According to UNUMProvident's Form 10-Q For The Quarterly Period Ended June 30, 2002, in October 2001, the parties reached an agreement to settle the litigation. Under the terms of the settlement, the Company paid $45 million to settle all claims that were or could have been asserted in the litigation by the class, which includes all persons who exchanged the stock of Unum or Provident for the common stock of UnumProvident pursuant to the joint proxy/registration statement or otherwise acquired UnumProvident common stock traceable to the joint proxy/registration statement on or before August 3, 1999, other than the defendants and their officers, directors, affiliates, and subsidiaries. On June 27, 2002, the district court entered an order that, among other things, finally approved the terms of the settlement. On June 28, 2002 the district court entered an Order and Final Judgment that, among other things, dismissed all claims against the defendants with prejudice and released the defendants from all claims that were or could have been asserted in the litigation and barred any member of the class that did not opt out of the settlement from asserting any claims against the defendants arising out of the subject matter of the litigation.
Apart from a $1.0 million deductible, the entire amount paid under the settlement, as well as the attorneys’ fees and expenses incurred by the Company defending the litigation, have been covered under the Company’s insurance policies.
The original complaint alleges that defendants violated the federal securities laws, including Sections 10(b), 14(a) and 20 of the Securities Exchange Act of 1934, as amended, and Sections 11, 12(2) and 15 of the Securities Act of 1933, as amended, by making false and misleading statements in press releases, filings with the Securities and Exchange Commission, including the Joint Proxy concerning, among other things, understating reserves for disability insurance claims, and merger costs, which resulted in the overstatement of UNUMProvident's and UNUM's total assets, shareholders' equity, and net income.
The complaint further alleges that in connection with the merger between UNUM and Provident Companies, Inc. ("Provident"), defendants issued the false and misleading Joint Proxy, which failed to disclose, among other things: the adverse impact of increased disability insurance claims on the earnings of UNUMProvident; that Provident was allegedly deriving a material portion of its income by improperly denying disability insurance claims and that there had been law suits filed against Provident for such; and that both UNUM and Provident due diligence reviews in regard to the merger were limited in scope by agreement.