<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
UNUM CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C>
UNUM CORPORATION
[LOGO] 2211 Congress Street
Portland, Maine 04122
</TABLE>
March 31, 1997
To Our Stockholders:
You are invited to attend the 1997 Annual Meeting of Stockholders of UNUM
Corporation. The meeting will be held on May 9, 1997, 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 1996 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 9, 1997, at 10:30 a.m., local
time, for the following purposes:
1. To elect four directors to serve for three-year terms expiring
in 2000;
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Corporation's independent auditors for the year 1997;
3. To approve the Corporation's Incentive Compensation Plan for
Designated Executive Officers;
4. To approve an increase in the authorized shares of Common Stock
of the Corporation; and
5. To transact any other business that may properly come before the
Annual Meeting.
The close of business on March 11, 1997, 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 31, 1997
Portland, Maine
<PAGE>
UNUM CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 9, 1997
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 9, 1997 (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 the Corporation's Incentive Compensation Plan for Designated
Executive Officers and "FOR" approval of an increase in the authorized shares of
Common Stock of the Corporation. 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. Other than the election of
directors, all matters to be acted on at the Annual Meeting 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 except for the proposal
to amend the Certificate of Incorporation of the Corporation, which requires the
affirmative vote of a majority of the outstanding shares. 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 31, 1997.
The Corporation had 70,577,876 outstanding shares of Common Stock, par value
$0.10 per share (the "Common Stock"), as of March 11, 1997.
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 10,
1996, there were four Class II directors, four Class III directors and four
Class I directors, serving terms expiring in 1997, 1998 and 1999, respectively.
The term of the Class II directors expires with this Annual Meeting.
2
<PAGE>
The Board of Directors proposes the election of Gayle O. Averyt, Gwain H.
Gillespie, Cynthia A. Montgomery and James L. Moody, Jr. as Class II directors,
to hold office for a term of three years, expiring at the close of the Annual
Meeting of Stockholders to be held in 2000 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.......................... 54 1986 Chairman and Chief Executive 1999
Officer
Gayle O. Averyt........................... 63 1993 Director 1997
Robert E. Dillon, Jr...................... 65 1990 Director 1999
Gwain H. Gillespie........................ 65 1991 Director 1997
Ronald E. Goldsberry...................... 54 1993 Director 1999
Donald W. Harward......................... 57 1990 Director 1999
George J. Mitchell........................ 63 1995 Director 1998
Cynthia A. Montgomery..................... 44 1990 Director 1997
James L. Moody, Jr........................ 65 1988 Director 1997
Lawrence R. Pugh.......................... 64 1988 Director 1998
Lois Dickson Rice......................... 64 1993 Director 1998
John W. Rowe.............................. 51 1988 Director 1998
</TABLE>
3
<PAGE>
NOMINEES FOR ELECTION FOR TERM EXPIRING IN 2000:
<TABLE>
<S> <C>
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.
CYNTHIA A. MONTGOMERY
John G. McLean Professor
of Business Administration
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, and was named John G. McLean Professor of Business Administration in June 1995.
She also serves as a director of Newell Co. and certain Merrill Lynch mutual funds.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
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.
CONTINUING DIRECTORS:
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
Global Ford Customer Service Operations
Ford Motor Company
(Picture) Detroit, Michigan
Ronald E. Goldsberry is Vice President and General Manager of Global Ford Customer
Service Operations at Ford Motor Company, a post he has held since January 1997.
Previously, Dr. Goldsberry served as General Manager of the Customer Service Division
from February 1994 to December 1996 and General Sales and Marketing Manager for the
Parts and Service Division from October 1991 to February 1994. He is also Chairman of
UNC Ventures, Inc., a venture capital firm.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
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.
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 and at the request of the British and Irish governments, he serves as Chairman
of the peace negotiations in Northern 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 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.
</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 Milliken & Company.
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 14, 1997, 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 1.7
percent of the outstanding shares on March 14, 1997, as calculated pursuant to
the rules of the Securities and Exchange Commission (the "Commission"). All
other amounts reported total less than one 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 OWNED
NAMED EXECUTIVE OFFICERS OWNED (2) 1997 (2)
- - ---------------------------------------------------------- ------------ ----------------- --------------------
<S> <C> <C> <C>
James F. Orr III.......................................... 155,547(3) 249,996 405,543(3)
Gayle O. Averyt........................................... 193,235(4) 1,000 194,235(4)
Robert E. Dillon.......................................... 2,900 7,000 9,900
Gwain H. Gillespie........................................ 27,512(5) 4,000 31,512(5)
Ronald E. Goldsberry...................................... 900 5,000 5,900
Donald W. Harward......................................... 1,416(6) 6,300 7,716(6)
George J. Mitchell........................................ 500 3,000 3,500
Cynthia A. Montgomery..................................... 1,000(7) 7,000 8,000(7)
James L. Moody, Jr........................................ 4,000 8,000 12,000
Lawrence R. Pugh.......................................... 2,000 8,000 10,000
Lois Dickson Rice......................................... 300 5,000 5,300
John W. Rowe.............................................. 1,000 5,000 6,000
Robert W. Crispin......................................... 43,265 41,699 84,964
Stephen B. Center......................................... 55,409 43,271 98,680
Thomas G. Brown........................................... 29,425 23,782 53,207
Elaine D. Rosen........................................... 23,811 29,982 53,793
All directors, nominees and executive officers as a group
(19 persons including the above named)*................. 624,346(8) 538,138 1,162,484(8)
</TABLE>
- - ------------
(1) The number of shares reflected which, under applicable Commission
regulations, are deemed to be beneficially owned. Unless otherwise
indicated, the person indicated holds sole voting and dispositive power.
