<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
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
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
</TABLE>
____________________________UNUM Corporation____________________________
(Name of Registrant as Specified In Its Charter)
___________________________Merrill Corporation__________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
<TABLE>
<S> <C> <C>
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
---------------------------------------------------------------------
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):
---------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------------
/ / 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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</TABLE>
<PAGE>
<TABLE>
<S> <C>
UNUM CORPORATION
[LOGO] 2211 Congress Street
Portland, Maine 04122
</TABLE>
March 25, 1996
To Our Stockholders:
You are invited to attend the 1996 Annual Meeting of Stockholders of UNUM
Corporation. The meeting will be held on May 10, 1996, at 10:30 a.m. at the
Portland Marriott, 200 Sable Oaks Drive, South Portland, Maine.
The items to be considered at this meeting are detailed in this proxy
statement. Also enclosed is a copy of UNUM Corporation's 1995 Annual Report,
including consolidated financial statements.
WHETHER OR NOT YOU PLAN ON ATTENDING THE ANNUAL MEETING, WE ASK THAT YOU
COMPLETE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENVELOPE PROVIDED. PLEASE TAKE NOTE THAT IF YOU ARE PLANNING TO ATTEND THE
ANNUAL MEETING, THERE IS A BOX TO CHECK ON THE PROXY CARD IN ORDER TO REQUEST AN
ADMISSION TICKET.
Thank you for your interest in and commitment to UNUM Corporation. We look
forward to seeing you at the meeting.
Sincerely,
[/S/ JAMES F. ORR III]
JAMES F. ORR III
Chairman and
Chief Executive Officer
<PAGE>
UNUM CORPORATION
2211 CONGRESS STREET
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of UNUM
Corporation, a Delaware corporation, will be held at the Portland Marriott, 200
Sable Oaks Drive, South Portland, Maine, on May 10, 1996, at 10:30 a.m., local
time, for the following purposes:
1. To elect four directors to serve for three-year terms expiring
in 1999;
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Corporation's independent auditors for the year 1996;
3. To approve certain amendments to the Corporation's 1987
Executive Stock Option Plan and 1990 Long-Term Stock Incentive
Plan;
4. To approve the adoption of the Corporation's 1996 Long-Term
Stock Incentive Plan; and
5. To transact any other business that may properly come before the
Annual Meeting.
The close of business on March 13, 1996, has been fixed as the record date
for determination of the stockholders entitled to notice of and to vote at the
Annual Meeting.
By order of the Board of Directors,
[/S/ KEVIN J. TIERNEY]
KEVIN J. TIERNEY
SECRETARY
YOUR VOTE IS IMPORTANT TO ENSURE THAT A MAJORITY OF THE STOCK IS
REPRESENTED. PLEASE DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN
THE ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
March 25, 1996
Portland, Maine
<PAGE>
UNUM CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 10, 1996
GENERAL INFORMATION
This proxy statement concerns the Annual Meeting of Stockholders of UNUM
Corporation, a Delaware corporation (the "Corporation" or "UNUM") to be held on
May 10, 1996 (the "Annual Meeting"). The Board of Directors is soliciting your
proxy for use at the meeting and at any adjournment of the meeting by asking you
to date, sign and return the enclosed proxy card.
For proxy cards properly dated, signed and returned, the shares will be
voted at the meeting in accordance with each stockholder's directions. Please
vote by marking the appropriate boxes on the enclosed proxy card. If the card is
signed and returned without directions, the shares will be voted "FOR" the
election of all directors as nominated, "FOR" the ratification of Coopers &
Lybrand L.L.P. ("Coopers & Lybrand") as the Corporation's independent auditors,
"FOR" approval of certain amendments to the Corporation's 1987 Executive Stock
Option Plan and 1990 Long-Term Stock Incentive Plan, and "FOR" approval of the
Corporation's 1996 Long-Term Stock Incentive Plan. If other matters properly
come before the meeting, the shares will be voted in accordance with the best
judgment of the persons named as proxies on the proxy card. Any shares not voted
"FOR" a particular director as a result of a direction to withhold or a broker
nonvote will not be counted in such director's favor. All matters to be acted on
at the Annual Meeting other than the election of directors require the
affirmative vote of a majority of the shares present in person or by proxy at
the meeting to constitute the action of the stockholders. In accordance with
Delaware law, abstentions will, while broker nonvotes will not, be treated as
present for this purpose. A broker nonvote is a proxy submitted by a broker in
which the broker fails to vote on behalf of a client on a particular matter for
lack of instruction when such instruction is required by the New York Stock
Exchange. A proxy may be revoked by a stockholder at any time before its use by
giving written notice of revocation to the Corporate Secretary of the
Corporation, 2211 Congress Street, Portland, Maine 04122, by submitting a
subsequent proxy, or by voting in person at the Annual Meeting. This proxy
statement and the enclosed proxy card are being sent to stockholders beginning
approximately March 27, 1996.
The Corporation had 73,242,765 outstanding shares of Common Stock, par value
$0.10 per share (the "Common Stock"), as of March 13, 1996.
ITEM 1. ELECTION OF DIRECTORS
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, is elected, and the term of that class is three years. As
of the close of the Corporation's last Annual Meeting of Stockholders on May 12,
1995, there were four Class I directors, four Class II directors and four Class
III directors, serving terms expiring in 1996, 1997 and 1998, respectively. The
term of the Class I directors expires with this Annual Meeting.
2
<PAGE>
The Board of Directors proposes the election of Robert E. Dillon, Jr.,
Ronald E. Goldsberry, Donald W. Harward and James F. Orr III 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 1999 and until their successors
are elected and qualify. Each nominee is currently serving as a member of the
Board of Directors of the Corporation.
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 Corporation, principal occupation,
business history for at least five years, and other directorships held. The
terms of office for each of the remaining eight 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>
James F. Orr III.......................... 53 1986 Chairman and Chief Executive 1996
Officer
Gayle O. Averyt........................... 62 1993 Director 1997
Robert E. Dillon, Jr...................... 64 1990 Director 1996
Gwain H. Gillespie........................ 64 1991 Director 1997
Ronald E. Goldsberry...................... 53 1993 Director 1996
Donald W. Harward......................... 56 1990 Director 1996
George J. Mitchell........................ 62 1995 Director 1998
Cynthia A. Montgomery..................... 43 1990 Director 1997
James L. Moody, Jr........................ 64 1988 Director 1997
Lawrence R. Pugh.......................... 63 1988 Director 1998
Lois Dickson Rice......................... 63 1993 Director 1998
John W. Rowe.............................. 50 1988 Director 1998
</TABLE>
3
<PAGE>
NOMINEES FOR ELECTION FOR TERM EXPIRING IN 1999:
<TABLE>
<S> <C>
ROBERT E. DILLON, JR.
Retired Executive
(Picture) Westfield, New Jersey
Robert E. Dillon, Jr. retired as Executive Vice President of Sony Electronics Inc.,
a New Jersey-based electronics firm, in December 1995, a post he had held since 1981.
RONALD E. GOLDSBERRY
Vice President and General Manager
Customer Service Division
Ford Motor Company
(Picture) Detroit, Michigan
Ronald E. Goldsberry is Vice President and General Manager of the Customer Service
Division at Ford Motor Company, a post he has held since February 1994. Previously,
Dr. Goldsberry served as General Sales and Marketing Manager for the Parts and Service
Division from October 1991 to February 1994 and Executive Director for Sales and
Service Strategies of Sales Operations from May 1990 to October 1991. He is also
Chairman of UNC Ventures, Inc., a venture capital firm.
DONALD W. HARWARD
President
Bates College
(Picture) Lewiston, Maine
Donald W. Harward is President of Bates College in Maine, a post he has held since
October 1989.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
JAMES F. ORR III
Chairman and Chief Executive Officer
UNUM Corporation
(Picture) Portland, Maine
James F. Orr III was elected Chairman of the Corporation in February 1988.
Additionally, he has served as President and Chief Executive Officer since September
1987. Mr. Orr joined the Corporation in 1986. Mr. Orr also serves as a director of
Nashua Corporation.
CONTINUING DIRECTORS:
GAYLE O. AVERYT
Retired Executive
(Picture) Columbia, South Carolina
Gayle O. Averyt served as Chairman of Colonial Companies, Inc. from August 1989 to
December 1993 and additionally served as Chairman of Colonial Life & Accident
Insurance Company from 1970 to December 1993. Mr. Averyt also serves as a member of the
South Carolina State Ports Authority.
GWAIN H. GILLESPIE
Retired Executive
(Picture) Sunapee, New Hampshire
Gwain H. Gillespie served as Vice Chairman of the Corporation from May 1991 to
October 1992. He served as Executive Vice President, Finance and Administration upon
joining UNUM in September 1988 until May 1991.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
GEORGE J. MITCHELL
Special Counsel
Verner, Liipfert, Bernhard, McPherson & Hand
(Picture) Washington, D.C.
George J. Mitchell joined the firm of Verner, Liipfert, Bernhard, McPherson & Hand
as special counsel in January 1995. He also serves as an advisor to James I.
Wolfensohn, Inc., an investment banking firm. In addition, he serves as a special
advisor to the President of the United States relative to economic initiatives in
Ireland. Previously, he served as a United States senator from Maine from 1980 to 1994
and additionally as Senate Majority Leader from 1989 to 1994. Senator Mitchell also
serves as a director of Federal Express Corporation, The Walt Disney Company and Xerox
Corporation.
JAMES L. MOODY, JR.
Chairman
Hannaford Bros. Co.
(Picture) Scarborough, Maine
James L. Moody, Jr. is the Chairman of Hannaford Bros. Co., a Maine-based food
retailing company, a post he has held since 1984. Additionally, Mr. Moody served as
Chief Executive Officer from 1973 to 1992. He is also a director of IDEXX Laboratories,
Inc., Penobscot Shoe Company, Sobeys Inc., Staples, Inc. and several funds of the
Colonial Group of mutual funds.
CYNTHIA A. MONTGOMERY
Professor of Competition and Strategy
Harvard University Graduate School of
Business Administration
(Picture) Boston, Massachusetts
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 also serves as a director of Newell Co. and certain Merrill Lynch mutual
funds.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
LAWRENCE R. PUGH
Chairman
VF Corporation
(Picture) Reading, Pennsylvania
Lawrence R. Pugh is Chairman of VF Corporation, an apparel company in Pennsylvania,
a post he has held since 1983. Additionally, Mr. Pugh served as Chief Executive
Officer from 1983 to 1995. He is also a director of The Black & Decker Corporation,
Mercantile Stores Company, Inc. and Meridian Bancorp, Inc.
LOIS DICKSON RICE
Guest Scholar
The Brookings Institution
(Picture) Washington, D.C.
Lois Dickson Rice is a guest scholar at The Brookings Institution, a post she has
held since October 1991. From 1981 to 1991, Ms. Rice served as Senior Vice President
of Government Affairs and a director of Control Data Corp. She also serves as a
director of Fleet Financial Group, Inc., Hartford Steam Boiler Inspection & Insurance
Co., International Multifoods Corporation and McGraw-Hill, Inc.
JOHN W. ROWE
President and Chief Executive Officer
New England Electric System
(Picture) Westborough, Massachusetts
John W. Rowe is President, Chief Executive Officer and a director of New England
Electric System ("NEES"), a post he has held since joining NEES in February 1989, and
a director of certain subsidiaries of NEES, including Massachusetts Electric Company,
The Narragansett Electric Company and New England Power Company. Mr. Rowe is also a
director of Bank of Boston Corporation and First National Bank of Boston.
</TABLE>
7
<PAGE>
SECURITY OWNERSHIP (1)
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Corporation, as of March 8, 1996, by each
director, nominee and named executive officer, and by all directors, nominees
and executive officers of the Corporation as a group. The share holdings
reported for all directors, nominees and executive officers as a group total 1.5
percent of the outstanding shares on March 8, 1996, as calculated pursuant to
the Commission's rules. All other amounts reported total less than 1 percent of
the outstanding shares on such date.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
OWNED
SUBJECT TO
OPTIONS
SHARES EXERCISABLE TOTAL SHARES
DIRECTORS, NOMINEES AND BENEFICIALLY AS OF MAY 31, BENEFICIALLY
NAMED EXECUTIVE OFFICERS OWNED 1996 OWNED
- ------------------------------------------------------------- ------------ ----------------- -----------------
<S> <C> <C> <C>
James F. Orr III............................................. 141,807(2) 236,400 378,207(2)
Gayle O. Averyt.............................................. 218,244(3) 0 218,244(3)
Robert E. Dillon, Jr......................................... 2,408 7,000 9,408
Gwain H. Gillespie........................................... 27,354(4) 3,000 30,354(4)
Ronald E. Goldsberry......................................... 900 4,000 4,900
Donald W. Harward............................................ 1,392(5) 5,300 6,692(5)
George J. Mitchell........................................... 500 2,000 2,500
Cynthia A. Montgomery........................................ 1,000(6) 6,000 7,000(6)
James L. Moody, Jr........................................... 4,000 7,000 11,000
Lawrence R. Pugh............................................. 2,000 7,000 9,000
Lois Dickson Rice............................................ 300 4,000 4,300
John W. Rowe................................................. 1,000 4,000 5,000
Robert W. Crispin............................................ 33,306 25,000 58,306
Stephen B. Center............................................ 56,241 52,350 108,591
Thomas G. Brown.............................................. 8,750 20,400 29,150
Peter J. Moynihan............................................ 35,129(7) 49,600 84,729(7)
All directors, nominees and executive officers as a group (19
persons including the above named)*........................ 582,274(8) 521,850 1,104,124(8)
</TABLE>
- ------------
(1) The number of shares reflected which, under applicable regulations of the
Securities and Exchange Commission (the "Commission"), are deemed to be
beneficially owned. Unless otherwise indicated, the person indicated holds
sole voting and dispositive power.
(2) Includes 15,185 shares held by Mr. Orr's spouse and child.
(3) Includes 45,077 shares held by Mr. Averyt's spouse and 74,654 shares held in
trust for the benefit of family members under various trusts pursuant to
which Mr. Averyt, as trustee, has sole or shared voting or dispositive
power. Mr. Averyt disclaims beneficial ownership of 18,941 of these shares
held in trust.
(4) Includes 22,237 shares held jointly with or by Mr. Gillespie's spouse.
(5) Includes 1,392 shares held jointly with Dr. Harward's spouse.
8
<PAGE>
(6) Includes 1,000 shares held jointly with Ms. Montgomery's spouse.
(7) Includes 300 shares held jointly with Mr. Moynihan's spouse.
(8) Includes 105,765 shares held in the name of a spouse, child or certain other
relative sharing the same home as the director or executive officer, or held
by the director or executive officer, or the spouse of the director or
executive officer, as a trustee or as a custodian for family members.
* Includes officers of subsidiaries who are not officers of the Corporation
but are considered "executive officers" of the Corporation under rules of
the Commission.
