SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): November 22, 1998
UNUM Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-9254 01-0405657
(State or Other (Commission File (IRS Employer
Jurisdiction Number) Identification Number)
of Incorporation)
2211 Congress Street, Portland, Maine 04122
(Address of principal executive offices) (Zip Code)
(207) 770-2211
(Registrant's telephone number, including area code)
None
(Former Name or Former Address, if Changed Since Last Report)
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2
Item 5. Other Events.
On November 22, 1998, UNUM Corporation ("UNUM") entered into an
Agreement and Plan of Merger dated as of November 22, 1998 (the "Merger
Agreement"), between UNUM and Provident Companies, Inc. ("Provident"),
pursuant to which UNUM and Provident will merge (the "Merger") under the
name UNUMProvident Corporation ("UNUMProvident"). Pursuant to the Merger
and the other transactions contemplated by the Merger Agreement, each share
of Provident common stock will be converted into 0.730 of a share of
UNUMProvident common stock and each share of UNUM common stock will be
converted into one share of UNUMProvident common stock.
In connection with the Merger Agreement, UNUM granted Provident
an option to purchase 27,563,644 shares of the common stock of UNUM (19.9%
of UNUM's issued and outstanding common stock) pursuant to a Stock Option
Agreement (the "UNUM Stock Option Agreement") dated as of November 22,
1998, between UNUM and Provident. The option becomes exercisable upon the
occurrence of certain events, none of which has occurred at the time of
this filing. Also in connection with the Merger Agreement, Provident
granted UNUM an option to purchase 26,945,874 shares of the common stock of
Provident (19.9% of Provident's issued and outstanding common stock)
pursuant to a Stock Option Agreement (the "Provident Stock Option
Agreement") dated as of November 22, 1998, between Provident and UNUM. The
option becomes exercisable upon the occurrence of certain events, none of
which has occurred at the time of this filing.
Also in connection with the Merger Agreement, Stockholders who
collectively have beneficial ownership of approximately 26% of the
outstanding common stock of Provident have agreed, pursuant to a
Stockholders Agreement (the "Stockholders Agreement"), dated as of November
22, 1998, to vote in favor of the Merger and related transactions at any
stockholders meeting in which such matters are considered.
The Merger is subject to certain regulatory approvals as well as
to the adoption of the Merger Agreement by the stockholders of UNUM and
the stockholders of Provident, and the approval of the issuance of
UNUMProvident common stock pursuant to the Merger Agreement by the holders
of Provident common stock.
Attached and incorporated herein by reference in their entirety
as Exhibits 2.1, 10.1, 10.2, 10.3 and 99.1, respectively, are copies of (1)
the Merger Agreement, (2) the Provident Stock Option Agreement, (3) the
UNUM Stock Option Agreement, (4) the Stockholders Agreement and (5) a press
release of UNUM and Provident announcing the signing of a definitive
agreement to merge the two companies.
Item 7(c). Exhibits.
2.1 Agreement and Plan of Merger dated as of November 22, 1998,
between Provident Companies, Inc., and UNUM Corporation.
10.1 Stock Option Agreement dated as of November 22, 1998,
between Provident Companies, Inc., and UNUM Corporation,
as Grantee.
10.2 Stock Option Agreement dated as of November 22, 1998,
between UNUM Corporation and Provident Companies, Inc.,
as Grantee.
10.3 Stockholders Agreement dated as of November 22, 1998,
between UNUM Corporation and certain stockholders of
Provident Companies, Inc.
99.1 Press release dated November 23, 1998, announcing the
signing of an agreement to merge UNUM Corporation and
Provident Companies, Inc.
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3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
UNUM Corporation
------------------------------
(Registrant)
Date: November 25, 1998 By: /s/ Robert E. Broatch
------------------------- ------------------------------
(Signature)
Name: Robert E. Broatch
Title: Senior Vice President &
Chief Financial Officer
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4
EXHIBIT INDEX
Exhibit Description
2.1 Agreement and Plan of Merger dated as of November 22, 1998,
between Provident Companies, Inc., and UNUM Corporation.
10.1 Stock Option Agreement dated as of November 22, 1998,
between Provident Companies, Inc., and UNUM Corporation,
as Grantee.
10.2 Stock Option Agreement dated as of November 22, 1998,
between UNUM Corporation and Provident Companies, Inc.,
as Grantee.
10.3 Stockholders Agreement dated as of November 22, 1998, between
UNUM Corporation and certain stockholders of Provident
Companies, Inc.
99.1 Press release dated November 23, 1998, announcing the
signing of an agreement to merge UNUM Corporation and
Provident Companies, Inc.
EXECUTION COPY
STOCK OPTION AGREEMENT dated as of November 22,
1998 (the "Agreement"), by and between PROVIDENT
COMPANIES, INC., a Delaware corporation ("Issuer"), and
UNUM CORPORATION, a Delaware corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"; defined terms
used but not defined herein have the meanings set forth in the Merger
Agreement), providing for, among other things, the merger of Grantee with
and into Issuer with Issuer as the surviving corporation in the Merger;
B. As a condition and inducement to Grantee's willingness to
enter into the Merger Agreement, the Stockholders Agreement and the UNUM
Stock Option Agreement, Grantee has requested that Issuer agree, and Issuer
has agreed, to grant Grantee the Option (as defined below); and
C. As a condition and inducement to Issuer's willingness to enter
into the Merger Agreement and this Agreement, Issuer has requested that
Grantee agree, and Grantee has agreed, to grant Issuer an option to
purchase shares of Grantee's common stock on substantially the same terms
as the Option;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, Issuer and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option", which term shall, as applicable, be deemed to refer to an option
with respect to Issuer Preferred Stock (as defined in Section 2(b)) to
purchase up to 26,945,874 (as adjusted as set forth herein) shares (the
"Option Shares", which term shall, as applicable, be deemed to refer to
Issuer Preferred Option Shares (as defined in Section 2(b)), of Common
Stock, par value $1.00 per share ("Issuer Common Stock"), of Issuer at a
purchase price of $35.131 (as adjusted as set forth herein) per Option
Share (the "Purchase Price").
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2. Exercise of Option. (a) Grantee may exercise the Option, with
respect to any or all of the Option Shares at any time, subject to the
provisions of Section 2(c), after the occurrence of any event as a result
of which the Grantee is entitled to receive the Termination Fee pursuant to
Section 5.09(b) of the Merger Agreement (a "Purchase Event"); provided,
however, that (i) except as provided in the last sentence of this Section
2(a), the Option will terminate and be of no further force and effect upon
the earliest to occur of (A) the Effective Time, (B) 18 months after the
first occurrence of a Purchase Event, and (C) termination of the Merger
Agreement in accordance with its terms prior to the occurrence of a
Purchase Event, unless, in the case of this clause (C), the Grantee has the
right to receive a Termination Fee following such termination upon the
occurrence of certain events, in which case the Option will not terminate
until the later of (x) six months following the time such Termination Fee
becomes payable and (y) the expiration of the period in which the Grantee
has such right to receive a Termination Fee, and (ii) any purchase of
Option Shares upon exercise of the Option will be subject to compliance
with the HSR Act and the obtaining or making of any consents, approvals,
orders, notifications, filings, expiration of applicable waiting periods or
authorizations, the failure of which to have obtained or made would have
the effect of making the issuance of Option Shares to Grantee illegal (the
"Regulatory Approvals"). Notwithstanding the termination of the Option,
Grantee will be entitled to purchase the Option Shares if it has exercised
the Option in accordance with the terms hereof prior to the termination of
the Option and the termination of the Option will not affect any rights
hereunder which by their terms do not terminate or expire prior to or as of
such termination.
(b) In the event that Grantee is entitled to and wishes to
exercise the Option, it will send to Issuer a written notice (an "Exercise
Notice"; the date of which being herein referred to as the "Notice Date")
to that effect which Exercise Notice also specifies the number of Option
Shares, if any, Grantee wishes to purchase pursuant to this Section 2(b),
the number of Option Shares, if any, with respect to which Grantee wishes
to exercise its Cash-Out Right (as defined herein) pursuant to Section
6(c), the denominations of the certificate or certificates evidencing the
Option Shares which Grantee wishes to purchase pursuant to this Section
2(b) and a date (an "Option Closing Date"), subject to the following
sentence, not earlier than three business days nor later than 20 business
days from the Notice Date for the closing of such purchase (an "Option
Closing"); provided, however, that in the event a sufficient
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number of shares of Issuer Common Stock are not authorized to permit the
issuance by the Issuer of the number of Option Shares subject to such
Exercise Notice, the Issuer shall use its best efforts to cause such number
of shares of Issuer Common Stock to become authorized for issuance prior to
the Option Closing Date, or, in lieu thereof, a number of shares of
preferred stock, par value $1.00 per share, authorized and designated by
the Issuer in accordance with the DGCL ("Issuer Preferred Stock"), which
shares (or units thereof) of preferred stock shall be equal (in number and
voting power) to the number of Option Shares issuable pursuant to such
Exercise Notice and otherwise have terms that make such preferred stock
substantially similar to Issuer Common Stock (the "Issuer Preferred Option
Shares"). Any Option Closing will be at an agreed location and time in New
York, New York on the applicable Option Closing Date or at such later date
as may be necessary so as to comply with the first sentence of Section
2(a).
(c) Notwithstanding anything to the contrary contained herein,
any exercise of the Option and purchase of Option Shares shall be subject
to compliance with applicable laws and regulations, which may prohibit the
purchase of all the Option Shares specified in the Exercise Notice without
first obtaining or making certain Regulatory Approvals. In such event, if
the Option is otherwise exercisable and Grantee wishes to exercise the
Option, the Option may be exercised in accordance with Section 2(b) and
Grantee shall acquire the maximum number of Option Shares specified in the
Exercise Notice that Grantee is then permitted to acquire under the
applicable laws and regulations, and if Grantee thereafter obtains the
Regulatory Approvals to acquire the remaining balance of the Option Shares
specified in the Exercise Notice, then Grantee shall be entitled to acquire
such remaining balance. Issuer agrees to use its reasonable efforts to
assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a
Regulatory Approval required for the purchase of any Option Shares will not
be issued or granted or (ii) such Regulatory Approval has not been issued
or granted within six months of the date of the Exercise Notice, Grantee
shall have the right to exercise its Cash-Out Right pursuant to Section
6(c) with respect to the Option Shares for which such Regulatory Approval
will not be issued or granted or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option
Closing, Grantee will pay to Issuer in immediately available funds by wire
transfer to a bank account
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designated in writing by Issuer an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased at such Option
Closing.
