-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, p6niE8RfpbnBq3SefXHaSLLmXyBvvUihfJhTD1EMNue5veEqczS2Az43iIeHFPV8 oNyufb/lJZ/9eEU/5n7DBg== 0000004977-94-000003.txt : 19940315 0000004977-94-000003.hdr.sgml : 19940315 ACCESSION NUMBER: 0000004977-94-000003 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFLAC INC CENTRAL INDEX KEY: 0000004977 STANDARD INDUSTRIAL CLASSIFICATION: 6321 IRS NUMBER: 581167100 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 34 SEC FILE NUMBER: 001-07434 FILM NUMBER: 94515856 BUSINESS ADDRESS: STREET 1: 1932 WYNNTON RD CITY: COLUMBUS STATE: GA ZIP: 31999 BUSINESS PHONE: 4043233431 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN FAMILY CORP DATE OF NAME CHANGE: 19920306 DEF 14A 1 93 PROXY TEXT NOTICE AND PROXY STATEMENT AFLAC INCORPORATED Worldwide Headquarters 1932 Wynnton Road Columbus, Georgia 31999 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held on Monday, April 25, 1994 The Annual Meeting of Shareholders of AFLAC Incorporated (the "Company") will be held on Monday, April 25, 1994, at 10:00 a.m., at the Columbus Museum (in the Patrick Theater), 1251 Wynnton Road, Columbus, Georgia, for the following purposes, all of which are described in the accompanying proxy statement: 1. To elect twenty Directors of the Company to serve until the next Annual Meeting and until their successors are duly elected and qualified; 2. To consider and adopt amendments to the Company's Stock Option Plan (1985); 3. To consider and adopt the Management Incentive Plan (in effect since 1985) to comply with the Omnibus Budget Reconciliation Act of 1993; 4. To consider and act upon the ratification of the appointment of KPMG Peat Marwick as independent auditors of the Company for the year ending December 31, 1994; and 5. To transact such other business as may properly come before the meeting or any adjournment thereof. The accompanying proxy is solicited by the Board of Directors of the Company. The proxy statement and the Company's Annual Report for the year ended December 31, 1993, are enclosed. The record date for the determination of shareholders entitled to vote at the meeting is February 18, 1994, and only shareholders of record at the close of business on that date will be entitled to vote at this meeting, and any adjournment thereof. YOUR VOTE IS IMPORTANT! WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED PREPAID ENVELOPE SO THAT WE MAY BE ASSURED OF A QUORUM TO TRANSACT BUSINESS. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON. By order of the Board of Directors, Columbus, Georgia Joey M. Loudermilk March 10, 1994 Secretary AFLAC INCORPORATED PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MONDAY, April 25, 1994 SOLICITATION AND REVOCATION OF PROXY This proxy statement is furnished to shareholders in connection with the solicitation of proxies by the Board of Directors of AFLAC Incorporated (the "Company") for use at the Annual Meeting of Shareholders to be held on Monday, April 25, 1994, and any adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders and described in detail herein. The meeting will be held at 10:00 a.m., at the Columbus Museum (in the Patrick Theater), 1251 Wynnton Road, Columbus, Georgia. All properly executed proxies will be voted in accordance with the instructions contained thereon, and if no choice is specified, the proxies will be voted for the election of all nominees named elsewhere in this proxy statement, in favor of the amendments to the Company's Stock Option Plan (1985) (the "1985 Plan") and for approval of the Company's Management Incentive Plan (the "Management Incentive Plan"), both as described herein, and for the appointment of KPMG Peat Marwick as independent auditors. Any proxy may be revoked by the shareholder at any time before it is exercised by giving written notice to that effect to the Secretary of the Company or by signing a later-dated proxy. Shareholders who attend the meeting may revoke any proxy previously granted and vote in person. This proxy statement and the accompanying proxy are being mailed to the shareholders on or about March 14, 1994. DESCRIPTION OF VOTING RIGHTS In accordance with the Company's Articles of Incorporation, shares of the Company's Common Stock, par value $.10 per share (the "Common Stock"), are entitled to one vote per share until they have been held by the same beneficial owner for a continuous period of greater than 48 months prior to the record date of the meeting, at which time they become entitled to ten votes per share. Any transferee of a share of Common Stock where such share was transferred to the transferee by gift, devise or bequest or otherwise through the laws of inheritance, descent or distribution from the estate of the transferor, or by distribution to a beneficiary of shares held in trust for such beneficiary, is deemed to be the same beneficial owner as the transferor. Shares acquired as a direct result of a stock split, stock dividend or other distribution with respect to existing shares ("dividend shares") are deemed to have been acquired and held continuously from the date on which the shares with regard to which the issued dividend shares were acquired. Shares of Common Stock acquired pursuant to the exercise of a stock option are deemed to have been acquired on the date the option was granted. Shares of Common Stock held in "street" or "nominee" name are presumed to have been held for less than 48 months and are entitled to one vote per share unless this presumption is rebutted by providing evidence to the contrary to the Board of Directors of the Company. Shareholders desiring to rebut this presumption should complete and execute the affidavit appearing on the reverse side of their proxy. The Board of Directors reserves the right to require evidence to support the affidavit. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF Holders of record of Common Stock at the close of business on February 18, 1994, will be entitled to vote at the meeting. At that date, the number of outstanding shares of Common Stock entitled to vote was 103,232,957. According to the Company's records, this represents the following voting rights: 82,172,191 Shares @ 1 Vote Per Share = 82,172,191 Votes 21,060,766 Shares @ 10 Votes Per Share = 210,607,660 Votes 103,232,957 Shares Total 292,779,851 Votes Shareholders with one vote per share shown above can rebut the presumption that they are entitled to only one vote as outlined in "Description of Voting Rights" above. If all of the outstanding shares were entitled to ten votes per share, the total votes available would be 1,032,329,570. However, for the purposes of this Proxy Statement, it is assumed that the total votes available to be cast at the meeting will be 292,779,851. The holders of a majority of the voting rights entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of such business as shall come before the meeting. Directors are elected by an affirmative vote of a plurality of voting rights cast. Approval of the amendments to the 1985 Plan described herein (the "1985 Plan Amendments"), the Management Incentive Plan and all other matters to be considered at the meeting requires the affirmative vote of holders of a majority of the voting rights present in person or represented by proxy at the meeting. In the case of the election of directors, under applicable Georgia law, in tabulating the vote, votes withheld will be disregarded and will have no effect on the outcome of the vote. In all matters, other than the election of the Directors, abstentions will be counted and have the same effect as a vote against the proposal. No person, as of February 18, 1994, was the owner of record, or to the knowledge of the Company, beneficially owned 5% or more of the outstanding shares of Common Stock or of the available votes of the Company other than as shown below:
Name and Amount of Percent Address of Title of Class Beneficial Ownership Percent of Beneficial ________________ ____________________ of Available Owner Common Stock Shares Votes Class Votes __________ ________________ _________ _________ _______ _________ Oppenheimer 1 Vote Per Share 9,898,226 9,898,226 9.6% 3.4% Group, Inc.* Oppenheimer Tower World Trade Center New York, NY 10281 (*) This information is derived from Amendment No. 5 to Schedule 13G, dated February 1, 1994, filed with the Securities and Exchange Commission by Oppenheimer Group, Inc. Oppenheimer Group, Inc. filed the Schedule 13G as a parent holding company on behalf of itself, Oppenheimer & Co., LP (its parent company), certain of its subsidiaries and certain investment advisory clients and discretionary accounts of such subsidiaries. Oppenheimer Group, Inc. and Oppenheimer & Co., LP disclaim beneficial ownership of the shares listed above.
SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth, as of February 18, 1994, the number of shares and percentage of outstanding Common Stock beneficially owned by certain of the executive officers named in the "Summary Compensation Table" below (the "Named Executive Officers"), and Directors and executive officers as a group. The beneficial ownership of Directors and of the remaining Named Executive Officers is set forth below in the information provided for director nominees under the caption "Election of Directors." The number of shares of Common Stock shown are those deemed "beneficially owned," as determined under Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which a person, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has sole or shared voting power or investment power, and also any shares that the person has the right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security, or pursuant to the automatic termination or power of revocation of a trust, discretionary account or similar arrangement. Common Stock Beneficially Owned and Approximate Percentage of Class As of February 18, 1994
Percent Percent of of Name Shares(1) Shares Votes(1) Votes _________________________ _________ _______ ________ _______ Kriss Cloninger, III Executive Vice President 37,576 * 37,576 * Hidefumi Matsui Executive Vice President AFLAC Japan Branch 53,287 .1 283,156 .1 All Directors and executive officers as a group (39 persons) 6,363,304 6.0 31,935,796 10.7 * Percentage not listed if less than .1% (1) Includes options to purchase shares (and available votes), which are exercisable within 60 days, for Kriss Cloninger, III, 37,500 (37,500) and Hidefumi Matsui, 48,500 (260,000), and for all Directors and executive officers as a group, 2,010,136 (6,651,130).
SOLICITATION OF PROXIES The cost of soliciting proxies will be paid by the Company. The Company will make arrangements with brokerage firms, custodians and other fiduciaries to send proxy materials to their principals, and the Company will reimburse them for their mailing and related expenses. In addition to solicitation by mail, certain officers and other employees of the Company, who will receive no compensation for their services other than their regular compensation, may solicit proxies by telephone and by personal contacts. In addition, the Company has retained D. F. King & Co., Inc., to assist in the solicitation of proxies for a fee of $10,000, plus reimbursement of reasonable out-of-pocket expenses. 1. ELECTION OF DIRECTORS The Company proposes that the following twenty individuals be elected to the Board of Directors of the Company. The persons named in the following table have been nominated by the Nominating Committee of the Board of Directors for election as Directors and, if elected, are willing to serve as such until the next Annual Meeting of Shareholders and until their successors have been elected and qualified. It is intended that the persons named in the accompanying proxy, or their substitutes, will vote for the election of these nominees (unless specifically instructed to the contrary). However, if any nominee at the time of the election is unable or unwilling to serve or is otherwise unavailable for election, and in consequence another nominee is designated, the persons named in the proxy, or their substitutes, will have discretionary authority to vote or refrain from voting in accordance with their judgment on such other nominees. The Board of Directors has no reason to believe that any of the persons nominated will be unable or unwilling to serve. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE BELOW-LISTED NOMINEES AS DIRECTORS. The following information is provided with respect to the nominees:
Shares of Common Stock Beneficially Per- Voting Owned on cent Rights Percent Year February 18, of Out- on Feb- of First 1994 standing ruary 18, Available Name Principal Occupation (1) Age Elected (2) (3) Shares 1994 (2) Votes _________________________________________________________________________________________________________________ Paul S. Amos Chairman, the Company 67 1956 693,979 .7 4,662,277 1.6 and AFLAC**, since August 1990; Vice Chairman, the Company and AFLAC, until August 1990 Daniel P. Amos Chief Executive Officer, 42 1983 1,711,791 1.6 5,557,635 1.9 the Company and AFLAC, since August 1990; President, AFLAC Incor- porated, since August 1991; President, AFLAC; Deputy Chief Executive Officer, the Company, from June 1988 until August 1990; Chief Operating Officer, AFLAC, until August 1990; Director, Synovus Financial Corp., Columbus, GA J. Shelby Amos, II Alabama/West Florida 41 1983 247,390 .2 2,210,650 .8 State Sales Coordinator, AFLAC Michael H. Armacost Professor, Asia/Pacific 56 (4) 300 * 300 * Research Center, Stanford University, Stanford, CA, since 1993; U.S. Ambassador to Japan, from 1989 until 1993; Under Secretary of State for Political Affairs from 1984 until 1989 Shares of Common Stock Beneficially Per- Voting Owned on cent of Rights Percent Year February 18, Out- on Feb- of First 1994 standing ruary 18, Available Name Principal Occupation (1) Age Elected (2) (3) Shares 1994 (2) Votes _________________________________________________________________________________________________________________ M. Delmar Edwards,MD Vice President and Assistant 67 1990 16,351 * 16,351 * to the Chairman, Columbus Regional Healthcare System, Inc., Columbus, GA, since July 1993; Practicing Physician, Columbus, GA, until July 1993; Director, First Union National Bank of Georgia, Columbus, GA; Vice Chairman, Morehouse School of Medicine, Atlanta, GA, since 1990 George W. Ford, Jr. Chairman of the Board, 70 1986 9,625 * 96,250 * Progressive Funeral Home, Columbus GA; Retired Director, Columbus Bank & Trust Company, Columbus, GA Cesar E. Garcia Chairman of the Board, 72 1987 104,750 .1 944,000 .3 OWD Garcia Inc., Jacksonville, FL Joe Frank Harris Chairman of the Board, 58 1991 10,625 * 10,625 * Harris Georgia Corp., Cartersville, GA, since January 1991; Governor of the State of Georgia until January 1991; Director, Law Companies Group, Inc.; Director, Bankhead Enterprises, Inc. Shares of Common Stock Beneficially Per- Voting Owned on cent of Rights Percent Year February 18, Out- on Feb- of First 1994 standing ruary 18, Available Name Principal Occupation (1) Age Elected (2) (3) Shares 1994 (2) Votes _________________________________________________________________________________________________________________ Elizabeth J. Hudson Executive Producer, 44 1990 14,887 * 14,887 * NBC Productions, since February 1993; Senior Vice President, Corporate Communications, NBC Inc., until February 1993; Vice President, Corporate and Media Relations, NBC Inc., New York, NY, until 1989 Kenneth S.Janke,Sr. President, Chief Executive 59 1989 35,110 * 35,110 * Officer, National Assoc- iation of Investors Corp., Royal Oak, MI; President and Director, NAIC Growth Fund, Royal Oak, MI, since 1989 Charles B. Knapp President, The University 47 1990 14,750 * 14,750 * of Georgia, Athens, GA; Director, Law Companies Group Inc., Atlanta, GA Hisao Kobayashi Senior Managing Director, 58 (4) 1,250,000 1.2 1,250,000 .4 The Dai-Ichi Kangyo Bank, Ltd.,Tokyo, Japan; Chairman, CIT Group Holdings Inc., Livingston, NJ Peter D. Morrow President, Fran Mar, Inc. 73 1987 8,000 * 80,000 * (Textile Sales), Roaring Gap, NC Shares of Common Stock Beneficially Per- Voting Owned on cent of Rights Percent Year February 18, Out- on Feb- of First 1994 standing ruary 18, Available Name Principal Occupation (1) Age Elected (2) (3) Shares 1994 (2) Votes _________________________________________________________________________________________________________________ Yoshiki Otake President, AFLAC 54 1986 303,061 .3 1,921,540 .7 Japan Branch; Vice Chairman, AFLAC International, Inc., since October 1991; Executive Vice President, AFLAC, from January 1991 until October 1991 John M. Pope Retired Owner, 74 1967 144,306 .1 1,443,060 .5 John M. Pope Concrete Construction Company, Americus, GA; Director, Sumter Bank and Trust Company, Americus, GA E.Stephen Purdom MD Medical Director, 46 1987 82,758 .1 368,571 .1 Columbus Clinic, Columbus, GA; Senior Vice President and Medical Director, AFLAC; Director, Trust Company Bank, Columbus, GA Jack S. Schiffman President, Jack S. 73 1970 217,112 .2 2,171,120 .7 Schiffman, Inc. (Consul- tants and Investments), Columbus, GA; Retired Director, Synovus Financial Corp., Columbus, GA Henry C. Schwob Owner, Schwob Realty 66 1965 322,579 .3 3,074,239 1.0 Company, Columbus, GA; Director, First Union National Bank of Georgia, Columbus, GA Shares of Common Stock Beneficially Per- Voting Owned on cent of Rights Percent Year February 18, Out- on Feb- of First 1994 standing ruary 18, Available Name Principal Occupation (1) Age Elected (2) (3) Shares 1994 (2) Votes _________________________________________________________________________________________________________________ J. Kyle Spencer President, Spencer 67 1968 326,346 .3 3,263,460 1.1 Investment Company, Columbus, GA; Director, First Union National Bank of Georgia, Columbus, GA; Retired Chairman of the Board, Bank South N.A., Columbus, GA Glenn Vaughn, Jr. Retired Chairman of the 64 1990 15,790 * 27,400 * Board, Columbus Ledger- Enquirer, Columbus, GA (*) Percentage not listed if less than .1% (**) American Family Life Assurance Company of Columbus ("AFLAC") is a wholly owned subsidiary of the Company. (1) Unless specifically noted, the respective Director or nominee has held the occupation for at least five years. (2) Includes options to purchase shares (and available votes), which are exercisable within 60 days, for Paul S. Amos, 207,464 (207,464); Daniel P. Amos, 751,466 (915,932); J. Shelby Amos, II, 18,750 (187,500); M. Delmar Edwards, 13,750 (13,750); George W. Ford, Jr., 7,125 (71,250); Joe Frank Harris, 8,750 (8,750); Elizabeth J. Hudson, 13,750 (13,750); Kenneth S. Janke, Sr., 18,750 (18,750); Charles B. Knapp, 13,750 (13,750); Yoshiki Otake, 174,920 (829,598); John M. Pope, 30,000 (300,000); E. Stephen Purdom, 38,008 (245,071); Jack S. Schiffman, 50,000 (500,000); Henry C. Schwob, 50,000 (500,000); J. Kyle Spencer, 50,000 (500,000); and Glenn Vaughn, Jr., 13,750 (13,750). Excludes options to purchase shares (and available votes), which will vest and be exercisable upon the re-election of the following Directors: Joe Frank Harris, 5,000 (5,000); Elizabeth J. Hudson, 5,000 (5,000); Charles B. Knapp, 5,000 (5,000); and Glenn Vaughn, Jr., 5,000 (5,000). Excludes options to purchase shares granted in 1993 which are subject to shareholder approval of the 1985 Plan Amendments. (3) All stock is owned solely and directly by the nominee except as follows: Paul S. Amos, 71,272 shares owned by spouse; 32,584 shares owned by his minor grandchildren with Mr. Amos as custodian; 194,050 shares owned by trusts with Mr. Amos as trustee; and 750 shares owned by the Paul S. Amos Education Foundation. Daniel P. Amos, 38,125 shares owned by spouse; 234,894 shares owned by his minor children with Mr. Amos as trustee; 172,924 shares owned by a trust with Mr. Amos as trustee; 875 shares owned by a corporation of which his wife is the sole shareholder; 32,297 shares owned by Daniel P. and Shannon Amos Foundation, Inc; and 750 shares owned by the Paul S. Amos Education Foundation. J. Shelby Amos, II, 82,056 shares owned by his minor children with Mr. Amos as trustee; and 8,143 shares owned by a corporation of which Mr. Amos is a controlling shareholder. Cesar E. Garcia, 250 shares owned by spouse; and 104,500 shares owned jointly with son. Elizabeth J. Hudson, 1,137 shares owned jointly with spouse. Kenneth S. Janke, Sr., 1,410 shares owned by a trust with Mr. Janke as trustee; 12,450 shares owned by a partnership of which Mr. Janke is a partner; and 2,500 shares owned by the NAIC Growth Fund of which Mr. Janke is President. Charles B. Knapp, 1,000 shares owned by spouse. Hisao Kobayashi, 1,250,000 shares owned by The Dai-Ichi Kangyo Bank, Ltd; Mr. Kobayashi shares the power to vote these shares. Peter D. Morrow, 8,000 shares owned by a trust with Mr. Morrow as trustee. John M. Pope, 605 shares owned by spouse. E. Stephen Purdom, 3,750 shares owned jointly with spouse; and 500 shares owned by his minor child with Dr. Purdom as custodian. Jack S. Schiffman, 37,230 shares owned jointly with spouse; and 500 shares owned by spouse. Henry C. Schwob, 18,079 shares owned by spouse; and 22,210 shares owned by his children with spouse as custodian. J. Kyle Spencer, 31,567 shares owned by spouse. Glenn Vaughn, Jr., 1,415 shares owned jointly with spouse; and 625 shares owned by spouse. (4) First year nominated. Daniel P. Amos is the son of Paul S. Amos. J. Shelby Amos, II is the nephew of Paul S. Amos. Daniel P. Amos and J. Shelby Amos, II are cousins. Kenneth S. Janke, Sr. is the father of Kenneth S. Janke Jr., an executive officer of the Company. No other family relationship exists among any other executive officers or Directors.