Indicated below are the number of shares beneficially owned as of December
31, 1995, by holders of more than five percent of the Common Stock as reported
to the Commission by such holders on Form 13G, and the percentage of the total
shares of the Common Stock outstanding which such holdings represented on such
date. American Express Financial Advisors, IDS Tower 10, Minneapolis, MN 55440,
reported beneficial ownership of 5,893,508 shares (8.1 percent), including
shared voting power over 2,781,088 shares and shared dispositive power over all
such shares; and Janus Capital Corporation, 100 Fillmore Street, Suite 300,
Denver, Colorado 80206, reported beneficial ownership of 6,955,125 shares (9.5
percent), including shared dispositive and voting power over all such shares.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held nine meetings during 1995. Average attendance at
Corporation board and committee meetings in 1995 was 96 percent. Each director
attended more than 75 percent of the board and committee meetings of which he or
she was a member, with the exception of Mr. Moody, who attended 61 percent of
such meetings. The Board of Directors has four standing committees, responsible
for assisting the full Corporation board in the discharge of its
responsibilities. Each committee member is appointed annually and serves until a
successor is named. All committees report their deliberations and
recommendations to the full Corporation board. The membership and principal
responsibilities of each committee are described below.
The Audit Committee, which held four meetings in 1995, consists of four
directors: Mr. Rowe, who is Chairperson, Mr. Mitchell, Mr. Moody and Ms. Rice.
This committee is responsible for reviewing the activities of the Corporation's
independent auditors and the internal audit department, with particular
attention to corporate accounting, reporting practices of the Corporation, the
quality and integrity of its financial statements and the independence of the
outside auditors. Each year it is responsible for recommending to the full
Corporation board the appointment of independent auditors.
The Compensation Committee, which held eight meetings in 1995, consists of
three directors: Mr. Pugh, who is Chairperson, Mr. Dillon and Dr. Harward. This
committee is responsible for monitoring compensation practices to ensure that
compensation is being designed and administered in a manner that is consistent
with the Corporation's compensation principles, objectives and strategy.
The Board Governance Committee, which held five meetings in 1995, consists
of four directors: Mr. Moody, who is Chairperson, Ms. Montgomery, Mr. Pugh and
Mr. Rowe. This committee is responsible for recommending Corporation board
membership candidates and compensation for Corporation board and committee
membership to the full Corporation board. The committee is also responsible for
determining committee composition and conducting periodic evaluations of the
Corporation board's performance and of the contribution of individual
Corporation board members.
9
<PAGE>
The Investment Committee, which held three meetings in 1995, consists of
four directors: Ms. Montgomery, who is Chairperson, Mr. Averyt, Mr. Gillespie
and Dr. Goldsberry. This committee is responsible for reviewing investment
policy and related investment strategy, and for monitoring the performance of
the investment results of the Corporation and its subsidiaries. In particular,
the committee is responsible for reviewing risk management practices,
non-performing assets and related reserving policy.
The By-Laws of the Corporation establish an advance notice procedure with
regard to the nomination, other than by or at the direction of the Corporation
board, of candidates for election as directors. To be timely, a stockholder's
notice must be delivered to, or mailed and received at, the principal executive
offices of the Corporation not less than 60 nor more than 90 days prior to the
meeting at which directors are to be elected, unless less than 75 days notice of
the date of the meeting is given or made to stockholders, in which case notice
by the stockholder must be received not later than the close of business on the
15th day following the day on which such notice of the date of the meeting was
mailed. A stockholder's notice to the Secretary shall set forth (a) as to each
nominee for director (i) the name, age, business address and residence address
of the person; (ii) the principal occupation or employment of the person; (iii)
the class and number of shares of the Corporation that are beneficially owned by
the person; and (iv) any other information relating to the person that is
required to be disclosed in solicitations of proxies for election of directors
pursuant to Rule 14(a) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and any other applicable laws or rules or regulations of
any governmental authority or of any national securities exchange or similar
body overseeing any trading market on which shares of the Corporation are
traded, and (b) as to the stockholder giving the notice (i) the name and record
address of the stockholder and (ii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder.
COMPENSATION OF DIRECTORS
Non-employee directors are paid an annual retainer of $27,500 by the
Corporation. Directors who chair a committee of the Corporation board are paid
an additional annual retainer of $4,000. Directors are also paid an attendance
fee of $1,000 for each board meeting attended, and an additional $1,000 for each
committee meeting attended. Directors may defer their compensation pursuant to a
nonqualified deferred compensation plan. Directors are also reimbursed for
out-of-pocket expenses relating to attendance at meetings. In addition, pursuant
to the Corporation's 1990 Long-Term Stock Incentive Plan, each continuing
non-employee director receives an annual automatic grant of an option to
purchase 1,000 shares of Common Stock, and each newly elected non-employee
director receives an automatic grant of an option to purchase 2,000 shares of
Common Stock.
Upon termination of service as a director, each non-employee director who
has served for at least one full three-year term will receive an annual
consulting fee equal to the director's final year retainer for as many years as
the director has served, or until his or her earlier death or association with a
competitor of the Corporation.
Mr. Averyt served as an employee of Colonial Life & Accident Insurance
Company, a wholly-owned subsidiary of the Corporation, during 1995 from January
1 through October 13, 1995, for which he was paid a salary of $11,875 and fringe
benefits of $43,250.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ELECTION OF
THE ABOVE NOMINEES.
10
<PAGE>
ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of its Audit Committee, has
appointed Coopers & Lybrand as independent auditors for the year 1996. Although
not required, the board has determined that it is desirable to request
ratification of this appointment by the stockholders of the Corporation. If
ratification is not obtained, the board will reconsider the appointment.
The Corporation has been advised that representatives of Coopers & Lybrand
will be present at the Annual Meeting. They will be afforded the opportunity to
make a statement, should they desire to do so, and to respond to appropriate
questions.
Coopers & Lybrand has served as the Corporation's independent auditors since
1993.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL.
ITEM 3. APPROVAL OF CERTAIN AMENDMENTS TO THE CORPORATION'S 1987 EXECUTIVE STOCK
OPTION PLAN AND 1990 LONG-TERM STOCK INCENTIVE PLAN
The Corporation seeks stockholder approval of certain amendments to the 1987
Executive Stock Option Plan (the "1987 Plan") and 1990 Long-Term Stock Incentive
Plan (the "1990 Plan") to extend the period during which recipients who retire
(or already have retired) on or after January 1, 1995, may exercise nonqualified
stock options to the earlier of five years after termination of employment or
the stock option's expiration date. Prior to this amendment, such retirees were
permitted only three years to exercise stock options after termination of
employment. The purpose of this amendment is to afford participants additional
flexibility in planning for their retirement.
The 1987 and 1990 Plans were approved by stockholders at the 1987 and 1990
Annual Meetings of Stockholders, respectively. The terms and administration of
the 1987 and 1990 Plans are substantially similar to those of the 1996 Long-Term
Stock Incentive Plan described under Item 4 below. The tax consequences
associated with the granting and exercise of stock options under the 1987 and
1990 Plans are described in the section entitled "Certain Federal Income Tax
Effects" under Item 4 below. As of March 8, 1996, there were 723,775 shares of
Common Stock remaining available for the granting of awards under the 1990 Plan.
As of March 8, 1996, the number of options and shares of restricted stock held
by each of the named executive officers in the Summary Compensation Table (see
page 21), by all executive officers as a group, and by all employees as a group
under the 1987 and 1990 Plans were as follows: Mr. Orr: 277,750 options and
33,600 shares of restricted stock; Mr. Crispin: 75,450 options and 22,900 shares
of restricted stock; Mr. Center: 71,050 options and 23,800 shares of restricted
stock; Mr. Brown: 30,800 options and 7,750 shares of restricted stock; Mr.
Moynihan: 60,000 options and 7,350 shares of restricted stock; all executive
officers as a group: 631,600 options and 116,450 shares of restricted stock; and
all employees as a group: 4,614,481 options and 193,200 shares of restricted
stock.
The Board of Directors may amend, suspend or terminate the plans or any
portion thereof at any time. The Chief Executive Officer of the Corporation is
authorized to make minor or administrative modifications to the plans, as well
as modifications to the plans that may be dictated by requirements of federal or
state statutes applicable to the Corporation or authorized or made desirable by
such statutes. No modification or termination of the plans shall, without the
participant's consent, alter or impair any of his or her rights or obligations
under any award theretofore granted to him or her under the plans.
11
<PAGE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Corporation present in person or by proxy at the Annual Meeting is
required for the approval of the amendments to the 1987 and 1990 Plans.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THE ABOVE DESCRIBED AMENDMENTS TO THE 1987 AND 1990 PLANS.
ITEM 4. APPROVAL OF THE ADOPTION OF THE CORPORATION'S
1996 LONG-TERM STOCK INCENTIVE PLAN
Subject to stockholder approval, the Board of Directors of the Corporation
has adopted the 1996 Long-Term Stock Incentive Plan (the "Plan"). The purpose of
the Plan is to promote the interests of the Corporation and its stockholders by
(i) attracting and retaining executive officers and other key employees of
outstanding ability; (ii) motivating such individuals, by means of
performance-related incentives, to achieve longer-range performance goals; and
(iii) enabling such individuals to participate in the long-term growth and
financial success of the Corporation.
An additional purpose of the Plan is to permit the granting of Awards (as
defined below) that satisfy the requirements of Section 162(m) of the Code and
the regulations thereunder ("Section 162(m)"). Section 162(m) generally limits
to $1 million the amount that a publicly held corporation is allowed each year
to deduct for the compensation paid to each of the corporation's chief executive
officer and the corporation's four most highly compensated officers. However,
certain types of compensation paid to such executives are not subject to the $1
million deductions limit. One such type is "qualified performance-based"
compensation. Qualified performance-based compensation must satisfy all the
following requirements: (i) compensation must be payable solely as a result of
the attainment of pre-established objective performance measures, (ii) the
performance measures must be determined by a committee consisting solely of two
or more "outside directors," (iii) the material terms under which the
compensation is to be paid, including the performance measures, must be approved
by a majority of the corporation's stockholders, and (iv) the committee
administering the plan must certify that the applicable performance measures
were satisfied before payment of any performance-based compensation is made. The
Committee (as defined below) will consist solely of "outside directors" as
defined for purposes of Section 162(m). As a result, if stockholders approve the
Plan, certain compensation under the Plan, such as that payable with respect to
options and performance-based restricted stock, is not expected to be subject to
the $1 million deductions limit under Section 162(m), but the Committee reserves
the right to grant Awards that would not meet the requirements of this section.
DESCRIPTION OF THE PLAN
Under the Plan, key employees of the Corporation and its subsidiaries
("Participants") may be granted incentive stock options, nonqualified stock
options, stock appreciation rights, limited stock appreciation rights,
performance shares and shares of restricted stock (all of which are referred to
as "Awards").
The Plan is administered by the Compensation Committee of the Corporation's
Board of Directors (the "Committee"). The Committee may interpret the Plan and
establish rules and regulations governing the administration of the Plan. The
Committee will also determine which employees of the Corporation and its
subsidiaries will be granted Awards, the time or times at which Awards shall be
granted, and the terms,
12
<PAGE>
conditions and restrictions of each Award. The Committee may delegate to members
of the Corporation's management the administration of Awards to Participants who
are not subject to Sections 16(a) and 16(b) of the Exchange Act, and except with
respect to Awards which are designed to satisfy the requirements of Section
162(m). Awards may not be transferred by a Participant other than by will or by
the laws of descent and distribution unless otherwise provided in the agreement
relating to a specific grant or in guidelines adopted by the Committee.
The maximum number of shares of Common Stock available for all Awards under
the Plan is 3,500,000. If an Award expires or is canceled without the issuance
of shares, shares subject to that Award will become available for other Awards
under the Plan. In the event of any change in the corporate structure of the
Corporation or shares of Common Stock as a result of a stock split, stock
dividend, merger or certain other specified transactions, appropriate
adjustments will be made by the Committee in the number and class of shares
available for grant, in the number and kind of shares covered by Awards and in
the purchase price of outstanding options. Shares issued under the Plan may be
authorized but unissued shares, or shares reacquired by the Corporation and held
in its treasury.
All key employees of the Corporation and its subsidiaries are eligible to be
Participants in the Plan. Approximately 450 employees would presently be
eligible to be considered for Awards under the Plan.
No Awards have yet been granted under the Plan. If the Plan had been in
effect in 1995, the grants of stock options and shares of restricted stock to
the Chief Executive Officer and the four other most highly compensated executive
officers listed in the Summary Compensation Table, to all executive officers as
a group and to all employees as a group, would have been made under the Plan.
TYPES OF AWARDS
Eligible employees who are designated by the Committee may be granted one or
more of the following Awards:
OPTIONS. Options are rights to purchase a specified number of shares of
Common Stock at the fair market value of the underlying Common Stock at the
time the option is granted with cash, or, at the discretion of the
Committee, with cash and/or with other shares of Common Stock. Options are
exercisable at such time and in such installments as determined by the
Committee. Options expire no later than ten years after the date on which
they are granted. Options on no more than 200,000 shares of the Common Stock
may be granted to any individual Participant in a single calendar year,
subject to equitable adjustment as provided in the Plan.
If a Participant ceases to be an employee of the Corporation or any
subsidiary other than by reason of death, retirement or permanent
disability, any then outstanding options may be exercised at any time before
their expiration date or within three months after the date of termination,
whichever is earlier, but only (unless otherwise determined by the
Committee) to the extent that such options were exercisable when employment
ceased, and to the extent not so exercisable, the options shall terminate on
the date employment ceases. If a Participant's employment terminates because
of death or permanent disability, any then outstanding options previously
granted to the Participant will become exercisable. In the case of death of
the Participant, such options may be exercised at any time before their
expiration date or within three years after the date of termination,
whichever is earlier. In the case of permanent disability, such options may
be exercised at any time before their expiration date. If a
13
<PAGE>
Participant's employment terminates because of retirement, any then
outstanding options may be exercised at any time before their expiration
date or within five years after the date of termination, whichever is
earlier, but only (unless otherwise determined by the Committee) to the
extent that such options were exercisable when employment ceased, and to the
extent not so exercisable, the options shall terminate on the date
employment ceases.
STOCK APPRECIATION RIGHTS AND LIMITED RIGHTS. Stock appreciation rights
("SARs") entitle the Participant to receive a payment equal to the excess of
the fair market value of a share of Common Stock on the date of exercise
over the grant price thereof. These rights may be granted under the Plan in
tandem with an option and on a freestanding basis. In the discretion of the
Committee, payment may be made in cash, shares of Common Stock or a
combination thereof. Limited stock appreciation rights ("LSARs") afford the
optionee the right to receive payment upon a Change in Control (as defined
in the Plan) equal to the excess of the higher of the highest price per
share paid in connection with such Change in Control or the highest fair
market value per share at any time during the 60 day period preceding the
Change in Control, over the option price per share. In the event of
termination of employment, with a few limited exceptions including
termination as a result of death, disability or retirement, SARs will be
canceled within 90 days of termination.
RESTRICTED STOCK. A grant of restricted stock entitles the Participant,
subject to his or her continued employment by the Corporation during the
Restricted Period (as defined below), and other conditions specified in the
Plan, to unconditional ownership of a specified number of shares of Common
Stock (the "Restricted Stock"). Restrictions will lapse on Restricted Stock
at a specified rate over a period of time (the "Restricted Period") to be
determined by the Committee and specified in the Participant's agreement
(the "Agreement") at the time of the grant. The Committee may determine
whether or not a Restricted Stock Award is designed to satisfy the
requirements of Section 162(m) and whether to condition the vesting of
shares on the attainment of specified Performance Measures (as described
below) by the Corporation over a stated Performance Period. In the event of
termination of employment, any cancelation or forfeiture of shares of
Restricted Stock will be subject to the terms set forth in the agreement
relating to such Award and/or to guidelines established by the Committee. No
more than an aggregate of 100,000 Performance Shares and shares of
Restricted Stock may be granted to any Participant in a single calendar
year, subject to equitable adjustment as provided in the Plan.