(2) Includes the following number of shares of phantom Common Stock credited to
the named executive officers' account held under the Corporation's
Nonqualified 401(k) Plan: Mr. Orr: 438 shares; Mr. Crispin: 346 shares; Mr.
Center: 373 shares; and Ms. Rosen 15 shares.
(3) Includes 15,221 shares held by Mr. Orr's spouse and child.
8
<PAGE>
(4) Includes 22,577 shares held by Mr. Averyt's spouse and 74,654 shares held in
trust for the benefit of the family members under various trusts pursuant to
which Mr. Averyt, as trustee, has sole or shared voting or dispositive
power. Mr. Averyt disclaims beneficial ownership of 18,941 of these shares
held in trust.
(5) Includes 22,237 shares held jointly with or by Mr. Gillespie's spouse.
(6) Includes 1,416 shares held jointly with Dr. Harward's spouse.
(7) Includes 1,000 shares held jointly with Ms. Montgomery's spouse.
(8) Includes 83,301 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, 1996, 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 Company, 200 Vesey Street, New York, NY 10285, and its
subsidiary, American Express Financial Corporation, IDS Tower 10, Minneapolis,
MN 55440, reported beneficial ownership of 7,146,846 shares (9.95 percent),
including shared voting power over 5,259,636 shares and shared dispositive power
over all such shares; Janus Capital Corporation, 100 Fillmore Street, Denver,
Colorado 80206, reported beneficial ownership of 7,155,275 shares (9.96
percent), including shared voting and dispositive power over all such shares;
and FMR Corp., 82 Devonshire Street, Boston, MA, 02109 reported beneficial
ownership of 5,156,689 shares (7.18 percent), including sole voting power over
350,128 shares and sole dispositive power over all such shares.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held ten meetings during 1996. Average attendance at
Corporation board and committee meetings in 1996 was 97 percent. Each director
attended more than 75 percent of the board and committee meetings of which he or
she was a member. 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 1996, 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, internal controls 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 five meetings in 1996, 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.
9
<PAGE>
The Board Governance Committee, which held four meetings in 1996, 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.
The Investment Committee, which held two meetings in 1996, 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. Currently, each
non-employee director who has served for a least one full three-year term is
entitled upon termination of service as a director to receive an annual
consulting fee equal to the director's final year retainer for as many years as
the director will have served, or until his or her earlier death or association
with a competitor of the Corporation.
In order to further align the interests of the directors with those of the
stockholders, during 1997 the Board of Directors adopted stock ownership
expectations which provide that over a five-year period each director is to
accumulate UNUM stock (exclusive of stock options) valued at three-times the
annual retainer paid to the director. In addition, the Board has determined to
phase out the consulting fee arrangement described above in favor of a
stock-based form of compensation. Specifically, effective as of the Annual
10
<PAGE>
Meeting, further benefits under this consulting fee arrangement will cease to
accrue, so that upon termination of Board service, each eligible director will
be entitled to receive an annual consulting fee fixed at $27,500 for only the
number of full years each such director shall have served as of May 31, 1997. In
lieu of the continued accrual of benefits under the consulting fee arrangement,
in December, 1996, the Board of Directors voted to increase the size of the
existing annual non-employee director stock option grants under the 1990
Long-Term Stock Incentive Plan. Consequently, beginning on May 10, 1997, each
continuing non-employee director will receive an annual automatic grant of an
option to purchase 2,000 shares of Common Stock, and each newly elected
non-employee director will receive an automatic grant of an option to purchase
3,000 shares of Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ELECTION OF
THE ABOVE NOMINEES.
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 1997. 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. INCENTIVE COMPENSATION PLAN FOR DESIGNATED EXECUTIVE OFFICERS
Under Section 162(m) of the Internal Revenue Code and certain regulations
thereunder (together, the "Code"), the amount of compensation paid by a
publicly-held corporation to the Chief Executive Officer and the next four most
highly compensated executive officers during any year which may be deductible
for federal income tax purposes is limited to $1 million per person per year
except that compensation which is "qualified performance-based compensation"
will be exempt from this limit.
