UNUM CORPORATION
1996 LONG-TERM STOCK INCENTIVE PLAN
SECTION 1. Purpose.
The purpose of the UNUM Corporation 1996 Long-Term Stock Incentive Plan (the
"Plan") is to promote the interests of UNUM Corporation and its stockholders by
(i) attracting and retaining executive officers and other key employees of
outstanding ability; (ii) motivating such individuals, by means of
performance-related incentives, to achieve longer-range performance goals; and
(iii) enabling such individuals to participate in the long-term growth and
financial success of UNUM Corporation.
SECTION 2. Definitions.
"Affiliate" shall mean any corporation or other entity which is not a Subsidiary
but as to which the Corporation possesses a direct or indirect ownership
interest and has representation on the board of directors or any similar
governing body.
"Award" shall mean a grant or award under Sections 6 through 10, inclusive, of
the Plan, as evidenced in a written document delivered to a Participant.
"Board" shall mean the Board of Directors of the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean the Compensation Committee of the Board, or, to the
extent necessary to satisfy the requirements of Section 162(m) of the Code, a
subcommittee thereof.
"Common Stock" or "Stock" shall mean the common stock, $.10 par value, of the
Corporation.
"Corporation" shall mean UNUM Corporation.
"Employee" shall mean any employee of the Employer.
"Employer" shall mean the Corporation and any Subsidiary or Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from
time to time.
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"Fair Market Value" shall mean the average of the highest and lowest sales
prices reported for consolidated trading of the Stock on the New York Stock
Exchange on the date in question, or, if the Stock shall not have been traded on
such date, the average of such highest and lowest sales prices on the first day
prior thereto on which the Stock was so traded.
"Fiscal Year" shall mean the fiscal year of the Corporation.
"Incentive Stock Option" shall mean a stock option granted under Section 6 which
is intended to meet the requirements of Section 422 of the Code.
"Limited Right" shall mean a limited stock appreciation right granted under
Section 8.
"Non-Qualified Stock Option" shall mean a stock option granted under Section 6
which is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option.
"Participant" shall mean an Employee who is selected by the Committee to receive
an Award under the Plan.
"Performance Measures" shall mean the criteria and objectives, established by
the Committee, which shall be satisfied as a condition to the receipt of shares
by a Participant under a Restricted Stock Award, or to the payment or receipt of
shares or cash under a Performance Share Award. With respect to any Restricted
Stock or Performance Share Award which the Committee designates as being
intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder, such criteria and objectives shall be based on one or
more of the following: the market price of a share of the Common Stock; earnings
per share, return to stockholders (including dividends), return on equity,
earnings of the Corporation on a GAAP or statutory accounting basis, revenues,
market share, cash flow or cost reduction goals, underwriting margin, or any
combination of the foregoing. Such criteria and objectives may be expressed on
either an absolute basis or relative to the performance of a peer group selected
by the Committee. In the case of any Restricted Stock or Performance Share Award
which the Committee does not designate as being intended to satisfy the
requirements of Section 162(m) of the Code and the regulations thereunder, such
criteria and objectives, if any, may include one or more of the criteria and
objectives referred to above or such other criteria and objectives as the
Committee may determine.
"Performance Period" shall mean a period designated by the Committee during
which the Performance Measures applicable to a Performance Share Award shall be
measured.
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"Performance Share" shall mean a right, granted to a Participant under Section
10 of this Plan, contingent upon the attainment of specified Performance
Measures within a specified Performance Period, to receive one share of Common
Stock, which may be Restricted Stock, or in lieu thereof, the Fair Market Value
of such Performance Share in cash.
"Restricted Stock" shall mean shares of Common Stock contingently granted to a
Participant under Section 9 of this Plan.
"Restriction Period" shall mean a period designated by the Committee during
which the Performance Measures and other conditions applicable to a Restricted
Stock Award or Performance Share Award shall be measured.