PERFORMANCE SHARES. The Plan also provides for the grant of Performance
Shares. Each "Performance Share" is a right, contingent upon the attainment
of Performance Measures within a specified performance period, to receive
one share of the Common Stock, which may be Restricted Stock, or the fair
market value of such Performance Share in cash. Prior to the settlement of a
Performance Share awarding shares of Common Stock, the holder of such Award
will have no rights as a stockholder of the Corporation with respect to the
shares of Common Stock subject to the Award. Performance Shares will be
non-transferable during the applicable performance period; provided however,
that in the event of termination of employment any cancelation or forfeiture
of the portion of a Performance Share Award that is then subject to a
performance period will be subject to the terms set forth in the agreement
relating to such Award and/or to guidelines established by the Committee. No
more than an aggregate of 100,000 Performance Shares and shares of
Restricted Stock may be granted to any Participant in a single calendar
year, subject to equitable adjustment as provided in the Plan.
14
<PAGE>
In the event of a Change in Control (as defined in the Plan) all outstanding
options and SARs will become exercisable and all restrictions on Performance
Shares and shares of Restricted Stock will lapse.
PERFORMANCE MEASURES
"Performance Measures" shall mean the criteria and objectives, established
by the Committee, that shall be satisfied as a condition to the receipt of
shares by a Participant under a Restricted Stock Award, or to the payment or
receipt of shares or cash under a Performance Share Award. With respect to any
Restricted Stock or Performance Share Award that the Committee designates as
being intended to satisfy the requirements of Section 162(m), such criteria and
objectives shall be based on one or more of the following: the market price of a
share of the Common Stock, earnings-per-share, return to stockholders (including
dividends), return-on-equity, earnings on a GAAP or statutory accounting basis,
revenues, market share, cash flow or cost reduction goals, underwriting margin,
or any combination of the foregoing. Such criteria and objectives may be
expressed on either an absolute basis or relative to the performance of a peer
group selected by the Committee. In the case of any Restricted Stock or
Performance Share Award that the Committee does not designate as being intended
to satisfy the requirements of Section 162(m), such criteria and objectives, if
any, may include one or more of the criteria and objectives referred to above or
such other criteria and objectives, including ones relating to the Participant,
as the Committee may determine.
AMENDMENT
The board may amend, suspend or terminate the Plan or any portion thereof at
any time. The Chief Executive Officer of the Corporation shall be authorized to
make minor or administrative modifications to the Plan as well as modifications
to the Plan that may be dictated by requirements of federal or state statutes
applicable to the Corporation or authorized or made desirable by such statutes.
No modification or termination of the Plan shall, without the Participant's
consent, alter or impair any of his or her rights or obligations under any Award
theretofore granted to him or her under the Plan.
CERTAIN FEDERAL INCOME TAX EFFECTS
The following discussion of certain relevant federal income tax effects
applicable to options, SARs, LSARs, Performance Shares and Restricted Stock
granted under the Plan is a summary only, and reference is made to the Internal
Revenue Code of 1986, as amended (the "Code"), for a complete statement of all
relevant federal tax provisions.
NONQUALIFIED STOCK OPTIONS
In the case of a nonqualified stock option, a Participant generally will not
be taxed upon the grant of such an option. Rather, at the time of exercise of
such nonqualified stock option (and in the case of an untimely exercise of an
incentive stock option), the Participant will recognize ordinary income for
federal income tax purposes in an amount equal to the excess of the fair market
value of the shares purchased over the option price. The Corporation will
generally be entitled to a federal income tax deduction at such time, in the
same amount that the Participant recognizes as ordinary income.
INCENTIVE STOCK OPTIONS
In the case of an incentive stock option, a Participant will not be in
receipt of taxable income upon the grant of the incentive stock option or upon
its timely exercise.
If stock acquired pursuant to a timely exercised incentive stock option is
later disposed of after satisfaction of certain holding period requirements set
forth in the Code, the Participant will generally
15
<PAGE>
recognize long-term capital gain or loss (if the stock is a capital asset of the
Participant) equal to the difference between the amount realized upon such sale
and the option price. The Corporation, under these circumstances, will not be
entitled to any federal income tax deduction in connection with either the
exercise of the incentive stock option or the sale of such stock by the
Participant.
RESTRICTED STOCK
In the case of a Restricted Stock Award, a Participant generally will not be
taxed upon the grant of such an Award, but, rather, the Participant will
recognize ordinary income in an amount equal to the fair market value of the
Common Stock at the time the shares are no longer subject to a substantial risk
of forfeiture (as defined in the Code). A Participant may, however, elect (not
later than 30 days after acquiring such shares) to recognize ordinary income at
the time the shares of Restricted Stock are awarded in an amount equal to their
fair market value at that time. The Corporation will generally be entitled to a
federal income tax deduction at such time, in the same amount that the
Participant recognizes as ordinary income, except to the extent the limit of
Section 162(m) applies.
PERFORMANCE SHARES
A Participant will not recognize taxable income upon the grant of
Performance Shares and the Corporation will not be entitled to a tax deduction
at such time. Upon the settlement of Performance Shares, the Participant will
recognize compensation taxable as ordinary income in an amount equal to the fair
market value of any shares delivered and any cash paid by the Corporation, and
the Corporation will be entitled to a corresponding deduction, except to the
extent the limit of Section 162(m) applies.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Corporation present in person or by proxy at the Annual Meeting is
required for the approval of the adoption of the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THE ADOPTION OF THE PLAN.
ITEM 5. OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. If other matters are presented, it is intended that the persons
named as proxies on the proxy card will have discretionary authority to vote on
such matters in accordance with their best judgment.
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<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
OVERVIEW
- - The three-member Committee makes decisions on compensation for executives of
the Corporation and its subsidiaries, subject to the approval of the full
Board of Directors in the case of cash compensation for the Corporation's
Chief Executive Officer.
- - All of the members of the Committee are outside directors as defined under
Section 162(m).
- - The Corporation's compensation philosophy is "Pay for Results." Compensation
is designed to support the attainment of the Corporation's strategic goals
and to balance the focus on short- and long-term performance goals.
- - The compensation programs for executives are highly dependent upon the
Corporation's performance and significant portions of executives' total
compensation are tied to UNUM's return to shareholders. There are three
components of executive compensation: base salary; long-term incentives,
including shares of performance-based restricted stock and options to
purchase UNUM stock; and contingent cash payments under annual incentive
plans.
- - The Committee has taken steps to preserve the deductibility of executive
compensation under Section 162(m) by designing stock-based incentive
programs that comply with this section. However, the Committee reserves the
right to make future determinations as to existing and future compensation
plans that it believes to be in the best interests of the shareholders,
whether or not such compensation is fully deductible.
COMPENSATION PEER GROUP
- - During 1995 the Committee conducted a reassessment of its executive
compensation design in light of the evolution of the Corporation's
businesses and competitive environment, as well as changes in the market for
executive talent.
- - The Committee concluded that although the basic design of the program
continued to serve the Corporation's needs very well, executive compensation
needed to be better aligned with current compensation levels in the
financial services industry in order to continue to attract and retain top
executive talent.
- - Therefore, the Committee approved the development of a new list of 34
companies in the insurance and financial services industry against which to
measure UNUM's executive compensation (the "Peer Group"). This group is
different from the companies making up the Dow Jones Life Insurance Industry
Index shown on the performance graph below because the Corporation looks
beyond the life insurance industry when hiring executives.
- - Total compensation will be designed to equate to that paid at the 75th
percentile of the Peer Group if the Corporation performs at the level
achieved by the 75th percentile of the Peer Group.
- - Total compensation will be less than the median for the Peer Group if the
Corporation's results under-perform this group.
17
<PAGE>
BASE SALARY
- - Base salaries are set to be competitive with the Peer Group for positions
with similar levels of responsibility. Salary decisions are impacted by job
performance but generally are designed to ensure that salaries are at a
competitive level for similar positions within the Peer Group.
- - Mr. Orr's salary during 1995 reflected an increase of 12 percent in his base
salary rate to recognize his performance and to be more competitive with
salaries for chief executive officers of comparable companies. This salary
was below the median salary for chief executive officers both of the
companies in the comparison group of 76 insurance, financial services and
industrial firms used by UNUM during 1995 and for the new Peer Group.
LONG-TERM INCENTIVES
- - Long-term incentive compensation is paid in awards of stock options and
performance-based restricted stock, the value of which is estimated using a
Black-Scholes model. Forty percent of the targeted value of stock-based
compensation awarded during 1995 was allocated to restricted stock grants
and 60 percent to stock option grants.
- - The Committee does not take into consideration the level of an executive's
stock ownership or accumulated stock options in making determinations
concerning the size of stock-based awards. However, the Corporation has
suggested stock ownership guidelines that provide that over time the Chief
Executive Officer, each Executive Vice President, and each Senior Vice
President-level officer should aim to accumulate UNUM stock (exclusive of
stock options) valued at five-, three-, and two-times salary, respectively.
- - The Corporation grants nonqualified stock options at fair market value,
generally during the first quarter of each year. Stock options basically
reflect increased shareholder value, and have no value to optionees unless
the Corporation's stock price increases. The Corporation has never repriced
stock options.
- - Performance-based Restricted Stock Awards are also generally granted in the
first quarter of each year and are contingent upon the attainment of
multi-year goals set at the time of grant by the Committee. With the
exceptions of a one-time grant to Mr. Center in 1994 and grants to Mr.
Crispin provided for within his hiring agreement, all restricted stock
awards to the named executives include performance measures. Prior to 1996,
these performance measures were in terms of three-year internal
return-on-equity targets. As a result of the executive compensation
reassessment referred to above, payouts of restricted stock granted after
1995 will be determined based on financial performance relative to the
companies in the Peer Group. In order to transition to the new measurement
criteria, the restricted stock grants in 1995 for the 1995-1997 performance
cycle were replaced in 1996 with
identically-sized grants incorporating return-on-equity performance measures
relative to the Peer Group for the years 1996-1997.
- - The Corporation did not reach its return-on-equity threshold for the
1993-1995 performance cycle, and thus, despite the Corporation's good
performance during 1995, all shares for this cycle, including those granted
to the Chief Executive Officer and the other named executives, were
forfeited.
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<PAGE>
ANNUAL INCENTIVE
- - The annual cash incentive component of compensation consists of a percentage
of base salary that is a function of the officer's level within the
organization.
- - With the exception of Mr. Brown (see description under "Other Agreements and
Transactions"), annual incentive plan awards for the Chief Executive Officer
and Executive Vice Presidents are based entirely on overall corporate
performance, giving the greatest weight to attainment of financial targets,
but also considering progress against the Corporation's long-term strategic
goals. For other executive officers, annual incentives are composed of an
overall corporate component and a component based on financial and strategic
measures for the executive's affiliate or business unit.
- - The Committee sets financial measures for a threshold, target and maximum
cash incentive payout in February of each year and makes determinations
concerning payout of incentives in the following February after review of
the Corporation's performance for the full year.
- - The Corporation's 1995 earnings exceeded the earnings-per-share threshold for
a payout under the overall corporate annual incentive plan for the year. The
Committee determined to award an incentive payment for overall corporate
performance (comprising the entire payment for Messrs. Orr and Center and
the entire payment awarded to Mr. Brown as of the mailing of this proxy
statement) at a level 20 percent higher than the threshold payment
percentage based on the excellent appreciation in the Corporation's share
price during 1995 and the fact that reported earnings reflected solid
improvement in the Corporation's core disability businesses. Mr. Crispin's
annual incentive for 1995 was determined in accordance with the terms of his
hiring agreement (see description under "Other Agreements and
Transactions.") Mr. Moynihan's incentive reflected the same payout level for
the overall corporate component of his incentive and an additional component
for the performance of the Corporation's Investment Division, which exceeded
its plan for 1995.
Robert E. Dillon, Jr. Donald W. Harward Lawrence R. Pugh
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<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock for the last five fiscal years with the cumulative total return on
the S&P 500 and the Dow Jones Life Insurance Industry Index over the same period
(assuming the investment of $100 in the Corporation's Common Stock, the S&P 500
and the Dow Jones Life Insurance Industry Index on December 31, 1990, and the
reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURN
UNUM, the S&P 500, and the Dow Jones Life Insurance Industry Index ("Industry
Index")
(assumes $100 invested at 12/31/90)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
UNUM INDUSTRY INDEX S&P 500
<S> <C> <C> <C>
1990 100 100 100
1991 177 149 130
1992 234 195 140
1993 236 194 155
1994 173 174 157
1995 257 242 215
$ value of
investment
</TABLE>
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<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by the
Corporation and by UNUM Life Insurance Company of America ("UNUM America") and
Duncanson & Holt, Inc. (D&H), wholly-owned subsidiaries of the Corporation, to
the Chief Executive Officer and the other four most highly compensated executive
officers of the Corporation during any of the past three fiscal years during
which such person served as an executive officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
---------------------------
ANNUAL COMPENSATION NUMBER OF OTHER
----------------------- SECURITIES ----------------
NAME AND INCENTIVE RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY PAYMENT(1) STOCK AWARD(2) OPTIONS COMPENSATION(6)
- ------------------------------------------ --------- ---------- ----------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James F. Orr III.......................... 1995 $ 691,385 $ 248,900 $ 446,250(3) 36,950 $ 214,285
Chairman and CEO 1994 $ 626,154 $ 0 $ 388,125(5) 31,500 $ 24,238
1993 $ 606,154 $ 454,600 $ 390,500(5) 30,000 $ 27,439
Robert W. Crispin......................... 1995 $ 480,769 $ 250,000 $ 656,000(4) 55,150 $ 684,849
Executive Vice President
Stephen B. Center......................... 1995 $ 372,154 $ 111,000 $ 170,000(3) 14,150 $ 6,000
Executive Vice President 1994 $ 353,308 $ 0 $ 596,150(5) 11,650 $ 6,000
1993 $ 341,692 $ 212,300 $ 151,250(5) 11,500 $ 8,984
Thomas G. Brown........................... 1995 $ 332,127 $ 40,900 $ 102,000(3) 8,550 $ 822,980
Executive Vice President
Peter J. Moynihan......................... 1995 $ 260,000 $ 103,000 $ 93,500(3) 7,750 $ 6,000
Senior Vice President 1994 $ 234,327 $ 0 $ 64,688(5) 5,250 $ 6,000
1993 $ 225,846 $ 112,400 $ 77,000(5) 5,850 $ 6,288
</TABLE>
- ------------
(1) Cash incentive payments for 1995, 1994 and 1993 performance have been listed
in year earned, but were actually paid in the following fiscal year.
Additional cash incentive amounts in respect of 1995 were earned by Mr.
Brown (see description under "Other Agreements and Transactions") but had
not been calculated as of the mailing of this proxy statement. Such amounts
will be reported in UNUM's next proxy statement.
(2) The aggregate number and fair market value at December 31, 1995 ($54.75 per
share), of shares of restricted stock held by the five named executives as
of December 31, 1995, were as follows: Mr. Orr (25,100, $1,374,225), Mr.