(b) At any Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer will
deliver to Grantee a certificate or certificates representing the Option
Shares to be purchased at such Option Closing, which Option Shares will be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever.
(c) Certificates for the Option Shares delivered at an Option
Closing will have typed or printed thereon a restrictive legend which will
read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF NOVEMBER 22, 1998, A COPY OF WHICH MAY BE
OBTAINED FROM THE SECRETARY OF PROVIDENT COMPANIES, INC. AT ITS
PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been registered pursuant to the Securities Act, such Option Shares have
been sold in reliance on and in accor dance with Rule 144 under the
Securities Act or Grantee has delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act and (ii) the
reference to restrictions pursuant to this Agreement in the above legend
will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions
of this Agreement under circumstances that do not require the retention of
such reference.
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4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and, subject to the expiration
or termination of any required waiting period under the HSR Act, to
permit it to issue, and, at all times from the date hereof until the
obligation to deliver Option Shares upon the exercise of the Option
terminates, shall have reserved for issuance, upon exercise of the
Option, shares of Issuer Common Stock or, to the extent of any
deficiency in the amount of authorized Issuer Common Stock, Issuer
Preferred Option Shares necessary for Grantee to exercise the Option,
and Issuer will take all necessary corporate action to authorize and
reserve for issuance all additional shares of Issuer Common Stock
and/or Issuer Preferred Option Shares or other securities which may be
issued pursuant to Section 6 upon exercise of the Option. The shares
of Issuer Common Stock and/or Issuer Preferred Option Shares to be
issued upon due exercise of the Option, including all additional
shares of Issuer Common Stock and/or Issuer Preferred Option Shares or
other securities which may be issuable upon exercise of the Option or
any other securities which may be issued pursuant to Section 6, upon
issuance pursuant hereto, will be duly and validly issued, fully paid
and nonassessable, and will be delivered free and clear of all liens,
claims, charges and encumbrances of any kind or nature whatsoever,
including without limitation any preemptive rights of any stockholder
of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
Purchase Not for Distribution. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be
transferred or otherwise disposed of except in a transaction
registered, or exempt from registration, under the Securities Act.
6. Adjustment upon Changes in Capitalization, Etc. (a) In the
event of any change in the Issuer Common Stock by reason of a stock
dividend, split-up, reverse stock split, merger, recapitalization,
combination, exchange of shares, or similar transaction, the type and
number of shares or securities subject to the Option, and the Purchase
Price thereof, will be adjusted appropriately, and proper provision will be
made in the agreements governing such transaction, so that Grantee will
receive upon exercise of
<PAGE>
the Option the number and class of shares or other securities or property
that Grantee would have received in respect of Issuer Common Stock if the
Option had been exercised immediately prior to such event or the record
date therefor, as applicable. Subject to Section 1, and without limiting
the parties' relative rights and obligations under the Merger Agreement, if
any additional shares of Issuer Common Stock are issued after the date of
this Agreement (other than pursuant to an event described in the first
sentence of this Section 6(a)), the number of shares of Issuer Common Stock
subject to the Option will be adjusted so that, after such issuance, it
equates 19.9% of the number of shares of Issuer Common Stock then issued
and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that Issuer enters into an
agreement (i) to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Issuer will not be the continuing
or surviving corporation in such consolidation or merger, (ii) to permit
any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer will be the continuing or surviving corporation, but in
connection with such merger, the shares of Issuer Common Stock outstanding
immediately prior to the consummation of such merger will be changed into
or exchanged for stock or other securities of Issuer or any other person or
cash or any other property, or the shares of Issuer Common Stock
outstanding immediately prior to the consummation of such merger will,
after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or
one of its subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option
will, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class
of shares or other securities or property that Grantee would have received
in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or transfer, or the
record date therefor, as applicable and make any other necessary
adjustments.
(c) Notwithstanding that the Issuer may at any such time not have
sufficient authorized shares of Issuer Common Stock or may not have
authorized and designated the
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Issuer Preferred Option Shares in accordance with the DGCL, in each case
issuable pursuant to exercise of the Option, if, at any time during the
period commencing on a Purchase Event and ending on the termination of the
Option in accordance with Section 2, Grantee sends to Issuer an Exercise
Notice indicating Grantee's election to exercise its right (the "Cash-Out
Right") pursuant to this Section 6(c), then Issuer shall pay to Grantee, on
the Option Closing Date, in exchange for the cancellation of the Option
with respect to such number of Option Shares as Grantee specifies in the
Exercise Notice, an amount in cash equal to such number of Option Shares
multiplied by the difference between (i) the average closing price, for the
10 NYSE trading days commencing on the 12th NYSE trading day immediately
preceding the Notice Date, per share of Issuer Common Stock as reported on
the NYSE Composite Transaction Tape (or, if not listed on the NYSE, as
reported on any other national securities exchange or national securities
quotation system on which the Issuer Common Stock is listed or quoted, as
reported in The Wall Street Journal (Northeast edition), or, if not
reported thereby, any other authoritative source) (the "Closing Price") and
(ii) the Purchase Price. Notwithstanding the termination of the Option,
Grantee will be entitled to exercise its rights under this Section 6(c) if
it has exercised such rights in accordance with the terms hereof prior to
the termination of the Option.
7. Registration Rights. Issuer will, if requested by Grantee at
any time and from time to time within three years of the exercise of the
Option, as expeditiously as possible prepare and file up to three
registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
shares of securities that have been acquired by or are issuable to Grantee
upon exercise of the Option in accordance with the intended method of sale
or other disposition stated by Grantee, including a "shelf" registration
statement under Rule 415 under the Securities Act or any successor
provision, and Issuer will use its best efforts to qualify such shares or
other securities under any applicable state securities laws. Grantee agrees
to use reasonable efforts to cause, and to cause any underwriters of any
sale or other disposition to cause, any sale or other disposition pursuant
to such registration statement to be effected on a widely distributed
basis so that upon consummation thereof no purchaser or transferee will own
beneficially more than 4.9% of the then-outstanding voting power of Issuer.
Issuer will use reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of
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other parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 180 calendar days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The
obligations of Issuer hereunder to file a registration statement and to
maintain its effectiveness may be suspended for up to 60 calendar days in
the aggregate if the Board of Directors of Issuer shall have determined
that the filing of such registration statement or the maintenance of its
effectiveness would require premature disclosure of material nonpublic
information that would materially and adversely affect Issuer or otherwise
interfere with or adversely affect any pending or proposed offering of
securities of Issuer or any other material transaction involving Issuer.
Any registration statement prepared and filed under this Section 7, and any
sale covered thereby, will be at Issuer's expense except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto. Grantee will provide all information
reasonably requested by Issuer for inclusion in any registration statement
to be filed hereunder. If, during the time periods referred to in the first
sentence of this Section 7, Issuer effects a registration under the
Securities Act of Issuer Common Stock for its own account or for any other
stockholders of Issuer (other than on Form S-4 or Form S-8, or any
successor form), it will allow Grantee the right to participate in such
registration, and such participation will not affect the obligation of
Issuer to effect demand registration statements for Grantee under this
Section 7; provided that, if the managing underwriters of such offering
advise Issuer in writing that in their opinion the number of shares of
Issuer Common Stock requested to be included in such registration exceeds
the number which can be sold in such offering, Issuer will include the
shares requested to be included therein by Grantee pro rata with the shares
intended to be included therein by Issuer. In connection with any
registration pursuant to this Section 7, Issuer and Grantee will provide
each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification, and contribution
in connection with such registration.
8. Limitation on Profit. (a) Notwithstanding any other provision
of this Agreement, in no event shall the Grantee's Total Profit (as defined
below) plus any Termination Fee paid to Grantee pursuant to Section 5.09(b)
of the Merger Agreement exceed in the aggregate $250 million and, if the
total amount that otherwise would be received by Grantee would exceed such
amount, the Grantee, at its sole election, shall either (i) reduce the
number of shares of
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Issuer Common Stock or Issuer Preferred Stock, as the case may be, subject
to the Option, (ii) deliver to the Issuer for cancellation Option Shares
previously purchased by Grantee against the refund of the Purchase Price
therefore, (iii) pay cash to the Issuer or (iv) any combination thereof, so
that Grantee's actually realized Total Profit, when aggregated with such
Termination Fee so paid to Grantee, shall not exceed $250 million after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Option Shares as would, as of
the date of exercise, result in a Notional Total Profit (as defined below)
which, together with any Termination Fee theretofore paid to Grantee, would
exceed $250 million; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received
by Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to Section 6(c), (ii)(x) the net cash amounts or the fair
market value of any property received by Grantee pursuant to the sale of
Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, but in no case less than
the fair market value of such Option Shares, less (y) the Grantee's
purchase price of such Option Shares, and (iii) the net cash amounts
received by Grantee on the transfer (in accordance with Section 12(g)
hereof) of the Option (or any portion thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of Option Shares as to which Grantee may propose to exercise
the Option shall be the Total Profit determined as of the date of such
proposal assuming for such purpose that the Option were exercised on such
date for such number of Option Shares and assuming that such Option Shares
(including any units of Issuer Preferred Stock intended to equate to Issuer
Common Stock), together with all other Option Shares (including any units
of Issuer Preferred Stock intended to equate to Issuer Common Stock) held
by Grantee and its affiliates as of such date, were sold for cash at the
closing market price on the NYSE for the Issuer Common Stock as of the
close of business on the preceding trading day (less customary brokerage
commissions.)
<PAGE>
9. Transfers. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) in an underwritten public
offering as provided in Section 7 or (ii) to any purchaser or transferee
who would not, to the knowledge of the Grantee after reasonable inquiry,
immediately following such sale, assignment, transfer or disposal
beneficially own more than 4.9% of the then-outstanding voting power of the
Issuer; provided, however, that Grantee shall be permitted to sell any
Option Shares if such sale is made pursuant to a tender or exchange offer
that has been approved or recommended by a majority of the members of the
Board of Directors of Issuer (which majority shall include a majority of
directors who were directors as of the date hereof).
10. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on the NYSE (or any
other national securities exchange or national securities quotation
system), Issuer, upon the request of Grantee, will promptly file an
application to list the shares of Issuer Common Stock or other securities
to be acquired upon exercise of the Option on the NYSE (and any such other
national securities exchange or national securities quotation system) and
will use reasonable efforts to obtain approval of such listing as promptly
as practicable.
11. Loss or Mutilation. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered will constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed, or mutilated shall at any time be enforceable by anyone.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in
the Merger Agreement, each of the parties hereto will bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
(b) Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
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(c) Extension; Waiver. Any agreement on the part of a party to
waive any provision of this Agreement, or to extend the time for
performance, will be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the UNUM Stock Option Agreement, the Merger Agreement (including
the documents and instruments attached thereto as exhibits or schedules or
delivered in connection therewith), the Stockholders Agreement, the
Confidentiality Agreement and the Letter Agreement (i) constitute the
entire agreement, and supersede all prior agreements and understandings,
both written and oral, between the parties with respect to the subject
matter of this Agreement, and (ii) except as provided in Section 8.06 of
the Merger Agreement, are not intended to confer upon any person other than
the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, without
regard to the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed
given if delivered personally, telecopied (which is confirmed), or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
If to Issuer to:
Provident Companies, Inc.
1 Fountain Square
Chattanooga, Tennessee 37402
Telecopy No.: (423) 755-5036
Attention: F. Dean Copeland
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with a copy to:
Sullivan & Cromwell
125 Broad Street New York,
New York 10004
Attention: H. Rodgin Cohen
Fax: (212) 558-3588; and
If to Grantee to:
UNUM Corporation
2211 Congress Street
Portland, Maine 04122
Telecopy No.: (207) 770-4377
Attention: Kevin J. Tierney
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler
Fax: (212) 474-3700
(g) Assignment. Neither this Agreement, the Option nor any of the
rights, interests, or obligations under this Agreement may be assigned or
delegated, in whole or in part, by operation of law or otherwise, by Issuer
or Grantee without the prior written consent of the other. Any assignment
or delegation in violation of the preceding sentence will be void. Subject
to the first and second sentences of this Section 12(g), this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the
Option by Grantee, Issuer and Grantee will execute and deliver all other
documents and instruments and take all other actions that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(i) Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of
<PAGE>
the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed
that the parties will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms
and provisions of this Agreement in any Federal court located in the State
of Delaware or in Delaware state court, the foregoing being in addition to
any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (ii)
agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and
(iii) agrees that it will not bring any action relating to this Agreement
or any of the transactions contemplated by this Agreement in any court
other than a Federal court sitting in the State of Delaware or a Delaware
state court.
13. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Amendment so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by
applicable law
<PAGE>
in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of
the day and year first written above.
PROVIDENT COMPANIES, INC.,
by /s/ James F. Orr III
---------------------------------
Name: James F. Orr III
Title: Chairman, President
and Chief Executive
Officer
UNUM CORPORATION,
by /s/ J. Harold Chandler
--------------------------------
Name: J. Harold Chandler
Title: Chairman and Chief
Executive Officer
EXECUTION COPY
STOCK OPTION AGREEMENT dated as of November 22,
1998 (the "Agreement"), by and between PROVIDENT
COMPANIES, INC., a Delaware corporation ("Issuer"), and
UNUM CORPORATION, a Delaware corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"; defined terms
used but not defined herein have the meanings set forth in the Merger
Agreement), providing for, among other things, the merger of Grantee with
and into Issuer with Issuer as the surviving corporation in the Merger;
B. As a condition and inducement to Grantee's willingness to
enter into the Merger Agreement, the Stockholders Agreement and the UNUM
Stock Option Agreement, Grantee has requested that Issuer agree, and Issuer
has agreed, to grant Grantee the Option (as defined below); and
C. As a condition and inducement to Issuer's willingness to enter
into the Merger Agreement and this Agreement, Issuer has requested that
Grantee agree, and Grantee has agreed, to grant Issuer an option to
purchase shares of Grantee's common stock on substantially the same terms
as the Option;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, Issuer and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option", which term shall, as applicable, be deemed to refer to an option
with respect to Issuer Preferred Stock (as defined in Section 2(b)) to
purchase up to 26,945,874 (as adjusted as set forth herein) shares (the
"Option Shares", which term shall, as applicable, be deemed to refer to
Issuer Preferred Option Shares (as defined in Section 2(b)), of Common
Stock, par value $1.00 per share ("Issuer Common Stock"), of Issuer at a
purchase price of $35.131 (as adjusted as set forth herein) per Option
Share (the "Purchase Price").
<PAGE>
2. Exercise of Option. (a) Grantee may exercise the Option, with
respect to any or all of the Option Shares at any time, subject to the
provisions of Section 2(c), after the occurrence of any event as a result
of which the Grantee is entitled to receive the Termination Fee pursuant to
Section 5.09(b) of the Merger Agreement (a "Purchase Event"); provided,
however, that (i) except as provided in the last sentence of this Section
2(a), the Option will terminate and be of no further force and effect upon
the earliest to occur of (A) the Effective Time, (B) 18 months after the
first occurrence of a Purchase Event, and (C) termination of the Merger
Agreement in accordance with its terms prior to the occurrence of a
Purchase Event, unless, in the case of this clause (C), the Grantee has the
right to receive a Termination Fee following such termination upon the
occurrence of certain events, in which case the Option will not terminate
until the later of (x) six months following the time such Termination Fee
becomes payable and (y) the expiration of the period in which the Grantee
has such right to receive a Termination Fee, and (ii) any purchase of
Option Shares upon exercise of the Option will be subject to compliance
with the HSR Act and the obtaining or making of any consents, approvals,
orders, notifications, filings, expiration of applicable waiting periods or
authorizations, the failure of which to have obtained or made would have
the effect of making the issuance of Option Shares to Grantee illegal (the
"Regulatory Approvals"). Notwithstanding the termination of the Option,
Grantee will be entitled to purchase the Option Shares if it has exercised
the Option in accordance with the terms hereof prior to the termination of
the Option and the termination of the Option will not affect any rights
hereunder which by their terms do not terminate or expire prior to or as of
such termination.
(b) In the event that Grantee is entitled to and wishes to
exercise the Option, it will send to Issuer a written notice (an "Exercise
Notice"; the date of which being herein referred to as the "Notice Date")
to that effect which Exercise Notice also specifies the number of Option
Shares, if any, Grantee wishes to purchase pursuant to this Section 2(b),
the number of Option Shares, if any, with respect to which Grantee wishes
to exercise its Cash-Out Right (as defined herein) pursuant to Section
6(c), the denominations of the certificate or certificates evidencing the
Option Shares which Grantee wishes to purchase pursuant to this Section
2(b) and a date (an "Option Closing Date"), subject to the following
sentence, not earlier than three business days nor later than 20 business
days from the Notice Date for the closing of such purchase (an "Option
Closing"); provided, however, that in the event a sufficient
<PAGE>
number of shares of Issuer Common Stock are not authorized to permit the
issuance by the Issuer of the number of Option Shares subject to such
Exercise Notice, the Issuer shall use its best efforts to cause such number
of shares of Issuer Common Stock to become authorized for issuance prior to
the Option Closing Date, or, in lieu thereof, a number of shares of
preferred stock, par value $1.00 per share, authorized and designated by
the Issuer in accordance with the DGCL ("Issuer Preferred Stock"), which
shares (or units thereof) of preferred stock shall be equal (in number and
voting power) to the number of Option Shares issuable pursuant to such
Exercise Notice and otherwise have terms that make such preferred stock
substantially similar to Issuer Common Stock (the "Issuer Preferred Option
Shares"). Any Option Closing will be at an agreed location and time in New
York, New York on the applicable Option Closing Date or at such later date
as may be necessary so as to comply with the first sentence of Section
2(a).
(c) Notwithstanding anything to the contrary contained herein,
any exercise of the Option and purchase of Option Shares shall be subject
to compliance with applicable laws and regulations, which may prohibit the
purchase of all the Option Shares specified in the Exercise Notice without
first obtaining or making certain Regulatory Approvals. In such event, if
the Option is otherwise exercisable and Grantee wishes to exercise the
Option, the Option may be exercised in accordance with Section 2(b) and
Grantee shall acquire the maximum number of Option Shares specified in the
Exercise Notice that Grantee is then permitted to acquire under the
applicable laws and regulations, and if Grantee thereafter obtains the
Regulatory Approvals to acquire the remaining balance of the Option Shares
specified in the Exercise Notice, then Grantee shall be entitled to acquire
such remaining balance. Issuer agrees to use its reasonable efforts to
assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a
Regulatory Approval required for the purchase of any Option Shares will not
be issued or granted or (ii) such Regulatory Approval has not been issued
or granted within six months of the date of the Exercise Notice, Grantee
shall have the right to exercise its Cash-Out Right pursuant to Section
6(c) with respect to the Option Shares for which such Regulatory Approval
will not be issued or granted or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option
Closing, Grantee will pay to Issuer in immediately available funds by wire
transfer to a bank account
<PAGE>
designated in writing by Issuer an amount equal to the Purchase Price
multiplied by the number of Option Shares to be purchased at such Option
Closing.
(b) At any Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer will
deliver to Grantee a certificate or certificates representing the Option
Shares to be purchased at such Option Closing, which Option Shares will be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever.
(c) Certificates for the Option Shares delivered at an Option
Closing will have typed or printed thereon a restrictive legend which will
read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF NOVEMBER 22, 1998, A COPY OF WHICH MAY BE
OBTAINED FROM THE SECRETARY OF PROVIDENT COMPANIES, INC. AT ITS
PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been registered pursuant to the Securities Act, such Option Shares have
been sold in reliance on and in accor dance with Rule 144 under the
Securities Act or Grantee has delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act and (ii) the
reference to restrictions pursuant to this Agreement in the above legend
will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions
of this Agreement under circumstances that do not require the retention of
such reference.
