 239,300 272,800 306,200 339,600
600,000 91,100 138,700 187,600 237,800 289,300 329,700 370,100 410,400
700,000 106,900 162,700 220,000 278,900 339,300 386,600 434,000 481,300
800,000 122,700 186,700 252,500 320,000 389,300 443,600 497,800 552,100
900,000 138,400 210,700 284,900 361,100 439,300 500,500 561,700 622,900
1,000,000 154,200 234,700 317,300 402,200 489,300 557,500 625,600 693,800
1,100,000 170,000 258,700 349,800 443,300 539,300 614,400 689,500 764,600
1,200,000 185,800 282,700 382,200 484,500 589,300 671,400 753,400 835,400
1,300,000 201,600 306,700 414,700 525,600 639,300 728,300 817,300 906,300
1,400,000 217,300 330,700 447,100 566,700 689,300 785,300 881,200 977,100
1,500,000 233,100 354,700 479,600 607,800 739,300 842,200 945,100 1,047,900
1,600,000 248,900 378,700 512,000 648,900 789,300 899,100 1,009,000 1,118,800
1,700,000 264,700 402,700 544,500 690,000 839,300 956,100 1,072,800 1,189,600
1,800,000 280,400 426,700 576,900 731,100 889,300 1,013,000 1,136,700 1,260,400
1,900,000 296,200 450,700 609,300 772,200 939,300 1,070,000 1,200,600 1,331,300
2,000,000 312,000 474,700 641,800 813,300 989,300 1,126,900 1,264,500 1,402,100
</TABLE>
The above table reflects the amendment of the Pension Plan to a Lifecycle
formula effective January 1, 1997. Retirement benefits under this plan include
a Basic Benefit based upon age at retirement, years of Credited Service, Final
Average Earnings and Social Security Compensation and an additional Transition
Benefit based on the preceding factors and also upon each participant's age at
June 30, 1997. The plan also includes certain limited duration grandfathered
formulas in effect prior to 1997. "Final Average Earnings: is defined as the
average of salary plus annual cash incentive payments for the five years in
which earnings were highest within the last 10 years of employment. "Social
Security Covered Compensation" means the average of the annual Social Security
taxable wage base in effect during the 35 year period ending when the employee
reaches Social Security Retirement Age. Accrued benefits are 100 percent
vested after 5 years of service. Because the Transition Benefit varies based
upon age at 6/30/97 and Social Security Covered Compensation varies with year
of birth, the retirement benefits shown above are averages; benefits for
individual executives may be 10 to 15 percent higher or lower than shown.
The supplemental Plan provides benefits equal to the difference between what
the Pension Plan can pay reflecting the limits imposed by Sections 401(a) and
415 of the Code and what the Pension Plan would otherwise have paid had these
limits not existed. All participants in the Pension Plan who retire or
terminate after January 1, 1983 and are affected by the limits are eligible to
participate in the Supplemental Pension Plan, including Messrs, Orr, Crispin,
Broatch and Ms. Rosen. Effective January 1, 1997, the Supplemental Pension
Plan also pays benefits that would have been paid by the Pension Plan had
compensation not been deferred.
Messrs. Orr and Crispin were entitled to pension benefits under the
Supplemental Executive Retirement Plan (the "SERP") which provides benefits
for certain executives who have been designated to participate by the
Corporation's Board. The SERP benefits equal 2.5 percent of Final Average
Earnings for each year of credited service up to a maximum of 20 years, less
any benefit payable from the Pension and Supplemental Plans. Messrs. Orr's
SERP benefit was replaced under the terms of his new employment agreement.
Messr. Crispin terminated employment prior to being eligible for the SERP. Ms.
Rosen is eligible to participate in a modified SERP, however, her benefits
under the Pension and Supplemental Plans are expected to exceed the minimum
benefits under the SERP formula.