BOARD AND COMMITTEE MEETINGS AND OTHER INFORMATION During 1993, the Board of Directors met six times and all Directors attended more than 75% of the meetings of the Board and of the Board Committees on which they served. THE FOLLOWING DIRECTORS WERE MEMBERS OF THE RESPECTIVE COMMITTEES DURING THE PAST YEAR: Audit Compensation Nominating ___________________ __________________ ________________ J. Kyle Spencer John M. Pope Paul S. Amos George W. Ford, Jr. Cesar E. Garcia Daniel P. Amos Peter D. Morrow Peter D. Morrow J. Shelby Amos, II Henry C. Schwob Kenneth S. Janke, Sr. Charles B. Knapp The Audit Committee, which met four times during 1993, is charged with the duties of assuring that proper guidelines are established for the dissemination of financial information; meeting periodically with, and reviewing recommendations of, the Company's independent and internal auditors; meeting periodically with management with respect to the Company's system of internal controls and accounting systems used by the Company; determining that no restrictions are placed on the scope of the examination of the financial statements by the independent auditors; reviewing consolidated financial statements; and performing any other duties or functions deemed appropriate by the Board. The Committee also recommends to the Board of Directors the appointment of the Company's principal independent auditors. At least annually, the Committee reviews the services performed and the fees charged by the independent auditors. The independent auditors have direct access to the Committee and may discuss any matters which arise in connection with their audits, the maintenance of internal controls and any other matters relating to the Company's financial affairs. The Committee may authorize the independent auditors to investigate any matters which the Committee deems appropriate and may present its recommendations and conclusions to the Board. The Nominating Committee met once during 1993 to recommend nominees for election as Directors at the Annual Meeting of Shareholders. The Committee will consider, as potential nominees, persons recommended by shareholders. Recommendations should be submitted to the Nominating Committee in care of the Secretary of the Company. Each Director of the Company receives $1,250 per month for service as such. A Director serving on one or more committees who is not an officer of the Company receives an additional $600 per month for that service ($200 if an officer). Each Director also receives $2,000 for attendance at each meeting of the Board of Directors. During 1993, the following Directors received additional payments as compensation for special consulting services to individual subsidiaries of the Company: Mr. Cesar E. Garcia, $12,000, for services to Communicorp, Inc.; and Mr. Henry C. Schwob, $49,686, for services to AFLAC's Investment Committee. Directors who are not also employees of the Company or its subsidiaries have been granted non-qualified stock options pursuant to the 1985 Plan. The exercise price for the options is the fair market value of the Common Stock on the date of grant. In years prior to 1993, aggregate stock options, ranging from 15,000 to 40,000 per Director, have been granted by the Directors' Committee, which determined the value of each Director's continuing service to the Company based on experience gained from the number of years already served. The stock options granted prior to 1993 vest over a four-year period, contingent upon the shareholders re-electing the Director to the Board of Directors. Options vest in full upon the death or disability of the Director. The number of options which will vest upon each Director's re-election by the shareholders at the April 25, 1994 meeting are set forth in footnote 2 on page 8 of this Proxy Statement. Subject to shareholder approval of the 1985 Plan Amendments, the 1985 Plan, as so amended (the "Amended 1985 Plan"), eliminates the current plan provisions allowing discretionary stock option grants to non-employee Directors, and provides instead for automatic formula grants to non-employee Directors, including Advisory Directors. As of August 13, 1993, initial grants of options to purchase 10,000 shares of Common Stock had been made to the non-employee Directors serving on the Board of Directors as of that date, consisting of J. Shelby Amos, II, Michael H. Armacost, John M. Pope, George W. Ford, Jr., Cesar E. Garcia, Joe Frank Harris, Elizabeth J. Hudson, Kenneth S. Janke, Sr., Charles B. Knapp, Peter D. Morrow, M. Delmar Edwards, Glenn Vaughn, Jr., Jack S. Schiffman, Henry C. Schwob, J. Kyle Spencer and Koji Takahashi. Thereafter each new non-employee Director, including any Advisory Director, will be granted an option to purchase 10,000 shares of Common Stock as of the earlier of the date such individual is appointed to the Board or the date of the first annual meeting of shareholders at which such Director is elected to the Board. Options granted to each non-employee Director will become exercisable in cumulative installments of 20% of the shares of Common Stock covered thereby as of the date of grant, and an additional 20% as of each of the next four anniversaries of the date of option grant to the extent the non-employee Director continues to be a Director as of that date; provided, however, that upon cessation of service by reason of retirement, a non-employee Director will become immediately vested in all outstanding options that have not yet expired. The exercise price of all shares of Common Stock subject to options granted to non-employee Directors will be 100% of the fair market value of such shares as of the date of grant. CERTAIN LITIGATION On December 1, 1988, a lawsuit purporting to be a shareholders derivative suit was filed by Susie H. Millsap on behalf of the Company in the Superior Court of Meriwether County, Georgia, naming as individual defendants the Company's Board of Directors (the "Action"). Mrs. Millsap is the daughter of Kenneth M. Henson, a former employee of and counsel for the Company. The original complaint was subsequently amended to substitute The Henson Company in place of Mrs. Millsap as plaintiff. The Company was named a party defendant in the suit but no claim was asserted against the Company. The Action alleged that the members of the Board of Directors improperly approved or acquiesced in certain transactions between the Company and Mr. John B. Amos (the Company's former Chairman and Chief Executive Officer). Since the Action purported to be a shareholders derivative suit, any recovery (except recovery of attorneys' fees and costs of litigation) would inure to the Company's benefit and not to the plaintiff. The Board of Directors of the Company appointed a Special Litigation Committee of independent Directors to inquire into the matters alleged in the Action and to report its findings. The Special Litigation Committee issued its final report on March 12, 1990. The report recommended that the Company collect the amount of $64,600 from Mr. John Amos as additional interest due on a promissory note executed by Mr. Amos in 1975 when he purchased shares of common stock from the Company. Mr. Amos paid this amount to the Company in March 1990. The report also concluded that the allegations made in the lawsuit were without merit and recommended that no action be brought by or on behalf of the Company against any officer or Director with regard to such allegations and that the Company seek dismissal of the lawsuit. Pursuant to the Company's Motion to Dismiss the Action, the Superior Court of Meriwether County, Georgia, entered its Order and Judgment on January 27, 1992, in which the Court dismissed the Action based on its findings that the Special Litigation Committee and its counsel were independent, that the Committee's investigation was adequate, and that its conclusions and recommendations were reasonable and appropriate within the bounds of the business judgment rule under Georgia law. This decision was affirmed by the Court of Appeals of Georgia on March 12, 1993. A motion for reconsideration was denied by the Court on March 30, 1993. On September 10, 1993, the Supreme Court of Georgia denied a motion for rehearing of the Supreme Court's previous July 15, 1993 denial of a writ of certiorari filed by the plaintiff with respect to the Court of Appeals decision. COMPENSATION REPORT This report on the compensation policies, components and decisions of the Company for 1993 with respect to the Company's executive officers is presented by the Compensation Committee of the Company, which for 1993 was made up of three members, consisting of Messrs. John M. Pope, Chairman of the Compensation Committee, Cesar E. Garcia and Peter D. Morrow, all of whom are outside Directors. The function of the Compensation Committee is to approve compensation arrangements for executive officers of the Company who are also members of the Board of Directors, including, among the executive officers named in the accompanying compensation tables, Messrs. Daniel P. Amos, Paul S. Amos and Yoshiki Otake, and to make decisions under the 1985 Plan. The Compensation Committee also determines all aspects of compensation under the Company's Management Incentive Plan with respect to all executive officers. Compensation decisions for executive officers who are not also members of the Board, other than decisions under the Management Incentive Plan and with respect to stock options, are made by the Chief Executive Officer, Mr. Daniel P. Amos. The Compensation Committee met a total of four times over the past fiscal year. COMPENSATION POLICIES AND GOALS The Company's goal is to retain, motivate and reward management of the Company through its compensation policies and awards, while aligning their interests more closely with that of the Company and its shareholders. With respect to the retention of management, the Company seeks to attract and retain the highest caliber of management by offering, in addition to other intangible non-monetary benefits, total compensation which is comparable to that offered by its competitors. The Company believes that it is also important to provide compensation components which accrue to the benefit of, and provide security to, its management over the long term, such as pension benefits, to promote the retention of management. To align the interest of management more closely with that of the Company and to motivate and reward individual initiative and effort, the Company seeks to promote performance-based compensation where contribution to the Company as a whole, as well as the attainment of individual performance goals, are rewarded. Through the use of performance-based plans that reward attainment of division or Company goals, the Company seeks to foster an attitude of teamwork and strengthen a sense of group affiliation. The Company also believes that the use of equity ownership is an important tool to ensure that the efforts of management are consistent with the objectives of its shareholders and through the use of stock options seeks to promote increased equity ownership by management in the Company. COMPENSATION COMPONENTS At present, the compensation of the executive officers of the Company consists of a combination of salary, cash bonuses, stock options, contributions to or accruals for benefit plans, and participation in various other plans, such as the Company's 401(k) plan, as well as the provision of medical and other personal benefits typically offered to executives at large corporations. SALARIES. In 1993, salaries for executive officers were established on the basis of a study by Ernst & Young regarding salary levels at comparable companies for executive officer positions and on the basis of a general 5% salary increase. With respect to Mr. Daniel P. Amos, his salary was established in connection with the execution of a new employment contract with the Company, as further described in "Employment Contracts and Termination of Employment Arrangements" below. His increase in salary of 5.5% was based on the recommendation of Ernst & Young, which provided the Company with a compensation review of twelve comparable insurance organizations, including their Chief Executive Officer ("CEO") compensation, and the favorable performance of the Company over the last year under Mr. Daniel P. Amos' leadership. Based on the Ernst & Young review, the Compensation Committee believes that Mr. Amos' salary at this increased level is slightly above the average of the comparable companies, which the Compensation Committee believes is appropriate in view of the Company's performance under Mr. Amos' leadership. In connection with its consideration of Mr. Daniel P. Amos' salary arrangement, the Compensation Committee noted in particular Mr. Amos' substantial and critical management responsibilities with respect to the Company's international operations. Although the companies used in the Ernst & Young study include each of the companies which constitute the S&P Life Insurance Index, which is one of the indices used in the Company's "Stock Performance Graph," (see p.20 below), the Ernst & Young group of insurance organizations consists of a broader group of companies. The companies used by Ernst & Young are those viewed by the Company as its most direct competitors, and it was deemed appropriate to consider this broader group of companies for comparative compensation purposes. BONUSES. Under the Company's Management Incentive Plan, cash bonuses in an amount equal to 15% to 50% of salary, for 1993, with respect to the Company's executive officers generally, and equal to 70% of salary, with respect to Mr. Daniel P. Amos pursuant to his employment agreement and to Mr. Paul S. Amos, are paid on the basis of the attainment of target annual performance goals for the Company and, in the case of executive officers other than Messrs. Daniel P. Amos and Paul S. Amos, personal goals. In the event that maximum performance goals are achieved, Messrs. Daniel P. Amos and Paul S. Amos may earn up to 105% of salary and other executive officers may earn up to 75% of salary. The establishment of the percentage of salary which such bonus may constitute for Messrs. Daniel P. Amos and Paul S. Amos was based on the recognition by the