<PAGE>
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and, subject to the expiration
or termination of any required waiting period under the HSR Act, to
permit it to issue, and, at all times from the date hereof until the
obligation to deliver Option Shares upon the exercise of the Option
terminates, shall have reserved for issuance, upon exercise of the
Option, shares of Issuer Common Stock or, to the extent of any
deficiency in the amount of authorized Issuer Common Stock, Issuer
Preferred Option Shares necessary for Grantee to exercise the Option,
and Issuer will take all necessary corporate action to authorize and
reserve for issuance all additional shares of Issuer Common Stock
and/or Issuer Preferred Option Shares or other securities which may be
issued pursuant to Section 6 upon exercise of the Option. The shares
of Issuer Common Stock and/or Issuer Preferred Option Shares to be
issued upon due exercise of the Option, including all additional
shares of Issuer Common Stock and/or Issuer Preferred Option Shares or
other securities which may be issuable upon exercise of the Option or
any other securities which may be issued pursuant to Section 6, upon
issuance pursuant hereto, will be duly and validly issued, fully paid
and nonassessable, and will be delivered free and clear of all liens,
claims, charges and encumbrances of any kind or nature whatsoever,
including without limitation any preemptive rights of any stockholder
of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
Purchase Not for Distribution. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be
transferred or otherwise disposed of except in a transaction
registered, or exempt from registration, under the Securities Act.
6. Adjustment upon Changes in Capitalization, Etc. (a) In the
event of any change in the Issuer Common Stock by reason of a stock
dividend, split-up, reverse stock split, merger, recapitalization,
combination, exchange of shares, or similar transaction, the type and
number of shares or securities subject to the Option, and the Purchase
Price thereof, will be adjusted appropriately, and proper provision will be
made in the agreements governing such transaction, so that Grantee will
receive upon exercise of
<PAGE>
the Option the number and class of shares or other securities or property
that Grantee would have received in respect of Issuer Common Stock if the
Option had been exercised immediately prior to such event or the record
date therefor, as applicable. Subject to Section 1, and without limiting
the parties' relative rights and obligations under the Merger Agreement, if
any additional shares of Issuer Common Stock are issued after the date of
this Agreement (other than pursuant to an event described in the first
sentence of this Section 6(a)), the number of shares of Issuer Common Stock
subject to the Option will be adjusted so that, after such issuance, it
equates 19.9% of the number of shares of Issuer Common Stock then issued
and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that Issuer enters into an
agreement (i) to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Issuer will not be the continuing
or surviving corporation in such consolidation or merger, (ii) to permit
any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer will be the continuing or surviving corporation, but in
connection with such merger, the shares of Issuer Common Stock outstanding
immediately prior to the consummation of such merger will be changed into
or exchanged for stock or other securities of Issuer or any other person or
cash or any other property, or the shares of Issuer Common Stock
outstanding immediately prior to the consummation of such merger will,
after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or
one of its subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option
will, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class
of shares or other securities or property that Grantee would have received
in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or transfer, or the
record date therefor, as applicable and make any other necessary
adjustments.
(c) Notwithstanding that the Issuer may at any such time not have
sufficient authorized shares of Issuer Common Stock or may not have
authorized and designated the
<PAGE>
Issuer Preferred Option Shares in accordance with the DGCL, in each case
issuable pursuant to exercise of the Option, if, at any time during the
period commencing on a Purchase Event and ending on the termination of the
Option in accordance with Section 2, Grantee sends to Issuer an Exercise
Notice indicating Grantee's election to exercise its right (the "Cash-Out
Right") pursuant to this Section 6(c), then Issuer shall pay to Grantee, on
the Option Closing Date, in exchange for the cancellation of the Option
with respect to such number of Option Shares as Grantee specifies in the
Exercise Notice, an amount in cash equal to such number of Option Shares
multiplied by the difference between (i) the average closing price, for the
10 NYSE trading days commencing on the 12th NYSE trading day immediately
preceding the Notice Date, per share of Issuer Common Stock as reported on
the NYSE Composite Transaction Tape (or, if not listed on the NYSE, as
reported on any other national securities exchange or national securities
quotation system on which the Issuer Common Stock is listed or quoted, as
reported in The Wall Street Journal (Northeast edition), or, if not
reported thereby, any other authoritative source) (the "Closing Price") and
(ii) the Purchase Price. Notwithstanding the termination of the Option,
Grantee will be entitled to exercise its rights under this Section 6(c) if
it has exercised such rights in accordance with the terms hereof prior to
the termination of the Option.
7. Registration Rights. Issuer will, if requested by Grantee at
any time and from time to time within three years of the exercise of the
Option, as expeditiously as possible prepare and file up to three
registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
shares of securities that have been acquired by or are issuable to Grantee
upon exercise of the Option in accordance with the intended method of sale
or other disposition stated by Grantee, including a "shelf" registration
statement under Rule 415 under the Securities Act or any successor
provision, and Issuer will use its best efforts to qualify such shares or
other securities under any applicable state securities laws. Grantee agrees
to use reasonable efforts to cause, and to cause any underwriters of any
sale or other disposition to cause, any sale or other disposition pursuant
to such registration statement to be effected on a widely distributed
basis so that upon consummation thereof no purchaser or transferee will own
beneficially more than 4.9% of the then-outstanding voting power of Issuer.
Issuer will use reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of
<PAGE>
other parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 180 calendar days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The
obligations of Issuer hereunder to file a registration statement and to
maintain its effectiveness may be suspended for up to 60 calendar days in
the aggregate if the Board of Directors of Issuer shall have determined
that the filing of such registration statement or the maintenance of its
effectiveness would require premature disclosure of material nonpublic
information that would materially and adversely affect Issuer or otherwise
interfere with or adversely affect any pending or proposed offering of
securities of Issuer or any other material transaction involving Issuer.
Any registration statement prepared and filed under this Section 7, and any
sale covered thereby, will be at Issuer's expense except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto. Grantee will provide all information
reasonably requested by Issuer for inclusion in any registration statement
to be filed hereunder. If, during the time periods referred to in the first
sentence of this Section 7, Issuer effects a registration under the
Securities Act of Issuer Common Stock for its own account or for any other
stockholders of Issuer (other than on Form S-4 or Form S-8, or any
successor form), it will allow Grantee the right to participate in such
registration, and such participation will not affect the obligation of
Issuer to effect demand registration statements for Grantee under this
Section 7; provided that, if the managing underwriters of such offering
advise Issuer in writing that in their opinion the number of shares of
Issuer Common Stock requested to be included in such registration exceeds
the number which can be sold in such offering, Issuer will include the
shares requested to be included therein by Grantee pro rata with the shares
intended to be included therein by Issuer. In connection with any
registration pursuant to this Section 7, Issuer and Grantee will provide
each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification, and contribution
in connection with such registration.
8. Limitation on Profit. (a) Notwithstanding any other provision
of this Agreement, in no event shall the Grantee's Total Profit (as defined
below) plus any Termination Fee paid to Grantee pursuant to Section 5.09(b)
of the Merger Agreement exceed in the aggregate $250 million and, if the
total amount that otherwise would be received by Grantee would exceed such
amount, the Grantee, at its sole election, shall either (i) reduce the
number of shares of
<PAGE>
Issuer Common Stock or Issuer Preferred Stock, as the case may be, subject
to the Option, (ii) deliver to the Issuer for cancellation Option Shares
previously purchased by Grantee against the refund of the Purchase Price
therefore, (iii) pay cash to the Issuer or (iv) any combination thereof, so
that Grantee's actually realized Total Profit, when aggregated with such
Termination Fee so paid to Grantee, shall not exceed $250 million after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Option Shares as would, as of
the date of exercise, result in a Notional Total Profit (as defined below)
which, together with any Termination Fee theretofore paid to Grantee, would
exceed $250 million; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received
by Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to Section 6(c), (ii)(x) the net cash amounts or the fair
market value of any property received by Grantee pursuant to the sale of
Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, but in no case less than
the fair market value of such Option Shares, less (y) the Grantee's
purchase price of such Option Shares, and (iii) the net cash amounts
received by Grantee on the transfer (in accordance with Section 12(g)
hereof) of the Option (or any portion thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of Option Shares as to which Grantee may propose to exercise
the Option shall be the Total Profit determined as of the date of such
proposal assuming for such purpose that the Option were exercised on such
date for such number of Option Shares and assuming that such Option Shares
(including any units of Issuer Preferred Stock intended to equate to Issuer
Common Stock), together with all other Option Shares (including any units
of Issuer Preferred Stock intended to equate to Issuer Common Stock) held
by Grantee and its affiliates as of such date, were sold for cash at the
closing market price on the NYSE for the Issuer Common Stock as of the
close of business on the preceding trading day (less customary brokerage
commissions.)
<PAGE>
9. Transfers. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) in an underwritten public
offering as provided in Section 7 or (ii) to any purchaser or transferee
who would not, to the knowledge of the Grantee after reasonable inquiry,
immediately following such sale, assignment, transfer or disposal
beneficially own more than 4.9% of the then-outstanding voting power of the
Issuer; provided, however, that Grantee shall be permitted to sell any
Option Shares if such sale is made pursuant to a tender or exchange offer
that has been approved or recommended by a majority of the members of the
Board of Directors of Issuer (which majority shall include a majority of
directors who were directors as of the date hereof).
10. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on the NYSE (or any
other national securities exchange or national securities quotation
system), Issuer, upon the request of Grantee, will promptly file an
application to list the shares of Issuer Common Stock or other securities
to be acquired upon exercise of the Option on the NYSE (and any such other
national securities exchange or national securities quotation system) and
will use reasonable efforts to obtain approval of such listing as promptly
as practicable.
11. Loss or Mutilation. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered will constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed, or mutilated shall at any time be enforceable by anyone.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in
the Merger Agreement, each of the parties hereto will bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
(b) Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
<PAGE>
(c) Extension; Waiver. Any agreement on the part of a party to
waive any provision of this Agreement, or to extend the time for
performance, will be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the UNUM Stock Option Agreement, the Merger Agreement (including
the documents and instruments attached thereto as exhibits or schedules or
delivered in connection therewith), the Stockholders Agreement, the
Confidentiality Agreement and the Letter Agreement (i) constitute the
entire agreement, and supersede all prior agreements and understandings,
both written and oral, between the parties with respect to the subject
matter of this Agreement, and (ii) except as provided in Section 8.06 of
the Merger Agreement, are not intended to confer upon any person other than
the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, without
regard to the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed
given if delivered personally, telecopied (which is confirmed), or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
If to Issuer to:
Provident Companies, Inc.