17
<PAGE>
Employment Agreements
In connection with the signing of the Merger agreement, the Company and UNUM
entered into a new employment agreement with Mr. Orr and the Company entered
into a new employment agreement with Mr. Chandler. The agreements for Messrs.
Orr and Chandler were effective upon the completion of the Merger and
superseded Mr. Orr's previous executive severance agreement with UNUM and Mr.
Chandler's previous employment agreement with the Company. The new agreements
were to 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.
On November 1, 1999, Mr. Orr retired from the Company. At that time, the
Company negotiated a settlement of all obligations under his employment
agreement as described in the Report of the Compensation Committee and it was
terminated.
Upon Mr. Orr's retirement, Mr. Chandler became the Chairman and Chief
Executive Officer of the Company, as well as President. Under the terms of the
employment agreement with Mr. Chandler, he receives an initial annual base
salary of $900,000. Mr. Chandler is eligible for an annual bonus with a target
level not less than 100% of his annual base salary during the term of his
agreement. As provided for in his employment agreement, 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
Stock Plan of 1999 was made to Mr. Chandler, to vest ratably over four years.
Mr. Chandler is 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 benefits will be paid only if he
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 Mr. Chandler reaches age 55, the replacement percentage
will increase by 1% per year, up to a maximum of 60%. Upon his 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.
The employment agreement provides for payments upon 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. Chandler and his spouse on the same basis as such benefits are
provided to the Chief Executive Officer of the Company, 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.
If any payments pursuant to the agreement or otherwise would be subject to
any excise tax under Section 4999 of the Internal Revenue Code, the Company
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.
Mr. Chandler is subject to a non-competition provision for one year
following termination of employment.
18
<PAGE>
The Company also entered into employment agreements with Messrs. Crispin,
Watjen, and Copeland, and Ms. Rosen. The respective agreements for each of
these individuals superseded previous agreements with UNUM or the Company
regarding the employment and the termination of these executive officers. Mr.
Crispin ceased to be an executive officer of the Company in September, and
resigned from the Company in December 1999. Mr. Crispin and the Company agreed
that the employment agreement entered into in connection with the merger would
be terminated, and that Mr. Crispin would be entitled to the benefits provided
under his previous employment agreement with UNUM.
The employment agreements with Mr. Watjen and Ms. Rosen, provide for base
salaries of $500,000 and initial grants of options to acquire 170,000 shares
of the Company's common stock at fair market value at the time of the Merger.
Mr. Copeland's base salary is $350,000 and he received a grant of options for
110,000 shares. The stock options vest ratably over four years. Each of these
executives is eligible for a target bonus of 75% of base salary.
Each executive is 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 the Company, provided that such benefit will not be less than the
benefit each executive had accrued at the completion of the Merger under the
Provident Companies, Inc. Supplemental Executive Retirement Plan.
In the event of termination during employment without cause or for good
reason, in the three-year period following the Merger or after any subsequent
change in control each executive will receive an amount equal to three times
salary and bonus and three years of pension accrual, and continued welfare
benefit coverage for three years; all stock options would vest, all
restrictions on restricted stock awards would lapse, other equity-based awards
would vest and options would 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 executive officers would
receive two times salary and bonus and two years of health continuation
coverage.
If any payments pursuant to the agreement or otherwise would be subject to
any excise tax under Section 4999 of the Internal Revenue Code, the Company
will provide an additional payment such that these individuals retain a net
amount equal to the payments each would have retained if such excise tax had
not applied.
Change in Control Severance Agreements
The Company offers Change in Control Severance Agreements to certain other
of its senior officers as determined by the Board of Directors, acting on the
recommendation of the Compensation Committee. The essential provisions of the
agreements provide certain benefits in the event the senior officer's
employment is terminated by the Company without cause or by the officer for
good reason as defined in the plan, within a two year period following a
change in control, or in certain circumstances prior to a change in control if
the severance benefits include:
. Payment of two times base salary and bonus (based on higher of pre-
change-in-control salary and bonus or current salary and bonus);
. Pro rata bonus, assuming achievements of target;
. Two years additional service credit towards pension benefit accrual,
including both qualified and supplemental plans;
. Continued medical and dental coverage for two years (secondary to
coverage obtained from subsequent employer);
. Vesting of all equity based awards;
. Vesting of accrued pension benefits, including both qualified and
supplemental retirement plans; and
. Payment of all deferred compensation
Mr. Best is one of the senior officers who has a change in control severance
agreement as described above.