On March 14, 1997, the Board of Directors adopted, effective January 1, 1997
and subject to stockholder approval, the UNUM Corporation Incentive Compensation
Plan for Designated Executive Officers (the "Plan"), which is designed to
qualify the amounts paid from time to time thereunder to certain of the
Corporation's executive officers as "qualified performance-based compensation"
under the Code.
The purpose of the Plan is to provide a means of rewarding certain executive
officers of the Corporation who have contributed to the profitability of the
Corporation while permitting such compensation to be deductible by the
Corporation or any of its subsidiaries for federal income tax purposes. The
administration of the Plan is vested in the Compensation Committee of the
Corporation's Board of Directors (the "Committee"). Under the Plan, each member
of the Committee is required to qualify as an "outside director" as that term is
used in the Code.
All executive officers of the Corporation are eligible to participate in the
Plan. No other employees of the Corporation nor members of the Committee are
eligible for awards under the Plan. Within the first 90
11
<PAGE>
days of each calendar year (the "Designation Period"), the Committee may
designate one or more such executive officers of the Corporation (each, a
"Participant") who will participate in the Plan for such year (the "Performance
Period").
Within the Designation Period, the Committee will allocate, in writing,
amounts on behalf of each Participant which will be awarded if the Corporation
and/or a business unit attains objective performance goals established by the
Committee within the Designation Period 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,
operating or statutory accounting basis; revenues; annualized sales; market
share; cash flow or cost reduction goals; underwriting margin; or any
combination of the foregoing (each a "Performance Goal"). Such goals may be
expressed on either an absolute basis or relative to the performance of a peer
group selected by the Committee. The Committee may, in its sole discretion,
reduce or cancel any award under the Plan. At the discretion of the Committee,
awards may be satisfied in cash, shares of Restricted Stock issued under the
Corporation's 1996 Long-Term Stock Incentive Plan or a combination of the above.
Each of the foregoing Performance Goals shall be determined in accordance
with generally accepted accounting principles and shall be subject to
certification by the Committee; provided that the Committee shall have the
authority to make equitable adjustments to the Performance Goals in recognition
of unusual or non-recurring events affecting the Corporation or any subsidiary
or affiliate thereof or the financial statements of the Corporation or any
subsidiary or affiliate thereof, in response to changes in applicable laws or
regulations, or to account for items of gain, loss or expense determined to be
extraordinary or unusual in nature or infrequent in occurrence or related to the
disposal of a segment of a business or to a change in accounting principles.
The Committee will set a maximum amount payable for each Participant in
respect of each Performance Period in cash and Restricted Stock (valued at the
fair market value on the date of issuance) which shall not exceed the lesser of
250 percent of the base salary of the individual at the time of designation or
$3,000,000. If the Plan had been in effect during 1996 and if the Committee had
determined to award the highest permitted amount thereunder, the maximum amount
that could have been paid thereunder to any individual would have been
$1,870,000.
Following the completion of each Performance Period, the Committee will
certify in writing (i) whether the Performance Goals and any other material
terms of each award were attained, and (ii) the award payable to the
Participants. Each Participant shall receive payment, subject to all required
tax withholdings, of his or her award in cash or certificates representing
shares of Restricted Stock as soon as practicable following the determination of
the amount of such award.
At the discretion of the Committee, any Participant, subject to such terms
and conditions as the Committee may determine, may elect to defer payment of all
or part of any awards which such Participant might earn with respect to a
Performance Period by complying with such procedures as the Committee may from
time to time proscribe.
The Committee may amend the Plan at any time, provided that no award that
requires stockholder approval under the Code may be made without such approval.
The Board of Directors may terminate the Plan at any time.
12
<PAGE>
In order for the compensation payable pursuant to the Plan to constitute
"qualified performance-based compensation" under the Code, this proposal must be
approved by the affirmative vote of a majority of the shares of the Common Stock
present in person or by proxy at the meeting. No awards will be effective under
the Plan unless such approval is obtained.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
THIS PLAN.
ITEM 4. APPROVAL OF INCREASE IN AUTHORIZED SHARES OF
COMMON STOCK OF THE CORPORATION
On March 14, 1997, the Board of Directors authorized a two-for-one Common
Stock split subject to stockholder approval of an increase in the number of
authorized shares of Common Stock from 120 million shares to 240 million shares.
If approval by the stockholders has been obtained, the stock split will be
effected in the form of a stock dividend of one share of Common Stock for each
share of Common Stock then issued, including shares of Common Stock held in the
Corporation's treasury. The shares of Common Stock to be issued in connection
with the split would be distributed on or about June 2, 1997 to stockholders of
record at the close of business on May 19, 1997.