"Stock Appreciation Right" shall mean an Award granted under Section 7 of the
Plan.
"Subsidiary" shall mean any business entity in which the Corporation possesses
directly or indirectly fifty percent (50%) or more of the total combined voting
power.
"Voting Securities" shall mean securities which are entitled to cast votes as to
general corporate matters, including the election of directors.
SECTION 3. Administration.
The Committee shall have full power to interpret and administer the Plan and
full authority to select the individuals to whom Awards will be granted and to
determine the type and amount of Award(s) to be granted to each Participant, the
terms and conditions of Awards granted under the Plan and the terms and
conditions of the agreements which will be entered into with Participants.
The Committee shall have the authority to adopt, alter and repeal such rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any agreements relating thereto); to direct employees
of the Corporation and its subsidiaries or other advisors to prepare such
materials or perform such analysis as the Committee deems necessary or
appropriate; and otherwise to supervise the administration of the Plan. The
Committee may delegate such of its responsibilities set forth above to members
of the Corporation's management as the Committee may determine, with regard to
the grant, amendment, interpretation and administration of Awards to
Participants who are not subject to Sections 16(a) and 16(b) of the Exchange
Act, and except with respect to Awards which are designed to satisfy the
requirements of Section 162(m) of the Code and the regulations thereunder.
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Any interpretation and action under this Plan by the Committee, or members of
the Corporation's management acting under authority delegated by the Committee,
shall be final, binding and conclusive on the Corporation, its stockholders,
Subsidiaries, Affiliates, all Participants, their respective legal
representatives, successors and assigns and upon all persons claiming under or
through any of them. Neither any member of the Board of Directors or of the
Committee nor any member of the Corporation's management acting under authority
delegated by the Committee shall incur any liability for any action taken or
omitted, or any determination made, in good faith in connection with the Plan.
SECTION 4. Eligibility.
Participation in the Plan shall be limited to those key employees of the
Corporation and any Subsidiary and Affiliate selected at the sole discretion of
the Committee.
SECTION 5. Maximum Amount Available for Awards.
Subject to adjustment as provided in Section 12(j), the maximum number of shares
of Stock in respect of which Awards may be made under the Plan shall be a total
of 7,000,000 shares of Common Stock, provided that during any single calendar
year (i) Options shall not be granted to any individual Participant to purchase
more than 400,000 shares of the Common Stock, and (ii) the sum of all shares of
Restricted Stock plus all Performance Shares granted to any individual
Participant shall not exceed 200,000. Common Stock may be made available from
the authorized but unissued shares of the Corporation or from shares reacquired
by the Corporation, including shares purchased in the open market. In the event
that (i) an Option, or Stock Appreciation Right, or Limited Right expires,
terminates, or is canceled, surrendered or exchanged unexercised as to any
shares of Common Stock covered thereby, or (ii) any other Award in respect of
shares is forfeited for any reason under the Plan, such shares shall thereafter
be again available for award pursuant to the Plan.
SECTION 6. Stock Options.
(a) Grant. The Committee may, in its discretion, grant Options to such
eligible Participants as it may select. The Committee shall determine
the number of shares to be covered by each Option, the Option Price, as
defined below, therefor and the conditions and limitations applicable to
the exercise of the Option. The Committee shall have the authority to
grant Incentive Stock Options, or to grant Non-Qualified Stock Options,
or to grant both types of Options. In the case of
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Incentive Stock Options, the terms and conditions of such grants shall
be subject to and comply with such rules as may be prescribed by Section
422 of the Code and any regulations implementing Section 422.
(b) Option Price. The Committee shall establish the exercise price of the
Option (the "Option Price") at the time each Option is granted, which
Option Price shall not be less than 100% of the Fair Market Value of the
Common Stock on the date of grant.
(c) Exercise.