Compensation Committee that the bonus goals are set very aggressively and that such performance-based compensation should account for a substantial proportion of the total compensation for these top two executives of the Company. The performance goals are established on the basis of recommendations by management, and the awards, if attained, are paid at the end of the award year or in the following year. With respect to 1993, the Committee established Company performance goals for executive officers, including the CEO, based on, among other things, earnings per share, number of policies in force, increases in revenues, increases in new sales, specified operating expense controls, pretax operating earnings, and, in the case of executive officers other than Messrs. Daniel P. Amos and Paul S. Amos, personal goals. (The Compensation Committee deemed it appropriate that the bonus components of Messrs. Daniel P. Amos' and Paul S. Amos' compensation be based on objective Company performance goals rather than more subjective personal goals.) With respect to Messrs. Daniel P. Amos and Paul S. Amos, 30% of the target award was attributed to the earnings per share goal, while the other Company performance goals accounted for 70% of the total possible award in 5% to 10% increments. With respect to the other executive officers, 30% of the target award was attributed to the earnings per share goal, while the other Company performance goals each accounted for 5% to 10% percent of the total possible award, generally up to 90% . Generally, personal goals constituted the remainder of the performance award for the other executive officers. With respect to each Company performance goal, a minimum, target and maximum performance level is specified, the attainment of which determines the amount paid with respect to each performance goal. The percentage which the bonus represents of salary is decreased or increased to the extent the Company performance levels meet the minimum levels or exceed target levels as the case may be, up to the maximum performance levels. Performance levels with respect to personal goals are not considered for purposes of this percentage adjustment. Personal goals may be achieved in whole or in part with an appropriate payment adjustment to reflect partial achievement; however, no additional payments are made if such goals are exceeded. Payment on attainment of any particular performance goal may occur independently of (i.e., is not contingent upon) attainment of any other performance goal. STOCK OPTIONS. Under the 1985 Plan, options are granted in each case based generally on a subjective evaluation of the officer level, duties and responsibilities of the individual and his or her present and potential contributions to the growth and success of the Company or its subsidiaries. These decisions with respect to the 1985 Plan have been made by the Compensation Committee, pending shareholder approval of the 1985 Plan Amendments. In 1993, a total of 1,067,250 options were granted to the Company's executive officers. This amount includes 300,000 options granted to Mr. Daniel P. Amos as an inducement to enter into his employment agreement with the Company and 150,000 options granted to Mr. Paul S. Amos, each on a post-split share basis, contingent on receipt of shareholder approval of the 1985 Plan Amendments to increase the number of authorized shares under the 1985 Plan. Although the actual amount of options awarded to Messrs. Daniel P. Amos and Paul S. Amos was based to some extent on the subjective judgment of the Committee members as to the appropriate size of the grant, in connection with its decision to make these grants, the Compensation Committee noted that Mr. Daniel P. Amos and Mr. Paul S. Amos had not received any option grants since 1990 and that the option grants would be the only ones received by Messrs. Daniel P. Amos and Paul S. Amos in the three-year period commencing in 1993, contrary to the normal industry practice of annual option grants as indicated in the Ernst & Young study. The Compensation Committee also noted that the Company did not provide its CEO with a cash-based long-term incentive, again in contrast to the majority of the industry group CEOs. With respect to the grants made to the executive officers as a group, almost all of which are also contingent on shareholder approval of the 1985 Plan Amendments, as indicated above these grants are based generally on a subjective evaluation of the officer level, duties and responsibilities of the individual and his or her present and potential contributions to the growth and success of the enterprise. These grants were also based on the recommendation of Mr. Daniel P. Amos and on the desire of the Compensation Committee to increase the stock ownership of executives in the Company, including the executives of the Company's Japan Branch, both as a long-term incentive that focuses on performance of the Company as a whole, rather than on any particular division of the Company, and as a way to further align the executives' interest with shareholders, in response to the findings of the Ernst & Young report that the Company's average reported percentage ownership by executives and Directors is approximately half of that reported by the industry group used in the report. The Compensation Committee's decisions with respect to bonuses to be awarded to Mr. Daniel P. Amos under the Management Incentive Plan and the 1993 option grant are consistent with recommendations of Ernst & Young and Hewitt Associates (which was retained by the Compensation Committee and which provided advice to the Compensation Committee based upon the Ernst & Young study) as to the appropriate compensation to be awarded to Mr. Amos for his compensation to be at, or somewhat above, competitive levels based on the companies in the Ernst & Young study. In the case of Hewitt Associates, their recommendations were part of a total recommended compensation package, including the 300,000 share option grant and the management incentive bonus, which provided that Mr. Amos' salary would remain at its then current level. The Compensation Committee determined instead to accept the Ernst & Young recommendation with respect to salary increase for the reasons set forth above. On June 28, 1993, the Compensation Committee authorized, subject to the receipt of shareholder approval, the 1985 Plan Amendments which would: (i) increase the number of shares available under the 1985 Plan by 3,000,000 shares; (ii) eliminate the two separate committees formerly used to administer the 1985 Plan and replace them with the Compensation Committee; (iii) eliminate the ability to make discretionary grants to non-employee Directors, providing instead for automatic formula grants to non-employee Directors, including Advisory Directors; (iv) modify the 1985 Plan to conform to and take advantage of revised Rule 16b-3 under the Exchange Act, including limiting the requirement of obtaining shareholder approval of plan amendments; and (v) make certain other amendments, as described below. The Compensation Committee decided to increase the shares available under the 1985 Plan based on the recommendations from its outside law firm and the recommendation of the CEO, taking into account the fact that: (i) the 1985 Plan is currently almost out of shares; (ii) the newly authorized shares should be sufficient to address the Company's needs and objectives for at least the next three years; (iii) the shares would be used to provide long term incentives to the Company's officers; and (iv) option grants are a means of staying competitive with the compensation to executive officers offered by the Company's peer industry group as recommended by Ernst & Young. Further, the additional shares could be used to focus the officers and other key employees in the Company's Japan Branch on the overall Company's stock performance, rather than on the short-term performance of the Company's Japanese operations alone. OTHER BENEFITS. The Company maintains its Retirement Plan for Senior Officers, which provides lifetime retirement and medical benefits to plan participants, and also maintains a Supplemental Executive Retirement Plan for certain key executives of the Company and certain subsidiaries who do not participate in the Retirement Plan for Senior Officers, which provides for certain pension benefits in the event of termination (other than for cause), upon death, after age 55 or in certain change in control situations. Certain of the named executive officers are participants in the Retirement Plan for Senior Officers or in the Supplemental Executive Retirement Plan. The executive officers of the Company may also participate in the non-discriminatory AFLAC Incorporated 401(k) Retirement Plan and a non-contributory defined benefit pension plan covering substantially all employees. Except as described below, no decisions with respect to any of these plans were made by the Compensation Committee in 1993. In 1993, the Compensation Committee determined to amend the Company's Supplemental Executive Retirement Plan to provide that a person who suffers a qualifying termination following a change in control shall be entitled to the greater of (i) the present value of the retirement benefit (for participants not yet age 55 as of such date, of the retirement benefit to which the person would have been entitled if he had remained in the employ of the Company to his early retirement date) or (ii) three times the person's final pay (whereas prior to the amendment, participants who were under 55 could only receive the present value of their retirement benefit had they remained in the employ of the Company, and any other participants could only receive the present value of three times their final pay). The Committee believes the amendment was appropriate to allow this provision to operate fairly among members of management, regardless of age. The Compensation Committee believes that the executive compensation policies serve the best interests of the shareholders and the Company. The bonus and stock option components of compensation for Company executives are intended to be directly related to and commensurate with Company performance. In connection with making decisions with respect to executive compensation, the Compensation Committee will take into account as one of the factors which it considers, the provisions of Section 162(m) of the Internal Revenue Code of 1986 (which was enacted by the Omnibus Budget Reconciliation Act of 1993), which limits the deductibility by the Company of certain categories of compensation in excess of $1,000,000 paid to certain executive officers. It may, however, determine to authorize compensation arrangements that exceed the $1,000,000 deductibility cap imposed by Section 162(m). In this connection, the 1985 Plan has been amended (subject to shareholder approval) to conform to the requirements of Section 162(m) and the Management Incentive Plan is being submitted to shareholders for approval so that amounts payable pursuant to that plan will be deductible by the Company. COMPENSATION COMMITTEE ______________________ JOHN M. POPE CESAR E. GARCIA PETER D. MORROW SUMMARY COMPENSATION TABLE Annual Compensation Long-Term Compensation Awards
Other Annual Restricted Comp- Stock LTIP All Other Name and ensation Award(s) Payouts Compensation Principal Position Year Salary($) Bonus($)(1) ($) ($) Options(#)* ($) ($)(2)(3) __________________ ____ _________ ___________ ________ __________ ___________ _______ ____________ Daniel P. Amos 1993 913,218 658,346 -0- -0- 300,000 -0- 5,602 President & CEO 1992 848,491 483,278 -0- -0- -0- -0- 5,539 1991 751,204 380,108 -0- -0- -0- -0- -0- Paul S. Amos, 1993 975,064 722,333 -0- -0- 150,000 -0- 14,782 Chairman of Board 1992 905,722 517,805 -0- -0- -0- -0- 14,719 1991 803,263 324,219 -0- -0- -0- -0- -0- Yoshiki Otake 1993 614,213 123,689 -0- -0- 50,000 -0- 4,478 President 1992 518,387 76,482 -0- -0- 75,000 -0- -0- AFLAC Japan Branch 1991 459,102 76,977 -0- -0- 57,179 -0- -0- Kriss Cloninger, III** 1993 326,563 166,663 -0- -0- 75,000 -0- 3,420 Exec. Vice President 1992 197,118 62,500 -0- -0- 37,500 -0- 2,565 1991 N/A N/A -0- -0- N/A -0- N/A Hidefumi Matsui*** 1993 307,275 64,263 -0- -0- 50,000 -0- 1,978 Exec. Vice President 1992 258,151 40,189 -0- -0- 12,500 -0- -0- AFLAC Japan Branch 1991 N/A N/A -0- -0- N/A -0- N/A (*) Options have been adjusted for the five-for-four stock split on June 15, 1993. All options granted in 1993 are contingent on shareholder approval of the 1985 Plan Amendments. (**) Kriss Cloninger, III was not employed by the Company until March 1992. Therefore the amount shown for 1992 reflects a partial-year compensation. (***) Hidefumi Matsui was appointed an executive officer in 1992. (1) Includes cash bonuses paid in 1992, 1993 and 1994 under the Management Incentive Plan for services rendered during 1991, 1992 and 1993 and other cash bonus payments. (2) Not included in all other compensation are payments made to a corporation formerly owned by Mr. Daniel P. Amos for vested renewal commissions on insurance policies sold prior to Mr. Amos being elected as President of AFLAC in 1983, at which time Mr. Amos was associated with AFLAC on a commission-only basis. During the years 1991, 1992 and 1993, payments of $291,348; $255,941 and $239,447 on annualized premiums of $11,774,562; $11,143,791 and $9,564,150, respectively, were made to this corporation. This corporation was sold by Mr. Amos to the Company on December 15, 1993. See "Certain Transactions and Relationships" below. (3) Includes premiums paid in 1993 for term life insurance in the amount of $3,420, $12,600, $3,420, $4,478, and $1,978 for Mr. Daniel P. Amos, Mr. Paul S. Amos, Mr. Kriss Cloninger, III, Mr. Yoshiki Otake and Mr. Hidefumi Matsui, respectively, and Company matching contributions to the 401(k) retirement plan in the amount of $2,182 for each of Mr. Daniel P. Amos and Paul S. Amos. Includes premiums paid in 1992 for term life insurance in the amount of $3,420, $12,600, and $2,565 for Mr. Daniel P. Amos, Mr. Paul S. Amos, and Mr. Kriss Cloninger, III and the Company matching contributions to the 401(k) retirement plan in the amount of $2,119 for each of Mr. Daniel P. Amos and Mr. Paul S. Amos.