The Corporation is presently authorized to have 130 million shares issued
and outstanding, consisting of: (a) 120 million shares of Common Stock, and (b)
10 million shares of Preferred Stock, par value $.10 per share. The proposed
amendment does not change the terms of the Common Stock. No change in the terms
or the number of authorized shares of Preferred Stock is proposed. As of March
11, 1997, there were 70,577,876 shares of Common Stock issued and outstanding
and 29,410,082 shares of Common Stock held in treasury. Thus, as of March 11,
1997, the maximum number of authorized, but unissued shares was 20,012,042, an
insufficient number of shares to effect the two-for-one stock split.
Adoption of the proposed amendment, after giving effect to the two-for-one
stock split, would provide 40,024,084 shares of Common Stock for future
issuance. This is, proportionately, the same number of shares as was available
for future issuance as of March 11, 1997.
The holders of the Corporation's Common Stock have no preemptive rights as
to additional issues of Common Stock or securities convertible into or entitling
the holder to purchase Common Stock.
The additional shares of Common Stock sought by the amendment will be
available for issuance without further action by stockholders, unless such
action is required by applicable law or the rules of any stock exchange on which
the Corporation's securities may then be listed.
The Board of Directors is of the opinion that the proposed increase in the
number of authorized shares of Common Stock is in the best interests of the
Corporation and its stockholders. The Board of Directors believes that the
Corporation should have sufficient authorized but unissued shares for issuance
in connection with the two-for-one stock split and for any future stock
dividends, employee benefit plans, offerings of shares for cash, mergers and
acquisitions, and other business purposes.
Although the purpose of seeking an increase in the number of authorized
shares of Common Stock is not intended for anti-takeover purposes, Commission
rules require disclosure of charter, by-law and similar provisions that could
have an anti-takeover effect. These include: (i) a classified board, providing
for three classes of directors serving three-year terms; (ii) a fair price
provision requiring a supermajority vote for certain business combination
transactions involving significant shareholders; (iii) Board authority under the
Certificate of Incorporation to issue one or more series of preferred stock up
to a maximum of
13
<PAGE>
approximately 9.4 million shares presently available; (iv) under the By-Laws a
special meeting of stockholders may only be called by the Chairman of the Board
or the Board of Directors; and (v) the Rights Agreement dated as of March 13,
1992, as amended June 19, 1996, between UNUM Corporation and First Chicago Trust
Company of New York (the "Rights Plan"), which could have a deterrent effect
against a takeover of the Corporation.
It is proposed to amend Paragraph A of Article Fourth of the Certificate of
Incorporation of the Corporation to read as follows to effect the increase in
authorized shares of Common Stock:
The total number of shares of capital stock which the Corporation shall
have authority to issue is 250,000,000 shares, consisting of 240,000,000
shares of Common Stock, par value $.10 per share (the "Common Stock")
and 10,000,000 shares of Preferred Stock, par value $.10 per share (the
"Preferred Stock").
To be adopted, the amendment to the Certificate of Incorporation must be
approved by the holders of a majority of all shares of the Common Stock
outstanding on March 11, 1997.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THIS PROPOSAL.
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.
14
<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
the Code and Non-Employee Directors as defined under Rule 16b-3 promulgated
under the Securities Exchange Act of 1934.
- - - 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 stockholders. 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 annual incentive payments, which may be
in cash and/or stock.
- - - The Committee has taken steps to preserve the deductibility of executive
compensation under the Code by designing stock-based incentive programs that
comply with Section 162(m) thereof. 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 stockholders,
whether or not such compensation is fully deductible.
COMPENSATION PEER GROUP
- - - The Committee has approved a 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 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.
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 base salary rate for 1996 was increased to $748,000, reflecting an
increase in the Peer Group salary level and to recognize Mr. Orr's
performance during 1995.
15
<PAGE>
LONG-TERM INCENTIVES
- - - Long-term incentive compensation is paid in awards of stock options, the
value of which is estimated using a Black-Scholes model, and
performance-based restricted stock. Fifty percent of the targeted value of
stock-based compensation awarded during 1996 was allocated to restricted
stock grants and 50 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
established minimum stock ownership expectations that provide that over a
five-year period the Chief Executive Officer, each Executive Vice President,
and each Senior Vice President-level officer should accumulate UNUM stock
(exclusive of stock options) valued at five-, three-, and two-times salary,
respectively. All of the affected officers have made significant progress
toward these expected ownership levels or have exceeded them. In addition,
stock ownership expectations have been established for all officer-level
employees at more junior levels.
- - - The Corporation grants non-qualified stock options at fair market value,
generally during the first quarter of each year. Stock options basically
reflect increased stockholder 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 in 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. The Corporation did not reach the return-on-equity threshold set by
the Committee for the 1994-1996 cycle, and thus, despite the Corporation's
solid performance during 1996, all shares for this cycle, including those
granted to the Chief Executive Officer and the other named executive
officers, were forfeited. Beginning in 1996, restricted stock performance
measures have been established in terms of the Corporation's average return
on equity over a multi-year period relative to the companies in the Peer
Group.