(1) Each Option shall be exercisable at such times and subject to
such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award or thereafter;
provided, however, that in no event may any Option granted
hereunder be exercisable after the expiration of ten years from
the date of grant. The Committee may impose such conditions with
respect to the exercise of Options, including without limitation,
any relating to the application of federal or state securities
laws, as it may deem necessary or advisable.
(2) No shares shall be delivered pursuant to any exercise of an
Option until payment in full of the Option Price therefor is
received by the Corporation. Such payment may be made in cash, or
its equivalent, or, subject to such rules and guidelines as the
Committee may establish, by exchanging shares of Common Stock
owned by the optionee (which are not the subject of any pledge or
other security interest), or by a combination of the foregoing,
provided that the combined value of all cash and cash equivalents
and the Fair Market Value of any such Common Stock so tendered to
the Corporation, valued as of the date of such tender, is at
least equal to such Option Price.
(d) Termination of Employment.
(1) If a Participant ceases to be an Employee other than by reason of
death, retirement or permanent disability, any then outstanding
Options may be exercised at any time before their expiration date
or within three months after the date of termination, whichever
is earlier, but only (unless otherwise determined by the
Committee) to the extent that such Options were exercisable when
employment ceased, and to the extent not so exercisable, the
Option shall terminate on the date employment ceases; provided,
however, that if a Participant is terminated for cause the
Committee may determine that no Option may be exercised at any
time after the termination date.
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(2) If a Participant's employment terminates because of death or
permanent disability, all then outstanding Options previously
granted to the Participant will become exercisable. In the case
of death of the Participant, such Options may be exercised at any
time before their expiration date or within three years after the
date of termination, whichever is earlier. In the case of
permanent disability, such Options may be exercised at any time
before their expiration date.
(3) If a Participant's employment terminates because of retirement,
any then outstanding Options may be exercised at any time before
their expiration date or within five years after the date of
termination, whichever is earlier, but only (unless otherwise
determined by the Committee) to the extent that such Options were
exercisable when employment ceased, and to the extent not so
exercisable, the Option shall terminate on the date employment
ceases.
SECTION 7. Stock Appreciation Rights.
(a) The Committee shall have the authority to grant Stock Appreciation
Rights in tandem with the grant of an Option or freestanding and
unrelated to an Option. Stock Appreciation Rights granted in tandem with
an Option may be granted either at or after the time of the grant of
such Option.
Stock Appreciation Rights or any applicable portion thereof granted in
tandem with a given Option shall only be exercisable to the extent that
the related Option is exercisable and shall terminate and no longer be
exercisable upon the expiration, termination, or cancellation of the
related Option.
The exercise of an Option shall result in an immediate forfeiture of any
Stock Appreciation Right granted in tandem with that Option, and the
exercise of such Stock Appreciation Right shall cause an immediate
forfeiture of its related Option. Stock Appreciation Rights shall not be
exercisable after the expiration of ten years from date of grant. A
Stock Appreciation Right granted in tandem with an Option may be
exercised by an optionee, in accordance with this Section 7, by
surrendering the applicable portion of the related Option. Upon such
exercise and surrender, the optionee shall be entitled to receive an
amount determined in the manner prescribed in this Section 7.
(b) A Stock Appreciation Right shall entitle the Participant to receive from
the Corporation an amount equal to the excess of the Fair Market Value
of a share of Common Stock on the date of the exercise of the Stock
Appreciation Right over the
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grant price thereof, provided that the Committee may for administrative
convenience determine that, for any Stock Appreciation Right which is
not related to an Incentive Stock Option and can only be exercised
during limited periods of time in order to satisfy the conditions of
certain rules of the Securities and Exchange Commission, the exercise of
any such Stock Appreciation Right for cash during such limited period
shall be deemed to occur for all purposes hereunder on the day during
such limited period on which the Fair Market Value of the Stock is the
highest. Any such determination by the Committee may be changed by the
Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted prior to such determination as well as Stock
Appreciation Rights thereafter granted. The Committee shall determine
whether Stock Appreciation Rights shall be settled in cash, shares of
Common Stock or a combination of cash and shares of Common Stock.