STOCK PERFORMANCE GRAPH The following graph compares the five-year performance of the Company's Common Stock to the Dow Jones Industrial Average (Dow Jones), the Standard & Poor's 500 Index (S & P 500), and the Standard & Poor's Life Insurance Index (S & P Life). The Standard & Poor's Life Insurance Index includes: Capital Holding Corp., Jefferson-Pilot Corp., Lincoln National Corp., Torchmark Corp. and USLIFE Corp. The graph assumes that the value of the investment in the Company's Common Stock and each index was $100 at December 31, 1988, and that all dividends were reinvested. (Stock Performance graph inserted here.) Performance Graph Index December 31
1988 1989 1990 1991 1992 1993 ________________________________________________________________________ AFLAC Incorporated 100 133 145 237 268 281 ________________________________________________________________________ S & P LIFE 100 158 129 186 250 253 ________________________________________________________________________ Dow Jones 100 132 131 163 175 204 ________________________________________________________________________ S & P 500 100 132 128 166 179 197 ________________________________________________________________________
(All performance data provided by STAR Services, Inc., San Francisco, CA 94120) * In the third quarter of 1990, Paul S. Amos was appointed Chairman, and Daniel P. Amos was named Chief Executive Officer. DEFINED BENEFIT PENSION PLAN The Company has a non-contributory defined benefit pension plan covering substantially all U.S. employees who satisfy the eligibility requirements. Prior to 1989, benefits were calculated pursuant to the following formula: 50 percent of average compensation reduced by (i) 50 percent of primary Social Security benefits and (ii) 1/25 for each year by which the number 25 exceeds the number of years of service at normal retirement age. Effective January 1, 1989, benefits are calculated in accordance with the following formula: one percent of average monthly compensation times years of credited service not in excess of 25 years, plus .5 percent of average monthly compensation times years of service in excess of 25 years. However, non-highly compensated employees (which for this purpose generally includes employees whose compensation did not exceed $52,235 in 1988) are guaranteed to receive not less than the amount that they would have been entitled to receive at December 31, 1989, based on the previous formula and years of service and compensation at that date. Benefits for highly compensated employees are guaranteed to be not less than the amount that they would have been entitled to receive at December 31, 1988, based on the previous formula and years of service and compensation at that date. Effective January 1, 1993, the Company amended the plan to provide for unreduced early retirement benefits when a participant reaches his or her early retirement date. If the participant's whole years of credited service plus his or her attained age equals or exceeds eighty-five, then such participant shall be entitled to a monthly pension commencing prior to his or her normal retirement date computed as otherwise provided for in the plan with no benefit reduction. The maximum benefit is limited in accordance with section 415 of the Internal Revenue Code (the "Code") and, commencing in 1989, the compensation that may be taken into account in the calculation of benefits is limited in accordance with section 401(a) (17) of the Code. The maximum compensation and benefits for 1993 are $235,840 and $115,641, respectively; however, effective January 1, 1994 the maximum compensation limit will be reduced to $150,000. These amounts are indexed for cost-of-living adjustments. For purposes of the plan, average monthly compensation is deemed to be the participant's highest average compensation during any five consecutive years of service within the ten consecutive plan years of service immediately preceding retirement. Compensation generally means salaries and annual incentive bonuses. The benefits payable under the plan as amended are not subject to adjustment for Social Security benefits or other offsets. Benefits may be paid monthly over the life of the participant (with joint and survivor options available at reduced rates). The following table reflects annual benefits as determined under the revised formula. DEFINED BENEFIT PENSION PLAN TABLE
Years of Service ____________________________________________________ Remuneration 15 20 25 30 35 ____________ ________ ________ ________ ________ ________ $125,000 $18,750 $25,000 $31,250 $34,375 $37,500 150,000 22,500 30,000 37,500 41,250 45,000 175,000 26,250 35,000 43,750 48,125 52,500 200,000 30,000 40,000 50,000 55,000 60,000 225,000 33,750 45,000 56,250 61,875 67,500 250,000 34,329 45,772 57,215 62,936 68,658
Mr. Daniel P. Amos and Mr. Kriss Cloninger, III have 20 years and 2 years, respectively, of credited service in the plan as of the date of this Proxy Statement. RETIREMENT PLANS FOR KEY EXECUTIVES Participants in the Retirement Plan for Senior Officers receive full compensation for the first twelve months after retirement. Thereafter, the participants may elect to receive annual lifetime retirement benefits equal to 60% of their final compensation, or 54% of such compensation with one-half of such amount to be paid to their spouse for a specified period after death of the participant. Final compensation is deemed to be the higher of (i) the compensation paid during the last twelve months of active employment with the Company, or (ii) the highest compensation received in any calendar year of the last three years preceding the date of retirement. Compensation under this plan is defined to be salary plus bonus. All benefits are subject to annual cost of living increases as the Compensation Committee may approve. Retired participants and their spouses are also entitled to receive full medical expense benefits for their lifetimes. The benefits payable under the plan are not subject to social security or defined benefit pension plan offsets. Generally, no benefits are payable until the participant accumulates 10 years credited service at age 60 or 20 years credited service. Reduced benefits may be paid to a participant who retires (other than for disability) before age 65 with less than 20 years credited service. Messrs. Daniel P. Amos and Paul S. Amos are covered by this plan. AFLAC has entered into a substantially similar agreement with Mr. Yoshiki Otake. The Company accrued $1,900,000 and $500,000 in 1993 as its estimated annual cost of the compensation benefits for Mr. Paul S. Amos and Mr. Daniel P. Amos, respectively, who are the only executives with vested benefits under this plan. Mr. Daniel P. Amos, Mr. Paul S. Amos and Mr. Yoshiki Otake have 20, 39, and 19 years, respectively, of credited service. RETIREMENT PLAN FOR SENIOR OFFICERS TABLE
Years of Service _________________________________________________________ Remuneration 15 20 25 30 35 ____________ _________ _________ _________ _________ _________ $ 250,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 500,000 300,000 300,000 300,000 300,000 300,000 750,000 450,000 450,000 450,000 450,000 450,000 1,000,000 600,000 600,000 600,000 600,000 600,000 1,250,000 750,000 750,000 750,000 750,000 750,000 1,500,000 900,000 900,000 900,000 900,000 900,000 1,750,000 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000 2,000,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
The Company maintains a Supplemental Executive Retirement Plan for certain key executives of the Company and its subsidiaries who do not participate in the Retirement Plan for Senior Officers. Participation in the Supplemental Executive Retirement Plan is limited to key employees of the Company (and its subsidiaries) designated by the Board of Directors of the Company from time to time. On August 11, 1992, the Plan was amended to require fifteen years of service in order for a participant to be qualified under the Plan, provided that said requirement not affect those individuals who were participating in the Plan prior to this amendment. Under the Plan, participants who terminate their employment for any reason other than "cause" or death (i) between the ages of 55 to 65, are entitled to an annual pension which, when combined with the retirement income payable under the Company's Defined Benefit Pension Plan (assuming benefits thereunder are paid as a single life annuity) will equal 50% of their final pay, or (ii) at the age of 65 or older, are entitled to an annual pension which, when combined with the retirement income payable under the Company's Defined Benefit Pension Plan (assuming benefits thereunder are paid as a single life annuity) will equal 65 percent of their final pay. For purposes of the Plan, final pay means the highest annual base salary paid to a participant during any calendar year in the three-calendar-year period preceding the participant's termination of employment. Benefits are generally payable in the form of an annuity for the life of the participant. However, a participant may elect a joint and survivor annuity pursuant to which he or she will receive reduced benefits during his or her lifetime and, after his or her death, his or her surviving spouse will receive a monthly benefit equal to 50 percent of the amount which had been paid to the participant. No benefits are payable to a participant whose employment is terminated before age 55 except for certain terminations following a "change in control." If a participant dies after age 55 but before benefits are paid under the plan, his or her spouse will receive a death benefit equal to 50 percent of the benefits which the participant would have been entitled to receive had he or she retired on the day preceding the date of his or her death. If a participant's employment is terminated for "cause," he or she immediately forfeits all rights and entitlements under the plan. The benefits payable under the plan are not subject to social security offset; benefits are subject to offset for amounts paid under the Company's defined benefit pension plan. Kriss Cloninger, III participates in the Supplemental Executive Retirement Plan. The Company accrued $29,663 with respect to its estimated annual benefits for Mr. Cloninger in 1993. The estimated annual benefit payable upon a retirement age of 55 for Mr. Cloninger is $252,091. STOCK OPTION PLANS During 1993, the Company had in effect two Stock Option Plans, the Incentive Stock Option Plan (1982) (the "1982 Plan"), and the Stock Option Plan (1985) (as amended) (the "1985 Plan") (collectively, the "Plans"). The adoption of the 1985 Plan was approved by shareholders in 1986 and amendments to the 1985 Plan were approved by shareholders in 1987 and 1990. The 1982 Plan, but not outstanding options previously granted under the 1982 Plan, expired as of February 15, 1992. The Plans provide for the granting of options to key employees and Directors of the Company and its subsidiaries to buy Common Stock. The Plans were adopted by the Board of Directors to provide an incentive to these persons to improve the growth and profits of the Company and its subsidiaries. The 1982 Plan and the 1985 Plan specify that options for a maximum of 1,056,000 and 4,616,666 shares, respectively, can be granted under the Plans. (However, no further options may be granted under the 1982 Plan following February 15, 1992.) The number of shares have been adjusted as a result of the five-for-four stock split in 1993 so that options for a total of 1,320,000 and 5,770,832 shares, respectively, may be granted under the Plans. As of February 18, 1994, there were options for 276 shares remaining available for grant under the 1985 Plan. There were total options outstanding to purchase 3,010,702 shares under the Plans. The following tables provide certain information regarding stock options granted and exercised in the last fiscal year and the number and value of unexercised options at the end of the fiscal year. OPTION GRANTS IN 1993
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation Individual Grants(1) for Option Term(2) ______________________________________________________________________ ____________________________________________ Number of % of Total If Stock If Stock Securities Options Grant At At Underlying Granted to Date $46.02 $73.27 Options Employees Exercise Market Granted in Fiscal Price Price Expiration Name (#) Year ($/Sh) ($/Sh) Date 5%($) 10%($) _____________________ __________ __________ ________ ______ __________ _____________ _____________ STOCK APPRECIATION N/A N/A N/A N/A N/A 1,834,000,000 4,648,000,000 FOR ALL SHAREHOLDERS(3) Daniel P. Amos, CEO 300,000 11.2 28.25 28.25 6-28-03 5,329,882 13,506,967 Paul S. Amos 150,000 5.6 28.25 28.25 6-28-03 2,664,941 6,753,484 Yoshiki Otake 50,000 1.9 28.25 28.25 6-28-03 888,314 2,251,161 Kriss Cloninger, III 75,000 2.8 28.25 28.25 6-28-03 1,332,470 3,376,742 Hidefumi Matsui 50,000 1.9 28.25 28.25 6-28-03 888,314 2,251,161 (1) All option grants shown above vest 1/3 on the date of grant, 1/3 on January 1, 1994 and 1/3 on January 1, 1995, and were granted contingent on shareholder approval of the 1985 Plan Amendments. (2) The annual rates of stock price appreciation (shown at the assumed rates of 5% and 10% for the option term of 10 years), as required by the Securities and Exchange Commission, are compounded annually and therefore are shown at the compound appreciation rates of 63% and 159%, respectively. (3) For "Stock Appreciation For All Shareholders," the Potential Realizable Value is calculated based on $28.25, the average market price of a share of Company Common Stock on the date the options reported in this table were granted, and the number of shares outstanding on February 18, 1994.
AGGREGATED OPTION EXERCISES IN 1993 AND OPTION VALUES AS OF DECEMBER 31, 1993
Value of Unexercised Number of Unexercised In-the-Money Shares Options at Options at Acquired Value 12-31-93 (#) 12-31-93 ($) Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable _______________________ ______________ ___________ ___________________________ __________________________ Daniel P. Amos, CEO 134,865 3,486,260 776,604 274,862 11,256,796 1,701,576 Paul S. Amos -0- -0- 209,417 180,720 3,366,065 1,802,497 Yoshiki Otake 77,097 1,947,962 176,586 78,335 3,063,479 601,278 Kriss Cloninger, III -0- -0- 62,500 50,000 235,156 15,625 Hidefumi Matsui -0- -0- 65,166 33,334 584,389 10,417
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS On August 1, 1993, the Company entered into an employment agreement with Mr. Daniel P. Amos. This agreement replaced a prior employment agreement with Mr. Amos which expired on July 31, 1993. The new agreement provides for a three-year term commencing August 1, 1993, with automatic extensions of one year-periods to the term of the agreement occurring on an annual basis beginning August 1, 1994, unless written notice of termination is given prior to such annual extensions. Pursuant to the agreement, Mr. Amos is entitled to receive an annual base salary of $893,585 subject to annual increases in the same general proportion as provided to other senior executive officers of the Company. As described in the "Compensation Report" above, as an inducement to Mr. Amos to enter into this new employment agreement, the Company agreed to grant to him options to purchase 300,000 shares of Common Stock, subject to shareholder approval of the necessary increase in authorized shares under the 1985 Plan to facilitate such grant. The agreement provides that Mr. Amos (referred to hereafter as the "Employee") will continue to participate in the Company's Management Incentive Plan, the Retirement Plan for Senior Officers and the Company's stock option plans, and will participate in all other fringe benefit plans applicable to employees generally or provided to senior executive employees of the Company. The Employee may receive other benefits as determined from time to time by the Compensation Committee. Pursuant to the agreement, the Company remains obligated to continue compensation and benefits to the Employee for the scheduled term of the agreement if the employment of the Employee is terminated by the Company without "good cause". If the Employee's employment is terminated by the Company for "good cause", or by the Employee without "good reason", the Company is generally obligated to pay compensation and benefits only to the date of termination (except that the Employee is entitled to benefits under the Retirement Plan for Senior Officers if the termination is not for "good cause"). "Good cause" generally means (i) the willful failure by the Employee to substantially perform his management duties for more than 60 days, (ii) intentional conduct by the Employee causing substantial injury to the Company, or (iii) the conviction or plea of guilty by the Employee of a felony crime involving moral turpitude. "good reason" is defined to include a breach of the agreement, a diminution or change in the Employee's title, duties or authority, or a relocation of the Company's principal offices. Upon voluntary termination without "good reason" or termination by the Company for "good cause", the Employee is prohibited for a two-year period from directly or indirectly competing with the Company. The Agreement provides that compensation and benefits continue for certain specified periods in the event that the Employee becomes totally disabled. Upon death of the Employee, his estate is to be paid an amount, payable over a three-year period, equal to the Employee's base salary and any bonus actually paid during the last three years of his life. Upon a "change in control" of the Company, the agreement is extended for an additional three-year period. If, following a change in control, the Employee's employment with the Company is terminated by the Company without "good cause," or by the Employee for "good reason", the Company must pay to the Employee, among other payments but in lieu of any further salary payments subsequent to the date of termination, a lump sum severance payment equal to three times the sum of the Employee's base salary and bonus under the Management Incentive Plan (as paid during periods specified in the agreement). A "change in control" is generally deemed to occur when: (i) a person or group acquires beneficial ownership of thirty percent or more of the Common Stock of the Company; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute a majority of the Board; or (iii) the shareholders approve a liquidation or sale of substantially all of the assets of the Company or certain mergers or consolidation of the Company. Pursuant to an employment agreement between AFLAC and Mr. Yoshiki Otake, Mr. Otake is to serve as President of the AFLAC Japan Branch (or, upon his removal, the position of a senior officer of AFLAC) through December 31, 1995, subject to annual renewals thereafter by the mutual consent of the parties. Pursuant to the agreement, Mr. Otake shall be considered for salary increases in the same manner and time as the senior officers of AFLAC, provided that at no time shall his salary be less than 50 million yen. Mr. Otake shall participate in the Company's stock option plan in the same manner as most AFLAC senior officers, other than the CEO. Under the agreement, Mr. Otake is eligible for retirement benefits upon age 60 with at least 20 years of credited service, and may take voluntary retirement with reduced benefits upon the approval of AFLAC. Mr. Otake is entitled to full retirement benefits for total and permanent disability prior to age 60. His full retirement benefits (which are subject to adjustment for cost-of-living increases) consist of a choice between (1) 60% of the higher of his total compensation for the last twelve months of employment or the highest compensation received in any calendar year during the agreement term, during the remainder of Mr. Otake's life, or (2) 54% of such compensation, paid to Mr. Otake during the remainder of his life, with 1/2 of such amount to be paid to his spouse after his death for a specified period of time. After retirement, Mr. Otake and his spouse shall receive medical benefits for the remainder of their lives. After 1995 and until Mr. Otake reaches age sixty-five, where mutual consent to renew the agreement is not obtained but where Mr. Otake remains mentally and physically sound, he shall be allowed to continue his employment with such stature as deemed appropriate by AFLAC with a starting salary equivalent to 70% of his last salary, subject to annual cost-of-living increases. Mr. Otake has agreed not to engage in any activity competitive with AFLAC while any benefits (including retirement benefits) are being paid to him by AFLAC. In consideration of the benefits contained in his agreement, Mr. Otake has waived any rights to participate in any other AFLAC or AFLAC Japan Branch retirement or pension plans. Pursuant to an employment agreement between the Company and Mr. Kriss Cloninger, III, as amended, Mr. Cloninger will be employed until March 15, 1995, as Chief Financial Officer of the Company, with automatic two-year extensions on an annual basis beginning March 16, 1994 unless written notice that such extension will not occur is given prior to such annual date by either party. Mr. Cloninger is entitled to a base salary per year of $325,000, which shall be increased annually during the term of the agreement and any extensions thereof, as determined by the Company's CEO. The Company shall also pay Mr. Cloninger, as performance bonus compensation, an amount each year under the Company's Management Incentive Plan with a target level based on at least 25% of base salary. Mr. Cloninger may also receive additional discretionary bonuses approved by the Company's Board. Mr. Cloninger will be eligible to participate in all fringe benefit programs applicable to employees generally, and shall receive such other "fringe" or employee benefits (including awards of stock options) as are provided to key executive employees of the Company and which are appropriate to his responsibilities as Chief Financial Officer. Other material terms of Mr. Cloninger's employment agreement relating to terminations, disability, death and changes in control of the Company are substantially similar to such provisions in Mr. Daniel P. Amos' employment contract, as described above. The Company maintains a Supplemental Executive Retirement Plan for certain key executives of the Company and its subsidiaries who do not participate in the Retirement Plan for Senior Officers. Mr. Kriss Cloninger, III is a participant in the Plan. Under the plan, as amended, in the event that a participant's employment with the Company is terminated within two years of a "change in control" of the Company other than for death, disability or cause, or a participant terminates his employment during such period for "good reason", the participant becomes 100% vested in his retirement benefits and is entitled to receive a lump sum amount equal to the greater of: (i) the present value of the retirement benefit, which (a) he is entitled to receive upon the date of such termination, or (b) which he would have received had he remained in the employ of the Company until he attained age 55 (for participants who had not yet attained age 55 as of the date of termination); and (ii)three times the participant's final pay (as defined). A "change in control" shall generally occur under the same circumstances described as a "change in control" in Mr. Daniel P. Amos' employment agreement. "Cause" shall mean generally: (i) the participant's willful failure to substantially perform his duties with the Company (other than that resulting from illness or after a participant gives notice of termination of employment for "good reason") after a written demand for substantial performance is delivered to the participant by the Board, or (ii) the willful engaging by the participant in materially injurious conduct to the Company. "Good reason" is defined to include various adverse changes in employment status, duties and/or compensation and benefits following a "change in control." Benefits may be reduced to the extent that they are not deductible by the Company for income tax purposes. CERTAIN TRANSACTIONS AND RELATIONSHIPS Information is provided with respect to executive officers, Directors and/or members of their immediate families who were indebted to the Company or its subsidiaries, at any time since January 1, 1993, in excess of $60,000, as follows:
Largest Aggregate Amount Amount Outstanding Outstanding Rate as of Since Janu- Nature of of January 31, Name (1) ary 1, 1993 Indebtedness Interest 1994 _______________ ___________ __________________ ________ ___________ Daniel P. Amos $ 2,000,000 Term Stock Note(2) 6.00% $ 2,000,000 David A. Halmrast 120,000 Term Note(3) -0- -0- Minoru Nakai 352,237 Stock Option Note(4) 5.54% 350,461 Gary Stegman 55,323 Stock Option Note(4) 5.54% 47,552 100,002 Stock Option Note(4) 4.83% 99,162 (1) All of the named individuals were executive officers of the Company or one of its subsidiaries during 1993. (2) Collateralized note accepted by the Company and secured by stock of the Company. (3) Relocation loan. (4) Collateralized notes accepted by the Company in payment of stock options exercised.