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.
- - - The Committee sets financial measures for a threshold, target and maximum
cash incentive payout in the first quarter of each year and makes
determinations concerning payout of incentives after review of the
Corporation's performance for the full year.
- - - The annual incentive plan awards in respect of 1996 performance for the Chief
Executive Officer and Messrs. Crispin and Center were based 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 consisted
of an overall corporate
16
<PAGE>
component and a component based on financial and strategic measures for the
executive's affiliate or business unit. All annual incentive awards were
subject to an individual performance adjustment as described below.
- - - Subject to stockholder approval of the UNUM Corporation Incentive
Compensation Plan for Designated Executive Officers, the Committee has based
its performance measures for 1997 performance on operating earnings per
share for the Corporation.
- - - The Corporation's 1996 earnings per share exceeded the target performance
measure set by the Committee by more than 10 percent. Management took
far-reaching actions to improve return on capital through the sale of the
TSA business and the reinsurance of the Corporation's non-cancelable
individual disability business. Progress toward the Corporation's 1998
Goals, however, was mixed. While the Corporation delivered an outstanding
return to stockholders through a 33 percent increase in stock price and made
excellent progress in its People Goal, it fell short on its Customer Service
and Operating Effectiveness Goals. Therefore, the Committee set a corporate
incentive amount of 110 percent of the target amount and made individual
adjustments (up or down) to this payout level by up to 10 percent to reflect
individual performance. In the case of the Chief Executive Officer, the
Committee made an award of 125 percent of the target amount to reward Mr.
Orr for his record of delivering consistent stockholder value during his
term as Chairman of the Corporation.
Robert E. Dillon, Jr. Donald W. Harward Lawrence R. Pugh
17
<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, 1991, 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 12/31/91 and all dividends reinvested)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
UNUM INDUSTRY INDEX S&P 500
<S> <C> <C> <C>
1991 $100.00 $100.00 $100.00
1992 133.00 131.00 108.00
1993 133.00 130.00 118.00
1994 98.00 117.00 120.00
1995 145.00 162.00 165.00
1996 193.00 215.00 203.00
</TABLE>
18
<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 ---------------------------
----------------------- SECURITIES
NAME AND INCENTIVE RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY PAYMENT(1) STOCK AWARD(2) OPTIONS COMPENSATION(7)
- - ---------------------------------------------- --------- ---------- ----------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James F. Orr III.............................. 1996 $ 739,923 $ 740,000 $ 912,600(3) 41,200 $ 9,000
Chairman and CEO 1995 $ 691,385 $ 248,900 $ 446,250(4) 36,950 $ 214,285
1994 $ 626,154 $ 0 $ 388,125(5) 31,500 $ 24,238
Robert W. Crispin............................. 1996 $ 500,000 $ 363,000 $ 450,450(3) 20,300 $ 266,884
Executive Vice President and CFO 1995 $ 480,769 $ 250,000 $ 656,000(6) 55,150 $ 684,849
Stephen B. Center............................. 1996 $ 395,385 $ 287,100 $ 409,500(3) 18,550 $ 9,000
Executive Vice President 1995 $ 372,154 $ 111,000 $ 170,000(4) 14,150 $ 6,000
1994 $ 353,308 $ 0 $ 596,150(5) 11,650 $ 6,000
Elaine D. Rosen............................... 1996 $ 296,154 $ 184,900 $ 228,150(3) 10,250 $ 9,000
President, UNUM America 1995 $ 272,308 $ 65,400 $ 102,000(4) 8,550 $ 6,000
1994 $ 235,384 $ 0 $ 75,038(5) 6,000 $ 6,000
Thomas G. Brown............................... 1996 $ 340,002 $ 61,200 $ 228,150(3) 10,250 $ 809,500
Executive Vice President 1995 $ 332,127 $ 414,260 $ 102,000(4) 8,550 $ 822,980
</TABLE>
- - ------------
(1) Cash incentive payments for 1996, 1995 and 1994 performance have been listed
in year earned, but were actually paid in the following fiscal year.
Additional cash incentive amounts in respect of 1996 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, 1996 ($72.375 per
share) of shares of Restricted Stock held by the five named executives as of
December 31, 1996 were as follows: Mr. Orr (33,600, $2,431,800), Mr. Crispin
(22,900, $1,657,388), Mr. Center (23,800, $1,722,525), Ms. Rosen (7,750,
$560,906) and Mr. Brown (7,750, $560,906).
(3) 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.
19
<PAGE>
(4) 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. 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 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.
(5) All shares shown were forfeited as described in the Committee report above,
with the exception of 10,000 shares with a grant value of $451,250 for Mr.
Center that will vest on January 6, 1998 provided that he remains in the
Corporation's employ until such vesting date.
(6) The amount shown includes 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.
