SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or 240.14a-12
LINCOLN HERITAGE CORPORATION
(Name of Registrant as Specified in its Charter)
Not Applicable
(Name of Person Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
Filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total Fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
LINCOLN HERITAGE CORPORATION
1250 Capital of Texas Highway
Building 3, Suite 100
Austin, Texas 78746
April 30, 1999
Dear Fellow Shareholders:
Our Annual Meeting of Shareholders will be held at the Clayton Holiday Inn,
7730 Bonhomme, Clayton, Missouri 63105, at 10:00 a.m., local time, on Thursday,
May 20, 1999. The Notice of Annual Meeting of Shareholders, Proxy Statement and
proxy that accompany this letter outline fully matters on which action is
expected to be taken at the Annual Meeting.
We cordially invite you to attend the Annual Meeting. Even if you plan to
be present at the meeting, you are requested to date, sign and return the
enclosed proxy in the envelope provided so that your shares will be represented.
The mailing of an executed proxy will not affect your right to vote in person
should you later decide to attend the Annual Meeting.
Sincerely,
CLIFTON MITCHELL
Chief Executive Officer
<PAGE>
LINCOLN HERITAGE CORPORATION
1250 Capital of Texas Highway
Building 3, Suite 100
Austin, Texas 78746
(512) 328-0075
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 20, 1999
Approximate Date of Mailing to Security Holders: April 30, 1999
Dear Shareholder:
The Annual Meeting of Shareholders of Lincoln Heritage Corporation, a Texas
corporation (the Company), will be held at the Clayton Holiday Inn, Clayton,
Missouri 63105, on Thursday, May 20, 1999, at 10:00 a.m. local time, for the
following purposes:
1. To elect two (2) members of the Board of Directors; and
2. To consider and act upon such other business as may properly
come before the meeting or any adjournment thereof.
The Company's Board of Directors has fixed the close of business on April
19, 1999 as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournment thereof.
The accompanying Proxy Statement sets forth important information and is
deemed incorporated by reference herein.
By Order of the Board of Directors,
Howard A. Wittner
Secretary
April 30, 1999
Whether or not you expect to attend the meeting, please complete, date and sign
the enclosed proxy and mail it promptly in the enclosed envelope to assure
representation of your shares. No postage need be affixed if mailed in the
United States.
<PAGE>
LINCOLN HERITAGE CORPORATION
1250 Capital of Texas Highway
Building 3, Suite 100
Austin, Texas 78746
(512) 328-0075
PROXY STATEMENT
For Annual Meeting of Shareholders to be
Held on Thursday, May 20, 1999
_________________
GENERAL
This Proxy Statement is furnished to the shareholders of Lincoln Heritage
Corporation, a Texas corporation (the Company), in connection with the
solicitation of proxies for use at the Annual Meeting of Shareholders to be held
at the Clayton Holiday Inn, Clayton, Missouri 63105, at 10:00 a.m. local time,
on Thursday, May 20, 1999, and at any adjournment thereof (the Annual
Meeting), for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders.
Your proxy is being solicited by the Board of Directors of the Company (the
Board of Directors). This proxy may be revoked at any time before it is voted
by filing a written notice of revocation or a later-dated proxy with the
Secretary of the Company at the principal offices of the Company or by attending
the Annual Meeting and voting the shares in person. Attendance alone at the
Annual Meeting will not of itself revoke a proxy. Proxies that are properly
executed, timely received and not revoked will be voted in the manner indicated
thereon at the Annual Meeting and any adjournment thereof.
This Proxy Statement, the Notice of Annual Meeting and the accompanying
proxy were first mailed to the shareholders of the Company on or about April 30,
1999. The Company will bear the entire expense of soliciting proxies. Proxies
will be solicited by mail initially. The directors, executive officers and
employees of the Company also may solicit proxies personally or by telephone or
other means, but such persons will not be specially compensated for such
services. Certain holders of record, such as brokers, custodians and nominees,
are being requested to distribute proxy materials to beneficial owners and will
be reimbursed by the Company for their reasonable expenses incurred in sending
proxy materials to beneficial owners. Only shareholders of record at the close
of business on April 19, 1999 are entitled to notice of, and to vote at, the
Annual Meeting. On such date, there were 4,520,000 shares of Common Stock, $.01
par value, of the Company (the Common Stock), issued and outstanding. The
holder of each outstanding share of Common Stock is entitled to one vote on each
matter to be acted upon at the Annual Meeting. Shares subject to abstentions
will be treated as shares that are present at the Annual Meeting for purposes of
determining the presence of a quorum and as voted for the purposes of
determining the base number of shares voted on any proposal. If a broker or
other nominee holder indicates on the proxy that it does not have discretionary
authority to vote the shares it holds of record on a proposal, those shares will
not be treated as present at the Annual Meeting for purposes of determining the
presence of a quorum and will not be considered as voted for purposes of
determining the approval of the shareholders on a particular proposal.