J. Shelby Amos, II, a Director of the Company, has been associated with AFLAC since 1973 and presently serves as Alabama/West Florida State Sales Coordinator (Louisiana State Sales Coordinator, until 1987). In 1993, he earned renewal and first-year commissions of $611,478 (before expenses) on annualized premiums of $19,726,015, and he received $15,629 in 1994 in lieu of shares earned in 1993 under the AFLAC Associates' Stock Bonus Plan. In 1993, $302,062 was paid by AFLAC to a corporation of which Maria Theresa Amos Land, the sister of J. Shelby Amos, II, is the sole shareholder. This amount was earned as renewal commissions before expenses, on annualized premiums of $11,126,415 by W. Donald Land, the deceased husband of Maria Theresa Amos Land, who served as Florida State Sales Coordinator with AFLAC from 1975 until May 1990. State Sales Coordinators are not salaried employees, but are compensated on a commission basis and are required to pay their own expenses which include travel, office expenses, incentives for district and regional sales coordinators and associates in their state, and recruiting and training costs. The compensation arrangements with J. Shelby Amos, II and W. Donald Land are similar to those of other State Sales Coordinators. On December 15, 1993, pursuant to a Plan of Reorganization and Exchange Agreement dated as of December 2, 1993, between Mr. Daniel P. Amos and the Company, the Company acquired all the shares of National Equity Corporation ("National Equity"), a Nevada corporation which was wholly owned by Mr. Daniel P. Amos, in exchange for 316,748 shares of Common Stock. The number of shares of Common Stock exchanged by the Company for the National Equity stock was based on the fair market value of the National Equity stock, based on a valuation of its assets, less liabilities. At December 15, 1993, the assets of National Equity consisted of 238,308 shares of Common Stock, cash and vested renewal commissions ("renewal commissions") on insurance previously sold prior to Mr. Amos being elected as President of AFLAC in 1983, at which time Mr. Amos was associated with AFLAC on a commission-only basis. For purposes of the exchange, the renewal commissions were valued by taking the average of three appraisals of the present value of the renewal commissions prepared by three independent valuation firms, Deloitte & Touche, Coopers & Lybrand and KPMG Peat Marwick. The Common Stock exchanged by the Company and the 238,308 shares of Common Stock that were held by National Equity as a part of its assets were valued using the average closing prices of the Common Stock on the New York Stock Exchange over a period of eighteen trading days, commencing on November 8, 1993, and ending on December 2, 1993. See also the description of the payments made to Daniel P. Amos in footnote 2 to the "Summary Compensation Table." 2. PROPOSAL TO ADOPT THE 1985 PLAN AMENDMENTS The 1985 Plan is a principal component of the Company's executive compensation program. Stock options tie executive compensation directly to an increase in shareholder value, specifically the market price of the Common Stock. In this way, options further align the interests of managers and shareholders and provide a meaningful incentive for management to maximize shareholder value. SUMMARY OF THE 1985 PLAN AMENDMENTS In order to continue and to enhance the effectiveness of the 1985 Plan, the Board of Directors, in accordance with the recommendation of its Compensation Committee, has amended the 1985 Plan, subject to approval by shareholders at the annual meeting as required by the terms of the 1985 Plan. A summary of the 1985 Plan Amendments is set forth below. Increase in Number of Authorized Shares _______________________________________ Prior to the 1985 Plan Amendments, the maximum number of shares of Common Stock that may be issued upon the exercise of options granted under the 1985 Plan is 5,770,832. Options to purchase less than 300 shares remain available for grant under the 1985 Plan. In addition, options to purchase 2,651,000 shares granted during 1993 at exercise prices ranging from $28.25 to $31.3125 remain subject to approval by shareholders of the 1985 Plan Amendments and such options will become void if such approval is not given. The 1985 Plan Amendments increase the number of shares of Common Stock which may be issued upon the exercise of options from 5,770,832 shares to 8,770,832 shares, subject to certain adjustments. As noted, 2,651,000 of the proposed additional 3,000,000 shares relate to stock options granted in 1993. The remaining 349,000 additional shares are necessary to enable the Compensation Committee to make option grants in the future in order to continue to carry out the purposes of the 1985 Plan. The 1985 Plan provides and, following approval of the 1985 Plan Amendments, would continue to provide for appropriate adjustment in the number of shares in the event of a stock dividend, recapitalization, merger or the like. On February 18, 1994, the average price for the Common Stock on the New York Stock Exchange was $30.375. Use of Only One Administrative Committee ________________________________________ Formerly, the 1985 Plan authorized two separate committees, the Employee Committee, which administered the 1985 Plan as it related to key employees, and the Directors Committee, which administered the 1985 Plan as it related to Directors, including Directors who were employees. Prior to its amendment the 1985 Plan permitted the Directors Committee to make discretionary grants to Directors, including non-employee Directors. The Amended 1985 Plan is administered by only one committee, the Compensation Committee, which will perform substantially the same functions as the Employee Committee (i.e., it will administer all aspects of the Amended 1985 Plan affecting key employees, but including Directors who are employees). The Compensation Committee (which will be composed of only non-employee Directors), is intended to be disinterested for purposes of Rule 16b-3 of the Exchange Act. Replacement of Discretionary Stock Option Grants with Formula Grants for Non-Employee Directors _________________________________________ Under the Amended 1985 Plan, in lieu of the discretionary grants that previously could be awarded to non-employee Directors by the Directors Committee, non-employee Directors (including Advisory Directors) will automatically receive grants of non-qualified stock options without action by any committee. Specifically, as of August 13, 1993, initial grants of options to purchase 10,000 shares of Common Stock have been made to all non-employee Directors serving on the Board as of that date. Each new non-employee Director, including any Advisory Director, will be granted an option to purchase 10,000 shares of Common Stock as of the earlier of the date such individual is appointed to the Board or the date of the first annual meeting of shareholders at which such Director is elected to the Board. Options granted to non-employee Directors will become exercisable in cumulative installments of 20% of the shares of Common Stock covered thereby as of the date of grant, and an additional 20% as of each of the next four anniversaries of the date of option grant to the extent the non-employee Director continues to be a Director as of that date; provided, however, that upon cessation of service by reason of retirement, a non-employee Director will become immediately vested in all outstanding options that have not yet expired. The exercise price of all shares of Common Stock subject to options granted to non-employee Directors will be 100% of the fair market value of such shares as of the date of grant. Compliance with Section 162(m) of the Code ______________________________ Prior to the 1985 Plan Amendments, the 1985 Plan did not have a limit on the maximum number of shares of Common Stock with respect to which options could be granted to any individual. The 1985 Plan Amendments also include provisions which (i) limit the number of shares of Common Stock with respect to which options may be granted to any individual during any calendar year to 450,000, commencing with the 1994 calendar year, and (ii) require the Compensation Committee to be constituted to comply with the requirements of Section 162(m) of the Code (described below). These provisions are intended to preserve the Company's ability to deduct, for U. S. income tax purposes, compensation recognized by certain optionees upon exercise of a nonqualified stock option or upon a disqualifying disposition of an incentive stock option. Section 162(m) of the Code, as recently enacted by the Omnibus Budget Reconciliation Act of 1993 (the "Revenue Act"), denies a deduction by an employer for certain compensation in excess of $1 million per year paid by a publicly traded corporation to the chief executive officer and the four most highly compensated executive officers, other than the chief executive officer, at the end of the taxable year. Compensation with respect to stock options will be excluded from this deduction limit if it satisfies certain requirements, including the following: (i) the stock options must be granted at an exercise price not lower than fair market value at date of grant; (ii) the stock option grant must be made by a compensation committee composed of two or more "outside directors" within the meaning of Section 162(m); (iii) the plan under which the stock option is granted must state the maximum number of shares with respect to which options may be granted during a specified period to any individual; and (iv) the material terms pursuant to which the compensation is to be paid must be disclosed to, and approved by, shareholders in a separate vote prior to payment. Additional Amendments _____________________ Certain other technical non-material revisions to the 1985 Plan have been made (including revisions made to conform to and benefit from the latest amendments to Rule 16b-3), as well as updating related to amended sections of the Code. In specific, the amendment and termination provisions of the 1985 Plan have been amended to require shareholder approval only to the extent such approval is required either by applicable law or, as is already required by the 1985 Plan, to comply with Rule 16b-3. Previously, shareholder approval for an amendment was also required if such amendment: (i) changed the maximum number of shares of Common Stock subject to options under the 1985 Plan, (ii) changed the class of employees eligible to receive options under the 1985 Plan, (iii) extended the term of the 1985 Plan, or (iv) extended the exercisability period of the incentive stock options beyond ten years from the date of grant. SUMMARY OF THE MATERIAL PROVISIONS OF THE 1985 PLAN THAT ARE NOT AFFECTED BY THE 1985 PLAN AMENDMENTS The following is a summary of the material provisions of the 1985 Plan that are not affected by the 1985 Plan Amendments and that would continue in force regardless of whether shareholder approval of the 1985 Plan Amendments is obtained. The 1985 Plan provides for the granting, to key employees and Directors of the Company and its subsidiaries, of options to buy the Common Stock. The 1985 Plan provides for the grant of "incentive stock options" ("ISOs") pursuant to Section 422 of the Code as well as non-qualified stock options ("non-ISOs"). Directors who are not employees are eligible to receive only non-ISOs. The selection of eligible employees, number of options to be granted to any employee or Director, the exercise price for such options, and the terms and conditions governing the options, subject to the provisions of the 1985 Plan, are among the matters currently determined by the relevant Plan administrative committee (which will be the Compensation Committee under the Amended 1985 Plan, except with respect to the automatic formula grants provided to non-employee Directors). Accordingly, it is not possible to state the amount of stock options to be received by any key employee or group of employees. Information relating to the most recent grants of stock options is set forth below under "Information Concerning Certain 1993 Grants." The exercise price for ISOs under the 1985 Plan is not less than the fair market value of the stock at the time of grant; for non-ISOs, the exercise price is the amount set by the Compensation Committee, but not less than one-half of such fair market value. Under the 1985 Plan, the aggregate fair market value (determined as of the time an option is granted) of stock for which ISOs may be granted to an individual that are exercisable for the first time in any one year may not exceed $100,000. Options may not be granted to employees or Directors who own more than 10% of the voting power of the Company or any subsidiary. As of February 18, 1994 there are 204 participants (including employee Directors) who participate in the 1985 Plan and 16 non-employee Directors. Options granted under the 1985 Plan are exercisable for a period of ten years from the date of grant or such shorter periods as the Compensation Committee may establish as to any or all shares subject to any option. Under the 1985 Plan, except with respect to certain ISOs granted prior to 1987, all options to employees (including employee Directors) are exercisable immediately upon grant unless the Compensation Committee provides otherwise. An option may be exercised all at one time or in parts. The exercise price for shares subject to option must be paid in cash, except that under the 1985 Plan, the Compensation Committee may, but need not, permit payment with Common Stock and the terms of an option may, but need not, permit the grantee to borrow the exercise price from the Company, at a rate of interest specified at the time of the grant (or at a rate determined under a formula so specified). Under the 1985 Plan, an employee who exercises a non-ISO may elect, subject to such rules as may be adopted by the Compensation Committee, to have the Company withhold shares of Common Stock, or to transfer shares of Common Stock to the Company, to satisfy tax liabilities arising from the exercise of such options. Under the 1985 Plan, on termination of employment, an employee to whom an ISO has been granted may, at any time within three months after the date of termination but not later than the date of expiration of the option, exercise the option and still retain the tax benefits accorded such options. If an employee holding such an option terminates employment by reason of death or disability, the period for such exercise is twelve months. Options not exercised within these periods after termination of employment remain exercisable until their original expiration date unless provided for otherwise in the option agreement, but no longer qualify for special tax treatment. However, all options held by the grantee at the time of death cease to be exercisable twelve months after death. Options are not transferable except on the death of the grantee, by will or the laws of descent and distribution. The Board of Directors may terminate, suspend, amend or revise the 1985 Plan without approval by the shareholders of the Company with respect to any shares as to which options have not been granted except where shareholder approval is required to comply with Rule 16b-3 under the Exchange Act, and in certain other limited circumstances. The Board may not, without the consent of the holder of an option, alter or impair rights under any option previously granted except as authorized in the 1985 Plan. TEXT OF THE AMENDED 1985 PLAN The text of the Amended 1985 Plan is attached to this Proxy Statement as Exhibit A and is incorporated herein by reference. The foregoing description of the 1985 Plan, including the 1985 Plan Amendments thereto, is a summary only and is qualified in its entirety by reference to such exhibit. INFORMATION CONCERNING CERTAIN GRANTS MADE IN 1993 AND DESCRIPTION OF CERTAIN AMENDED PLAN BENEFITS On June 28, 1993, August 10, 1993 and August 13, 1993, options to purchase an aggregate of 2,651,000 shares of Common Stock were granted to a total of 153 key employees, including all of the executive officers of the Company, by the Compensation Committee, and automatically to 16 non-employee Directors. Each such option has an exercise price of $28.25, $30.9375, or $31.3125, respectively, per share , which in each case was the average sale price per share of Common Stock on the date of grant. As noted above, all of the foregoing options remain subject to approval by shareholders of the 1985 Plan Amendments. The benefits to be derived from the Amended 1985 Plan to the eligible participating individuals and groups cannot be estimated, as option grants (with the exception of non-employee Directors) will be made in the sole discretion of the Compensation Committee, based on a variety of factors. In addition, the value of any option grant will depend on the market performance of the Common Stock. For information with respect to 1993 grants to the Named Executive Officers, see "Stock Option Plans-Option Grants in 1993". With respect to all executive officers as a group, options to purchase 1,053,500 shares were granted. Based on an average market price of $30.375 on February 18, 1994 the dollar value of the shares underlying these options was $32,000,063. With respect to all non-executive officer Employees as a group, options to purchase 1,437,500 shares of Common Stock were granted. Based on the February 18, 1994 average market price, the value of shares underlying these options was $43,664,063. The Amended 1985 Plan will provide all non-employee Directors as of August 10, 1993 and each newly elected or appointed non-employee Director with an automatic one-time grant of options to purchase 10,000 shares of Common Stock. As of August 13, 1993, such grants amounting to 160,000 shares had been made to a total of 16 non-employee Directors, and the dollar value of the shares underlying such a grant at February 18, 1994, was $303,750 ($4,860,000 in the aggregate for all such grants to non-employee Directors). CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS The following discussion of certain relevant federal income tax effects applicable to stock options granted under the 1985 Plan is a brief summary only, and reference is made to the Code and the regulations and interpretations issued thereunder for a complete statement of all relevant federal tax consequences. INCENTIVE STOCK OPTIONS No taxable income will be realized by an option holder upon the grant or timely exercise of an ISO. If shares are issued to an option holder pursuant to the timely exercise of an ISO and a disqualifying disposition of such shares is not made by the option holder (i.e., no disposition is made within two years after the date of grant or within one year after the receipt of shares by such option holder), then (i) upon sale of the shares, any amount realized in excess of the exercise price of the ISO will be taxed to the option holder as a long-term capital gain and any loss sustained will be long-term capital loss, and (ii) no deduction will be allowed to the Company. However, if shares acquired upon the timely exercise of an ISO are disposed of prior to satisfying the holding period described above, generally (a) the option holder will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares) over the exercise price thereof, and (b) subject to the provisions of Section 162(m) of the Code, the Company will be entitled to deduct an amount equal to such income. Any additional gain recognized by the option holder upon a disposition of shares prior to satisfying the holding period described above will be taxed as a short-term or long-term capital gain, as the case may be, and will not result in any deduction for the Company. If an ISO is not exercised on a timely basis, the option will be treated as a non-ISO. Subject to certain exceptions, an ISO generally will not be exercised on a timely basis if it is exercised more than three months following termination of employment. The amount by which the fair market value of shares of the Common Stock on the exercise date of an ISO exceeds the exercise price generally will constitute an item which increases the option holder's "alternative minimum taxable income". In general, the Company will not be required to