(7) 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 and $18,238 relative to 1995 and 1994, respectively. In
the case of Mr. Crispin, the Corporation paid the first and second of three
equal annual payments of $220,000 to compensate him for foregone
compensation from his previous employer and provided relocation assistance
of $37,384 and $464,849, relative to 1996 and 1995, respectively (see
description under "Other Agreements and Transactions"). In the case of Mr.
Brown, the stated amount includes four non-competition payments of $200,000
per quarter (see description under "Other Agreements and Transactions").
20
<PAGE>
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL POTENTIAL REALIZED VALUE
UNDERLYING OPTIONS GRANTED AT EXPIRATION(2)
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION ---------------------------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 0%($) 5%($) 10%($)
- - ------------------------ ----------- ----------------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James F. Orr III........ 41,200 3.82% $ 59.19 3/8/06 $ 0 $ 1,533,464 $ 3,886,396
Robert W. Crispin....... 20,300 1.88% $ 59.19 3/8/06 $ 0 $ 755,566 $ 1,914,899
Stephen B. Center....... 18,550 1.72% $ 59.19 3/8/06 $ 0 $ 690,431 $ 1,749,822
Elaine D. Rosen......... 10,250 0.95% $ 59.19 3/8/06 $ 0 $ 381,505 $ 966,883
Thomas G. Brown......... 10,250 0.95% $ 59.19 3/8/06 $ 0 $ 381,505 $ 966,883
</TABLE>
- - ------------
(1) Options were granted on March 8, 1996 based on the fair market value on that
date. Thirty three percent of the options will vest on March 8, 1997. An
additional 33 and 34 percent will vest on March 8, 1998 and 1999,
respectively.
(2) Potential realizable value at expiration 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.
AGGREGATED OPTION EXERCISES IN FISCAL 1996
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 $ 0 236,400 41,350 $ 8,500,778 $ 548,481
Robert W. Crispin................. 0 $ 0 35,000 40,450 $ 1,026,563 $ 851,600
Stephen B. Center................. 0 $ 0 52,350 18,700 $ 1,401,597 $ 249,784
Thomas G. Brown................... 0 $ 0 20,400 10,400 $ 479,625 $ 140,328
Elaine D. Rosen................... 0 $ 0 26,600 10,400 $ 702,331 $ 140,328
</TABLE>
- - ------------
(1) Potential unrealized value is (i) the fair market value at December 31, 1996
($72.375 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 and Brown and Ms. Rosen
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
21
<PAGE>
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 the such agreements.
During 1996, UNUM America paid $272,000 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 two
percent of annual profit commissions earned by D&H each fiscal year and
participation in UNUM America's executive bonus plan and D&H's 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") and
the Supplemental Retirement Plan (the "Supplemental Plan") upon normal
retirement of participants with varying Final Average Earnings (as defined
below) and years of Credited Service. The amounts shown are annual payments for
the life of a participant who retires at age 65. Specific variations from the
table for the named executives are discussed below. As of December 31, 1996,
Messrs. Orr, Crispin, Center and Brown, and Ms. Rosen had 10, 4, 34, 0,
22
<PAGE>
and 21 years of Credited Service, respectively. If each of the above were to
continue his or her employment until age 65, the respective years of Credited
Service would be 21, 27, 40, 13, and 42 for purposes of computing benefits.
<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>
$ 400,000 ................ $ 59,800 $ 91,000 $ 123,200 $ 156,200 $ 190,100 $ 216,700 $ 243,200 $ 269,800
500,000 ................ 75,600 115,000 155,600 197,300 240,100 273,600 307,100 340,600
600,000 ................ 91,400 139,000 188,100 238,400 290,100 330,500 371,000 411,400
700,000 ................ 107,100 163,000 220,500 279,500 340,100 387,500 434,900 482,300
800,000 ................ 122,900 187,000 252,900 320,600 390,100 444,400 498,800 553,100
900,000 ................ 138,700 211,000 285,400 361,700 440,100 501,400 562,700 623,900
1,000,000 ................ 154,500 235,000 317,800 402,900 490,100 558,300 626,500 694,800
1,100,000 ................ 170,300 259,000 350,300 444,000 540,100 615,300 690,400 765,600
1,200,000 ................ 186,000 283,000 382,700 485,100 590,100 672,200 754,300 836,400
1,300,000 ................ 201,800 307,000 415,200 526,200 640,100 729,200 818,200 907,300
1,400,000 ................ 217,600 331,000 447,600 567,300 690,100 786,100 882,100 978,100
1,500,000 ................ 233,400 355,000 480,100 608,400 740,100 843,000 946,000 1,048,900
</TABLE>
The above table reflects the amendment of the Pension Plan to a Lifecycle
formula effective January 1, 1997. Retirement benefits under this plan include a
Basic Benefit based upon age, years of Credited Service, Final Average Earnings
and Social Security Covered Compensation and an additional Transition Benefit
based on the preceding factors and also upon each participant's age at December
31, 1996. "Final Average Earnings" is defined as the average of basic earnings
plus incentives for the five years in which earnings were highest within the
last 10 years of employment. "Social Security Covered Compensation" means the
average of the annual Social Security taxable wage bases in effect during the 35
year period ending when the employee reaches Social Security Retirement Age.