SECTION 8. Limited Rights.
(a) The Committee shall have the authority to grant Limited Rights in tandem
with the grant of an Option or freestanding and unrelated to an Option.
Limited Rights granted in tandem with an Option may be granted either at
or after the time of the grant of such Option.
Limited Rights or any applicable portion thereof granted in tandem with
a given Option shall terminate and no longer be exercisable upon the
expiration, termination or cancellation of the related Option. The
exercise of an Option shall result in an immediate forfeiture of any
Limited Right granted in tandem with that Option, and the exercise of
such Limited Right shall cause an immediate forfeiture of its related
Option.
A Limited Right granted in tandem with an Option may be exercised by an
optionee, in accordance with this Section 8, by surrendering the
applicable portion of the related Option. Upon such exercise and
surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in this Section 8.
(b) Limited Rights shall only be exercisable during the 30 day period
following a Change in Control as defined in Section 11 and shall not be
exercisable after the expiration of ten years from the date of grant.
(c) Upon the exercise of a Limited Right, an optionee shall be entitled to
receive from the Corporation an amount in cash equal in value to the
excess of (i) the higher of (A) the highest price per share paid in
connection with the Change in Control or (B) the highest Fair Market
Value per share as reported in the Wall Street Journal at any time
during the 60 day period preceding the Change in Control over (ii) in
the
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case of a Limited Right granted in tandem with an Option, the Option
Price per share specified in the related Option and in the case of all
other Limited Rights, the price per share established in the grant of
the Limited Right (which shall not be less than the Fair Market Value of
a share of Common Stock on the date of grant), such excess to be
multiplied by the number of shares in respect of which the Limited Right
shall have been exercised; provided, however, that upon the exercise of
a Limited Right granted in tandem with an Incentive Stock Option, the
amount set forth in clause (i) shall not exceed the Fair Market Value of
a share on the date of exercise of the Limited Right.
(d) Limited Rights shall be subject to such other terms and conditions, not
inconsistent with the provisions of the Plan, as shall be determined
from time to time by the Committee. This Section 8 shall be interpreted
in accordance and consistent with the principles set forth in Rule 16b-3
of the Exchange Act.
SECTION 9. Restricted Stock.
(a) Grant. The Committee may, in its discretion, grant shares of Restricted
Stock to such eligible Participants as it may select. The Committee
shall determine the number of shares of Restricted Stock to be granted
to each Participant, whether or not the Restricted Stock Award is
designed to satisfy the requirements of Section 162(m) of the Code and
the regulations thereunder, the duration of the Restriction Period ( if
any) during which, and the conditions under which, the Restricted Stock
may be forfeited to the Corporation, and the other terms and conditions
of such Awards. The Committee may condition the vesting of shares of
Restricted Stock on Performance Measures to be attained by the
Corporation and/or the Participant over a stated Performance Period.
(b) Assignability. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as herein provided,
during the Restriction Period.
(c) Dividends. The Committee shall determine whether dividends payable on
shares of Restricted Stock shall be paid to the Participant during the
Restriction Period or held in a suspense account for payment (with or
without interest) to the Participant only in the event of the vesting of
the underlying shares of Restricted Stock.
(d) Termination of employment. Subject to Section 11 of this Plan, all of
the provisions governing the satisfaction of Performance Measures and
the termination of the Restriction Period relating to a Restricted Stock
Award, or any cancellation or forfeiture of shares of Restricted Stock
upon termination of employment of the
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Participant, whether by reason of death, permanent disability,
retirement, or otherwise, shall be set forth in the Agreement relating
to such Restricted Stock Award, or in guidelines established by the
Committee and made applicable to such Restricted Stock Award.