withhold income or payroll taxes on the timely exercise of an ISO. OPTIONS THAT DO NOT QUALIFY AS INCENTIVE STOCK OPTIONS In general, an optionee will not be subject to tax at the time a non-ISO is granted. Upon exercise of a non-ISO where the exercise price is paid in cash, the optionee generally must include in ordinary income at the time of exercise an amount equal to the excess, if any, of the fair market value of the shares of Common Stock at the time of exercise over the exercise price. The optionee's tax basis in the shares acquired upon exercise will equal the exercise price plus the amount taxable as ordinary income to the optionee. The federal income tax consequences of an exercise of a non-ISO where the exercise price is paid in previously owned shares of Common Stock are generally similar to those where the exercise price is paid in cash. However, the optionee will not be subject to tax on the surrender of such shares and the tax basis of the shares acquired on exercise that are equal in number to the shares surrendered will be the same as the optionee's tax basis in such surrendered shares. Pursuant to the revised rules under Section 16(b) of the Exchange Act, the purchase of shares of Common Stock upon exercise of an option by an optionee who is subject to reporting under Section 16(a) of the Exchange Act (generally an executive officer or Director of the Company) and would be subject to liability under Section 16(b) of the Exchange Act (an "Insider"), will not be deemed a "purchase" triggering a six-month period of potential short swing liability. Accordingly, unless a non-ISO is exercised during the six-month period following the date of grant of the option, the shares would not be considered subject to a substantial risk of forfeiture as a result of Section 16(b). Thus, in this context the taxable event for the exercise of a non-ISO that has been outstanding for at least six months ordinarily will be the date of exercise. If a non-ISO is exercised within six months after the date of the grant, then, unless the Insider files an election pursuant to Section 83(b) of the Code to be taxed on the date of exercise under the general rule described above, taxation ordinarily would be deferred until the date which is six months after the date of grant and the amount of income would be based upon the fair market value of the shares of Common Stock on such later date. Subject to the provisions of Section 162(m) of the Code discussed below, the Company generally will be entitled to a deduction in the amount of an optionee's ordinary income at the time such income is recognized by the optionee upon the exercise of a non-ISO. Income and payroll taxes are required to be withheld on the amount of ordinary income resulting from the exercise of a non-ISO. As discussed above, effective for tax years beginning on or after January 1, 1994, Section 162(m) of the Code may limit the Company's ability to claim a corporate deduction upon exercise of a non-ISO or upon the disqualifying disposition of an ISO. In general terms, Section 162(m) denies a corporate deduction for certain compensation in excess of $1 million per year paid by a publicly traded corporation to the chief executive officer and the four most highly compensated executive officers other than the chief executive officer at the end of the taxable year. Certain compensation, including certain performance-based compensation, will be excluded from this deduction limit. Compensation with respect to stock option plans that satisfy certain criteria will be considered performance-based and will be excluded from the compensation taken into account for purposes of the $1 million deduction limit. Consequently, effective for tax years beginning with the 1994 tax year, the Company may not be permitted to claim a corporate deduction for the full amount realized upon exercise of options by the chief executive officer and the four most highly compensated executive officers, other than the chief executive officer, at the end of that tax year in the event that the compensation with respect to the options exercised is not treated as performance-based for purposes of Section 162(m). SHAREHOLDER APPROVAL As previously indicated, the 1985 Plan Amendments will become effective if and when the shareholders approve the 1985 Plan Amendments. If the 1985 Plan Amendments are not approved by the shareholders, the 1985 Plan will be continued as in effect prior to the 1985 Plan Amendments described herein and the conditional grants discussed above will become void. THE BOARD OF DIRECTORS RECOMMENDS UNANIMOUSLY A VOTE "FOR" THE 1985 PLAN AMENDMENTS 3. PROPOSAL TO ADOPT MANAGEMENT INCENTIVE PLAN The AFLAC Management Incentive Plan (the "Management Incentive Plan") was initially approved by the Board of Directors in 1985. The purposes of the Management Incentive Plan are to reinforce corporate, organizational and business-development goals, to promote the achievement of year-to-year and long-range financial and other business objectives, and to reward the performance of individual officers and other employees in fulfilling their personal responsibilities for long-range achievement. DESCRIPTION OF PLAN The description of the Management Incentive Plan summarized below is qualified, in its entirety, by reference to the text of the Management Incentive Plan as set forth in Exhibit B. The Management Incentive Plan (unwritten) has been in effect at the Company since 1985. It has now been modified and is being submitted to shareholders at this time, to comply with certain provisions of the recently enacted Revenue Act. As discussed above, pursuant to the Revenue Act, Section 162(m) of the Code, denies deductions by an employer for certain compensation in excess of $1 million per year. Certain compensation, including compensation based on performance goals, is excluded from this deduction limit. Among the requirements for compensation to qualify for this exception, are the following; (1) the material terms pursuant to which the compensation is to paid, including the performance goals, must be disclosed to and approved by the shareholders in a separate vote prior to the payment, and (2) prior to payment, the Compensation Committee must certify that the performance goals and any other material terms were satisfied. Accordingly, the Management Incentive Plan is being submitted to the shareholders for approval at the 1994 Annual Meeting. If the shareholders do not approve the Management Incentive Plan, then the Management Incentive Plan will be void. The Management Incentive Plan provides for the granting of performance awards to employees of the Company and its subsidiaries, including employees who are also executive officers and Directors, and who possess a capacity for contributing in substantial measure to the successful performance of the Company. As of February 18, 1994, approximately 90 employees participate in the Management Incentive Plan. The Management Incentive Plan is administered by the Compensation Committee of the Board of Directors, which is composed entirely of directors who are not employees of the Company. The Compensation Committee selects the employees who participate in the Management Incentive Plan and grants all awards under the Management Incentive Plan; determines the terms and provisions, including the performance goals, of such awards and the respective award agreements between the Company and each participant (which need not be identical); construes and interprets the Management Incentive Plan and such agreements; makes rules and regulations in connection with the administration and operation of the Management Incentive Plan, and makes all other determinations necessary or desirable in administering the Management Incentive Plan. For each fiscal year commencing with 1994, the Compensation Committee will establish the performance goals that must be met during the fiscal year as a condition of receipt of awards under the Management Incentive Plan. Performance goals may include any or all of the following: (i) attainment of an amount of "consolidated net earnings" (as defined below), (ii) attainment of a percentage of "return on equity" (as defined below), (iii) attainment of amounts of "operating earnings per share" (as defined below), excluding all or a portion of the effects of translating foreign currency of business segments to U. S. dollars for financial reporting purposes; (iv) increases in the market price of Company Common Stock or levels of total return to shareholders; and (v) attainment of goals established based on the financial performance of individual subsidiaries or business segments of the Company relating to increases in premium income, investment income, total revenues, operating expenses, pretax operating earnings, premiums in force, number of policies in force, new sales and policy conversions (i.e., issuance of current policy contracts to existing policy holders in exchange for surrender of policies issued in prior years). With respect to participants who are not executive officers of the Company, performance goals may also include personal performance goals, but will not include personal goals with respect to "executive officers" (as defined). For purposes of the Management Incentive Plan "consolidated net earnings" means the net earnings of the Company for the fiscal year determined in accordance with generally accepted accounting principles and reported in the Company's audited financial statements for such fiscal year, but before any provision for the cumulative effect of accounting changes required to be adopted by generally accepted accounting principles in respect of such performance period; "operating earnings per share" means net earnings per share of Common Stock, excluding both (i) the effects of realized gains or losses on investments and (ii) the cumulative effect of adopting required accounting changes; and "return on equity" means the quotient obtained by dividing (i) consolidated net earnings for a fiscal year by (ii) the average of common shareholders' equity of the Company as of the beginning and the end of the fiscal year. Such common shareholders' equity will exclude the effect of unrealized gains and losses recognized in a separate equity component under Financial Accounting Standards Board Statement No. 115. The Compensation Committee will specify with respect to a fiscal year the performance goals applicable to each award and minimum, target and maximum levels applicable to each performance goal. The minimum level reflects the level of performance at which 50% of the performance goal is achieved and below which no payment will be made; the target level reflects the level at which 100% of the performance goal is achieved; and the maximum level reflects the level of performance at which 150% of the performance goal is achieved. Awards for any fiscal year may be expressed as a dollar amount or as a percentage of the participant's "annual base salary". "Annual base salary" means: (i) with respect to any executive officer, the annual rate of base salary of such executive officer in effect as of the first day of any fiscal year (or, if an executive officer was not employed as of the first day of a fiscal year, the annual rate of base salary in effect as of such executive officer's first day of employment); and (ii) with respect to any other participant, unless otherwise determined by the Company, the base salary paid to such participant during any fiscal year. Unless otherwise provided by the Compensation Committee in connection with specified terminations of employment, or upon the occurrence of a "change in control" (as defined), awards will be made only if and to the extent the performance goals established for the particular fiscal year have been attained. Notwithstanding the foregoing, any participant who is a "covered employee", as defined in section 162 (m) (3) of the Code (generally, the chief executive officer and the four most highly compensated executive officers, other than the chief executive officer, at the end of the fiscal year), may not receive an award for any fiscal year that exceeds 105% of his or her annual base salary. Awards will be paid to participants, in cash, within a reasonable period of time following the end of the fiscal year to which the awards relate. The Management Incentive Plan may be amended, suspended or terminated at any time by the Board of Directors or the Committee, provided, however, that no amendment that requires shareholder approval in order for the Management Incentive Plan to comply with section 162(m) of the Code will be effective unless the amendment is so approved. The Management Incentive Plan will terminate at the end of the 1998 fiscal year, but payment with respect to all awards previously granted under the Management Incentive Plan will be paid out pursuant to the terms of the Management Incentive Plan. Inasmuch as performance goal criteria may vary from year to year, and awards may vary from participant to participant, benefits under the Management Incentive Plan are not determinable. Bonuses paid to the Named Executive Officers in respect of the 1993 fiscal year, however, are noted in the Summary Compensation Table on page 13. THE BOARD OF DIRECTORS RECOMMENDS UNANIMOUSLY A VOTE "FOR" APPROVAL OF THE MANAGEMENT INCENTIVE PLAN 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS The Board of Directors of the Company, in accordance with the recommendation of its Audit Committee, none of whom is an employee of the Company, has reappointed KPMG Peat Marwick, Certified Public Accountants, as independent auditors for the Company, subject to ratification by the shareholders. In connection with its audit of the Company's financial statements for the year ended December 31, 1993, included in the Company's Annual Report to Shareholders, KPMG Peat Marwick reviewed the Company's filings with the Securities and Exchange Commission, the Tokyo Stock Exchange and the Ministry of Finance of Japan and conducted timely reviews of quarterly reports to shareholders. Representatives of KPMG Peat Marwick are expected to be present at the 1994 Annual Meeting of Shareholders with the opportunity to make a statement if they so desire. Such representatives are expected to be available to respond to appropriate questions. THE BOARD OF DIRECTORS RECOMMENDS UNANIMOUSLY A VOTE "FOR" RATIFICATION OF THE SELECTION OF SUCH FIRM AS THE COMPANY'S INDEPENDENT AUDITORS 5. OTHER MATTERS Management does not intend to bring any other matter before the meeting, and does not know of any other matter which is proposed to be brought before the meeting. However, should any other matter properly come before the meeting, the persons named in the enclosed proxy will have discretionary authority to vote all proxies in accordance with their judgment on such matter. SHAREHOLDER PROPOSALS For a shareholder's proposal to be included in the Company's proxy statement for the 1995 Annual Meeting of Shareholders, the shareholder must follow the procedures of Rule 14a-8 under the Exchange Act and the proposal must be received by the Secretary of the Company by November 18, 1994. ANNUAL REPORT The Company has mailed to each shareholder entitled to vote at the 1994 Annual Meeting of Shareholders a copy of its Annual Report. A copy of the Company's Form 10-K is available at no charge to all shareholders. For a copy write to: Kenneth S. Janke, Jr. Senior Vice President, Investor Relations AFLAC Incorporated Worldwide Headquarters Columbus, Georgia 31999 By Order of the Board of Directors, Joey M. Loudermilk Secretary March 10, 1994 EX-1 2 PROXY EXHIBIT A Exhibit A AFLAC INCORPORATED AMENDED 1985 STOCK OPTION PLAN I. ESTABLISHMENT OF THE 1985 PLAN AFLAC Incorporated (hereinafter called "the Company") has amended and restated the Stock Option Plan, as amended (1985) (the "1985 Plan") and has renamed it the AFLAC Incorporated Amended 1985 Stock Option Plan (hereinafter called "the Amended 1985 Plan") upon the terms and conditions hereinafter stated. II. PURPOSES OF THE 1985 PLAN The purposes of the Amended 1985 Plan are: (1) to encourage stock ownership by selected key employees and directors of the Company; (2) to provide an incentive for such employees to expand and improve the growth and prosperity of the Company and its Subsidiary Companies; (3) to assist the Company and its Subsidiary Companies in obtaining and retaining such employees and directors; and (4) to build a proprietary interest among the Company's Non-Employee Directors and thereby secure for the Company's shareholders the benefits associated with common stock ownership by those who will oversee the Company's future growth and success. The provisions of the Amended 1985 Plan are intended to satisfy the requirements of Section 16(b) of the Exchange Act and Rule 16b-3 promulgated thereunder. III. DEFINITIONS A. "Advisory Director" means a director of the Company appointed by the Board pursuant to the by-laws of the Company. B. "Board" means the Board of Directors of the Company, and includes the Executive Committee of the Board as to any matter in regard to which the Executive Committee may lawfully exercise the powers of the full Board. C. "Capital Stock" means shares of the common stock ($.10 par value), of the Company. D. "Code" means the Internal Revenue Code of 1986 (or any successor federal tax law) as from time to time amended. E. "Committee" means the Compensation Committee established by the Board pursuant to Article V(A) hereof. F. "Exchange Act" means the Securities Exchange Act of 1934, as amended. G. "Fair Market Value" means the fair market value of the shares of Capital Stock as determined by the Committee in its sole discretion; provided, however, that if the shares of Capital Stock are admitted to trading on national securities exchanges, the Fair Market Value on any date shall be the average of the high and low sale prices as reported in the Wall Street Journal for the shares of Capital Stock on such date or on the last day preceding such date on which a sale was reported. H. "Grantee" means an individual to whom an Option is granted under the Amended 1985 Plan. I. "Non-Employee Director" means a director (including an Advisory Director) of the Company who is not an employee of the Company or any Subsidiary Company. J. "Option" means a right granted to purchase Capital Stock under the Amended 1985 Plan. An Option may be either an Incentive Option or a Non-Qualifying Option (as both terms are defined in Article IV hereof). K. "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act. L. "Subsidiary Company" means a subsidiary of the Company that, at the time of granting the Option in question, meets the definition of a "subsidiary corporation" in Section 424(f) of the Code. IV. TYPES OF OPTION The Amended 1985 Plan provides for both: A. "Incentive Options"; that is, options intended to qualify as "incentive stock options" under the provisions of Section 422 of the Code, and B. "Non-Qualifying Options"; that is, non-qualified stock options that do not qualify as incentive stock options under the provisions of Section 422 of the Code. V. ADMINISTRATION OF THE AMENDED 1985 PLAN A. The Amended 1985 Plan shall be administered by the Committee comprised of not fewer than two directors of the Company who shall be appointed by and shall serve at the pleasure of the Board, and who shall meet all requirements for qualification as "disinterested administration" within the meaning of Rule 16b-3. B. The Committee may grant Options under the Amended 1985 Plan and shall have the authority, within the limitations of the Amended 1985 Plan, as amended or modified from time to time, to determine: 1. which of the eligible individuals will be granted Options under the Amended 1985 Plan, 2. whether Incentive Options or Non-Qualifying Options are to be granted in a particular case, 3. the number of shares that may be purchased under each Option, 4. the Fair Market Value at the time of grant of the shares subject to each Option, 5. the exercise price to be paid for shares subject to Options, such exercise price to be determined in accordance with Article IX, and 6. the terms and provisions of individual option agreements (which need not be identical). The Committee shall also have the power to make all other determinations, and to establish any