Accrued benefits are 100 percent vested after five years of service. Because the
Transition Benefit varies based upon age at December 31, 1996, and Social
Security Covered Compensation varies with year of birth, the retirement benefits
shown above are averages; benefits for individual executives may be 10 to 15
percent higher or lower than shown.
The Supplemental Plan provides benefits equal to the difference between what
the Pension Plan can pay reflecting the limits imposed by Sections 401(a)(17)
and 415 of the Internal Revenue Code and what the Pension Plan otherwise would
have paid had these limits not existed. All participants in the Pension Plan who
retire or terminate after January 1, 1983 and are affected by the limits are
eligible to participate in the Supplemental Plan, including Messrs. Orr,
Crispin, Center and Brown, and Ms. Rosen. Effective January 1, 1997, the
Supplemental Plan also pays benefits that would have been paid by the Pension
Plan had compensation not been deferred.
Messrs. Orr and Crispin may have an additional benefit payable under the
Supplemental Executive Retirement Plan (the "SERP"). The SERP benefits for
Messrs. Orr and Crispin equal 2.5 percent of Final Average Earnings for each
year of Credited Service, up to a maximum of 20 years, less benefits payable
from the Supplemental Plan and benefits payable from the Pension Plan.
23
<PAGE>
PROPOSALS OF STOCKHOLDERS
In order for proposals of stockholders to be included in the proxy materials
for presentation at the 1998 Annual Meeting of Stockholders, such proposals must
be received by the Corporate Secretary no later than November 24, 1997.
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
24
<PAGE>
THE UNUM CORPORATION
INCENTIVE COMPENSATION PLAN
FOR DESIGNATED EXECUTIVE OFFICERS
1. PURPOSE OF THE PLAN
The purpose of the UNUM Corporation ("UNUM" or the "Corporation")
Incentive Compensation Plan for Designated Executive Officers (the "Plan") is to
provide a means of rewarding certain executive officers of the Corporation and
its subsidiaries with compensation which, when coupled with a base salary,
produces a competitive level of total compensation that reflects their
contributions to the overall long term enhancement of the value of the
Corporation in a manner which permits such compensation to be deductible for
federal income tax purposes.
2. ADMINISTRATION OF THE PLAN
The administration of this Plan shall be vested in the Compensation
Committee of the Board (the "Committee") which shall make all determinations
necessary under this Plan. All members of the Committee shall qualify as
"outside directors" (as that term is defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder or
as may from time to time be in effect (the "Regulations")).
3. PARTICIPATION IN THE PLAN
All executive officers, as defined by rules of the Securities and
Exchange Commission, shall be eligible to participate in the Plan. Within the
period specified in the Regulations within which a performance goal is required
to be established to qualify as a pre-established performance goal (the
"Designation Period"), the Committee may designate one or more such executive
officers of the Corporation (each, a "Participant") who shall participate in the
Plan for the Performance Period.
4. PERFORMANCE GOALS AND AWARDS TO PARTICIPANTS
Within the Designation Period the Committee will allocate amounts on
behalf of each Participant which will be awarded if the Corporation and/or a
business unit attains objective performance goals established by the Committee
within the Designation Period 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, operating, or
statutory accounting basis, revenue, annualized sales, market share, cash flow
or cost reduction goals, underwriting margin, or any combination of the
foregoing. Such goals may be expressed either on an absolute basis or relative
to the performance of a peer group selected by the Committee.
<PAGE>
Where applicable, the Performance Goals may be expressed in terms
of attaining a specified level of the particular criteria or the attainment
of a percentage increase or decrease in the particular criteria. The
Performance Goals may include a threshold level of performance below which no
payment will be made (or no vesting will occur), levels of performance at
which specified payments will be made (or no vesting will occur) and a
maximum level of performance above which no additional payment will be made
(or at which full vesting will occur). Each of the foregoing Performance
Goals shall be determined in accordance with generally accepted accounting
principles and shall be subject to certification by the Committee; provided
that the Committee shall have the authority to make equitable adjustments to
the Performance Goals in recognition of unusual or non-recurring events
affecting the Corporation or any subsidiary or affiliate thereof or the
financial statements of the Corporation or any subsidiary or affiliate
thereof, in response to changes in applicable laws or regulations, or to
account for items of gain, loss or expense determined to be extraordinary or
unusual in nature or infrequent in occurrence or related to the disposal of a
segment of a business or to a change in accounting principles.
The Committee may, in its sole discretion, reduce or cancel any award
under the Plan. At the discretion of the Committee, Awards shall be satisfied
in cash or restricted stock under the Company's 1996 Stock Long-Term Incentive
Plan or a combination of the above.