SECTION 10. Performance Share Awards
(a) Grant. The Committee may, in its discretion, grant Performance Share
Awards to such eligible Participants as it may select. The Committee
shall determine the number of Performance Shares to be granted to each
Participant, whether or not the Performance Share Award is designed to
satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder, the Performance Measures and Performance Period
applicable to each grant, and any other terms and conditions relating to
each grant, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable.
(b) Settlement. The Agreement relating to a Performance Share Award (i)
shall specify whether such award may be settled in shares of Common
Stock (including shares of Restricted Stock) or cash or a combination
thereof; and (ii) may specify whether the holder thereof shall be
entitled to receive, on a current or deferred basis, dividend
equivalents, and if determined by the Committee, interest on any
deferred dividend equivalents with respect to the number of shares of
Common Stock subject to such Award. Prior to the settlement of a
Performance Share Award in shares of Common Stock, including Restricted
Stock, the holders of such award shall have no rights as a stockholder
of the Corporation with respect to the shares of Common Stock subject to
such Award.
(c) Termination of Employment. Subject to Section 11 of this Plan, all of
the terms relating the satisfaction of Performance Measures and the
termination of the Performance Period relating to a Performance Share
Award, or any cancellation or forfeiture of such Performance Share Award
upon a termination of employment, whether by reason of death,
disability, retirement, or otherwise, shall be set forth in the
Agreement relating to such Performance Share Award, or in guidelines
established by the Committee and made applicable to such Performance
Share Award.
SECTION 11. Change of Control.
Notwithstanding anything to the contrary contained herein, and notwithstanding
any contrary waiting period or installment period in any agreement relating to
an Award or in the Plan, in the event of a Change in Control (as hereinafter
defined), (i) each outstanding Option, Stock Appreciation Right and Limited
Right granted under the Plan shall become
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exercisable in full for the aggregate number of shares covered thereby; (ii) any
Performance Measure relating to any Restricted Stock or Performance Share Award
(including any Restricted Stock already granted or to be granted in satisfaction
of a Performance Share Award) shall be deemed to be satisfied at the maximum
level; and (iii) any Restriction Period and/or Performance Period relating to
any Restricted Stock or Performance Share Award (including any Restricted Stock
already granted or to be granted in satisfaction of a Performance Share Award)
shall lapse (and any other conditions pertaining to the vesting of any such
Award shall be waived) and such shares and Awards shall be deemed fully vested.
For purposes of this Plan, a Change in Control shall be deemed to have occurred
upon the first to occur of the following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Corporation, a trustee or
other fiduciary holding Voting Securities under an employee
benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation
in substantially the same proportions as their ownership of
stock of the Corporation), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing more
than 40% of the number of the Corporation's then outstanding
Voting Securities, excluding any "person" who becomes such a
beneficial owner in connection with an Excluded Transaction
described in clause (iii) below;
(ii) the following individuals cease for any reason to constitute a
majority of the directors then serving: individuals who on
January 1, 1996, constitute the Board, and any new director
(other than a director whose initial assumption of office is in
connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to
the election of directors of the Corporation) whose appointment
or election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors on January 1, 1996 or whose appointment or
election or nomination for election was previously so approved;
(iii) there is consummated a merger or consolidation of the
Corporation (or any direct or indirect wholly-owned Subsidiary
of the Corporation) with any other corporation, other than a
merger or consolidation which would result in the Voting
Securities of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or being converted into voting securities of the surviving
entity or any parent thereof) more than
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60% of the combined voting power of the Voting Securities of the
Corporation (or the voting securities of such surviving entity
or any parent thereof) outstanding immediately after such merger
or consolidation (an Excluded Transaction"); or
(iv) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or there is consummated an
agreement for the sale or disposition by the Corporation of all
or substantially all of the Corporation's assets.
SECTION 12. General Provisions.