19
<PAGE>
COMPANY PERFORMANCE
The following graph shows a five year comparison of cumulative total returns
for the common stock of the Company (NYSE symbol: UNM), based on UNUM (NYSE
symbol: UNM) historical and Provident (NYSE symbol: PVT) historical
performance, 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).
[GRAPH APPEARS HERE]
Assumes $100 invested in each at December 1994 with dividends reinvested
The following table contains the values used to plot the performance graph
above:
<TABLE>
<CAPTION>
Dec. 1994 Dec. 1995 Dec. 1996 Dec. 1997 Dec. 1998 Dec. 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
UnumProvident (UNUM).... $100 $148.95 $199.18 $303.86 $330.08 $183.80
S&P 500................. $100 $137.58 $169.17 $225.60 $290.08 $351.12
Life Index.............. $100 $145.30 $180.90 $251.07 $270.83 $288.97
PVT..................... $100 $160.08 $233.04 $375.53 $408.02 $233.78
</TABLE>
20
<PAGE>
SECURITY OWNERSHIP
The following table sets forth the information regarding the beneficial
ownership of the common stock of the Company, as of March 20, 2000, by each
director, nominee, and named executive officer, and by all directors,
nominees, and executive officers 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 disposition power.
<TABLE>
<CAPTION>
Shares Beneficially Owned Deferred % of
Shares Subject to Options Share Rights Total Shares Company
Beneficially Exercisable or Phantom Beneficially Common
Name Owned as of May 20, 1999 Shares Owned Stock
- ---- ------------ ------------------------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C>
J. Harold
Chandler(1)(2)......... 914,108 1,418,548 87,570 2,420,226 *
William L. Armstrong.... 31,771 11,899 0 43,670 *
Ronald E.
Goldsberry(3).......... 7,800 18,000 6,927 32,727 *
Hugh O. Maclellan,
Jr.(4)................. 24,205,130 14,454 0 24,219,584 10.07
A.S. (Pat)
MacMillan(4)........... 658 8,906 0 9,564 *
George J.
Mitchell(3)(5)......... 1,000 14,000 4,838 19,838 *
Cynthia A.
Montgomery(3).......... 7,200 22,000 2,947 32,147 *
James L. Moody, Jr.(3).. 16,000 16,000 2,081 34,081 *
C. William Pollard(5)... 16,397 0 3,325 19,722 *
Lawrence R. Pugh(3)..... 8,000 20,000 13,440 41,440 *
Steven S Reinemund(5)... 2,890 10,074 1,624 14,588 *
Lois Dickson Rice(3).... 600 18,000 2,160 20,760 *
John W. Rowe(3)(6)...... 8,500 16,000 4,160 28,660 *
Burton E. Sorensen(5)... 40,850 0 4,890 45,740 *
James F. Orr,
III(1)(7).............. 296,142 1,454,000 0 1,750,142 *
Thomas R. Watjen(1)(2).. 123,012 511,000 31,837 655,849 *
Elaine D. Rosen(1)...... 56,216 91,800 0 148,016 *
F. Dean Copeland(1)(2).. 25,508 146,000 9,676 181,184 *
Robert E. Broatch(1).... 27,908 92,282 0 120,190
Robert Crispin(1)....... 92,776 212,290 0 305,066
Robert O. Best(1)(2).... 40,529 183,230 4,953 228,712 *
All directors and
executive officers as a
group.................. 25,922,995 4,278,483 180,428 30,381,906 12.40
</TABLE>
- --------
* Denotes less than one percent
(1) Shares owned by Messrs. Chandler, Orr, Watjen, Copeland, Broatch and
Crispin and Ms. Rosen and the executive officers as a group include shares
owned in the Company's 401(k) plan and the Company's Employee Stock
Purchase Plan.