rules, regulations, or policies consistent with the terms of the Amended 1985 Plan, necessary or advisable for administering the Amended 1985 Plan, including policies concerning whether interruption of service for military or public service, leaves of absence, temporary assignment to other employment, or similar reasons shall constitute a termination or interruption of employment for purposes of the Amended 1985 Plan. C. In determining the employees to whom Options shall be granted, the type of Options to be granted in each case, and the number of shares to be covered by each Option, the Committee shall take into consideration the employee's duties and responsibilities, his or her present and potential contribution to the growth and success of the Company or a Subsidiary Company and such other factors as the Committee may deem relevant to accomplish the purposes of the Amended 1985 Plan. D. The Committee shall act by vote or written consent of a majority of its members. Subject to the express provisions and limitations of the Amended 1985 Plan, the Committee may adopt such rules, regulations and procedures as it deems advisable for the conduct of its affairs and may appoint one of its members to be chairman and any person whether or not a member, to be its secretary or agent. E. The decisions of the Committee shall be final and binding. The date of Committee action approving a grant of an Option shall be deemed the date of grant. No member of the Committee and no member of the Board shall be liable for any action taken, or determination made in good faith related to the Amended 1985 Plan, and the Company shall indemnify, to the fullest extent permitted by law, any Committee or Board member for any expenses borne by him or her (including costs of any proceeding or threatened proceeding), or claim made against him or her, arising out of actions related to the Amended 1985 Plan. VI. ELIGIBILITY The individuals to whom Options may be granted shall be key employees (including Directors who are employees), of the Company or of a Subsidiary Company. Pursuant to Article XIII hereof, automatic awards shall be granted to Non-Employee Directors. No Options shall be granted to an employee or director of the Company or of a Subsidiary Company who owns, directly or indirectly, more than 10% of the voting power of all classes of stock of either (i) the Company or (ii) any Subsidiary Company, and no Options shall be granted to any person who is not a Director of the Company or a full-time salaried employee of the Company or of a Subsidiary Company. VII. CAPITAL STOCK SUBJECT TO OPTION The aggregate number of shares of Capital Stock that may be issued pursuant to Options granted under the Amended 1985 Plan shall not exceed 8,770,832 shares, which number of shares is subject to adjustment as hereinafter provided in Article XIX. If an Option as to any shares is surrendered before exercise, or expires, or is canceled, surrendered, or otherwise terminates for any reason without having been exercised in full, or for any reason ceases to be exercisable, the number of unpurchased shares covered thereby shall, unless the Amended 1985 Plan shall have been terminated, again become available for the granting of Options under the Amended 1985 Plan within the aggregate maximum stated above (without regard to whether the expired or terminated option was an Incentive Option or a Non-Qualifying Option) to the extent permitted by Rule 16b-3. Notwithstanding the foregoing, commencing with the 1994 calendar year, grants of options under the Amended 1985 Plan to any individual shall be limited to Options to purchase no more than 450,000 shares of Capital Stock per calendar year. VIII. DURATION AND TERM OF PLAN Subject to the other provisions of the Amended 1985 Plan, Options may be granted under the Amended 1985 Plan at any time and from time to time during the period beginning on the date of adoption by the Board of Directors, and ending at the close of business on February 1, 1997, at which time the Amended 1985 Plan shall terminate. Termination of the Amended 1985 Plan either by reason of this Article or Board resolution under Article XX shall not affect any Options previously granted and such Options shall remain in effect until they have been fully exercised, are surrendered, or expire by their terms. IX. EXERCISE PRICE The price to be paid on exercise for each share of Capital Stock purchasable under any Option granted under the Amended 1985 Plan shall be: A. In the case of an Incentive Option, not less than the Fair Market Value thereof at the time the Incentive Option is granted. In determining such Fair Market Value the Committee shall comply with such rules and regulations as may be promulgated by the Internal Revenue Service for such determinations concerning "incentive stock options," as defined in Section 422 of the Code. B. In the case of a Non-Qualifying Option, the price determined by the Committee, but such price may not be less than one-half of the Fair Market Value thereof at the time the Non-Qualified Option is granted. X. TERMS OF THE OPTION A. Each Option granted pursuant to the Amended 1985 Plan shall state the total number of shares of Capital Stock that may be purchased under it, which number shall be subject to adjustment as hereinafter provided in Article XIX. B. Subject to the limitations of the Amended 1985 Plan, as amended or modified from time to time, every Option granted under the Amended 1985 Plan shall be evidenced by written option certificates in such form, and containing such agreements, terms and conditions (which need not be identical) as the Committee, in its discretion, may determine, and the Committee may condition the grant of any Option on execution by the Grantee of such documents as it judges appropriate to evidence the Grantee's acceptance of such agreements, limits and conditions. XI. SPECIAL RULES FOR INCENTIVE OPTIONS Notwithstanding any other provision of the Amended 1985 Plan, in the case of any Incentive Option granted under the Plan: A. The aggregate Fair Market Value (determined as of the time the Option is granted) of the shares of Capital Stock with respect to which Incentive Options (or other options qualifying as "incentive stock options" under Section 422 of the Code) are exercisable for the first time by the Grantee during each calendar year (under all option plans of the Company and its Subsidiary Companies) shall not exceed $100,000 as computed in accordance with Section 422 of the Code and the regulations thereunder. B. If any Grantee disposes of shares of Capital Stock acquired on the exercise of an Incentive Option by sale or exchange either: 1. within two years after the date of the grant of the Option under which such shares were acquired, or 2. within one year after the transfer of the shares so acquired, such Option will no longer qualify for the favorable tax treatment provided to an "incentive stock option" (within the meaning of Section 422 of the Code). In such event, the Grantee shall promptly notify the Company of such disposition and of the amount realized and of the adjusted basis in such shares. XII. EXERCISABILITY AND DURATION OF OPTIONS A. Exercisability. Unless an Option provides otherwise, each Option granted under the Amended 1985 Plan shall be exercisable in its entirety immediately on the date of grant. B. Duration of Exercisability. Unless an Option provides otherwise, the unexercised portion of any Option granted under the Amended 1985 Plan shall automatically and without notice terminate and become null and void on the earliest to occur of the following: 1. Ten years from the date of grant or the expiration of such shorter period of time as the Option may provide; 2. a. In the case of an Incentive Option, three months following the date of termination of the Grantee's employment with the Company, or twelve months in the case of: (i) an employee who is disabled (within the meaning of Section 422(c)(6) of the Code) on the date of termination, or (ii) an employee whose death occurs during his or her employment with the Company. b. Incentive Options not exercised prior to the dates specified in Article XII(B)(2)(a) remain exercisable until the date determined in accordance with Article XII(B)(1) and (3), but will not qualify for the favorable tax treatment provided for incentive stock options within the meaning of Section 422 of the Code. 3. Twelve months after the death of the Grantee. XIII. NON-EMPLOYEE DIRECTOR OPTIONS Notwithstanding any of the other provisions of the Amended 1985 Plan to the contrary, the provisions of this Article XIII shall apply only to grants of Options to Non-Employee Directors. Except as set forth in this Article XIII, the other provisions of the Amended 1985 Plan shall apply to grants of Options to Non-Employee Directors to the extent not inconsistent with this Article. For purposes of interpreting the applicable provisions of the Amended 1985 Plan, a Non-Employee Director's service as a member of the Board shall be deemed to be employment with the Company or its Subsidiary Companies. A. General. Non-Employee Directors shall receive Non-Qualifying Options in accordance with this Article and may not be granted Incentive Options under the Amended 1985 Plan. The purchase price per share of Capital Stock purchasable under Options granted to Non-Employee Directors shall be the Fair Market Value of a share of Capital Stock on the date of grant. No Option agreement with any Non-Employee Director may alter the provisions of this Article and no Option granted to a Non-Employee Director may be subject to a discretionary acceleration of exercisability. B. Initial Grant. As of August 10, 1993 each Non-Employee Director as of such date shall be granted automatically, without action by the Committee, an Option to purchase 10,000 shares of Capital Stock. C. Grants to New Non-Employee Directors. Each Non-Employee Director who, after August 10, 1993, is elected to the Board for the first time by the stockholders of the Company at any special or annual meeting of stockholders or, if earlier, is appointed to the Board, will, at the time such Non-Employee Director is elected or appointed (as the case may be) and duly qualified, be granted automatically, without action by the Committee, an Option to purchase 10,000 shares of Capital Stock. D. Vesting. Each Option shall be exercisable as to 20% of the shares of Capital Stock covered by the Option as of the date the Option is granted, and an additional 20% of the shares of Capital Stock covered by the Option on each of the first four anniversaries of the date the Option is granted; provided, however, that upon a Non-Employee Director's cessation of service by reason of retirement, such Non-Employee Director's Option shall be 100% vested and immediately exercisable. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, at any time after becoming exercisable, but not later than the date the Option expires. E. Duration. Subject to the immediately following sentence, each Option granted to a Non-Employee Director shall be for a term of 10 years. Upon the cessation of a Non-Employee Director's membership on the Board for any reason, Options granted to such Non-Employee Director not then exercisable shall expire, and Options to the extent then exercisable may be exercised until the expiration of the respective terms of such Options. The Committee may not provide for an extended exercise period beyond the periods set forth in this Article XIII(E). XIV. NON-ASSIGNABILITY Options shall not be transferable by a Grantee except by will or the laws of descent and distribution, and during a Grantee's lifetime shall be exercisable only by such Grantee. Options transferred by will or by the laws of descent and distribution may be exercised after the Grantee's death only by his or her executors or administrators, or by the person who acquired the right to exercise such Options by bequest or inheritance or by reason of the death of the Grantee. XV. PAYMENT FOR SHARES A. Payment in full of the purchase price for the shares purchased pursuant to the exercise of any Option shall be made, in accordance with Article XVI, upon exercise of the Option. All shares sold under the Amended 1985 Plan shall be fully paid and non-assessable. B. The terms of any Option granted under the Amended 1985 Plan (other than Options granted to Non-Employee Directors pursuant to Article XIII hereof), may, but need not, include an arrangement whereby the Grantee may, upon exercise of an Option, borrow all or an established part of the purchase price from the Company on such terms described in the Option agreement, consistent with applicable law or regulations, as the Committee shall from time to time determine. The principal amount of any such loan shall bear interest at a rate (or at a rate established by a formula) set forth in the Option agreement. C. The terms of the Options granted to Non-Employee Directors pursuant to Article XIII hereof shall permit Non-Employee Directors, upon exercise of their Options, to pay the purchase price by tender of shares of Capital Stock of the Company owned by such Non-Employee Directors. The terms of any Option granted under the Amended 1985 Plan to any other Grantee, may, but need not, permit the Grantee, under procedures established by the Committee, upon exercise of an Option, to pay the purchase price by tender of shares of Capital Stock of the Company owned by the Grantee. In either case, the current Fair Market Value of the shares tendered as of the date of the Company's receipt of notice of exercise, given pursuant to Article XVI(A), shall be treated as payment of the corresponding amount of the purchase price of the shares being acquired under the Option. D. Subject to such rules as may be adopted by the Committee, a Grantee (other than a Non-Employee Director) who will incur federal, state or local income tax liability as a result of the exercise of a Non-Qualifying Option may, at his or her option, elect to have the Company withhold, or to transfer to the Company, on the date that the amount of such tax liability is determined, shares of Capital Stock of the Company equal in market value to an amount not exceeding the maximum amount payable under federal, state and local marginal tax rates applicable to the Grantee and the particular Option exercise transaction. The election must be made on or before the date that the amount of tax to be withheld is determined. The value of the shares of Capital Stock to be withheld by, or transferred to, the Company shall be valued at Fair Market Value as of the date that the amount of the tax is determined. XVI. MANNER OF EXERCISE A. To exercise an Option granted under the Amended 1985 Plan as to all or part of the shares covered thereby, a Grantee (or after his or her death, the person authorized to exercise the Option, as provided in Article XII) shall deliver written notice of such exercise to the Company official designated by the Committee (or, in the absence of such designation, to the Secretary of the Company). The notice shall identify the Option being exercised and specify the number of shares then being purchased. The date of receipt of such notice shall be deemed the date of exercise. B. The notice of exercise shall be accompanied by payment of the amount of the aggregate purchase price of the shares being purchased under the Option being exercised in one of the following forms: 1. A check or money order payable to the order of the Company for such amount; 2. If the terms of the Option being exercised expressly permit borrowing from the Company for exercise of the Option, the Grantee's note for such amount, such note to include such terms, including terms related to time of payment and interest, and to be in such form, as is prescribed by the Committee, consistent with the terms of the Option; or 3. If the terms of the Option being exercised expressly permit payment with shares of Capital Stock for exercise of the Option, tender of shares of Capital Stock of the Company with Fair Market Value on the date of exercise equal to or exceeding such amount, such tender to be made in conformity with the applicable terms of the Option and with such requirements as the Committee may prescribe. C. The Committee shall have full authority to direct the proper officers of the Company to issue or transfer shares of Capital Stock pursuant to the exercise of an Option granted under the Amended 1985 Plan. As soon as practicable after its receipt of such notice and payment, the Company shall cause the shares so purchased to be issued to the Grantee or to the person authorized to exercise the Option after his or her death, as the case may be, and shall promptly thereafter cause one or more certificates for such shares to be delivered to such Grantee or other person. The holding periods referred to in Article XI(B)(1) and (2) shall be measured from the date of issuance. XVII. VOTING AND DIVIDEND RIGHTS No Grantee of any Option shall have any voting or dividend rights or any other rights of a stockholder in respect of any shares of Capital Stock covered by an Option prior to the time that his or her name is recorded on the Company's stockholder ledger as the holder of record of such shares acquired pursuant to an exercise of an Option. XVIII. CONDITIONS ON GRANTEE'S SALE OF SHARES A. Unless the Company has filed an effective Registration Statement, pursuant to the Securities Act of 1933, covering the shares offered under the Amended 1985 Plan, each Grantee purchasing shares shall be required to represent to the Company at that time that he or she is acquiring such shares for investment purposes and not with a view to their sale or distribution, and each certificate for such shares shall have printed or stamped thereon appropriate language, as determined by the Committee, stating such restriction. B. The Committee may in its discretion require the Grantee, on any exercise of an Option granted hereunder or any portion thereof and as a condition to the Company's obligation to accept the notice of exercise and to deliver certificates representing the shares subject to exercise, to take such action as is, in its sole judgment, necessary or prudent to insure that issuance of the shares of Capital Stock pursuant to exercise of the Option will be in compliance with applicable law. XIX. EFFECT OF CHANGE IN CAPITAL STOCK The aggregate number of shares of Capital Stock available for Option under the Amended 1985 Plan, the shares subject to any Option, and the price per share, shall all be proportionately adjusted for any increase or decrease in the number of shares of Capital Stock issued subsequent to the effective date of the Amended 1985 Plan or the effective date of any shareholder approved increase in the number of shares available for issuance under Options granted under the Amended 1985 Plan, resulting from a subdivision or consolidation of shares or any other capital adjustment, the payment of a stock dividend or other increases or decreases in such shares effected without receipt of consideration by the Company. A change in the number of shares, and/or a change in the price per share, subject to an Option shall also be made in order to reflect any reduction in the Fair Market Value of shares subject to an Option in any case in which (a) such reduction arises on account of a "corporate transaction" as defined in Treasury Regulations Section 1.425-1(a)(1)(ii), (b) the excess of the aggregate Fair Market Value (determined immediately after such corporate transaction) of the shares subject to the Option immediately after such change over the aggregate new Option exercise price of such shares is not more than the excess of the aggregate Fair Market Value of the shares subject to the Option immediately before the transaction over the aggregate former Option price of such shares, (c) the ratio of the Option exercise price to the Fair Market Value of the stock subject to the Option immediately after the corporate transaction is not more favorable to the Grantee on a share-by-share comparison than the ratio of the old Option exercise price to the Fair Market Value of the stock subject to the Option immediately before such transaction, (d) the Option after such change does not give the Grantee additional benefits that he or she did not have before such change, and (e) in the case of an Incentive Option, such change does not constitute a modification of the Option within the meaning of Section 424 of the Code. If the Company or a Subsidiary Company issues or assumes a stock option in a transaction to which Section 424(a) of the Code applies, the per share Option price, the date or dates of exercise and the other provisions of such Option shall be as fixed by the Committee so as to meet the requirements of that section. XX. AMENDMENT AND DISCONTINUANCE The Board, by resolution, may terminate, suspend, amend or revise the Amended 1985 Plan with respect to any shares of Capital Stock, as to which Options have not been granted; provided, however, that, except as provided in Article XIX hereof, no amendment shall be effective unless approved by the stockholders of the Company where stockholder approval of such amendment is required (a) to comply with Rule 16b-3 or (b) to comply with any other law, regulation or stock exchange rule. Notwithstanding anything in this Article XX to the contrary, Article XIII shall not be amended more than once in any six-month period, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules or regulations thereunder. The Board or Committee may not, without the consent of the Grantee of an Option, alter or impair rights under any Option previously granted under the Amended 1985 Plan except as expressly authorized herein. XXI. EMPLOYMENT RIGHTS Neither the Amended 1985 Plan, nor the grant of any Options hereunder nor any action taken by the Committee of the Board in connection with the Amended 1985 Plan, shall create any right on the part of any person to continue in the employ of (or as a director of) the Company or a Subsidiary Company, or affect the right of the Company to terminate a Grantee's employment (or directorship) at any time, subject to the provisions of law or any contract of employment between the Company and the Grantee. XXII. GOVERNING LAW A. All references to a provision of a statute or regulation incorporate subsequent amendments and apply also to corresponding successor provisions, however denominated. B. The Amended 1985 Plan and all Options granted under the Amended 1985 Plan shall be governed by, and construed in accordance with, the laws of the State of Georgia, except to the extent that federal law is controlling, and provided that the terms of the Amended 1985 Plan and all Options granted under it shall be construed so as to qualify for exemption under Rule 16b-3 and, in the case of any Incentive Options, for treatment as an incentive stock option under Section 422 of the Code. XXIII. EFFECTIVE DATE OF THE PLAN A. The 1985 Plan became effective on May 30, 1985, being the date of adoption by the Board of Directors, subject, however, to the approval by the Company's stockholders within twelve (12) months thereafter, such approval to be manifested by a vote sufficient to satisfy the federal tax and Securities and Exchange Commission ("SEC") requirements then in effect related to shareholder approval of stock option plans under the rules for incentive stock options and Rule 16b-3, respectively, which approval was so given at the stockholders' meeting held on April 28, 1986. B. The extension of the 1985 Plan's duration from May 30, 1995, to February 1, 1997, and certain other amendments approved by the Board on February 10, 1987, took effect on the approval by the Company's stockholders, which approval was so given at the stockholders' meeting held on April 27, 1987. C. The amendment and restatement of the 1985 Plan to increase the maximum number of shares of Capital Stock that may be granted thereunder, to change the administration of the 1985 Plan by reducing from two to one the number of committees administering the 1985 Plan, and by eliminating the award of discretionary grants to Non-Employee Directors, and to provide instead for automatic formula grants to Non-Employee Directors, to amend the 1985 Plan to satisfy certain requirements of Rule 16b-3 and to make certain other amendments, approved by the Board on August 10, 1993, and the subsequent amendment and restatement of the 1985 Plan, to comply with certain provisions of the Omnibus Budget Reconciliation Act of 1993 regarding the exclusion of certain compensation from the $1 million dollar per year compensation deduction limit for certain executives, approved by the Board on February 8, 1994, shall take effect only on approval by the Company's stockholders on or before April 25, 1994, such approval to be manifested by a vote sufficient to satisfy the federal tax and SEC requirements then in effect related to shareholder approval of stock option plans under the rules for incentive stock options and Rule 16b-3, respectively. EX-2 3 PROXY EXHIBIT B Exhibit B AFLAC INCORPORATED MANAGEMENT INCENTIVE PLAN 1. PURPOSES. The purposes of the AFLAC Incorporated Management Incentive Plan are to reinforce corporate, organizational and business-development goals; to promote the achievement of year-to-year and long-range financial and other business objectives; and to reward the performance of individual officers and other employees in fulfilling their personal responsibilities for long-range achievements. 2. DEFINITIONS. The following terms, as used herein, shall have the following meanings: (a) "AFLAC" shall mean AFLAC Incorporated, a Georgia corporation. (b) "Annual Base Salary" shall mean: (i) with respect to any Executive Officer, the annual rate of base salary of such Executive Officer in effect as of the first day of any Performance Period (or, if an Executive Officer was not employed as of the first day of a Performance Period, the annual rate of base salary in effect as of such Executive Officer's first day of employment); and (ii) with respect to any other Participant, unless otherwise determined by the Company, the base salary paid to such Participant during any Performance Period. (c) "Award" shall mean an annual incentive compensation award, granted pursuant to the Plan, which is contingent upon the attainment of Performance Goals with respect to a Performance Period. (d) "Award Agreement" shall mean any written agreement, contract, or other instrument or document between AFLAC and a Participant evidencing an Award. (e) "Board" shall mean the Board of Directors of AFLAC. (f) "Change in Control" shall mean the occurrence of an event described in Section 6(f) hereof. (g) "Code" shall mean the Internal Revenue Code of 1986, as amended. (h) "Committee" shall mean the Compensation Committee of the Board. (i) "Company" shall mean, collectively, AFLAC and its subsidiaries. (j) "Consolidated Net Earnings" shall mean the net earnings of the Company for the Performance Period determined in accordance with generally accepted accounting principles and reported in the Company's audited financial statements for such Performance Period, but before any provision for the cumulative effect of accounting changes required to be adopted by generally accepted accounting principles in respect of such Performance Period. (k) "Covered Employee" shall have the meaning set forth in Section 162(m)(3) of the Code. (l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (m) "Executive Officer" shall mean (i) the president, the chief executive officer, the chairman and vice chairman of the Board and the executive vice presidents of AFLAC, (ii) the president, the chairman and vice chairman of the Board of Directors and the executive vice presidents of American Family Life Assurance Company of Columbus, Japan Branch, (iii) the president, the chairman and vice chairman of the Board of Directors and the executive vice presidents of American Family Life Assurance Company of Columbus (iv) the president, the chairman and vice chairman of the Board of Directors and the executive vice presidents of AFLAC International, Inc. and (v) all members of the Board who are employees of the Company. (n) "Operating Earnings Per Share" shall mean net earnings per share of Stock, excluding the effects of realized gains or losses on investments and the cumulative effect of adopting required accounting changes. (o) "Participant" shall mean an officer or other employee of the Company who is, pursuant to Section 4 of the Plan, selected to participate herein. (p) "Performance Goal" shall mean the criteria and objectives, determined by the Committee, which must be met during the applicable Performance Period as a condition of the Participant's receipt of payment with respect to an Award. Performance Goals may include any or all of the following: (i) attainment of an amount of Consolidated Net Earnings during a Performance Period; (ii) attainment of a percentage of Return on Equity for a Performance Period; (iii) attainment of amounts of Operating Earnings Per Share of the Company, excluding all or a portion of the effect of translating foreign currency of business segments to U.S. dollars for financial reporting purposes, for a Performance Period; (iv) increases in the market price of Stock or levels of total return to shareholders during the Performance Period; and (v) attainment of goals established based on the financial performance of individual subsidiaries or business segments of the Company relating to increases in premium income, investment income, total revenues, operating expenses, pretax operating earnings, premiums in force, number of policies in force, new sales and policy conversions (i.e., issuance of current policy contracts to existing policyholders in exchange for surrender of policies issued in prior years). With respect to Participants who are not Executive Officers, Performance Goals shall also include such personal performance goals as the Committee shall, from time to time, establish. (q) "Performance Period" shall mean the Company's fiscal year. (r) "Plan" shall mean the AFLAC Incorporated Management Incentive Plan. (s) "Return on Equity" shall mean the quotient obtained by dividing (i) Consolidated Net Earnings for a Performance Period by (ii) the average of common shareholders' equity of the Company as of the beginning and the end of the Performance Period. Such common shareholders' equity shall exclude the effect of unrealized gains and losses recognized in a separate equity component under Financial Accounting Standards Board Statement No. 115. (t) "Stock" shall mean shares of common stock, par value $.10 per share, of AFLAC. 3. ADMINISTRATION. The Plan shall be administered by the Committee. The Committee shall have the authority in its sole discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to grant Awards; to determine the persons to whom and the time or times at which Awards shall be granted; to determine the terms, conditions, restrictions and performance criteria, including Performance Goals, relating to any Award; to determine whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited, or surrendered; to make adjustments in the Performance Goals in recognition of unusual or non-recurring events affecting the Company or the financial statements of the Company, or in response to changes in applicable laws, regulations, or accounting principles; to construe and interpret the Plan and any Award; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of Award Agreements; and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Committee shall consist of two or more persons each of whom shall be an "outside director" within the meaning of Section 162(m) of the Code. The Committee may appoint a chairperson and a secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable, and shall keep minutes of its meetings. All determinations of the Committee shall be made by a majority of its members either present in person or participating by conference telephone at a meeting or by written consent. The Committee may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan. All decisions, determinations and interpretations of the Committee shall be final and binding on all persons, including the Company, the Participant (or any person claiming any rights under the Plan from or through any Participant) and any shareholder. No member of the Board or the Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted hereunder. 4. ELIGIBILITY. Awards may be granted to officers and other employees of the Company in the sole discretion of the Committee. Subject to Section 5(b) below, in determining the persons to whom Awards shall be granted and the Performance Goals relating to each Award, the Committee shall take into account such factors as the Committee shall deem relevant in connection with accomplishing the purposes of the Plan. 5. TERMS OF AWARDS. Awards granted pursuant to the Plan shall be evidenced by an Award Agreement in such form as the Committee shall from time to time approve. (a) IN GENERAL. The Committee shall specify with respect to a Performance Period the Performance Goals applicable to each Award and minimum, target and maximum levels applicable to each Performance Goal. The minimum level reflects the level of performance at which 50% of the performance goal is achieved and below which no payment shall be made; the target level reflects the level of performance at which 100% of the Performance Goal is achieved; and the maximum level reflects the level of performance at which 150% of the Performance Goal is achieved. Awards for Performance Period may be expressed as a dollar amount or as a percentage of the Participant's Annual Base Salary. Unless otherwise provided by the Committee in connection with specified terminations of employment, or except as set forth in Section 6(f) hereof, payment in respect of Awards shall be made only if and to the extent the Performance Goals with respect to such Performance Period are attained. (b) SPECIAL PROVISIONS REGARDING AWARDS. Not withstanding anything to the contrary contained in this Section 5, in no event shall payment in respect of Awards granted for a Performance Period be made to a Participant who is a Covered Employee in an amount that exceeds 105% of such Participant's Annual Base Salary. (c) TIME AND FORM OF PAYMENT. Unless otherwise determined by the Committee, all payments in respect of Awards granted under this Plan shall be made, in cash, within a reasonable period after the end of the Performance Period. In the case of Participants who are Covered Employees, unless otherwise determined by the Committee, such payments shall be made only after achievement of the Performance Goals has been certified by the Committee. 6. GENERAL PROVISIONS. (a) COMPLIANCE WITH LEGAL REQUIREMENTS. The Plan and the granting and payment of Awards, and the other obligations of the Company under the Plan and any Award Agreement or other agreement shall be subject to all applicable federal and state laws, rules and regulations, and to such approvals by any regulatory or governmental agency as may be required. (b) NONTRANSFERABILITY. Awards shall not be transferable by a Participant except by will or the laws of descent and distribution. (c) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or in any Award granted or any Award Agreement or other agreement entered into pursuant hereto shall confer upon any Participant the right to continue in the employ of the Company or to be entitled to any remuneration or benefits not set forth in the Plan or such Award Agreement or other agreement or to interfere with or limit in any way the right of the Company to terminate such Participant's employment. (d) WITHHOLDING TAXES. The Company shall have the right to withhold the amount of any taxes that the Company may be required to withhold before delivery of payment of an Award to the Participant or other person entitled to such payment, or to make such other arrangements for the withholding of taxes that the Company deems satisfactory. (e) AMENDMENT, TERMINATION AND DURATION OF THE PLAN. The Board or the Committee may at any time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part; provided that, no amendment that requires shareholder approval in order for the Plan to continue to comply with Code Section 162(m) shall be effective unless the same shall be approved by the requisite vote of the shareholders of the Company. Notwithstanding the foregoing, no amendment shall affect adversely any of the rights of any Participant, without such Participant's consent, under any Award theretofore granted under the Plan. The Plan shall terminate at the completion of the Performance Period that ends in 1998; provided, however, that all payments with respect to Awards previously granted under the Plan shall be paid out pursuant to the terms of the Plan. (f) CHANGE IN CONTROL. Notwithstanding any other provision of the Plan to the contrary, if, while any Awards remain outstanding under the Plan, a "Change in Control" of AFLAC (as defined in this Section 6(f)) shall occur, the Performance Period outstanding at the time of such Change in Control shall be deemed to have been completed, the maximum level of performance set forth under the respective Performance Goals shall be deemed to have been attained and a pro rata portion (based on the number of full and partial months that have elapsed with respect to each Performance Period) of each outstanding Award granted to each Participant for the outstanding Performance Period shall become payable in cash to each Participant. For purposes of this paragraph 6(f), a Change in Control of AFLAC shall occur upon the happening of the earliest to occur of the following: (i) any "person," as such term is used in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) AFLAC, or any of its subsidiaries, (2) any trustee or other fiduciary holding securities under a benefit plan of AFLAC or any of its subsidiaries, (3) any underwriter temporarily holding securities pursuant to an offering of such securities, or (4) any corporation owned, directly or indirectly, by the shareholders of AFLAC in substantially the same proportions as their ownership of Stock), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of AFLAC (not including in the securities beneficially owned by such person any securities acquired directly from AFLAC or its affiliates) representing 30% or more of the combined voting power of AFLAC's then outstanding voting securities; (ii) during any period of not more than two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with AFLAC to effect a transaction described in clause (i), (iii), or (iv) of this paragraph (f)) whose election by the Board or nomination for election by AFLAC's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; (iii) the shareholders of AFLAC approve a merger or consolidation of AFLAC with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of AFLAC outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of AFLAC, at least 75% of the combined voting power of the voting securities of AFLAC or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of AFLAC (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of AFLAC's then outstanding securities; or (iv) the shareholders of AFLAC approve a plan of complete liquidation of AFLAC or an agreement for the sale or disposition by AFLAC of all or substantially all of AFLAC's assets (or any transaction having a similar effect). (g) PARTICIPANT RIGHTS. No Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment for Participants. (h) UNFUNDED STATUS OF AWARDS. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company. (i) GOVERNING LAW. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Georgia without giving effect to the conflict of laws principles thereof. (j) EFFECTIVE DATE. The Plan shall take effect upon its adoption by the Board; provided, however, that the Plan shall be subject to the requisite approval of the shareholders of the Company in order to comply with Section 162(m) of the Code. In the absence of such approval, the Plan (and any Awards theretofore made pursuant to the Plan) shall be null and void. (k) BENEFICIARY. A Participant may file with the Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Participant, the executor or administrator of the Participant's estate shall be deemed to be the grantee's beneficiary. (l) INTERPRETATION. The Plan is designed and intended to comply, to the extent applicable, with Section 162(m) of the Code, and all provisions hereof shall be construed in a manner to so comply. -----END PRIVACY-ENHANCED MESSAGE-----