(a) Withholding. The Employer shall have the right to deduct from all
amounts paid to a Participant in cash (whether under this Plan or
otherwise) any taxes required by law to be withheld in respect of Awards
under this Plan. In the case of payments of Awards in the form of Common
Stock, at the Committee's discretion the Participant may be required to
pay to the Employer the amount of any taxes required to be withheld with
respect to such Common Stock, or, in lieu thereof, to the extent
permitted by applicable federal and state securities laws, the Employer
shall have the right to retain (or the Participant may be offered the
opportunity to elect to tender) the number of shares of Common Stock
whose Fair Market Value equals the amount required to be withheld. The
Optionee shall be entitled to elect to pay all or a portion of the
exercise price for options granted under this Plan and any withholding
taxes in connection with such exercise by having the shares of Common
Stock to be issued by the Corporation pursuant to such exercise sold by
a broker-dealer under circumstances meeting the requirements of 12
C.F.R. Section 220.
(b) Nontransferability. Unless so provided in the Agreement with respect to
such Award, no Award shall be assignable or transferable, and no right
or interest of any Participant shall be subject to any lien, obligation
or liability of the Participant, except by will or the laws of descent
and distribution.
(c) No Right to Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the
Employer. Further, the Employer expressly reserves the right at any time
to dismiss a Participant free from any liability, or any claim under the
Plan, except as provided herein or in any agreement entered into with
respect to an Award.
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(d) No Rights as Stockholder. Subject to the provisions of the applicable
Award, no Participant or transferee of an Option shall have any rights
as a stockholder with respect to any shares of Common Stock to be
distributed under the Plan until he or she has become the holder
thereof. Notwithstanding the foregoing, in connection with each grant of
Restricted Stock hereunder, the applicable Award shall specify if and to
what extent the Participant shall not be entitled to the rights of a
stockholder in respect of such Restricted Stock.
(e) Construction of the Plan. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations,
and rights relating to the Plan, shall be determined solely in
accordance with the laws of the State of Delaware.
(f) Effective Date. Subject to the approval of the stockholders of the
Corporation, the Plan shall be effective on March 8, 1996 (the
"Effective Date"). No Options or Awards may be granted under the Plan
after March 7, 2006.
(g) Amendment of Plan. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time. The Chief Executive Officer shall be
authorized to make minor or administrative modifications to the Plan as
well as modifications to the Plan which may be dictated by requirements
of federal or state statutes applicable to the Corporation or authorized
or made desirable by such statutes. No modification or termination of
the Plan shall, without the optionee's consent, alter or impair any of
his or her rights or obligations under any Award theretofore granted to
him or her under the Plan.
(h) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award with the Participant's consent at any time prior to
payment or exercise in any manner not inconsistent with the terms of the
Plan, including without limitation, (i) to change the date or dates as
of which (A) an Option, Stock Appreciation Right or Limited Right
becomes exercisable, or (B) shares of Restricted Stock or Performance
Share Awards become nonforfeitable; or (ii) to cancel and reissue an
Award under such different terms and conditions as it determines
appropriate.
(i) Hardship Distributions. In no event shall any Option granted under this
Plan be exercisable through payment of the Option Price in cash during
the period of one year following a hardship distribution under the UNUM
Employees Retirement Savings Plan and Trust, as defined therein.
(j) Adjustments and Assumption. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares,
merger, consolidation,
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distribution of assets, or any other change in the corporate structure
or shares of the Corporation, the Committee shall make such adjustments
as it deems appropriate in the number and kind of shares authorized by
the Plan, in the number and kind of shares or Performance Shares covered
by the Awards granted, in the maximum number of Options, Restricted
Stock and Performance Shares which may be granted to any individual
Participant in a single calendar year, and in the purchase price of
outstanding Options. In the event of any merger, consolidation or other
reorganization in which the Corporation is not the surviving or
continuing corporation, unless otherwise provided for in the documents
governing such merger, consolidation or other reorganization, all Awards
granted hereunder and outstanding on the date of such event shall be
assumed by the surviving or continuing corporation with appropriate
adjustment as to the number and kind of shares and purchase price of the
shares.