Crispin (15,200, $832,200), Mr. Center (19,550, $1,070,363), Mr. Brown
(5,300, $290,175) and Mr. Moynihan (4,850, $265,538).
(3) The restricted stock awards shown were replaced by a grant to the named
executive of an identical number of shares in March 1996 in order to
transition the restricted stock program as explained in the Board
Compensation Committee Report. Restrictions may lapse on from 50 percent to
100 percent of such shares, provided that the Corporation attains targeted
return-on-equity goals during the period
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<PAGE>
1996-1997 and that the executive remains in the Corporation's employ as
provided in the 1990 Plan. No shares will be paid out if the Corporation
fails to attain the threshold financial measure established by the
Committee.
(4) The amounts shown include 7,200 shares with a grant value of $306,000 that
will vest on March 10, 1998 and 8,000 shares with a grant value of $350,000
that will vest on January 16, 1999, respectively, provided that Mr. Crispin
remains in the Corporation's employ until such vesting dates.
(5) Except as noted below, the restrictions may lapse on from 50 percent to 100
percent of the shares represented by the restricted stock awards shown for
each named executive, provided that the Corporation attains targeted
three-year return-on-equity goals and that the executive remains in the
Corporation's employ as provided in the 1990 Plan. No shares will be paid
out if the Corporation fails to attain the threshold financial measure
established by the Committee. In the case of Mr. Center, the amounts shown
include 10,000 shares with a grant value of $451,250 that will vest on
January 6, 1998 provided that Mr. Center remains in the Corporation's employ
until such vesting date.
(6) Except as noted below, the stated amounts are the Corporation's matching
contributions to the UNUM Employees Retirement Savings Plan and Trust or the
Duncanson & Holt, Inc. Employee Profit Participation and Savings Plan. In
December 1995, the Corporation paid $190,267 plus the proceeds of an
existing insurance policy to purchase a new split-dollar life insurance
policy on the lives of Mr. and Mrs. Orr that will provide a superior benefit
to Mr. and Mrs. Orr at lower overall cost to the Corporation. Mr. and Mrs.
Orr have assigned their interests in the policy back to the Corporation for
the period until Mr. Orr's retirement, and Mr. Orr is obligated under this
assignment to pay back to the Corporation the full cost of the policy if his
employment is terminated. Mr. Orr's repayment obligation will be ratably
reduced over the period until his normal retirement age of 65 and at normal
retirement the policy will become the property of Mr. and Mrs. Orr without
any repayment obligation. Insurance premiums were paid by the Corporation
with respect to Mr. Orr's previously existing term life insurance in the
amounts of $18,018, $18,238 and $18,445 relative to 1995, 1994 and 1993,
respectively. In the case of Mr. Crispin, the Corporation paid the first of
three equal annual payments of $220,000 to compensate him for foregone
compensation from his previous employer and provided relocation assistance
of $464,849 (see description under "Other Agreements and Transactions"). In
the case of Mr. Brown, the stated amount includes four non-competition
payments of $200,000 per quarter (see description under "Other Agreements
and Transactions").
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<PAGE>
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL POTENTIAL REALIZED VALUE
UNDERLYING OPTIONS GRANTED AT EXPIRATION(4)
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION ---------------------------------------
NAME GRANTED FISCAL YEAR PRICE DATE 0%($) 5%($) 10%($)
- ------------------------ ------------ ----------------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James F. Orr III........ 150(3) 0.01% $ 38.00 1/3/05 $ 0 $ 3,585 $ 9,084
36,800(1) 3.36% $ 42.69 3/10/05 $ 0 $ 987,939 $ 2,503,543
Robert W. Crispin....... 150(3) 0.01% $ 54.75 12/29/05 $ 0 $ 5,165 $ 13,088
40,000(2) 3.65% $ 43.31 1/16/05 $ 0 $ 1,089,569 $ 2,761,085
15,000(1) 1.37% $ 42.69 3/10/05 $ 0 $ 402,693 $ 1,020,466
Stephen B. Center....... 150(3) 0.01% $ 38.00 1/3/05 $ 0 $ 3,585 $ 9,084
14,000(1) 1.28% $ 42.69 3/10/05 $ 0 $ 375,846 $ 952,435
Thomas G. Brown......... 150(3) 0.01% $ 38.00 1/3/05 $ 0 $ 3,585 $ 9,084
8,400(1) 0.77% $ 42.69 3/10/05 $ 0 $ 225,508 $ 571,461
Peter J. Moynihan....... 150(3) 0.01% $ 38.00 1/3/05 $ 0 $ 3,585 $ 9,084
7,600(1) 0.69% $ 42.69 3/10/05 $ 0 $ 204,031 $ 517,036
</TABLE>
- ------------
(1) Options were granted on March 10, 1995, based on the fair market value on
that date ($42.69 per share) and became fully exercisable on March 10, 1996.
(2) 25% of the options granted were exercisable on January 16, 1996. An
additional 25% of the options granted will vest on January 16, 1997, 1998
and 1999. All options become immediately exercisable in the event of a
Change in Control of the Corporation.
(3) Options were granted on January 3, 1995, with the exception of the options
granted to Mr. Crispin on December 29, 1995. All options will become
exercisable on January 3, 2004 (with the exception of the options granted to
Mr. Crispin that will become exercisable on December 29, 2004), or on such
earlier date as it may be determined that the Corporation has attained
certain goals, as provided within the Corporation's 1998 Goals Stock Option
Plan. All options become immediately exercisable in the event of a Change in
Control of the Corporation.
(4) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten-year term. These numbers are
calculated based on the requirements promulgated by the Commission and do
not reflect the Corporation's estimate of future stock price growth.
23
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1995
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ON EXERCISE VALUE -------------------------- ---------------------------
NAME OF OPTIONS REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ------------- ------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
James F. Orr III.................. 0 $ 0 199,600 36,950 $ 3,899,703 $ 446,413
Robert W. Crispin................. 0 $ 0 0 55,150 $ 0 $ 638,438
Stephen B. Center................. 0 $ 0 38,350 14,150 $ 313,647 $ 171,388
Thomas G. Brown................... 0 $ 0 12,000 8,550 $ 20,625 $ 103,838
Peter J. Moynihan................. 0 $ 0 42,000 7,750 $ 861,746 $ 94,188
</TABLE>
- ------------
(1) Potential unrealized value is (i) the fair market value at December 31, 1995
($54.75 per share) less the option exercise price times (ii) the number of
shares acquired on exercise of options.
OTHER AGREEMENTS AND TRANSACTIONS
The Corporation has entered into severance agreements (the "Severance
Agreements") with each of Messrs. Orr, Crispin, Center, Brown and Moynihan
providing for payments and other benefits to the officer if, within two years
after a Change in Control of the Corporation, as defined in the Severance
Agreements, his or her employment is terminated (a) involuntarily other than for
willful and continued failure by the officer to perform substantially his or her
duties or willful conduct which is demonstrably and materially injurious to the
employer; or (b) voluntarily by the officer, if for Good Reason as defined in
the Severance Agreements. Under the Severance Agreements, an officer whose
employment so terminates will receive, in addition to accrued salary and
prorated incentive compensation, (1) a lump sum payment equal to three times the
sum of his or her salary in effect at termination or immediately prior to the
Change in Control, whichever is greater, plus three times the average of the
annual incentive compensation awards received by the officer in respect of the
preceding three years, or in the case of Mr. Crispin, an average designed to
approximate the amount he would have received had he been so employed; (2) a
lump sum payment equal to the present value of the reduction in retirement
payments resulting from the termination, assuming employment had continued for
three additional years; and (3) continuation of life, disability, and accident
and health insurance benefits for a maximum of three years, except to the extent
that equivalent benefits are provided by a subsequent employer. In the event of
a Potential Change in Control, as defined in the Severance Agreements, the
Corporation is obligated to fund a trust in an amount sufficient to provide for
all cash payments under such agreements.
During 1995, UNUM America assumed certain group long-term disability
insurance liabilities reinsured by Rochdale Insurance Company, an insurance
company of which Mr. Brown is the majority stockholder, in exchange for payment
to UNUM America of $10,454,000. Also during 1995, UNUM America paid $321,204 in
fees for reinsurance pool management services to ERG Management Corporation, a
corporation of which Mr. Brown is the majority stockholder.
In July 1992, in connection with the purchase of D&H, the Corporation
entered into a five-year employment agreement with Mr. Brown providing for
quarterly non-competition payments of $200,000 during the term of the agreement,
an initial base salary of $300,000 per year, payments in the amount of
24
<PAGE>
2 percent of annual profit commissions earned by D&H each fiscal year, and
participation in the UNUM America Results Sharing Plan and D&H bonus plans based
on profit, underwriting and reinsurance pool participation results, subject to
the discretion of the D&H board of directors.
Effective January 16, 1995, the Corporation entered into an agreement with
Mr. Crispin providing for an initial base salary of $500,000, a minimum annual
incentive award, stock option grant and restricted stock grant in respect of
1995 of $250,000, 15,000 shares, and 7,200 shares, respectively, and a partially
nonqualified pension arrangement providing for Mr. Crispin to receive the
equivalent of two years credit under the Corporation's retirement plans in which
executive officers participate for each of his first ten years of actual
employment. To compensate Mr. Crispin for foregone compensation from his
previous employer, the Corporation agreed to pay to him a total of $660,000 in
three annual installments, a grant on the date of hire of options to purchase
40,000 shares of Common Stock, a grant of 8,000 shares of time-lapse restricted
stock, and relocation assistance including up to $200,000 in protection for loss
on the sale of his home. In the event of termination of Mr. Crispin's employment
for any reason (except in connection with a Change of Control of the
Corporation) other than resignation or cause during the first five years of
employment, Mr. Crispin will receive a severance payment equivalent to two
years' base salary.
PENSION PLAN
The following table illustrates the combined estimated annual benefits
payable under the UNUM Employees Pension Plan and Trust (the "Pension Plan"),
the Supplemental Retirement Plan (the "Supplemental Plan") and the Supplemental
Executive Retirement Plan (the "SERP") upon normal retirement of participants
with varying Final Average Earnings (as defined below) and years of credited
service. The amounts are calculated on the basis of payments for the life of a
participant who is 65 years of age. As of December 31, 1995, Messrs. Orr,
Crispin, Center, and Moynihan had 9, 2, 33 and 23 whole years of credited
service. If each of the above were to continue their employment until age 65,
their respective years of credited service would be 21, 27, 40, and 36 for
purposes of computing benefits. Mr. Brown is not a participant in these plans.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS BY YEARS OF CREDITED SERVICE
FINAL AVERAGE ----------------------------------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35 40 45
---------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 200,000 .................. $ 37,000 $ 60,100 $ 85,100 $ 92,500 $ 102,500 $ 112,500 $ 122,500 $ 132,500
300,000 .................. 60,100 97,600 135,100 142,500 157,500 172,500 187,500 202,500
400,000 .................. 85,100 135,100 185,100 192,500 212,500 232,500 252,500 272,500
500,000 .................. 110,100 172,600 235,100 242,500 267,500 292,500 317,500 342,500
600,000 .................. 135,100 210,100 285,100 292,500 322,500 352,500 382,500 412,500
700,000 .................. 160,100 247,600 335,100 342,500 377,500 412,500 447,500 482,500
800,000 .................. 185,100 285,100 385,100 392,500 432,500 472,500 512,500 552,500
900,000 .................. 210,100 322,600 435,100 442,500 487,500 532,500 577,500 622,500
1,000,000 .................. 235,100 360,100 485,100 492,500 542,500 592,500 642,500 692,500
1,100,000 .................. 260,100 397,600 535,100 542,500 597,500 652,500 707,500 762,500
1,200,000 .................. 285,100 435,100 585,100 592,500 652,500 712,500 772,500 832,500
</TABLE>
Under the Pension Plan, retirement benefits are determined according to a
formula based upon the number of years of credited service and the Final Average
Earnings, minus 50 percent of the participant's Primary Social Security Amount
(as defined below). "Final Average Earnings" are defined as the average of basic
earnings plus incentives for the five consecutive years in which earnings were
the highest within the last
25
<PAGE>
10 years of credited service. The "Primary Social Security Amount" is defined as
the monthly benefit amount available to the participant as of the normal
retirement date under the provisions of Title II of the Social Security Act in
effect at the time of termination of employment. Accrued benefits are 100
percent vested after five years of service.
The Supplemental Plan provides benefits equal to the difference between what
the Pension Plan can pay per the maximums imposed by Sections 401(a)(17) and 415
of the Code, and what the Pension Plan would otherwise have paid pursuant to the
benefit formula had these maximums not existed. All participants in the Pension
Plan who retire or terminate after January 1, 1983 and are affected by the
maximums are eligible to participate in the Supplemental Plan, including Messrs.
Orr, Crispin, Center and Moynihan.
The SERP provides benefits for certain executives, including Messrs. Orr,
Crispin, Center and Moynihan, who have been designated to participate by the
Corporation's board. The benefits equal 2.5 percent of the Final Average
Earnings for each year of credited service, up to a maximum of 20 years, less
the sum of the participant's Primary Social Security Amount, benefits payable
from the Supplemental Plan and benefits payable from the Pension Plan.
PROPOSALS OF STOCKHOLDERS
In order for proposals of stockholders to be included in the proxy materials
for presentation at the 1997 Annual Meeting of Stockholders, such proposals must
be received by the Corporate Secretary no later than November 27, 1996.
ADDITIONAL INFORMATION
The Corporation will bear the cost of soliciting proxies from its
stockholders and will enlist the help of banks and brokerage houses in
soliciting proxies from their customers. The Corporation will reimburse these
institutions for out-of-pocket expenses. In addition to the use of the mails,
proxies may be solicited personally or by telephone by the directors, officers
and employees of the Corporation or its subsidiaries. The Corporation has
engaged Georgeson & Company Inc. to assist in soliciting proxies for a fee of
approximately $7,500 plus reasonable out-of-pocket expenses.
[/S/ KEVIN J. TIERNEY]
KEVIN J. TIERNEY
SECRETARY
26
<PAGE>
________________________________________________________________________________
UNUM CORPORATION
P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 10, 1996
R
The undersigned hereby appoints as Proxies, James F. Orr III, Robert W.
O Crispin, and Kevin J. Tierney, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as
X designated below, all the shares of Common Stock of UNUM Corporation held
of record by the undersigned on March 13, 1996, at the Annual Meeting of
Y Stockholders to be held on May 10, 1996, or any adjournments thereof.
Election of Directors, Nominees:
Robert E. Dillon, Jr., Ronald E. Goldsberry,
Donald W. Harward and James F. Orr III.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES SEE REVERSE
UNLESS YOU SIGN AND RETURN THIS CARD. SIDE
________________________________________________________________________________
FOLD AND DETACH HERE
<PAGE>
________________________________________________________________________________
PLEASE MARK YOUR 0606
/X/ VOTES AS IN THIS
EXAMPLE.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction
is made, this proxy will be voted FOR Proposals 1, 2, 3 and 4.
If other matters properly come before the meeting, the Proxies
will vote in accordance with their best judgment.
FOR WITHHELD FOR AGAINST ABSTAIN
2. Proposal to ratify the / / / / / /
appointment of Coopers &
Lybrand L.L.P. as the
Corporation's independent
1. / / / / auditors for the year 1996.