(2) Includes number of shares of phantom Company 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 the Company 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").
The performance shares cannot be converted into stock for a period of
three years after grant, unless (with respect to the awarded shares only)
the participant terminates employment with the Company. As a result of the
merger with UNUM, a change in control occurred under the terms of the MICP
and premium shares which were previously subject to forfeiture for a
period of three years, vested.
(3) Includes number of shares of phantom Company common stock credited to the
non-employee directors' accounts under the former UNUM Director Deferred
Compensation Plan.
(4) Information concerning the nature of the ownership of the securities
listed here may be found in the section of this Proxy Statement entitled
"Beneficial Ownership of Company Securities." Information concerning
shares for which ownership is disclaimed may also be found in that
section.
(5) Includes number of shares of phantom Company common stock representing
deferred share rights awarded under the Company's Non-Employee Director
Compensation Plan of 1998.
(6) Includes 7,000 shares held by Mr. Rowe's spouse and 500 shares held by Mr.
Rowe's child.
(7) Includes 26,000 shares held jointly with or by Mr. Orr's spouse and 4,459
shares held by Mr. Orr's child.
21
<PAGE>
BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK
Beneficial Ownership of UnumProvident Common Stock. Detailed information
about the security ownership of beneficial owners of more than 5% of
UnumProvident 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
UnumProvident 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.
<TABLE>
<CAPTION>
Percent of
UNUMProvident
Direct Owned Common Stock
Name and Address of Beneficial Owner (Voting Power) Outstanding
- ------------------------------------ -------------- -------------
<S> <C> <C>
The Maclellan Foundation, Inc.................... 10,342,180 4.30
Chattanooga, Tennessee
R. J. and Cora L. Maclellan Trusts for The
Maclellan Foundation............................ 4,441,024 1.85
Chattanooga, Tennessee
Charitable Trusts................................ 4,190,923 1.74
Chattanooga, Tennessee
Trusts U/A R. J. Maclellan and Trusts U/A
Cora L. Maclellan for Families of H. O.
Maclellan, Sr. and R. L. Maclellan.............. 3,710,155 1.54
Chattanooga, Tennessee
Trust U/A H. O. Maclellan, Sr. for Children and
Grandchildren................................... 1,617,605 0.67
Chattanooga, Tennessee
Kathrina H. Maclellan............................ 1,880,056 0.78
Lookout Mountain, Tennessee
Hugh O. Maclellan, Jr. .......................... 1,078,979 0.45
Chattanooga, Tennessee
Other (Trusts and Family Ownership).............. 1,676,479 0.70
Chattanooga, Tennessee
</TABLE>
The following tables present information about the beneficial owner of the
Company'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 stock voting power and these persons holding five
percent (5%) or more of such investment power, respectively. The Company does
not know of by other person that is a beneficial owner of more than 5% of the
Company's common stock.
Beneficial Ownership Based on Voting Power
<TABLE>
<CAPTION>
Amount Percent of
Beneficially UnumProvident
Owned(1) Common Stock
Name and Address of Beneficial Owner (Voting Power) Outstanding
- ------------------------------------ -------------- -------------
<S> <C> <C>
Hugh O. Maclellan, Jr.............................. 24,205,130 10.06
Chattanooga, Tennessee
Kathrina A. Maclellan.............................. 12,640,542 5.25
(Mrs. Robert L. Maclellan)
Lookout Mountain, Tennessee
</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 Hugh O. Maclellan, Jr. and
Kathrina H. Maclellan would have been equal to 28,937,401 shares of
UnumProvident common stock (12.03%).
22
<PAGE>
(2) Both Hugh O. Maclellan, Jr. and Kathrina H. Maclellan are trustees of The
Maclellan Foundation, Inc. (the "Maclellan Foundation"). Hugh O.