The maximum amount payable in cash and Restricted Stock (valued at the fair
market value on the date of grant) to any single participant with respect to any
Performance Period shall be the lesser of 250% of the base salary of the
participant at the time of designation or $3,000,000.
5. PERFORMANCE PERIOD
The Performance Period as to which awards may be made under this Plan
shall be the twelve-month period commencing January 1 of a calendar year and
ending on December 31 of such calendar year.
6. PAYMENT OF INCENTIVE AWARDS UNDER THE PLAN
(a) Following the completion of each Performance Period, the
Committee will certify in writing (i) whether the performance goals and any
other material terms of each award were attained, and (ii) the award payable to
the Participants.
(b) Except as provided in Section 7 of this Plan, each Participant
shall receive payment, in cash or certificates representing shares of Restricted
Stock, subject to all required tax withholdings, of his or her incentive award
as soon as practicable following the determination of the amount of such award.
<PAGE>
7. DEFERRAL OF PAYMENT OF AWARDS
At the discretion of the Committee and subject to such terms and
conditions as the Committee may determine, any Participant may elect to defer
payment of the cash portion of all or part of any award which such Participant
might earn with respect to a Performance Period (together with interest thereon
from the date as of which the award would have been paid but for such
Participant's election to defer payment at the rate, if any, fixed by the
Committee) by complying with such procedures as the Committee may from time to
time prescribe.
8. SEPARATION FROM THE CORPORATION AND ITS SUBSIDIARIES
The Committee may adopt rules governing the rights of Participants who
cease to be employed by the Corporation or its subsidiaries prior to the end of
the Performance Period to receive award payments.
9. AMENDMENTS
The Committee may amend this Plan at any time, provided that if
Section 162(m) of the Code or the Regulations would require stockholder approval
of such an amendment in order for payments under the Plan to be deductible then
no such amendment shall be effective without such approval.
10. TERMINATION
The Board of Directors of the Corporation may terminate this Plan at
any time. No termination of this Plan shall adversely affect the right of any
person to receive any award for a Performance Period or Periods for which such
person had been designated under Section 3 of this Plan, or amounts previously
awarded to such person but deferred in accordance with Section 7 of this Plan
plus any earnings thereon, or as provided in rules adopted under Section 8 of
this Plan.
11. MISCELLANEOUS
(a) Nothing contained in this Plan shall be construed as giving any
executive officer of the Corporation the right to participate in the Plan, to
continued employment or any interest in any asset of the Corporation or any of
its subsidiaries, or to prevent the Corporation or any of its subsidiaries or
affiliates from taking any action which it deems to be appropriate or in its
best interests, whether or not such action would have an adverse effect on this
Plan or the amounts payable hereunder.
(b) This Plan shall be unfunded and the Corporation shall not be
required to establish any segregation of assets to assure payment of any awards
made hereunder.
<PAGE>
(c) A Participant may not sell, transfer or assign any right or
interest in the Plan except as provided in rules adopted by the Committee under
Section 8 hereof and any attempted sale, transfer or assignment shall be null
and void.
(d) This Plan shall be governed by and construed in accordance with
the laws of the State of Delaware and the applicable provisions of the Code and
the Regulations.
12. EFFECTIVE DATE
This Plan shall be effective as of January 1, 1997, subject to the
subsequent approval hereof by the Corporation's stockholders at the 1997 Annual
Meeting of Stockholders and, if so approved, shall remain in effect until
terminated in accordance with Section 11 hereof.
<PAGE>
UNUM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 9, 1997
PROXY
The undersigned hereby appoints as Proxies, James F. Orr III, Robert W. Crispin
and Kevin J. Tierney, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
Common Stock of UNUM Corporation held of record by the undersigned on March 11,
1997, at the Annual Meeting of Stockholders to be held on May 9, 1997, or any
adjournments thereof.
Election of Directors, Nominees:
Gayle O. Averyt, Gwain H. Gillespie, Cynthia A. Montgomery and
James L. Moody, Jr.
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. SEE REVERSE SIDE
<PAGE>
/X/ Please mark your votes as in this example. | 0606
-----
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
\ \ \ \
1. Election of Directors. (mark only one)
----------------------------------------------------------------------
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name on the space provided.
2. Proposal to ratify the appointment of Coopers & Lybrand L.L.P. as the
Corporation's independent auditors for the year 1997.
FOR AGAINST ABSTAIN
\ \ \ \ \ \
3. Proposal to approve the Corporation's Incentive Compensation Plan for
Designated Executive Officers.
FOR AGAINST ABSTAIN
\ \ \ \ \ \
4. Proposal to approve an increase in the authorized shares of Common Stock of
the Corporation.
FOR AGAINST ABSTAIN
\ \ \ \ \ \
I would like to attend UNUM Corporation's Annual Meeting of Stockholders on
May 9, 1997. 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.