Election of Directors. 3. Proposal to approve certain / / / / / /
(mark only one) amendments to the
Corporation's 1987 Executive
_____________________ Stock Option Plan and 1990
(INSTRUCTION: To withhold Long-Term Stock Incentive
authority to vote for any Plan.
individual nominee write
that nominee's name on 4. Proposal to approve the / / / / / /
the space provided. adoption of the Corporation's
1996 Long-Term Stock Incentive
Plan.
I would like to attend UNUM Corporation's Annual / /
Meeting of Stockholders on May 10, 1996. Please
provide an admission ticket.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE(S)_____________________ DATE ____________
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, EACH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
________________________________________________________________________________
/\ FOLD AND DETACH HERE /\
HAVE YOU TRIED . . . [LOGO - Lighthouse]
UNUM.
SHAREHOLDER DIRECT [REGISTERED TRADEMARK]
1-800-UNM-FACT (1-800-866-3228)
AN INNOVATIVE ALTERNATIVE TO THE DISTRIBUTION
OF TRADITIONAL QUARTERLY SHAREHOLDER REPORTS
UNUM is pleased to offer shareholders this new 800# service
including voice messages regarding:
[Graphic - Telephone Handset] Earnings Releases
[Graphic - Telephone Handset] Corporate Announcements
[Graphic - Telephone Handset] Dividend Information
and/or
[Graphic - Telephone Handset] Hard copies of the above via fax or mail
INFORMATION AT YOUR FINGERTIPS!
[Graphic - Telephone]
1-800-UNM-FACT
(1-800-866-3228)
Shareholder Direct [REGISTERED TRADEMARK] is a
service of Direct Report Corporation
<PAGE>
Appendix
The following long-term incentive plans are being furnished
pursuant to Instruction 3 to Item 10 of Schedule 14A. They do
not comprise part of the proxy statement and are not being sent
to stockholders:
1987 Executive Stock Option Plan
1990 Long-Term Stock Incentive Plan
1996 Long-Term Stock Incentive Plan
<PAGE>
UNUM CORPORATION
1987 EXECUTIVE STOCK OPTION PLAN
1. PURPOSE.
This plan shall be known as the UNUM 1987 Stock Option Plan (the "Plan").
The purpose of the Plan shall be to promote the profitability of UNUM
CORPORATION and its subsidiaries (the "Company") by providing certain key
employees with incentives to contribute to the success of the Company and
by enabling the Company to attract, retain, and reward the best available
personnel for positions of substantial responsibility. The terms
"subsidiary" and "subsidiaries" as used herein shall mean corporations, a
majority of the outstanding shares of voting stock of which is owned by the
Company directly or indirectly. For purposes of the Plan, an Incentive
Stock Option shall have the meaning set forth in Section 422A of the
Internal Revenue Code of 1954, as amended (the "Code"); a Nonqualified
Stock Option shall mean any stock option for shares other than an Incentive
Stock Option.
2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board").
Each member of the Committee shall be a person who is not eligible, and has
not at any time within one year prior to his or her appointment to the
Committee been eligible, for selection as a person to whom stock may be
allocated or to whom stock options or stock appreciation rights may be
granted pursuant to the Plan or any other plan of the Company or any of its
subsidiaries. Subject to the provisions of the Plan, the Committee shall
be authorized to interpret the Plan and may from time to time adopt, amend,
or rescind such rules and regulations for carrying out the Plan as it may
deem appropriate. Decisions of the Committee on all matters relating to
the Plan shall be in the Committee's sole discretion and shall be
conclusive and binding on all parties, including the Company, the
shareholders, and the Participants. The validity, construction, and effect
of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of Delaware and applicable Federal
law.
3. SHARES AVAILABLE FOR THE PLAN.
Subject to adjustments as provided in Section 6, an aggregate of 2,500,000
shares of common stock of $.10 par value of UNUM Corporation ("Shares") may
be issued pursuant to the Plan. Such Shares may represent either
previously unissued shares or treasury shares. If any option granted under
the Plan shall expire or terminate unexercised or for any reason become
unexercisable as to any shares, such unpurchased shares shall thereafter be
available for further grants under the Plan unless the related Stock
Appreciation Rights are exercised.
<PAGE>
4. PARTICIPATION.
(a) Participation in this Plan shall be limited to those key employees of
the Company selected at the sole discretion of the Committee. Nothing
in the Plan or in any option or right granted thereunder shall confer
any right on an employee to continue in the employ of the Company or
shall interfere in any way with the right of the Company to terminate
employment at any time.
(b) Directors who are also employees and officers of the Company shall be
eligible to receive options and rights under the Plan. Members of the
Board of Directors who are not also employees of the Company and all
members of the Committee shall be ineligible to receive either options
or rights under the Plan.
(c) Options and rights may be granted to such persons and for such
respective number of shares as the Committee, in its absolute
discretion, shall determine (such individuals to whom options and
rights are granted are being herein called "Optionees"). A grant of
an option or right in any one year to an eligible employee shall
neither guarantee nor preclude a grant to such employee in subsequent
years.
5. TERMS AND CONDITIONS OF OPTIONS.
The Committee may from time to time select key employees to whom stock
options shall be granted as Incentive Stock Options within the meaning of
Section 422A of the Code or as Nonqualified Stock Options or any
combination thereof as the Committee shall decide. The options granted
shall take such form as the Committee shall determine, subject to the
following terms and conditions.
(a) PRICE. The purchase price per share deliverable upon the exercise of
each option shall not be less than 100% of the Fair Market Value of
the shares on the date the option is granted. Fair Market Value shall
be the average price of the high and low sale prices of the shares on
the New York Stock Exchange composite tape or such other recognized
market source as determined by the Committee from time to time on the
date the option is granted, or, if there is no sale on such date, then
such average price on the last previous day on which a sale is
reported. In the case of the grant of any Incentive Stock Option to
an employee who, at the time of the grant, owns more than 10% of the
total combined voting power of all classes of stock of UNUM
Corporation or any of its subsidiaries, such price per share shall not
be less than 110% of the Fair Market Value of the shares on the date
the option is granted.
(b) PAYMENT. Options may be exercised only upon payment of the purchase
price thereof in full. With respect to a Nonqualified Stock Option,
such payment shall be made in cash or, at the discretion of the
Committee, in shares, which shall have a value at least equal to the
aggregate exercise price of the shares being purchased, or a
combination of cash and shares.
2
<PAGE>
The value of shares so tendered shall be established in accordance
with methods determined by the Committee. With respect to an
Incentive Stock Option, payment of the exercise price shall be made in
cash. The Optionee shall be entitled to elect to pay all or a portion
of the exercise price for options granted under this Plan and any
withholding taxes in connection with such exercise by having the
shares of Common Stock to be issued by UNUM Corporation pursuant to
such exercise sold by a broker-dealer under circumstances meeting the
requirements of 12 C.F.R. Section 220.
(c) TERMS OF OPTIONS. The term during which options may be exercised
shall be determined by the Committee. Except as otherwise provided in
this Section 5(c), in no event shall an option be exercisable in whole
or in part less than one year, or more than ten years from the date it
is granted, provided further that, in the case of the grant of an
Incentive Stock Option to an employee who at the time of the grant,
owns more than 10% of the total combined voting power of all classes
of stock of UNUM Corporation or any of its subsidiaries, in no event
shall such option be exercisable more than five years from the date of
the grant. All rights to purchase shares pursuant to an option shall,
unless sooner terminated, expire at the date designated by the
Committee.
The Committee shall determine the date on which each option shall
become exercisable and may provide that an option shall become
exercisable in installments. The shares comprising each installment
may be purchased in whole or in part at any time after such
installment becomes exercisable, except that the exercise of an
Incentive Stock Option shall be further restricted as set forth
herein. The Committee may, in its sole discretion, accelerate the
time at which any option may be exercised in whole or in part. In the
case of the death, disability or retirement of an optionee, the
Committee may exercise such discretion to accelerate the time at which
any option may be exercised to a date less than one year from the date
of grant, provided however, that in no event may a Stock Appreciation
Right become exercisable less than six months from the date of grant.
The option agreement evidencing an option granted under the Plan may
contain such provisions limiting the acceleration of the exercise of
options as the Committee deems appropriate to ensure that the penalty
provisions of Section 4999 of the Code, or any successor thereto in
effect at the time of such acceleration, will not apply to any stock
or cash received by the holder from the Company.
Unless otherwise provided herein, an Optionee may exercise an option
only if he or she is, and has continuously been since the date the
option was granted, an employee of the Company.
Prior to the exercise of the option and delivery of the stock
represented thereby, the Optionee shall have no rights to any
dividends nor be entitled to any voting rights on any stock
represented by outstanding options.
3
<PAGE>
Notwithstanding anything to the contrary contained herein, and
notwithstanding any contrary waiting period or installment period in
any option agreement or in the Plan, each outstanding option granted
under the Plan shall become exercisable in full for the aggregate
number of shares covered thereby in the event of a Change in Control
(as hereinafter defined).
For purposes of this Plan, a Change in Control shall be deemed to have
occurred upon the first to occur of the following events:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (other than the Company or any
corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is
or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 40% of the
number of the Company's then outstanding securities;
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board, and
any new director (other than a director designated by a
person who has entered into an agreement with the Company to
effect a transaction described in Subsection 5(c)(i), (iii)
or (iv) of this Section 5(c)) whose election by the Board or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) more than 60% of the number of
outstanding securities of the Company or such surviving
entity outstanding immediately after such merger or
consolidation; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of
the Company's assets.
4
<PAGE>
(d) LIMITATIONS ON GRANTS. The aggregate Fair Market Value (determined as
of the date the Incentive Stock Option is granted) of the shares of
stock with respect to which Incentive Stock Options are exercisable
for the first time by an optionee during any calendar year may not
exceed $100,000.
(e) TERMINATION OF EMPLOYMENT. Except as provided below, if an Optionee
ceases to be an employee other than by reason of death, retirement or
disability, any then outstanding options may be exercised any time
before their expiration date or within three months after the date of
termination, whichever is earlier, but only to the extent that such
options were exercisable when employment ceased, absent a
determination by the Committee to the contrary; provided, however,
that if a Participant is terminated for cause the Committee may
determine that no option may be exercised at any time after the
termination date.
If an Optionee's employment terminates because of death or disability,
all then outstanding options previously granted to the Optionee will
become exercisable. In the case of death of the Optionee, such
options may be exercised at any time before their expiration date or
within three years after the date of termination, whichever is
earlier. In the case of permanent disability, such options may be
exercised at any time before their expiration date.
If an Optionee's employment terminates because of retirement prior to
January 1, 1995, any then outstanding options may be exercised any
time before their expiration or within three years after the date of
termination, whichever is earlier, but only to the extent that such
options were exercisable when employment ceased, absent a
determination by the Committee to the contrary. If an Optionee's
employment terminates because of retirement on or after January 1,
1995, any then outstanding options may be exercised any time before
their expiration or within five years after the date of termination,
whichever is earlier, but only to the extent that such options were
exercisable when employment ceased, absent a determination by the
Committee to the contrary.
(f) TRANSFERABILITY. No option or right shall be transferable by an
employee otherwise than by will or the laws of descent and
distribution, and during the lifetime of the employee to whom an
option or right is granted it may be exercised only by him or his
guardian or legal representative, but Incentive Stock Options may be
exercised by such guardian or legal representative only if permitted
by Section 422A and related sections of the Code and any regulations
promulgated thereunder.
(g) LISTING AND REGISTRATION. Each option shall be subject to the
requirement that if at any time the Committee shall determine, in its
discretion, the listing, registration, or qualification of the shares
subject to such option
5
<PAGE>
upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the granting of
such option or the issue or purchase or Shares thereunder, no such
option may be exercised in whole or in part unless such listing,
registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the
Committee.
(h) OPTION AGREEMENT. Each employee to whom an option may be granted
shall enter into an agreement with the Company, which shall contain
such provisions, consistent with the provisions of the Plan, as may be
established by the Committee.
(i) WITHHOLDING. The Company shall have the right to require a payment
from an optionee to cover any applicable withholding or other
employment taxes due upon the exercise of an option.
(j) STOCK OPTIONS. In no event shall any stock option granted after
May 15, 1989 be exercisable through payment of the exercise price in
cash during the period of one year following a hardship distribution
under the UNUM Employees Retirement Savings Plan and Trust, as defined
therein.
6. ADJUSTMENTS.
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of
assets, or any other change in the corporate structure or shares of the
Company, the Committee shall make such adjustments as it deems appropriate
in the number and kind of shares authorized by the Plan, in the number and
kind of shares covered by the options granted, and in the purchase price of
outstanding options. In the event of any merger, consolidation or other
reorganization in which the Company is not the surviving or continuing
corporation, all options and Stock Appreciation Rights granted hereunder
and outstanding on the date of such event shall be assumed by the surviving
or continuing corporation with appropriate adjustment as to the number and
kind of shares and purchase price of the shares.
7. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.
The Committee shall have the authority to grant Stock Appreciation Rights
in connection with the grant of options under this Plan to any Optionee.
The exercise of an option shall result in an immediate forfeiture of its
corresponding right, and the exercise of a right shall cause an immediate
forfeiture of its corresponding option. Stock Appreciation Rights shall be
subject to such other terms and conditions as the Committee may specify. A
Stock Appreciation Right granted in relation to an Incentive Stock Option
shall expire at the same time as the related option expires and shall be
transferable only when the related option is transferable, and under the
same conditions.
6
<PAGE>
8. EXERCISE OF STOCK APPRECIATION RIGHTS.
(a) Stock Appreciation Rights granted in connection with Incentive Stock
Options and, unless otherwise provided by the Committee, all other
Stock Appreciation Rights granted under this Plan shall be exercisable
only to the extent the related option is exercisable and only in
accordance with the instrument evidencing such right. No Stock
Appreciation Right may be exercised unless the Fair Market Value of a
share on the date of exercise exceeds the purchase price per share
under the option to which the Stock Appreciation Right corresponds.
(b) Upon the exercise of a Stock Appreciation Right, the Optionee shall be
entitled to a distribution in an amount equal to the difference
between the Fair Market Value of a Share on the date of exercise as
determined by the Committee, less the purchase price per Share under
the option to which the Stock Appreciation Right corresponds. The
Committee, in its sole discretion, shall decide whether such
distribution shall be in cash or in Shares. In the event distribution
is made in Shares, any fractional shares due shall be disregarded.
(c) The Company shall have the right to require a payment from an employee
to cover any applicable withholding or other employment taxes due upon
the exercise of a Stock Appreciation Right.
(d) The provisions of this subsection shall apply to Optionees who are or
who hereafter may be subject to Section 16(b) of the Securities
Exchange Act of 1934. No Stock Appreciation Right shall be exercised
for cash in complete or partial settlement of such right unless such
exercise shall occur during the period beginning on the third business
day following the date of release for publication by the Company of
quarterly and annual summary statements of sales and earnings and
ending on the twelfth business day following such date. No Stock
Appreciation Right or related option may be exercised for cash in
complete or partial settlement of such right during the first six
months of its term, except in the event the death or disability of the
holder occurs prior to the expiration of such six month period.
8A. An Optionee who is required under Section 5(i) or 8(c) of this Plan to make
any payment to the Company to cover withholding or other employment taxes
may elect to satisfy such obligation by tendering to the Company the number
of Shares to the Company's common stock whose Fair Market Value equals the
amount required to be withheld.