1 Fountain Square
Chattanooga, Tennessee 37402
Telecopy No.: (423) 755-5036
Attention: F. Dean Copeland
<PAGE>
with a copy to:
Sullivan & Cromwell
125 Broad Street New York,
New York 10004
Attention: H. Rodgin Cohen
Fax: (212) 558-3588; and
If to Grantee to:
UNUM Corporation
2211 Congress Street
Portland, Maine 04122
Telecopy No.: (207) 770-4377
Attention: Kevin J. Tierney
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler
Fax: (212) 474-3700
(g) Assignment. Neither this Agreement, the Option nor any of the
rights, interests, or obligations under this Agreement may be assigned or
delegated, in whole or in part, by operation of law or otherwise, by Issuer
or Grantee without the prior written consent of the other. Any assignment
or delegation in violation of the preceding sentence will be void. Subject
to the first and second sentences of this Section 12(g), this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the
Option by Grantee, Issuer and Grantee will execute and deliver all other
documents and instruments and take all other actions that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(i) Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of
<PAGE>
the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed
that the parties will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms
and provisions of this Agreement in any Federal court located in the State
of Delaware or in Delaware state court, the foregoing being in addition to
any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (ii)
agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and
(iii) agrees that it will not bring any action relating to this Agreement
or any of the transactions contemplated by this Agreement in any court
other than a Federal court sitting in the State of Delaware or a Delaware
state court.
13. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Amendment so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by
applicable law
<PAGE>
in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of
the day and year first written above.
PROVIDENT COMPANIES, INC.,
by /s/ James F. Orr III
---------------------------------
Name: James F. Orr III
Title: Chairman, President
and Chief Executive
Officer
UNUM CORPORATION,
by /s/ J. Harold Chandler
--------------------------------
Name: J. Harold Chandler
Title: Chairman and Chief
Executive Officer
EXECUTION COPY
STOCK OPTION AGREEMENT dated as of November 22, 1998
(the "Agreement"), by and between UNUM CORPORATION, a
Delaware corporation ("Issuer"), and PROVIDENT COMPANIES,
INC., a Delaware corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"; defined terms
used but not defined herein have the meanings set forth in the Merger
Agreement), providing for, among other things, the merger of Issuer with
and into Grantee with Grantee as the surviving corporation in the Merger;
B. As a condition and inducement to Grantee's willingness to
enter into the Merger Agreement and the Provident Stock Option Agreement,
Grantee has requested that Issuer agree, and Issuer has agreed, to grant
Grantee the Option (as defined below); and
C. As a condition and inducement to Issuer's willingness to enter
into the Merger Agreement, the Stockholders Agreement and this Agreement,
Issuer has requested that Grantee agree, and Grantee has agreed, to grant
Issuer an option to purchase shares of Grantee's common stock on
substantially the same terms as the Option;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, Issuer and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 27,563,644 (as adjusted as set forth herein)
shares (the "Option Shares") of Common Stock, par value $.10 per share
("Issuer Common Stock"), of Issuer at a purchase price of $50.657 (as
adjusted as set forth herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, with
respect to any or all of the Option Shares at any time, subject to the
provisions of Section 2(c), after the occurrence of any event as a result
of which the Grantee is entitled to receive the Termination Fee pursuant
<PAGE>
to Section 5.09(c) of the Merger Agreement (a "Purchase Event"); provided,
however, that (i) except as provided in the last sentence of this Section
2(a), the Option will terminate and be of no further force and effect upon
the earliest to occur of (A) the Effective Time, (B) 18 months after the
first occurrence of a Purchase Event, and (C) termination of the Merger
Agreement in accordance with its terms prior to the occurrence of a
Purchase Event, unless, in the case of this clause (C), the Grantee has the
right to receive a Termination Fee following such termination upon the
occurrence of certain events, in which case the Option will not terminate
until the later of (x) six months following the time such Termination Fee
becomes payable and (y) the expiration of the period in which the Grantee
has such right to receive a Termination Fee, and (ii) any purchase of
Option Shares upon exercise of the Option will be subject to compliance
with the HSR Act and the obtaining or making of any consents, approvals,
orders, notifications, filings, expiration of applicable waiting periods or
authorizations, the failure of which to have obtained or made would have
the effect of making the issuance of Option Shares to Grantee illegal (the
"Regulatory Approvals"). Notwithstanding the termination of the Option,
Grantee will be entitled to purchase the Option Shares if it has exercised
the Option in accordance with the terms hereof prior to the termination of
the Option and the termination of the Option will not affect any rights
hereunder which by their terms do not terminate or expire prior to or as of
such termination.
(b) In the event that Grantee is entitled to and wishes to
exercise the Option, it will send to Issuer a written notice (an "Exercise
Notice"; the date of which being herein referred to as the "Notice Date")
to that effect which Exercise Notice also specifies the number of Option
Shares, if any, Grantee wishes to purchase pursuant to this Section 2(b),
the number of Option Shares, if any, with respect to which Grantee wishes
to exercise its Cash-Out Right (as defined herein) pursuant to Section
6(c), the denominations of the certificate or certificates evidencing the
Option Shares which Grantee wishes to purchase pursuant to this Section
2(b) and a date (an "Option Closing Date"), subject to the following
sentence, not earlier than three business days nor later than 20 business
days from the Notice Date for the closing of such purchase (an "Option
Closing"). Any Option Closing will be at an agreed location and time in New
York, New York on the applicable Option Closing Date or at such later date
as may be necessary so as to comply with the first sentence of Section
2(a).
<PAGE>
(c) Notwithstanding anything to the contrary contained herein,
any exercise of the Option and purchase of Option Shares shall be subject
to compliance with applicable laws and regulations, which may prohibit the
purchase of all the Option Shares specified in the Exercise Notice without
first obtaining or making certain Regulatory Approvals. In such event, if
the Option is otherwise exercisable and Grantee wishes to exercise the
Option, the Option may be exercised in accordance with Section 2(b) and
Grantee shall acquire the maximum number of Option Shares specified in the
Exercise Notice that Grantee is then permitted to acquire under the
applicable laws and regulations, and if Grantee thereafter obtains the
Regulatory Approvals to acquire the remaining balance of the Option Shares
specified in the Exercise Notice, then Grantee shall be entitled to acquire
such remaining balance. Issuer agrees to use its reasonable efforts to
assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a
Regulatory Approval required for the purchase of any Option Shares will not
be issued or granted or (ii) such Regulatory Approval has not been issued
or granted within six months of the date of the Exercise Notice, Grantee
shall have the right to exercise its Cash-Out Right pursuant to Section
6(c) with respect to the Option Shares for which such Regulatory Approval
will not be issued or granted or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option
Closing, Grantee will pay to Issuer in immediately available funds by wire
transfer to a bank account designated in writing by Issuer an amount equal
to the Purchase Price multiplied by the number of Option Shares to be
purchased at such Option Closing.
(b) At any Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer will
deliver to Grantee a certificate or certificates representing the Option
Shares to be purchased at such Option Closing, which Option Shares will be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever. If at the time of issuance of Option Shares pursuant to an
exercise of the Option hereunder, Issuer shall not have redeemed the UNUM
Rights, or shall have issued any similar securities, then each Option Share
issued pursuant to such exercise will also represent a corresponding UNUM
Right or new rights with terms substantially the same as and at least as
favorable to Grantee as are provided under the UNUM Rights Agreement or any
similar agreement then in effect.
<PAGE>
(c) Certificates for the Option Shares delivered at an Option
Closing will have typed or printed thereon a restrictive legend which will
read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF NOVEMBER 22, 1998, A COPY OF WHICH MAY BE
OBTAINED FROM THE SECRETARY OF UNUM CORPORATION AT ITS PRINCIPAL
EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been registered pursuant to the Securities Act, such Option Shares have
been sold in reliance on and in accordance with Rule 144 under the
Securities Act or Grantee has delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act and (ii) the
reference to restrictions pursuant to this Agreement in the above legend
will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions
of this Agreement under circumstances that do not require the retention of
such reference.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and, subject to the expiration
or termination of any required waiting period under the HSR Act, to
permit it to issue, and, at all times from the date hereof until the
obligation to deliver Option Shares upon the exercise of the Option
terminates, shall have reserved for issuance, upon exercise of the
Option, shares of Issuer Common Stock necessary for Grantee to
exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve for issuance all additional shares of
Issuer Common Stock or other securities which may be issued pursuant
to Section 6 upon exercise of the Option. The shares of Issuer
<PAGE>
Common Stock to be issued upon due exercise of the Option, including
all additional shares of Issuer Common Stock or other securities which
may be issuable upon exercise of the Option or any other securities
which may be issued pursuant to Section 6, upon issuance pursuant
hereto, will be duly and validly issued, fully paid and nonassessable,
and will be delivered free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever, including without
limitation any preemptive rights of any stockholder of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
Purchase Not for Distribution. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be
transferred or otherwise disposed of except in a transaction
registered, or exempt from registration, under the Securities Act.
6. Adjustment upon Changes in Capitalization, Etc. (a) In the
event of any change in the Issuer Common Stock by reason of a stock
dividend, split-up, reverse stock split, merger, recapitalization,
combination, exchange of shares, or similar transaction, the type and
number of shares or securities subject to the Option, and the Purchase
Price thereof, will be adjusted appropriately, and proper provision will be
made in the agreements governing such transaction, so that Grantee will
receive upon exercise of the Option the number and class of shares or other
securities or property that Grantee would have received in respect of
Issuer Common Stock if the Option had been exercised immediately prior to
such event or the record date therefor, as applicable. Subject to Section
1, and without limiting the parties' relative rights and obligations under
the Merger Agreement, if any additional shares of Issuer Common Stock are
issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 6(a)), the number of shares
of Issuer Common Stock subject to the Option will be adjusted so that,
after such issuance, it equates 19.9% of the number of shares of Issuer
Common Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that Issuer enters into an
agreement (i) to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Issuer will not be the continuing
or
<PAGE>
surviving corporation in such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its subsidiaries, to merge into Issuer
and Issuer will be the continuing or surviving corporation, but in
connection with such merger, the shares of Issuer Common Stock outstanding
immediately prior to the consummation of such merger will be changed into
or exchanged for stock or other securities of Issuer or any other person or
cash or any other property, or the shares of Issuer Common Stock
outstanding immediately prior to the consummation of such merger will,
after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or
one of its subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option
will, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class
of shares or other securities or property that Grantee would have received
in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or transfer, or the
record date therefor, as applicable and make any other necessary
adjustments.