Maclellan, Jr. held a revocable proxy to vote the shares of UnumProvident
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) Both Hugh O. Maclellan, Jr. and Kathrina H. Maclellan are also trustees
of the R. J. Maclellan Trust for the Maclellan Foundation and the Cora L.
Maclellan Trust for the Maclellan Foundation. 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.
(4) Hugh O. Maclellan, Jr. had the power to vote the following shares of
UnumProvident common stock:
<TABLE>
<S> <C> <C> <C>
Sole Voting Power............................... 3,279,669 shares -- 1.36%
Shared Voting Power............................. 20,925,461 shares -- 8.70%
----------------- -----
Total......................................... 24,205,130 shares -- 10.06%
================= =====
Totals listed above, and in the "Beneficial Ownership Based on Investment
Power" table below, do not include 62,143 shares of UnumProvident common
stock voted solely by spouse, Nancy B. Maclellan, of which beneficial
ownership is disclaimed. Also totals do not include options to purchase
14,454 shares of UnumProvident common stock, all of which are exercisable
on June 30, 2000.
(5) Kathrina H. Maclellan has the power to vote the following shares of
UnumProvident common stock:
Sole Voting Power............................... 1,880,056 shares -- 0.78%
Shared Voting Power............................. 10,760,486 shares -- 4.47%
----------------- -----
Total......................................... 12,640,542 shares -- 5.25%
================= =====
</TABLE>
Beneficial Ownership Based on Investment Power
<TABLE>
<CAPTION>
Amount Percent of
Beneficially UnumProvident
Owned(1) Common Stock
Name and Address of Beneficial Owner (Investment Power) Outstanding
- ------------------------------------ ------------------ -------------
<S> <C> <C>
Hugh O. Maclellan, Jr. ........................ 24,205,130 10.06
Chattanooga, Tennessee
Kathrina H. Maclellan.......................... 22,982,772 9.55
Lookout Mountain Tennessee
Charlotte M. Heffner........................... 15,259,462 6.34
(Mrs. Richard L. Heffner)
Atlanta, Georgia
Robert H. Maclellan............................ 12,569,332 5.22
Lookout Mountain, Tennessee
</TABLE>
- --------
(1) Beneficial ownership of securities is listed according to Rule 13d-3 of
the Securities 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 Hugh O. Maclellan, Jr., Kathrina H.
Maclellan, Charlotte M. Heffner, Robert H. Maclellan and SunTrust Banks,
Inc. (with respect to the Maclellan family only) would have been equal to
31,358,720 shares of UnumProvident common stock (13.03%). Shares of
common stock held by SunTrust Bank, Chattanooga which are included in the
totals for the Maclellan family include 10,000,032 shares of
UNUMProvident common stock.
(2) The 10,342,180 shares of UnumProvident 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 and Robert
H. Maclellan, trustees of the Maclellan Foundation, all of whom share
investment power with respect to these shares.
23
<PAGE>
(3) Hugh O. Maclellan, Jr. had the power to invest the following shares of
UnumProvident common stock:
<TABLE>
<S> <C> <C> <C>
Sole Investment Power........................... 1,880,458 shares -- 0.78%
Shared Investment Power......................... 22,324,672 shares -- 9.28%
----------------- -----
Total......................................... 24,205,130 shares -- 10.06%
================= =====
These shares listed above as beneficially owned by Mr. Maclellan based
upon investment power include the 10,342,180 shares of UnumProvident common
stock owned by the Maclellan Foundation and 4,441,024 shares of
UnumProvident common stock owned by the R. J. and Cora L. Maclellan Trusts
for the Maclellan Foundation. Totals listed above do not include 62,143
shares of UnumProvident 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 14,454 shares of
UnumProvident common stock, all of which are exercisable on June 30, 2000.