9. TERMS AND CONDITIONS OF LIMITED RIGHTS.
(a) The Committee shall have the authority to grant Limited Rights in
connection with the grant of options under this Plan to any Optionee,
and such rights may be granted either at or after the time of the
grant of such option.
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Limited Rights or any applicable portion thereof granted with respect
to a given option shall terminate and no longer be exercisable upon
the termination of the related option. Upon the exercise of an
option, the related Limited Right shall cease to be exercisable to the
extent of the Shares with respect to which such option is exercised.
A Limited Right related to an option may be exercised by an Optionee,
in accordance with this Section 9, by surrendering the applicable
portion of the related option. Upon such exercise and surrender, the
Optionee shall be entitled to receive an amount determined in the
manner prescribed in this Section 9.
(b) Limited Rights shall only be exercisable during the 30 day period
following a Change in Control and only to the extent that the options
to which they relate shall be exercisable in accordance with the
provisions of the Plan; provided, however, that no Limited Right shall
be exercisable during the first six months of the term of the Limited
Right (except that this additional limitation shall not apply in the
event of death or disability of the Optionee prior to the expiration
of the six-month period).
(c) Upon the exercise of a Limited Right related to an option, an Optionee
shall be entitled to receive an amount in cash equal in value to the
excess of the higher of (i) the highest price per share paid in
connection with the Change in Control or (ii) the highest fair market
value per share as reported in the Wall Street Journal at any time
during the 60 day period preceding the Change in Control of one share
over the option price per share specified in the related option, such
excess to be multiplied by the number of shares in respect of which
the Limited Right shall have been exercised.
(d) Limited Rights shall be subject to such other terms and conditions,
not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Committee. This Section 9 shall
be interpreted in accordance and consistent with the principles set
forth in Rule 16b-3 of the Securities Exchange Act of 1934.
10. TERMINATION AND MODIFICATION OF THE PLAN.
The Board of Directors, without further approval of the shareholders, may
modify or terminate this Plan and from time to time may suspend, and if
suspended, may reinstate any or all of the provisions of this Plan except
that no modification or termination of this Plan may, without the consent
of the Optionee, alter or impair any option previously granted under this
Plan and that no modification shall become effective without prior approval
of the shareholders which would (a) increase (except as provided in Section
6) the maximum number of shares for which options may be granted under the
Plan; (b) reduce the option price which may be established under the Plan;
(c) extend the maximum option term under the Plan beyond ten years, or (d)
change the Plan's eligibility requirements. The Chief Executive Officer
shall be authorized to make minor or
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administrative modifications to the Plan as well as modification to the
Plan which may be dictated by requirements of federal or state statutes
applicable to the Company or authorized or made desirable by such statutes.
No modification or termination of the Plan shall, without the Optionee's
consent, alter or impair any of their rights or obligations under any
option or right theretofore granted to him or her under the Plan. Unless
previously terminated, the Plan shall terminate on December 31, 1996.
11. EFFECTIVE DATE.
The effective date of the Plan shall be January 1, 1987.
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UNUM CORPORATION
1990 LONG-TERM STOCK INCENTIVE PLAN
SECTION 1. PURPOSE.
The purpose of the UNUM Corporation 1990 Long-Term Stock Incentive Plan (the
"Plan") is to promote the interests of UNUM Corporation and its stockholders by
(i) attracting and retaining executive officers, other key employees and
corporation directors of outstanding ability; (ii) motivating such individuals,
by means of performance-related incentives, to achieve longer-range performance
goals; and (iii) enabling such individuals to participate in the long-term
growth and financial success of UNUM Corporation.
SECTION 2. DEFINITIONS.
"Affiliate" shall mean any corporation or other entity which is not a Subsidiary
but as to which the Corporation possesses a direct or indirect ownership
interest and has representation on the board of directors or any similar
governing body.
"Award" shall mean a grant or award under Sections 6 through 10, inclusive, of
the Plan, as evidenced in a written document delivered to a Participant.
"Board" shall mean the Board of Directors of the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean the Compensation Committee of the Board.
"Common Stock" or "Stock" shall mean the common stock, $.10 par value, of the
Corporation.
"Corporation" shall mean UNUM Corporation.
"Employee" shall mean any employee of the Employer.
"Employer" shall mean the Corporation and any Subsidiary or Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from
time to time.
"Fair Market Value" shall mean the average of the highest and lowest sales
prices reported for consolidated trading of the Stock on the New York Stock
Exchange on the date in question,
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or, if the Stock shall not have been traded on such date, the average of such
highest and lowest sales prices on the first day prior thereto on which the
Stock was so traded.
"Fiscal Year" shall mean the fiscal year of the Corporation.
"Incentive Stock Option" shall mean a stock option granted under Section 6 which
is intended to meet the requirements of Section 422A of the Code.
"Limited Right" shall mean a limited stock appreciation right granted under
Section 8.
"Non-Qualified Stock Option" shall mean a stock option granted under Section 6
which is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option.
"Participant" shall mean an Employee who is selected by the Committee to receive
an Award under the Plan.
"Restricted Period" shall mean the period of years selected by the Committee
during which a grant of Restricted Stock may be forfeited to the Corporation.
"Restricted Stock" shall mean shares of Common Stock contingently granted to a
Participant under Section 9 of the Plan.
"Subsidiary" shall mean any business entity in which the Corporation possesses
directly or indirectly fifty percent (50%) or more of the total combined voting
power.
SECTION 3. ADMINISTRATION.
Except as provided in Section 10, the Committee shall have full power to
interpret and administer the Plan and full authority to select the individuals
to whom Awards will be granted and to determine the type and amount of Award(s)
to be granted to each Participant, the terms and conditions of Awards granted
under the Plan and the terms and conditions of the agreements which will be
entered into with Participants. As to the selection and grant of Awards to
Participants who are not subject to Sections 16(a) and 16(b) of the Exchange
Act, or any successor sections, the Committee may delegate its responsibilities
to members of the Company's management consistent with applicable law.
The Committee shall have the authority to adopt, alter and repeal such rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any agreements relating thereto); to direct employees
of the Corporation and its subsidiaries or other advisors to prepare such
materials or perform such analysis as the Committee deems necessary or
appropriate; and otherwise to supervise the administration of the Plan.
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Any interpretation and administration of the Plan by the Committee, and all
actions of the Committee, shall be final, binding and conclusive on the
Corporation, its stockholders, Subsidiaries, Affiliates, all Participants, their
respective legal representatives, successors and assigns and upon all persons
claiming under or through any of them. No member of the Board or of the
Committee shall incur any liability for any action taken or omitted, or any
determination made, in good faith in connection with the Plan.
SECTION 4. ELIGIBILITY.
Participation in the Plan shall be limited to those key employees of the
Corporation and any Subsidiary and Affiliate selected at the sole discretion of
the Committee.
SECTION 5. MAXIMUM AMOUNT AVAILABLE FOR AWARDS.
Subject to adjustment as provided in Section 12(j), the maximum number of shares
of Stock in respect of which Awards may be made under the Plan shall be a total
of 6,800,000 shares of Common Stock. Shares of Common Stock may be made
available from the authorized but unissued shares of the Corporation or from
shares reacquired by the Corporation, including shares purchased in the open
market. In the event that (i) an Option, or Stock Appreciation Right, or
Limited Right expires or is cancelled unexercised as to any shares of Common
Stock covered thereby, or (ii) any Award in respect of shares is forfeited for
any reason under the Plan, such shares shall thereafter be again available for
award pursuant to the Plan.
SECTION 6. STOCK OPTIONS.
(a) GRANT. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Employees to whom Options
shall be granted, the number of shares to be covered by each Option, the
Option Price, as defined below, therefor and the conditions and limitations
applicable to the exercise of the Option. The Committee shall have the
authority to grant Incentive Stock Options, or to grant Non-Qualified Stock
Options, or to grant both types of Options. In the case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and
comply with such rules as may be prescribed by Section 422A of the Code and
any regulations implementing Section 422A.
(b) OPTION PRICE. The Committee shall establish the exercise price of the
Option (the "Option Price") at the time each Option is granted, which
Option Price shall not be less than 100% of the Fair Market Value of the
Common Stock on the date of grant.
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(c) EXERCISE.
(1) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award or thereafter; provided, however, that
in no event may any Option granted hereunder be exercisable after the
expiration of ten years from the date of grant. The Committee may
impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of
federal or state securities laws, as it may deem necessary or
advisable.
(2) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the Option Price therefor is received by the
Corporation. Such payment may be made in cash, or its equivalent, or,
subject to such rules and guidelines as the Committee may establish,
by exchanging shares of Common Stock owned by the optionee (which are
not the subject of any pledge or other security interest), or by a
combination of the foregoing, provided that the combined value of all
cash and cash equivalents and the Fair Market Value of any such Common
Stock so tendered to the Corporation, valued as of the date of such
tender, is at least equal to such Option Price.
(d) TERMINATION OF EMPLOYMENT.
(1) Except as provided below, if a Participant ceases to be an Employee
other than by reason of death, retirement or disability, any then
outstanding Options may be exercised any time before their expiration
date or within three months after the date of termination, whichever
is earlier, but only to the extent that such Options were exercisable
when employment ceased, absent a determination by the Committee to the
contrary; provided, however, that a Participant is terminated for
cause the Committee may determine that no Option may be exercised at
any time after the termination date.
(2) If a Participant's employment terminates because of death or
disability, all then outstanding Options previously granted to the
Participant will become exercisable. In the case of death of the
Participant, such Options may be exercised at any time before their
expiration date or within three years after the date of termination,
whichever is earlier. In the case of permanent disability, such
Options may be exercised at any time before their expiration date.
(3) If a Participant's employment terminates because of retirement prior
to January 1, 1995, any then outstanding Options may be exercised any
time before their expiration date or within three years after the date
of termination, whichever is earlier, but only to the extent that such
Options were exercisable when employment ceased absent a determination
by the Committee to the contrary. If a Participant's employment
terminates because of retirement on or after January 1,
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<PAGE>
1995, any then outstanding Options may be exercised any time before
their expiration date or within five years after the date of
termination, whichever is earlier, but only to the extent that such
Options were exercisable when employment ceased absent a determination
by the Committee to the contrary.
SECTION 7. STOCK APPRECIATION RIGHTS.
(a) The Committee shall have the authority to grant Stock Appreciation Rights
in tandem with the grant of an Option or freestanding and unrelated to an
Option. Stock Appreciation Rights granted in tandem with an Option may be
granted either at or after the time of the grant of such Option.
Stock Appreciation Rights or any applicable portion thereof granted in
tandem with a given Option shall only be exercisable to the extent that the
related Option is exercisable and shall terminate and no longer be
exercisable upon the expiration or cancellation of the related Option.
The exercise of an Option shall result in an immediate forfeiture of any
Stock Appreciation Right granted in tandem with that Option, and the
exercise of such Stock Appreciation Right shall cause an immediate
forfeiture of its related Option. Stock Appreciation Rights shall not be
exercisable after the expiration of ten years from date of grant. A Stock
Appreciation Right granted in tandem with an Option may be exercised by an
optionee, in accordance with this Section 7, by surrendering the applicable
portion of the related Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in this Section 7.
(b) A Stock Appreciation Right shall entitle the Participant to receive from
the Corporation an amount equal to the excess of the Fair Market Value of a
share of Common Stock on the date of the exercise of the Stock Appreciation
Right over the grant price thereof, provided that the Committee may for
administrative convenience determine that, for any Stock Appreciation Right
which is not related to an Incentive Stock Option and can only be exercised
during limited periods of time in order to satisfy the conditions of
certain rules of the Securities and Exchange Commission, the exercise of
any such Stock Appreciation Right for cash during such limited period shall
be deemed to occur for all purposes hereunder on the day during such
limited period on which the Fair Market Value of the Stock is the highest.
Any such determination by the Committee may be changed by the Committee
from time to time and may govern the exercise of Stock Appreciation Rights
granted prior to such determination as well as Stock Appreciation Rights
thereafter granted. The Committee shall determine whether Stock
Appreciation Rights shall be settled in cash, shares of Common Stock or a
combination of cash and shares of Common Stock.
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<PAGE>
SECTION 8. LIMITED RIGHTS.
(a) The Committee shall have the authority to grant Limited Rights in tandem
with the grant of an Option or freestanding and unrelated to an Option.
Limited Rights granted in tandem with an Option may be granted either at or
after the time of the grant of such Option.
Limited Rights or any applicable portion thereof granted in tandem with a
given Option shall terminate and no longer be exercisable upon the
expiration or cancellation of the related Option. The exercise of an
Option shall result in an immediate forfeiture of any Limited Right granted
in tandem with that Option, and the exercise of such Limited Right shall
cause an immediate forfeiture of its related Option.
A Limited Right granted in tandem with an Option may be exercised by an
optionee, in accordance with this Section 8, by surrendering the applicable
portion of the related Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in this Section 8.
(b) Limited Rights shall only be exercisable during the 30 day period following
a Change in Control as defined in Section 11 and shall not be exercisable
after the expiration of ten years from the date of grant.
(c) Upon the exercise of a Limited Right, an optionee shall be entitled to
receive from the Corporation an amount in cash equal in value to the excess
of (i) the higher of (A) the highest price per share paid in connection
with the Change in Control or (B) the highest Fair Market Value per share
as reported in the Wall Street Journal at any time during the 60 day period
preceding the Change in Control over (ii) in the case of a Limited Right
granted in tandem with an Option, the Option Price per share specified in
the related Option and in the case of all other Limited Rights, the price
per share established in the grant of the Limited Right, such excess to be
multiplied by the number of shares in respect of which the Limited Right
shall have been exercised; provided, however, that upon the exercise of a
Limited Right granted in tandem with an Incentive Stock Option, the amount
set forth in clause (i) shall not exceed the Fair Market Value of a share
on the date of exercise of the Limited Right.
(d) Limited Rights shall be subject to such other terms and conditions, not
inconsistent with the provisions of the Plan, as shall be determined from
time to time by the Committee. This Section 8 shall be interpreted in
accordance and consistent with the principles set forth in Rule 16b-3 of
the Exchange Act.
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<PAGE>
SECTION 9. RESTRICTED STOCK.
(a) Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees to whom shares of Restricted
Stock shall be granted, the number of shares of Restricted Stock to be
granted to each Participant, the duration of the Restricted Period during
which, and the conditions under which, the Restricted Stock may be
forfeited to the Corporation, and the other terms and conditions of such
Awards. The Committee may determine that the Restricted Period applicable
to a particular grant may vary depending upon the attainment of particular
conditions, such as corporate earnings, share price or other targets set by
the Committee.
(b) Shares of Restricted Stock may not be sold, assigned, transferred, pledged
or otherwise encumbered, except as herein provided, during the Restricted
Period. Certificates issued in respect of shares of Restricted Stock shall
be registered in the name of the Participant and deposited by such
Participant, together with a stock power endorsed in blank, with the
Corporation. At the expiration of the Restricted Period, the Corporation
shall deliver such certificates to the Participant or the Participant's
legal representative.
(c) If a Participant's employment terminates by reasons of disability or death,
any Restricted Stock held by such Participant shall thereafter vest and any
restriction lapse, to the extent such Restricted Stock would have become
vested and no longer subject to such restrictions within one year from the
time of termination had the Participant continued to fulfill all of the
conditions of the Restricted Stock during such period (or on such
accelerated basis as the Committee may determine at or after grant).