(c) If, at any time during the period commencing on a Purchase
Event and ending on the termination of the Option in accordance with
Section 2, Grantee sends to Issuer an Exercise Notice indicating Grantee's
election to exercise its right (the "Cash-Out Right") pursuant to this
Section 6(c), then Issuer shall pay to Grantee, on the Option Closing Date,
in exchange for the cancellation of the Option with respect to such number
of Option Shares as Grantee specifies in the Exercise Notice, an amount in
cash equal to such number of Option Shares multiplied by the difference
between (i) the average closing price, for the 10 NYSE trading days
commencing on the 12th NYSE trading day immediately preceding the Notice
Date, per share of Issuer Common Stock as reported on the NYSE Composite
Transaction Tape (or, if not listed on the NYSE, as reported on any other
national securities exchange or national securities quotation system on
which the Issuer Common Stock is listed or quoted, as reported in The Wall
Street Journal (Northeast edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the Purchase Price.
Notwithstanding the termination of the Option, Grantee will be entitled to
exercise its rights under this Section 6(c) if it has exercised such rights
in
<PAGE>
accordance with the terms hereof prior to the termination of the Option.
7. Registration Rights. Issuer will, if requested by Grantee at
any time and from time to time within three years of the exercise of the
Option, as expeditiously as possible prepare and file up to three
registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
shares of securities that have been acquired by or are issuable to Grantee
upon exercise of the Option in accordance with the intended method of sale
or other disposition stated by Grantee, including a "shelf" registration
statement under Rule 415 under the Securities Act or any successor
provision, and Issuer will use its best efforts to qualify such shares or
other securities under any applicable state securities laws. Grantee agrees
to use reasonable efforts to cause, and to cause any underwriters of any
sale or other disposition to cause, any sale or other disposition pursuant
to such registration statement to be effected on a widely distributed basis
so that upon consummation thereof no purchaser or transferee will own
beneficially more than 4.9% of the then-outstanding voting power of Issuer.
Issuer will use reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 180 calendar days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The
obligations of Issuer hereunder to file a registration statement and to
maintain its effectiveness may be suspended for up to 60 calendar days in
the aggregate if the Board of Directors of Issuer shall have determined
that the filing of such registration statement or the maintenance of its
effectiveness would require premature disclosure of material nonpublic
information that would materially and adversely affect Issuer or otherwise
interfere with or adversely affect any pending or proposed offering of
securities of Issuer or any other material transaction involving Issuer.
Any registration statement prepared and filed under this Section 7, and any
sale covered thereby, will be at Issuer's expense except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto. Grantee will provide all information
reasonably requested by Issuer for inclusion in any registration statement
to be filed hereunder. If, during the time periods referred to in the first
sentence of this Section 7, Issuer effects a registration under the
Securities Act of Issuer Common Stock
<PAGE>
for its own account or for any other stockholders of Issuer (other than on
Form S-4 or Form S-8, or any successor form), it will allow Grantee the
right to participate in such registration, and such participation will not
affect the obligation of Issuer to effect demand registration statements
for Grantee under this Section 7; provided that, if the managing
underwriters of such offering advise Issuer in writing that in their
opinion the number of shares of Issuer Common Stock requested to be
included in such registration exceeds the number which can be sold in such
offering, Issuer will include the shares requested to be included therein
by Grantee pro rata with the shares intended to be included therein by
Issuer. In connection with any registration pursuant to this Section 7,
Issuer and Grantee will provide each other and any underwriter of the
offering with customary representations, warranties, covenants,
indemnification, and contribution in connection with such registration.
8. Limitation on Profit. (a) Notwithstanding any other provision
of this Agreement, in no event shall the Grantee's Total Profit (as defined
below) plus any Termination Fee paid to Grantee pursuant to Section 5.09(c)
of the Merger Agreement exceed in the aggregate $250 million and, if the
total amount that otherwise would be received by Grantee would exceed such
amount, the Grantee, at its sole election, shall either (i) reduce the
number of shares of Issuer Common Stock subject to the Option, (ii) deliver
to the Issuer for cancellation Option Shares previously purchased by
Grantee against the refund of the Purchase Price therefore, (iii) pay cash
to the Issuer or (iv) any combination thereof, so that Grantee's actually
realized Total Profit, when aggregated with such Termination Fee so paid to
Grantee, shall not exceed $250 million after taking into account the
foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Option Shares as would, as of
the date of exercise, result in a Notional Total Profit (as defined below)
which, together with any Termination Fee theretofore paid to Grantee, would
exceed $250 million; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received
by Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to Section 6(c), (ii)(x) the net cash amounts or the fair
market value of any property received by Grantee pursuant to
<PAGE>
the sale of Option Shares (or any other securities into which such Option
Shares are converted or exchanged) to any unaffiliated party, but in no
case less than the fair market value of the Option Shares, less (y) the
Grantee's purchase price of such Option Shares, and (iii) the net cash
amounts received by Grantee on the transfer (in accordance with Section
12(g)) of the Option (or any portion thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of Option Shares as to which Grantee may propose to exercise
the Option shall be the Total Profit determined as of the date of such
proposal assuming for such purpose that the Option were exercised on such
date for such number of Option Shares and assuming that such Option Shares,
together with all other Option Shares held by Grantee and its affiliates as
of such date, were sold for cash at the closing market price on the NYSE
for the Issuer Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions.)
9. Transfers. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) in an underwritten public
offering as provided in Section 7 or (ii) to any purchaser or transferee
who would not, to the knowledge of the Grantee after reasonable inquiry,
immediately following such sale, assignment, transfer or disposal
beneficially own more than 4.9% of the then-outstanding voting power of the
Issuer; provided, however, that Grantee shall be permitted to sell any
Option Shares if such sale is made pursuant to a tender or exchange offer
that has been approved or recommended by a majority of the members of the
Board of Directors of Issuer (which majority shall include a majority of
directors who were directors as of the date hereof).
10. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on the NYSE (or any
other national securities exchange or national securities quotation
system), Issuer, upon the request of Grantee, will promptly file an
application to list the shares of Issuer Common Stock or other securities
to be acquired upon exercise of the Option on the NYSE (and any such other
national securities exchange or national securities quotation system) and
will use reasonable efforts to obtain approval of such listing as promptly
as practicable.
11. Loss or Mutilation. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss,
<PAGE>
theft, destruction or mutilation of this Agreement, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer
will execute and deliver a new Agreement of like tenor and date. Any such
new Agreement executed and delivered will constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement
so lost, stolen, destroyed, or mutilated shall at any time be enforceable
by anyone.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in
the Merger Agreement, each of the parties hereto will bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
(b) Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to
waive any provision of this Agreement, or to extend the time for
performance, will be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Provident Stock Option Agreement, the Merger Agreement
(including the documents and instruments attached thereto as exhibits or
schedules or delivered in connection therewith), the Stockholders
Agreement, the Confidentiality Agreement and the Letter Agreement (i)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter of this Agreement, and (ii) except as provided in
Section 8.06 of the Merger Agreement, are not intended to confer upon any
person other than the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, without
regard to the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
<PAGE>
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed
given if delivered personally, telecopied (which is confirmed), or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
If to Issuer to:
UNUM Corporation
2211 Congress Street
Portland, Maine 04122
Telecopy No.: (207) 770-4377
Attention: Kevin J. Tierney
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler
Fax: (212) 474-3700; and
If to Grantee to:
Provident Companies, Inc.
1 Fountain Square
Chattanooga, Tennessee 37402
Telecopy No.: (423) 755-5036
Attention: F. Dean Copeland
with copies to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: H. Rodgin Cohen
Fax: (212) 558-3588
(g) Assignment. Neither this Agreement, the Option nor any of the
rights, interests, or obligations under this Agreement may be assigned or
delegated, in whole
<PAGE>
or in part, by operation of law or otherwise, by Issuer or Grantee without
the prior written consent of the other. Any assignment or delegation in
violation of the preceding sentence will be void. Subject to the first and
second sentences of this Section 12(g), this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the
Option by Grantee, Issuer and Grantee will execute and deliver all other
documents and instruments and take all other actions that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(i) Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in Delaware state court, the
foregoing being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (i) consents
to submit itself to the personal jurisdiction of any Federal court located
in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, and (iii) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated
by this Agreement in any court other than a Federal court sitting in the
State of Delaware or a Delaware state court.
13. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall neverthe less remain in full force and effect. Upon such determi
nation that any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith to modify
this Amendment so as to effect the original intent of the parties as
closely as possible to the fullest extent permitted by applicable law
<PAGE>
in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of
the day and year first written above.
UNUM CORPORATION,
by /s/ James F. Orr III
--------------------------------
Name: James F. Orr III
Title: Chairman and Chief
Executive Officer
PROVIDENT COMPANIES, INC.,
by /s/ J. Harold Chandler
--------------------------------
Name: J. Harold Chandler
Title: Chairman, President
and Chief Executive
Officer
EXECUTION COPY
STOCKHOLDERS AGREEMENT dated as of November 22, 1998
(this "Agreement"), among UNUM Corporation, a Delaware
corporation ("UNUM"), and the individuals and other parties
listed on Schedule A attached hereto (each, a "Stockholder"
and, collectively, the "Stockholders").
WHEREAS UNUM and Provident Companies, Inc., a Delaware
corporation (the "Company"), propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (as the same may be amended or
supplemented, the "Merger Agreement"; capitalized terms used but not
defined herein shall have the meanings set forth in the Merger Agreement),
providing for the merger of UNUM with and into the Company, with the
Company as the surviving corporation in the merger (the "Merger"), upon the
terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS each Stockholder owns the number of shares of common
stock, par value $1.00 per share, of the Company (the "Common Stock"), set
forth opposite his, her or its name on Schedule A attached hereto (such
shares of Common Stock, together with any other shares of capital stock of
the Company acquired by such Stockholder after the date hereof and during
the term of this Agreement (including through the exercise of any stock
options, warrants or similar instruments), being collectively referred to
herein as the "Subject Shares"); and
WHEREAS as a condition to its willingness to enter into the
Merger Agreement, UNUM has requested that each Stockholder enter into this
Agreement.