</TABLE>
(4) Kathrina H. Maclellan had the power to invest the following shares of
UnumProvident common stock:
<TABLE>
<S> <C> <C> <C>
Sole Investment Power............................ 1,880,056 shares -- 0.78%
Shared Investment Power.......................... 21,102,666 shares -- 8.77%
----------------- ----
Total.......................................... 22,982,722 shares -- 9.55%
================= ====
These shares listed above as beneficially owned by Mrs. Maclellan based
upon investment power include the 10,342,180 shares of UnumProvident common
stock owned by the Maclellan Foundation and 4,441,024 shares of
UnumProvident common stock owned by the R. J. and Cora L. Maclellan Trusts
for the Maclellan Foundation.
</TABLE>
(5) Charlotte M. Heffner had the power to invest the following shares of
UnumProvident common stock:
<TABLE>
<S> <C> <C> <C>
Sole Investment Power............................ 668,234 shares -- 0.28%
Shared Investment Power.......................... 14,591,228 shares -- 6.06%
----------------- ----
Total.......................................... 15,259,462 shares -- 6.34%
================= ====
These shares listed above as beneficially owned by Mrs. Heffner based
upon investment power include the 10,342,180 shares of UnumProvident common
stock owned by the Maclellan Foundation for which Mrs. Heffner had shared
investment power. Totals listed above do not include 47,933 shares of
UnumProvident 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 7,811 shares of
UnumProvident common stock, all of which are exercisable on June 30, 2000.
</TABLE>
(6) Robert H. Maclellan had the power to invest the following shares of
UnumProvident common stock:
<TABLE>
<S> <C> <C> <C>
Sole Investment Power............................ 269,187 shares -- 0.11%
Shared Investment Power.......................... 12,300,145 shares -- 5.11%
----------------- ----
Total.......................................... 12,569,332 shares -- 5.22%
================= ====
</TABLE>
These shares listed above as beneficially owned by Mr. Maclellan based
upon investment power include the 10,342,180 shares of UnumProvident common
stock owned by the Maclellan Foundation for which Mr. Maclellan had shared
investment power.
Accountants
Representatives of the Company's accountants, Ernst & Young LLP, are
expected to be present at the annual meeting to respond to appropriate
questions and to make a statement if they so desire.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2001 Annual Meeting of
the Company stockholders pursuant to Rule 14a-8 promulgated under the
Securities Exchange Act of 1934 must be received by the Secretary not later
than January 20, 2001, in order to be included in the proxy materials sent by
management of the Company.
24
<PAGE>
[MAP APPEARS HERE]
<PAGE>
[X] Please mark your 606
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" PROPOSAL 1 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. (See Reverse) [_] [_]
- --------------------------------------------------------------
(Except Nominee(s) written above)
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME OR NAMES APPEAR 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.
- ---------------------------------------------------
- ---------------------------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Dear Stockholder:
UnumProvident 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 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 the Web site http://www.eproxyvote.com/unm
2. To submit your proxy over the telephone:
. On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683)
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>
UNUMPROVIDENT CORPORATION
Annual Meeting of
Stockholders May 19, 2000 10:00
a.m., Eastern Daylight Time
2211 Congress Street, Portland,
Maine 04122
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF UNUMPROVIDENT CORPORATION
The undersigned hereby appoints J. Harold Chandler and F. Dean Copeland, 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 the shares of common stock of the undersigned in UnumProvident,
at the Annual Meeting, upon all matters that may properly come before the
meeting, including the matters described in the Proxy Statement 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" 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.
Election of Directors, Nominees:
01) William L. Armstrong, 02) A.S. MacMillan, 03) George J. Mitchell,
04) Cynthia A. Montgomery
This proxy card, when signed and returned will also constitute voting
instructions to the trustee for shares held in the UnumProvident 401 (k)
Retirement Plan or to the broker-dealer for shares held in the Employee Stock
Purchase Plan. If voting instructions representing shares in the foregoing
employee benefit plans are not received, those shares will not be voted.
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