Unless otherwise determined by the Committee, if a Participant's employment
terminates for any reasons other than permanent disability or death, any
Restricted Stock which is unvested or subject to restriction shall
thereupon be forfeited.
SECTION 10. NON-EMPLOYEE DIRECTOR OPTIONS.
Notwithstanding any of the other provisions of the Plan to the contrary, the
provisions of this Section 10 shall only apply to a non-employee member of the
Board. The other provisions of the Plan shall apply to grants of Options under
this Section 10 to the extent not inconsistent with the provisions of this
Section.
(a) This Section 10 shall be administered by the Board.
(b) Each non-employee member of the Board shall receive Non-Qualified Stock
Options in accordance with the provisions of this Section 10.
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<PAGE>
(c) (i) Recipients of Options under this Section 10 shall enter into a stock
option agreement with the Corporation, which agreement shall set
forth, among other things, the exercise price of the Option, the
term of the Option and provisions regarding exercisability of the
Option granted thereunder.
(ii) On the Effective Date (as defined below) each non-employee member of
the Board of the Corporation shall receive Options to purchase 2,000
shares of Common Stock. Beginning in 1991, on the date after each
annual stockholders meeting of the Corporation each continuing non-
employee member of the Board shall be granted an Option to purchase
1,000 shares of Common Stock and, beginning in 1990, each newly
elected non-employee director shall be granted an Option to purchase
2,000 shares of Common Stock. The Option Price per share of Common
Stock purchasable under such Options shall be equal to the Fair
Market Value of the Common Stock on the date of grant. Such Option
shall remain exercisable until the earlier of ten years from the
date of grant or the termination of any post-directorship
consultancy agreement with the Corporation; PROVIDED, HOWEVER, that
if such consultancy agreement terminates by reason of death or
disability any then outstanding Options may be exercised (x) at any
time before their expiration date or (y), if such termination is by
reason of death, within three years of the date of death, whichever
is earlier. Such Options shall be exercisable one year from the
date of grant by payment in full in cash or in shares of Common
Stock having a Fair Market Value equal to the Option Price or in a
combination of cash and such shares.
(d) The Board may not amend, alter, or discontinue this Section 10 without the
approval of the stockholders of the Corporation.
SECTION 11. CHANGE OF CONTROL.
Notwithstanding anything to the contrary contained herein, and notwithstanding
any contrary waiting period or installment period in any agreement relating to
an Award or in the Plan, each outstanding Option, Stock Appreciation Right and
Limited Right granted under the Plan shall become exercisable in full for the
aggregate number of shares covered thereby, and any restriction or deferral
limitation applicable to any Restricted Stock shall lapse and such shares and
Awards shall be deemed fully vested, in the event of a Change in Control (as
hereinafter defined).
For purposes of this Plan, a Change in Control shall be deemed to have occurred
upon the first to occur of the following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Corporation or any corporation
owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership
of stock of the Corporation), is or becomes the "beneficial
8
<PAGE>
owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing more
than 40% of the number of the Corporation's then outstanding
securities;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into
an agreement with the Corporation to effect a transaction described
in Subsection 11(i), (iii) or (iv) of this Section 11) whose
election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other
than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or being
converted into voting securities of the surviving entity) more than
60% of the number of outstanding securities of the Corporation or
such surviving entity outstanding immediately after such merger or
consolidation; or
(iv) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets.
SECTION 12. GENERAL PROVISIONS.
(a) WITHHOLDING. The Employer shall have the right to deduct from all amounts
paid to a Participant in cash (whether under this Plan or otherwise) any
taxes required by law to be withheld in respect of Awards under this Plan.
In the case of payments of Awards in the form of Common Stock, at the
Committee's discretion the Participant may be required to pay to the
Employer the amount of any taxes required to be withheld with respect to
such Common Stock, or, in lieu thereof, to the extent permitted by
applicable federal and state securities laws, the Employer shall have the
right to retain (or the Participant may be offered the opportunity to elect
to tender) the number of shares of Common Stock whose Fair Market Value
equals the amount required to be withheld. The Optionee shall be entitled
to elect to pay all or a portion of the exercise price for options granted
under this Plan and any withholding taxes in connection with such exercise
by having the shares of Common Stock to be issued by UNUM Corporation
pursuant to such exercise sold by a broker-dealer under circumstances
meeting the requirements of 12 C.F.R. Section 220.
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(b) NONTRANSFERABILITY. No Award shall be assignable or transferable, and no
right or interest of any Participant shall be subject to any lien,
obligation or liability of the Participant, except by will or the laws of
descent and distribution.
(c) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the
Employer. Further, the Employer expressly reserves the right at any time
to dismiss a Participant free from any liability, or any claim under the
Plan, except as provided herein or in any agreement entered into with
respect to an Award.
(d) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or transferee of an Option shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she has become the holder thereof.
Notwithstanding the foregoing, in connection with each grant of Restricted
Stock hereunder, the applicable Award shall specify if and to what extent
the Participant shall not be entitled to the rights of a stockholder in
respect of such Restricted Stock.
(e) CONSTRUCTION OF THE PLAN. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with
the laws of the State of Delaware.
(f) EFFECTIVE DATE. Subject to the approval of the stockholders of the
Corporation, the Plan shall be effective on February 9, 1990 (the
"Effective Date"). No Options or Awards may be granted under the Plan
after February 9, 2000.
(g) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary to comply with
any tax or regulatory requirement, including for these purposes any
approval requirement which is a prerequisite for exemptive relief under
Section 16(b) of the Exchange Act. Notwithstanding anything to the
contrary contained herein, the Committee may amend the Plan in such manner
as may be necessary so as to have the Plan conform with local rules and
regulations. The Chief Executive Officer shall be authorized to make minor
or administrative modifications to the Plan as well as modification to the
Plan which may be dictated by requirements of federal or state statutes
applicable to the Corporation or authorized or made desirable by such
statutes. No modification or termination of the Plan shall, without the
optionee's consent, alter or impair any of his or her rights or obligations
under any Option, Stock Appreciation Right or Limited Right theretofore
granted to him or her under the Plan.
(h) AMENDMENT OF AWARD. The Committee may amend, modify or terminate any
outstanding Award with the Participant's consent at any time prior to
payment or exercise in any manner not inconsistent with the terms of the
Plan, including without
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limitation, (i) to change the date or dates as of which (A) an Option,
Stock Appreciation Right or Limited Right becomes exercisable; (B)
Restricted Stock becomes nonforfeitable; or (ii) to cancel and reissue an
Award under such different terms and conditions as it determines
appropriate.
(i) HARDSHIP DISTRIBUTIONS. In no event shall any Option granted under this
Plan be exercisable through payment of the Option Price in cash during the
period of one year following a hardship distribution under the UNUM
Employees Retirement Savings Plan and Trust, as defined therein.
(j) ADJUSTMENTS AND ASSUMPTION. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares,
merger, consolidation, distribution of assets, or any other change in the
corporate structure or shares of the Corporation, the Committee shall make
such adjustments as it deems appropriate in the number and kind of shares
authorized by the Plan, in the number and kind of shares covered by the
Awards granted, and in the purchase price of outstanding Options. In the
event of any merger, consolidation or other reorganization in which the
Corporation is not the surviving or continuing corporation, all Awards
granted hereunder and outstanding on the date of such event shall be
assumed by the surviving or continuing corporation with appropriate
adjustment as to the number and kind of shares and purchase price of the
shares.
(k) In addition to the purposes set forth in Section 1, the Committee may grant
Awards to eligible Participants in order to compensate such Participants to
surrender existing rights to receive benefits from the Employer under this
or any other benefit plan or arrangement.
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UNUM CORPORATION
1996 LONG-TERM STOCK INCENTIVE PLAN
SECTION 1. PURPOSE.
The purpose of the UNUM Corporation 1996 Long-Term Stock Incentive Plan (the
"Plan") is to promote the interests of UNUM Corporation and its stockholders by
(i) attracting and retaining executive officers and other key employees of
outstanding ability; (ii) motivating such individuals, by means of performance-
related incentives, to achieve longer-range performance goals; and (iii)
enabling such individuals to participate in the long-term growth and financial
success of UNUM Corporation.
SECTION 2. DEFINITIONS.
"Affiliate" shall mean any corporation or other entity which is not a Subsidiary
but as to which the Corporation possesses a direct or indirect ownership
interest and has representation on the board of directors or any similar
governing body.
"Award" shall mean a grant or award under Sections 6 through 10, inclusive, of
the Plan, as evidenced in a written document delivered to a Participant.
"Board" shall mean the Board of Directors of the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean the Compensation Committee of the Board, or, to the
extent necessary to satisfy the requirements of Section 162(m) of the Code, a
subcommittee thereof.
"Common Stock" or "Stock" shall mean the common stock, $.10 par value, of the
Corporation.
"Corporation" shall mean UNUM Corporation.
"Employee" shall mean any employee of the Employer.
"Employer" shall mean the Corporation and any Subsidiary or Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from
time to time.
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"Fair Market Value" shall mean the average of the highest and lowest sales
prices reported for consolidated trading of the Stock on the New York Stock
Exchange on the date in question, or, if the Stock shall not have been traded on
such date, the average of such highest and lowest sales prices on the first day
prior thereto on which the Stock was so traded.
"Fiscal Year" shall mean the fiscal year of the Corporation.
"Incentive Stock Option" shall mean a stock option granted under Section 6 which
is intended to meet the requirements of Section 422 of the Code.
"Limited Right" shall mean a limited stock appreciation right granted under
Section 8.
"Non-Qualified Stock Option" shall mean a stock option granted under Section 6
which is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option.
"Participant" shall mean an Employee who is selected by the Committee to receive
an Award under the Plan.
"Performance Measures" shall mean the criteria and objectives, established by
the Committee, which shall be satisfied as a condition to the receipt of shares
by a Participant under a Restricted Stock Award, or to the payment or receipt of
shares or cash under a Performance Share Award. With respect to any Restricted
Stock or Performance Share Award which the Committee designates as being
intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder, such criteria and objectives shall be based on one or
more of the following: the market price of a share of the Common Stock;
earnings per share, return to stockholders (including dividends), return on
equity, earnings of the Corporation on a GAAP or statutory accounting basis,
revenues, market share, cash flow or cost reduction goals, underwriting margin,
or any combination of the foregoing. Such criteria and objectives may be
expressed on either an absolute basis or relative to the performance of a peer
group selected by the Committee. In the case of any Restricted Stock or
Performance Share Award which the Committee does not designate as being intended
to satisfy the requirements of Section 162(m) of the Code and the regulations
thereunder, such criteria and objectives, if any, may include one or more of the
criteria and objectives referred to above or such other criteria and objectives
as the Committee may determine.
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"Performance Period" shall mean a period designated by the Committee during
which the Performance Measures applicable to a Performance Share Award shall be
measured.
"Performance Share" shall mean a right, granted to a Participant under Section
10 of this Plan, contingent upon the attainment of specified Performance
Measures within a specified Performance Period, to receive one share of Common
Stock, which may be Restricted Stock, or in lieu thereof, the Fair Market Value
of such Performance Share in cash.
"Restricted Stock" shall mean shares of Common Stock contingently granted to a
Participant under Section 9 of this Plan.
"Restriction Period" shall mean a period designated by the Committee during
which the Performance Measures and other conditions applicable to a Restricted
Stock Award or Performance Share Award shall be measured.
"Stock Appreciation Right" shall mean an Award granted under Section 7 of the
Plan.
"Subsidiary" shall mean any business entity in which the Corporation possesses
directly or indirectly fifty percent (50%) or more of the total combined voting
power.
"Voting Securities" shall mean securities which are entitled to cast votes as to
general corporate matters, including the election of directors.
SECTION 3. ADMINISTRATION.
The Committee shall have full power to interpret and administer the Plan and
full authority to select the individuals to whom Awards will be granted and to
determine the type and amount of Award(s) to be granted to each Participant, the
terms and conditions of Awards granted under the Plan and the terms and
conditions of the agreements which will be entered into with Participants.
The Committee shall have the authority to adopt, alter and repeal such rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any agreements relating thereto); to direct employees
of the Corporation and its subsidiaries or other advisors to prepare such
materials or perform such analysis as the Committee deems necessary or
appropriate; and otherwise to supervise the administration of the Plan. The
Committee may delegate such of its responsibilities set forth above to members
of the Corporation's management as the Committee may determine, with regard to
the grant, amendment, interpretation and administration of Awards to
Participants who are not subject to Sections 16(a) and 16(b) of the Exchange
Act, and except with respect
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to Awards which are designed to satisfy the requirements of Section 162(m) of
the Code and the regulations thereunder.
Any interpretation and action under this Plan by the Committee, or members of
the Corporation's management acting under authority delegated by the Committee,
shall be final, binding and conclusive on the Corporation, its stockholders,
Subsidiaries, Affiliates, all Participants, their respective legal
representatives, successors and assigns and upon all persons claiming under or
through any of them. Neither any member of the Board of Directors or of the
Committee nor any member of the Corporation's management acting under authority
delegated by the Committee shall incur any liability for any action taken or
omitted, or any determination made, in good faith in connection with the Plan.
SECTION 4. ELIGIBILITY.
Participation in the Plan shall be limited to those key employees of the
Corporation and any Subsidiary and Affiliate selected at the sole discretion of
the Committee.
SECTION 5. MAXIMUM AMOUNT AVAILABLE FOR AWARDS.
Subject to adjustment as provided in Section 12(j), the maximum number of shares
of Stock in respect of which Awards may be made under the Plan shall be a total
of 3,500,000 shares of Common Stock, provided that during any single calendar
year (i) Options shall not be granted to any individual Participant to purchase
more than 200,000 shares of the Common Stock, and (ii) the sum of all shares of
Restricted Stock plus all Performance Shares granted to any individual
Participant shall not exceed 100,000. Common Stock may be made available from
the authorized but unissued shares of the Corporation or from shares reacquired
by the Corporation, including shares purchased in the open market. In the event
that (i) an Option, or Stock Appreciation Right, or Limited Right expires,
terminates, or is canceled, surrendered or exchanged unexercised as to any
shares of Common Stock covered thereby, or (ii) any other Award in respect of
shares is forfeited for any reason under the Plan, such shares shall thereafter
be again available for award pursuant to the Plan.
SECTION 6. STOCK OPTIONS.
(a) GRANT. The Committee may, in its discretion, grant Options to such
eligible Participants as it may select. The Committee shall determine
the number of shares to be covered by each Option, the Option Price, as
defined below, therefor
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and the conditions and limitations applicable to the exercise of the
Option. The Committee shall have the authority to grant Incentive Stock
Options, or to grant Non-Qualified Stock Options, or to grant both types of
Options. In the case of Incentive Stock Options, the terms and conditions
of such grants shall be subject to and comply with such rules as may be
prescribed by Section 422 of the Code and any regulations implementing
Section 422.
(b) OPTION PRICE. The Committee shall establish the exercise price of the
Option (the "Option Price") at the time each Option is granted, which
Option Price shall not be less than 100% of the Fair Market Value of the
Common Stock on the date of grant.
(c) EXERCISE.
(1) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award or thereafter; provided, however, that
in no event may any Option granted hereunder be exercisable after the
expiration of ten years from the date of grant. The Committee may
impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of
federal or state securities laws, as it may deem necessary or
advisable.