NOW, THEREFORE, to induce UNUM to enter into, and in
consideration of its entering into, the Merger Agreement, and in
consideration of the promises and the representations, warranties and
agreements contained herein, the parties agree as follows:
1. Agreement to Vote Shares. (a) Subject to Section 1(b) hereof,
each of the Stockholders agrees during the term of this Agreement to vote
the Subject Shares as to which it has voting power or control, in person or
by proxy, in favor of the Merger, the adoption and approval of the Merger
Agreement and the approval of the transactions contemplated by the Merger
Agreement at every meeting of the stockholders of the Company at which such
matters are
<PAGE>
considered and at every adjournment thereof (each, a "Stockholder Meeting").
(b) Notwithstanding anything to the contrary contained herein,
the obligations of the Stockholders pursuant to Section 1(a) hereof with
respect to matters to be considered at any Stockholder Meeting are subject
to the following conditions:
(i) the Form S-4 (as defined in the Merger Agreement) to be filed
with the Securities and Exchange Commission (the "SEC") by the Company
under the Securities Act of 1933, as amended (the "Securities Act"),
to register the shares of Common Stock to be issued by the Company in
the Merger shall have become effective under the Securities Act and,
as of the date of such Stockholder Meeting, shall not be the subject
of any stop order or proceeding by the SEC seeking a stop order;
(ii) neither the Board of Directors of the Company nor any
committee thereof shall have withdrawn or modified, in a manner
adverse to UNUM, its approval or recommendation of the Merger or the
Merger Agreement pursuant to Section 4.02(b) of the Merger Agreement;
and
(iii) no amendment or modification of the Merger Agreement shall
have been effected which reduces the Ratio.
2. No Other Grant of Proxy. The Stockholder will not, directly or
indirectly, grant any proxies or powers of attorney with respect to the
Subject Shares (other than in connection with matters proposed by the
Company at an annual meeting of the Company) to any individual,
corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity (each, a
"person") other than UNUM or any person designated in writing by UNUM.
3. No Voting Trusts. Each of the Stockholders agrees that such
Stockholder will not, nor will such Stockholder permit any entity under
such Stockholder's control to, deposit any of such Stockholder's Subject
Shares in a voting trust or subject any of its Subject Shares to any
arrangement with respect to the voting of the Subject Shares inconsistent
with this Agreement.
4. Affiliate Agreement. If, at the time the Merger Agreement is
submitted for approval to the stock-
<PAGE>
holders of the Company, a Stockholder is an "affiliate" of the Company for
purposes of qualifying the Merger for pooling-of-interests accounting
treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules, regulations and interpretations thereunder, such
Stockholder shall deliver to UNUM at least 30 days prior to the Closing
Date a written agreement substantially in the form attached as Exhibit C-2
to the Merger Agreement.
5. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any
court of the United States located in the State of Delaware or in a
Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity, and neither party will oppose the
granting of such relief on the basis that the other party has an adequate
remedy at law.
6. Term and Termination. Subject to Section 11(f), the term of
this Agreement shall commence on the date hereof, and such term and this
Agreement shall terminate upon the earliest to occur of (i) the Effective
Time, (ii) the date on which the Merger Agreement is terminated in
accordance with its terms and (iii) the date of any amendment or
modification of the Merger Agreement, or other agreement entered into in
connection therewith, or action taken (including any waiver of the terms of
the Merger Agreement) by the Company or UNUM which (A) reduces the Ratio or
otherwise alters the Ratio in a manner adverse to the Stockholders or
holders of Company Common Stock generally, (B) grants to the stockholders
of UNUM any securities or other rights or requires UNUM or the Company to
take any action which would have the effect of altering the relative
interests of the stockholders of UNUM and the stockholders of the Company
implied by the Ratio, (C) alters the provisions of Section 5.16 of the
Merger Agreement, (D) extends the date set forth in Section 7.01(b)(i) of
the Merger Agreement or (E) waives, amends or modifies the provisions of
Section 6.03(c) of the Merger Agreement. Upon any such termination, no
party shall have any further obligations or liabilities hereunder.
7. Certain Events. (a) Except as provided for by Section 7(b)
hereof, each Stockholder agrees that this Agreement and the obligations
hereunder shall attach to such Stockholder's Subject Shares and shall be
binding upon any
<PAGE>
person to which legal or beneficial ownership of such Subject Shares shall
pass, whether by operation of law or otherwise, including such
Stockholder's heirs, guardians, administrators or successors. In the event
of any stock split, stock dividend, merger, reorganization, recapitaliza-
tion or other change in the capital structure of the Company affecting the
Common Stock, or the acquisition of additional shares of Common Stock or
other voting securities of the Company by any Stockholder, the number of
Subject Shares listed in Schedule A beside the name of such Stockholder
shall be adjusted appropriately and this Agreement and the obligations
hereunder shall attach to any additional shares of Common Stock or other
voting securities of the Company issued to or acquired by such Stockholder.
(b) Notwithstanding the foregoing, Section 7(a) shall not apply,
and the obligations of Section 1(a) shall not continue, with respect to
Subject Shares that are the subject of charitable contributions or bona
fide gifts (as described in Section 2522 of the Internal Revenue Code of
1986, as amended) made by (i) The Maclellan Foundation, Inc. in an amount
not to exceed 350,000, (ii) The R.J. Maclellan Trust For The Maclellan
Foundation, Inc. in an amount not to exceed 250,000 and (iii) Hugh O.
Maclellan, Jr., Kathrina H. Maclellan and Charlotte M. Heffner, in amounts
for each such person not to exceed .05% of the total outstanding number of
shares of Common Stock as of the date hereof (such Subject Shares are
collectively referred to herein as the "Excluded Charitable Shares").
(c) Each Stockholder agrees that such Stockholder will tender to
the Company, prior to any transfer, offer to transfer or agreement to
transfer any Subject Shares (other than Excluded Charitable Shares), by
sale, gift or otherwise, any and all certificates representing such
Subject Shares in order that the Company may inscribe upon such
certificates the legend in accordance with Section 5.18 of the Merger
Agreement and the Company shall thereafter cause such certificates to be
returned to such Stockholder within three business days of the Company's
receipt thereof in accordance with such Section 5.18.
8. Stockholder Capacity. No person executing this Agreement who
is or becomes during the term hereof a director or officer of the Company
(or who has been designated to the Board of Directors of the Company by a
Stockholder) makes (or shall be deemed to have made) any agreement or
understanding herein in his or her capacity as such director or officer.
Without limiting the generality of the foregoing, each Stockholder signs
solely in its, his or her capacity as the record and/or beneficial owner,
as
<PAGE>
applicable, of such Stockholder's Subject Shares and nothing herein shall
limit or affect any actions taken by a Stock holder (or a designee of a
Stockholder) in his or her capacity as an officer or director of the
Company in exercising its rights under the Merger Agreement.
9. Entire Agreement; No Third Party Beneficiaries; Amendment;
Waiver. This Agreement (including the documents and instruments referred to
herein) (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, written or oral, among the parties with
respect to the subject matter hereof and (ii) is not intended to confer
upon any person other than the parties hereto any rights or remedies
hereunder. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by each of the parties hereto. No waiver of any provisions
hereof by any party shall be deemed a waiver of any other provisions hereof
by any such party, nor shall any such waiver be deemed a continuing waiver
of any provision hereof by such party.
10. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be in writing
and shall be deemed to have been duly given if mailed, by first class or
registered mail, three (3) business days after deposit in the United States
Mail, or if telexed or telecopied, sent by telegram, or delivered by hand
or reputable overnight courier, when confirmation is received, in each case
as follows:
If to the Stockholders, to the addresses listed on Schedule A
hereto.
With a copy to:
King & Spalding
1185 Avenue of the Americas
New York, New York 10036-4003
Attention: E. William Bates, II, Esq.
Telephone: (212) 556-2240
Facsimile: (212) 556-2222
And a copy to:
Carter Ledyard & Milburn
2 Wall Street
New York, New York 10003
Attention: Richard Covey, Esq.
Telephone: (212) 732-3200
Facsimile: (212) 944-9738
<PAGE>
If to UNUM, in accordance with Section 8.02 of the Merger Agreement;
or to such other persons or addresses as may be designated in writing by
the party to receive such notice. Nothing in this Section 10 shall be
deemed to constitute consent to the manner and address for service of
process in connection with any legal proceeding (including litigation
arising out of or in connection with this Agreement), which service shall
be effected as required by applicable law.
11. Miscellaneous.
--------------
(a) When a reference is made in this Agreement to Sections, such
reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpreta-
tion of this Agreement. Wherever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation."
(b) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of
laws.
(c) If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner and to
the end that the transactions contemplated hereby are fulfilled to the
extent possible.
(d) This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall
become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood
that each party need not sign the same counterpart.
<PAGE>
(e) Except as provided for by Section 7 hereof, neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any Stockholder, on the one hand, without the prior written
consent of UNUM, nor by UNUM, on the other hand, without the prior written
consent of the Stockholders, except that UNUM may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder
to any direct or indirect wholly owned subsidiary of UNUM; provided that
notwithstanding such assignment UNUM shall remain liable for performance of
its obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
(f) The obligations of the Stockholders set forth in this
Agreement shall not be effective or binding upon the Stockholders until
after such time as the Merger Agreement is executed and delivered by UNUM
and the Company. Nothing contained in this Agreement shall be construed as
containing any liability on the part of the Stockholders under the Merger
Agreement.
IN WITNESS WHEREOF, UNUM has caused this Agreement to be signed
by its officer thereunto duly authorized and each Stockholder has signed
this Agreement, all as of the date first written above.
UNUM CORPORATION
By: /s/ James F. Orr III
---------------------------
James F. Orr III
<PAGE>
STOCKHOLDERS:
/s/ Hugh O. Maclellan, Jr.
--------------------------------
Hugh O. Maclellan, Jr.
/s/ Kathrina H. Maclellan
--------------------------------
Kathrina H. Maclellan
/s/ Charlotte M. Heffner
--------------------------------
Charlotte M. Heffner
<PAGE>
THE MACLELLAN FOUNDATION, INC.
By: /s/ Hugh O. Maclellan, Jr.
---------------------------
Hugh O. Maclellan, Jr.
President
THE R.J. MACLELLAN TRUST FOR THE
MACLELLAN FOUNDATION, INC.
By: /s/ Hugh O. Maclellan, Jr.
---------------------------
Hugh O. Maclellan, Jr.,
Trustee
By: /s/ Kathrina H. Maclellan
---------------------------
Kathrina H. Maclellan,
Trustee
By: /s/ Dudley Porter, Jr.
---------------------------
Dudley Porter, Jr., Trustee
THE HELEN M. TIPTON FOUNDATION,
INC.
By: /s/ Hugh O. Maclellan, Jr.
---------------------------
Hugh O. Maclellan, Jr.
President
THE R.J. MACLELLAN TRUST FOR THE
R.L. MACLELLAN FAMILY
By: /s/ Kathrina H. Maclellan
---------------------------
Kathrina H. Maclellan,
Trustee
By: /s/ Dudley Porter, Jr.
---------------------------
Dudley Porter, Jr., Trustee
<PAGE>
THE CORA L. MACLELLAN TRUST FOR
THE R.L. MACLELLAN FAMILY
By: /s/ Kathrina H. Maclellan
---------------------------
Kathrina H. Maclellan,
Trustee
By: /s/ Dudley Porter, Jr.
---------------------------
Dudley Porter, Jr., Trustee
THE R.J. MACLELLAN TRUST FOR THE
HUGH O. MACLELLAN, SR. FAMILY
By: /s/ Hugh O. Maclellan, Jr.
---------------------------
Hugh O. Maclellan, Jr.,
Trustee
THE CORA L. MACLELLAN TRUST FOR
THE HUGH O. MACLELLAN, SR.
FAMILY
By: /s/ Hugh O. Maclellan, Jr.
---------------------------
Hugh O. Maclellan, Jr.,
Trustee
TRUST U/A HUGH O. MACLELLAN, SR.
DATED 11/19/66 FOR THE BENEFIT
OF CATHERINE H. MACLELLAN
By: /s/ Hugh O. Maclellan, Jr.
---------------------------
Hugh O. Maclellan, Jr.,
Trustee
<PAGE>
TRUST U/A HUGH O. MACLELLAN, SR.
DATED 7/8/68 FOR THE BENEFIT OF
DANIEL O. MACLELLAN
By: /s/ Hugh O. Maclellan, Jr.
---------------------------
Hugh O. Maclellan, Jr.,
Trustee
TRUST U/A HUGH O. MACLELLAN, SR.
DATED 3/12/64 FOR THE BENEFIT OF
CHRISTOPHER H. MACLELLAN
By: /s/ Hugh O. Maclellan, Jr.
---------------------------
Hugh O. Maclellan, Jr.,
Trustee
<PAGE>
SCHEDULE A
Number of Percentage of
Outstanding Voting Power of
Stockholder Shares Owned the Company1
Hugh O. Maclellan, Jr. 1,544,054 1.14%
Kathrina H. Maclellan 2,756,283 2.04%
Charlotte M. Heffner 915,390 0.68%
The Maclellan Foundation, Inc. 15,484,693 11.44%
The R.J. Maclellan Trust For 6,583,160 4.86%
The Maclellan Foundation, Inc.
The Helen M. Tipton 3,327,454 2.46%
Foundation, Inc.
The R.J. Maclellan Trust For 1,076,690 0.80%
The R.L. Maclellan Family
The Cora L. Maclellan Trust 1,071,640 0.80%
For The R.L. Maclellan Family
The R.J. Maclellan Trust For The 1,045,230 0.77%
Hugh O. Maclellan, Sr. Family
The Cora L. Maclellan Trust 1,037,390 0.77%
For The Hugh O. Maclellan, Sr.
Family
Trust U/A Hugh O. Maclellan, Sr. 102,182 0.08%
Dated 11/19/66 For The Benefit
Of Catherine H. Maclellan
Trust U/A Hugh O. Maclellan, Sr. 102,120 0.08%
Dated 7/6/68 For The Benefit
Of Daniel O. Maclellan
Trust U/A Hugh O. Maclellan, Sr. 94,870 0.07%
Dated 3/12/64 For The Benefit
Of Christopher H. Maclellan
- --------
1 Based on 135,406,403 total shares outstanding as of November 17, 1998.
UNUM(R)
PROVIDENT
Contacts: For UNUM For Provident
Media: George Sard/David Reno Media & Analysts:
Catharine Hartnett Sard Verbinnen & Co. Thomas A. H. White
(207) 770-4356 (212) 687-8080 (423) 755-8996
Analysts:
Kent W. Mohnkern
(207) 770-4392
UNUM AND PROVIDENT ANNOUNCE STRATEGIC MERGER CREATING
GLOBAL LEADER IN DISABILITY INSURANCE
PORTLAND, ME and CHATTANOOGA, TN, November 23, 1998 -- UNUM
Corporation (NYSE:UNM) and Provident Companies, Inc. (NYSE:PVT) today
jointly announced a strategic merger that will create UNUMProvident, the
global leader in disability insurance and complementary special risk
products and services.
Under the terms of a definitive merger agreement approved by the
Boards of both companies, Provident shareholders will receive 0.73 shares
of UNUMProvident in exchange for each Provident common share and UNUM
shareholders will receive one share of UNUMProvident in exchange for each
UNUM common share. The transaction will be accounted for as a pooling of
interests and is expected to be tax-free to shareholders of both companies.
Combined, UNUM and Provident have pro forma revenues of more than $8.4
billion for the twelve months ended September 30, 1998, a current market
capitalization of over $11 billion, 1997 earned premiums of $6 billion and
a significant presence in group and individual disability insurance, group
life insurance and voluntary benefits. Total combined assets exceed $38
billion as of September 30, 1998. The companies expect the transaction to
be accretive to earnings per share in 1999. UNUMProvident anticipates
achieving annual cost savings of approximately $120-130 million.
James F. Orr III, 55, UNUM's chairman and chief executive officer,
said, "This unique strategic merger is the perfect fit of highly
complementary, healthy and growing businesses. The combination gives us
enhanced financial strength, expanded national and international
distribution and comprehensive product offerings to provide superior value
and integrated solutions to a broad range of customers. UNUM's leadership
in group disability and voluntary products combined with Provident's
leadership in
<PAGE>
2
individual products creates the clear leader in the still highly
under-penetrated disability market. It is our intention to take the
absolute best of both companies -- cultures and employees, products and
systems -- and build an organization that is capable of achieving far more
together than either of us could have on our own."
J. Harold Chandler, 49, Provident's chairman, president and chief
executive officer, said, "The merger with UNUM is the next logical step for
Provident and I couldn't be more proud of the result of our shareholders
and our many dedicated employees. Very importantly, our customers will
benefit as we accelerate the implementation of our plan to provide the
marketplace with more comprehensive disability insurance solutions
featuring industry-leading return-to-work programs. Together,
UNUMProvident will have outstanding new growth opportunities. We have
already made substantial progress in defining the new business model for
the merged company and we intend to focus on realizing the full potential
of this unique combination for our shareholders, customers and employees."
Upon the merger of the companies, Orr will serve as chairman and chief
executive officer of UNUMProvident and Chandler will serve as president and
chief operating officer. On July 1, 2001, Chandler will succeed Orr as
chief executive officer of UNUMProvident, and Orr will remain
UNUMProvident's chairman.
The UNUMProvident Board of Directors will be made up of eight current
members of the UNUM Board and seven current members of the Provident Board.
The only inside directors will be Orr and Chandler. The Executive Committee
of the Board will be comprised of Orr, Chandler, two current UNUM directors
and two current Provident directors.
Four other executives will comprise the senior UNUMProvident
management team along with Orr and Chandler. Thomas R. Watjen, currently
vice chairman and chief financial officer of Provident, will serve as
executive vice president of finance, with responsibility for financial
operations, investments and portfolio strategy, and corporate development.
Elaine D. Rosen, currently president, UNUM Life Insurance Company of
America, the largest subsidiary of UNUM Corp., will serve as executive vice
president in charge of North American products, underwriting, claims
management, and customer service. Robert W. Crispin, currently executive
vice president of UNUM, will serve as executive vice president in charge of
North American distribution, Canadian operations, and Colonial Life and
Accident Insurance Company, a UNUM
<PAGE>
3
subsidiary. F. Dean Copeland, currently executive vice president and
general counsel of Provident, will serve as executive vice president of
legal and administrative affairs.
A transition and integration team responsible for overseeing the
combination of the two companies will be comprised of these six
UNUMProvident senior executives. The team will be chaired by Orr and
coordinated by Watjen.
In addition, UNUM's chief financial officer, Robert E. Broatch, will
serve as chief financial officer of the combined company, reporting to
Watjen.
Significant corporate operations of UNUMProvident will remain in both
Portland, Maine and Chattanooga, Tennessee. UNUMProvident plans to maintain
substantial operations in Columbia, South Carolina; Worcester,
Massachusetts; Toronto/Burlington, Canada; and in other North American
cities and international locations.
The transaction is expected to be completed by mid-1999 and is subject
to clearance or approval by certain federal and state regulators, approval
by shareholders of both companies, and customary closing conditions.
Members of the Maclellan family representing approximately 26% of
Provident's common stock have agreed to vote in favor of the merger. Zurich
Centre Group and its affiliates, who hold approximately 14% of Provident's
common stock, have also advised the companies that they intend to vote in
favor of the merger.
As a result of the merger, approximately 58% of UNUMProvident will be
owned by current UNUM shareholders and 42% of UNUMProvident by current
Provident shareholders.
Effective immediately, both UNUM and Provident have rescinded their
existing share repurchase programs. The merger agreement provides for the
payment of termination fees under certain circumstances and UNUM and
Provident have also entered into customary "cross" stock option agreements.
Based in Chattanooga, Provident, through its subsidiaries, is a
leading provider of disability insurance and related products for
individual and corporate customers. Provident has significant operations
throughout the U.S. and Canada.
Based in Portland, UNUM, through its businesses, is the world leader
in group disability insurance and ranks among
<PAGE>
4
the world's leading special risk insurers. UNUM's companies are leading
providers of disability insurance in North America and the United Kingdom,
as well as providers of other employee benefits, including group life
insurance, long term care insurance and payroll-deducted voluntary benefits
offered to employees at their worksites. UNUM has operations in the United
States, Canada, the U.K., the Pacific Rim, Europe, Latin America and
Bermuda.
# # #