(2) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the Option Price therefor is received by the
Corporation. Such payment may be made in cash, or its equivalent, or,
subject to such rules and guidelines as the Committee may establish,
by exchanging shares of Common Stock owned by the optionee (which are
not the subject of any pledge or other security interest), or by a
combination of the foregoing, provided that the combined value of all
cash and cash equivalents and the Fair Market Value of any such Common
Stock so tendered to the Corporation, valued as of the date of such
tender, is at least equal to such Option Price.
(d) TERMINATION OF EMPLOYMENT.
(1) If a Participant ceases to be an Employee other than by reason of
death, retirement or permanent disability, any then outstanding
Options may be exercised at any time before their expiration date or
within three months after the date of termination, whichever is
earlier, but only (unless otherwise determined by the Committee) to
the extent that such Options were exercisable when employment ceased,
and to the extent not so exercisable, the Option shall terminate on
the date employment ceases; provided,
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however, that if a Participant is terminated for cause the Committee
may determine that no Option may be exercised at any time after the
termination date.
(2) If a Participant's employment terminates because of death or permanent
disability, all then outstanding Options previously granted to the
Participant will become exercisable. In the case of death of the
Participant, such Options may be exercised at any time before their
expiration date or within three years after the date of termination,
whichever is earlier. In the case of permanent disability, such
Options may be exercised at any time before their expiration date.
(3) If a Participant's employment terminates because of retirement, any
then outstanding Options may be exercised at any time before their
expiration date or within five years after the date of termination,
whichever is earlier, but only (unless otherwise determined by the
Committee) to the extent that such Options were exercisable when
employment ceased, and to the extent not so exercisable, the Option
shall terminate on the date employment ceases.
SECTION 7. STOCK APPRECIATION RIGHTS.
(a) The Committee shall have the authority to grant Stock Appreciation Rights
in tandem with the grant of an Option or freestanding and unrelated to an
Option. Stock Appreciation Rights granted in tandem with an Option may be
granted either at or after the time of the grant of such Option.
Stock Appreciation Rights or any applicable portion thereof granted in
tandem with a given Option shall only be exercisable to the extent that the
related Option is exercisable and shall terminate and no longer be
exercisable upon the expiration, termination, or cancellation of the
related Option.
The exercise of an Option shall result in an immediate forfeiture of any
Stock Appreciation Right granted in tandem with that Option, and the
exercise of such Stock Appreciation Right shall cause an immediate
forfeiture of its related Option. Stock Appreciation Rights shall not be
exercisable after the expiration of ten years from date of grant. A Stock
Appreciation Right granted in tandem with an Option may be exercised by an
optionee, in accordance with this Section 7, by surrendering the applicable
portion of the related Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in this Section 7.
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(b) A Stock Appreciation Right shall entitle the Participant to receive from
the Corporation an amount equal to the excess of the Fair Market Value of a
share of Common Stock on the date of the exercise of the Stock Appreciation
Right over the grant price thereof, provided that the Committee may for
administrative convenience determine that, for any Stock Appreciation Right
which is not related to an Incentive Stock Option and can only be exercised
during limited periods of time in order to satisfy the conditions of
certain rules of the Securities and Exchange Commission, the exercise of
any such Stock Appreciation Right for cash during such limited period shall
be deemed to occur for all purposes hereunder on the day during such
limited period on which the Fair Market Value of the Stock is the highest.
Any such determination by the Committee may be changed by the Committee
from time to time and may govern the exercise of Stock Appreciation Rights
granted prior to such determination as well as Stock Appreciation Rights
thereafter granted. The Committee shall determine whether Stock
Appreciation Rights shall be settled in cash, shares of Common Stock or a
combination of cash and shares of Common Stock.
SECTION 8. LIMITED RIGHTS.
(a) The Committee shall have the authority to grant Limited Rights in tandem
with the grant of an Option or freestanding and unrelated to an Option.
Limited Rights granted in tandem with an Option may be granted either at or
after the time of the grant of such Option.
Limited Rights or any applicable portion thereof granted in tandem with a
given Option shall terminate and no longer be exercisable upon the
expiration, termination or cancellation of the related Option. The
exercise of an Option shall result in an immediate forfeiture of any
Limited Right granted in tandem with that Option, and the exercise of such
Limited Right shall cause an immediate forfeiture of its related Option.
A Limited Right granted in tandem with an Option may be exercised by an
optionee, in accordance with this Section 8, by surrendering the applicable
portion of the related Option. Upon such exercise and surrender, the
optionee shall be entitled to receive an amount determined in the manner
prescribed in this Section 8.
(b) Limited Rights shall only be exercisable during the 30 day period following
a Change in Control as defined in Section 11 and shall not be exercisable
after the expiration of ten years from the date of grant.
(c) Upon the exercise of a Limited Right, an optionee shall be entitled to
receive from the Corporation an amount in cash equal in value to the excess
of (i) the higher of
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(A) the highest price per share paid in connection with the Change in
Control or (B) the highest Fair Market Value per share as reported in the
Wall Street Journal at any time during the 60 day period preceding the
Change in Control over (ii) in the case of a Limited Right granted in
tandem with an Option, the Option Price per share specified in the related
Option and in the case of all other Limited Rights, the price per share
established in the grant of the Limited Right (which shall not be less than
the Fair Market Value of a share of Common Stock on the date of grant),
such excess to be multiplied by the number of shares in respect of which
the Limited Right shall have been exercised; provided, however, that upon
the exercise of a Limited Right granted in tandem with an Incentive Stock
Option, the amount set forth in clause (i) shall not exceed the Fair Market
Value of a share on the date of exercise of the Limited Right.
(d) Limited Rights shall be subject to such other terms and conditions, not
inconsistent with the provisions of the Plan, as shall be determined from
time to time by the Committee. This Section 8 shall be interpreted in
accordance and consistent with the principles set forth in Rule 16b-3 of
the Exchange Act.
SECTION 9. RESTRICTED STOCK.
(a) GRANT. The Committee may, in its discretion, grant shares of Restricted
Stock to such eligible Participants as it may select. The Committee shall
determine the number of shares of Restricted Stock to be granted to each
Participant, whether or not the Restricted Stock Award is designed to
satisfy the requirements of Section 162(m) of the Code and the regulations
thereunder, the duration of the Restriction Period ( if any) during which,
and the conditions under which, the Restricted Stock may be forfeited to
the Corporation, and the other terms and conditions of such Awards. The
Committee may condition the vesting of shares of Restricted Stock on
Performance Measures to be attained by the Corporation and/or the
Participant over a stated Performance Period.
(b) ASSIGNABILITY. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as herein provided,
during the Restriction Period.
(c) DIVIDENDS. The Committee shall determine whether dividends payable on
shares of Restricted Stock shall be paid to the Participant during the
Restriction Period or held in a suspense account for payment (with or
without interest) to the Participant only in the event of the vesting of
the underlying shares of Restricted Stock.
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(d) TERMINATION OF EMPLOYMENT. Subject to Section 11 of this Plan, all of the
provisions governing the satisfaction of Performance Measures and the
termination of the Restriction Period relating to a Restricted Stock Award,
or any cancellation or forfeiture of shares of Restricted Stock upon
termination of employment of the Participant, whether by reason of death,
permanent disability, retirement, or otherwise, shall be set forth in the
Agreement relating to such Restricted Stock Award, or in guidelines
established by the Committee and made applicable to such Restricted Stock
Award.
SECTION 10. PERFORMANCE SHARE AWARDS
(a) GRANT. The Committee may, in its discretion, grant Performance Share
Awards to such eligible Participants as it may select. The Committee shall
determine the number of Performance Shares to be granted to each
Participant, whether or not the Performance Share Award is designed to
satisfy the requirements of Section 162(m) of the Code and the regulations
thereunder, the Performance Measures and Performance Period applicable to
each grant, and any other terms and conditions relating to each grant, not
inconsistent with the terms of this Plan, as the Committee shall deem
advisable.
(b) SETTLEMENT. The Agreement relating to a Performance Share Award (i) shall
specify whether such award may be settled in shares of Common Stock
(including shares of Restricted Stock) or cash or a combination thereof;
and (ii) may specify whether the holder thereof shall be entitled to
receive, on a current or deferred basis, dividend equivalents, and if
determined by the Committee, interest on any deferred dividend equivalents
with respect to the number of shares of Common Stock subject to such Award.
Prior to the settlement of a Performance Share Award in shares of Common
Stock, including Restricted Stock, the holders of such award shall have no
rights as a stockholder of the Corporation with respect to the shares of
Common Stock subject to such Award.
(c) TERMINATION OF EMPLOYMENT. Subject to Section 11 of this Plan, all of the
terms relating the satisfaction of Performance Measures and the termination
of the Performance Period relating to a Performance Share Award, or any
cancellation or forfeiture of such Performance Share Award upon a
termination of employment, whether by reason of death, disability,
retirement, or otherwise, shall be set forth in the Agreement relating to
such Performance Share Award, or in guidelines established by the Committee
and made applicable to such Performance Share Award.
SECTION 11. CHANGE OF CONTROL.
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Notwithstanding anything to the contrary contained herein, and notwithstanding
any contrary waiting period or installment period in any agreement relating to
an Award or in the Plan, in the event of a Change in Control (as hereinafter
defined), (i) each outstanding Option, Stock Appreciation Right and Limited
Right granted under the Plan shall become exercisable in full for the aggregate
number of shares covered thereby; (ii) any Performance Measure relating to any
Restricted Stock or Performance Share Award (including any Restricted Stock
already granted or to be granted in satisfaction of a Performance Share Award)
shall be deemed to be satisfied at the maximum level; and (iii) any Restriction
Period and/or Performance Period relating to any Restricted Stock or Performance
Share Award (including any Restricted Stock already granted or to be granted in
satisfaction of a Performance Share Award) shall lapse (and any other conditions
pertaining to the vesting of any such Award shall be waived) and such shares and
Awards shall be deemed fully vested.
For purposes of this Plan, a Change in Control shall be deemed to have occurred
upon the first to occur of the following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Corporation, a trustee or other
fiduciary holding Voting Securities under an employee benefit plan
of the Corporation, or any corporation owned, directly or
indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock of the
Corporation), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing more than 40% of the
number of the Corporation's then outstanding Voting Securities,
excluding any "person" who becomes such a beneficial owner in
connection with an Excluded Transaction described in clause (iii)
below;
(ii) the following individuals cease for any reason to constitute a
majority of the directors then serving: individuals who on January
1, 1996, constitute the Board, and any new director (other than a
director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to
a consent solicitation, relating to the election of directors of the
Corporation) whose appointment or election by the Board or
nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on January 1, 1996 or
whose appointment or election or nomination for election was
previously so approved;
(iii) there is consummated a merger or consolidation of the Corporation
(or any direct or indirect wholly-owned Subsidiary of the
Corporation) with any other
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corporation, other than a merger or consolidation which would result
in the Voting Securities of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or being converted into voting securities of the
surviving entity or any parent thereof) more than 60% of the
combined voting power of the Voting Securities of the Corporation
(or the voting securities of such surviving entity or any parent
thereof) outstanding immediately after such merger or consolidation
(an Excluded Transaction"); or
(iv) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or there is consummated an agreement
for the sale or disposition by the Corporation of all or
substantially all of the Corporation's assets.
SECTION 12. GENERAL PROVISIONS.
(a) WITHHOLDING. The Employer shall have the right to deduct from all amounts
paid to a Participant in cash (whether under this Plan or otherwise) any
taxes required by law to be withheld in respect of Awards under this Plan.
In the case of payments of Awards in the form of Common Stock, at the
Committee's discretion the Participant may be required to pay to the
Employer the amount of any taxes required to be withheld with respect to
such Common Stock, or, in lieu thereof, to the extent permitted by
applicable federal and state securities laws, the Employer shall have the
right to retain (or the Participant may be offered the opportunity to elect
to tender) the number of shares of Common Stock whose Fair Market Value
equals the amount required to be withheld. The Optionee shall be entitled
to elect to pay all or a portion of the exercise price for options granted
under this Plan and any withholding taxes in connection with such exercise
by having the shares of Common Stock to be issued by the Corporation
pursuant to such exercise sold by a broker-dealer under circumstances
meeting the requirements of 12 C.F.R. Section 220.
(b) NONTRANSFERABILITY. Unless so provided in the Agreement with respect to
such Award, no Award shall be assignable or transferable, and no right or
interest of any Participant shall be subject to any lien, obligation or
liability of the Participant, except by will or the laws of descent and
distribution.
(c) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the
Employer. Further, the Employer expressly reserves the right at any time
to dismiss a Participant free from any
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liability, or any claim under the Plan, except as provided herein or in any
agreement entered into with respect to an Award.
(d) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the applicable
Award, no Participant or transferee of an Option shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she has become the holder thereof.
Notwithstanding the foregoing, in connection with each grant of Restricted
Stock hereunder, the applicable Award shall specify if and to what extent
the Participant shall not be entitled to the rights of a stockholder in
respect of such Restricted Stock.
(e) CONSTRUCTION OF THE PLAN. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with
the laws of the State of Delaware.
(f) EFFECTIVE DATE. Subject to the approval of the stockholders of the
Corporation, the Plan shall be effective on March 8, 1996 (the "Effective
Date"). No Options or Awards may be granted under the Plan after March 7,
2006.
(g) AMENDMENT OF PLAN. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time. The Chief Executive Officer shall be
authorized to make minor or administrative modifications to the Plan as
well as modifications to the Plan which may be dictated by requirements of
federal or state statutes applicable to the Corporation or authorized or
made desirable by such statutes. No modification or termination of the
Plan shall, without the optionee's consent, alter or impair any of his or
her rights or obligations under any Award theretofore granted to him or her
under the Plan.
(h) AMENDMENT OF AWARD. The Committee may amend, modify or terminate any
outstanding Award with the Participant's consent at any time prior to
payment or exercise in any manner not inconsistent with the terms of the
Plan, including without limitation, (i) to change the date or dates as of
which (A) an Option, Stock Appreciation Right or Limited Right becomes
exercisable, or (B) shares of Restricted Stock or Performance Share Awards
become nonforfeitable; or (ii) to cancel and reissue an Award under such
different terms and conditions as it determines appropriate.
(i) HARDSHIP DISTRIBUTIONS. In no event shall any Option granted under this
Plan be exercisable through payment of the Option Price in cash during the
period of one year following a hardship distribution under the UNUM
Employees Retirement Savings Plan and Trust, as defined therein.
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(j) ADJUSTMENTS AND ASSUMPTION. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares,
merger, consolidation, distribution of assets, or any other change in the
corporate structure or shares of the Corporation, the Committee shall make
such adjustments as it deems appropriate in the number and kind of shares
authorized by the Plan, in the number and kind of shares or Performance
Shares covered by the Awards granted, in the maximum number of Options,
Restricted Stock and Performance Shares which may be granted to any
individual Participant in a single calendar year, and in the purchase price
of outstanding Options. In the event of any merger, consolidation or other
reorganization in which the Corporation is not the surviving or continuing
corporation, unless otherwise provided for in the documents governing such
merger, consolidation or other reorganization, all Awards granted hereunder
and outstanding on the date of such event shall be assumed by the surviving
or continuing corporation with appropriate adjustment as to the number and
kind of shares and purchase price of the shares.