Cumulative voting is not permitted in the election for directors. Each
duly-executed proxy in the form enclosed will be voted FOR all nominees listed
on such proxy, unless otherwise directed in the proxy. If a shareholder gives a
proxy in the form enclosed but withholds authority to vote for one or more of
the nominees listed on the proxy, the number of votes represented by such
shareholder's proxy will be voted for each of the remaining nominees.
ITEM I. ELECTION OF DIRECTORS
Two individuals will be elected at the Annual Meeting to serve as Class I
directors of the Company for a term of three years. The two nominees receiving
the greatest number of votes at the Annual Meeting will be elected.
The persons named as proxies on the accompanying proxy intend to vote all
duly executed proxies received by the Board of Directors for the election of
Clifton Mitchell and Paul J. Gallant as Class I directors, except as otherwise
directed by the shareholder on the proxy. Messrs. Mitchell and Gallant currently
are directors the Company. If for any reason Mr. Mitchell or Mr. Gallant becomes
unavailable for election, which is not now anticipated, the persons named in the
accompanying proxy will vote for such substitute nominee as is designated by the
Board of Directors.
The Board of Directors recommends a vote FOR the election of Clifton
Mitchell and Paul J. Gallant as Class I directors.
The name, age, principal occupation or position and other directorships
with respect to Messrs. Mitchell and Gallant and the other directors whose terms
of office will continue after the Annual Meeting are set forth below.
Class I Nominees - To Be Elected For a Term of
Three Years Expiring in 2002
Clifton Mitchell, 47, joined the Company in February 1998 and became
President and Chief Executive Officer in April 1999. Mr. Mitchell has been a
director of the Company since March 1998 and served as Executive Vice
President-Actuarial of the Company from March 1998 to April 1999. Prior to
joining the Company, Mr. Mitchell owned C. Mitchell Company, Inc., an actuarial
consulting firm, and was the Company's consulting actuary. Mr.Mitchell is a
Fellow of the Society of Actuaries, a Member of the American Academy of
Actuaries and a Fellow of the Conference of Consulting Actuaries and was a
consulting actuary in private practice from 1983 to 1998. Mr. Mitchell has been
involved in insurance acquisitions since 1978.
Paul J. Gallant, 65, became a director of the Company in October 1998.
Mr. Gallant has served as President of PJG & Associates, a consulting firm
specializing in forensic accounting since September 1996. Prior thereto,
Mr. Gallant was Chief Operating Officer of International Food Products
Corporation in St.Louis, Missouri from January 1993 to September 1996.
Mr. Gallant is a member of the American Institute of Certified Public
Accountants and the Missouri Society of Certified Public Accountants.
Class II - To Continue in Office Until 2000
Randall K. Sutton, 53, currently is the Chief Financial Officer of National
Prearranged Services, Inc. (NPS), an affiliate of the Company. During his
18-year tenure with NPS, Mr. Sutton also has managed investments for several
affiliated companies. Mr. Sutton has been a member of the Board of Directors and
a Vice President of the Company since 1996 and also serves as a member of the
Board of Directors of Memorial Service Life Insurance Company (Memorial),
Lincoln Memorial Life Insurance Company (Lincoln) and Lincoln Memorial
Services (a corporate investment firm), each a subsidiary of the Company.
Mark A. Turken, 57, became a director of the Company in October 1998.
Mr. Turken has served as Chief Executive Officer of Security Mortgage Company,
Inc./Turco Development Company (Security Mortgage) since 1964. Security
Mortgage specializes in the design and construction of industrial, commercial
and office facilities.
Class III - To Continue in Office Until 2001
Brent D. Cassity, 32, has spent his business career in the pre-need funeral
insurance industry in positions of increasing responsibilities with NPS and its
affiliates. He has served as President and Chief Operating Officer of NPS since
1997. In addition to serving as an officer and director and Chairman of the
Board of NPS, Mr. Cassity has served as a director of the Company since 1996 and
as Chairman of the Board since September 1997. Mr. Cassity also serves as a
member of the Board of Directors of each of Lincoln and Memorial.
Howard A.Wittner, 62, became a director of the Company in September 1997.
For more than the past five years, Mr. Wittner has been a senior partner
practicing corporate and business law through his firm Wittner, Poger, Spewak &
Maylack, P.C., St. Louis, Missouri. His professional memberships include the Bar
Association of Metropolitan St. Louis, The Association of Trial Attorneys and
the Missouri Defense Lawyers Association. Mr. Wittner has served as counsel for
the Company and its affiliates for more than the past five years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Substantially all of the Company's life insurance policies are issued to
fund prearranged funeral contracts that are sold by NPS and National Prearranged
Services Agency, Inc. (NPS Agency). NPS is an affiliated company that collects
all payments for prearranged funeral contracts and remits such amounts to the
Company either directly or through assumed reinsurance. In connection with
issuing insurance policies to fund prearranged funeral contracts, except in
Missouri, the individual owner of the policy assigns the policy to NPS and/or
NPS Agency. As assignee, NPS and/or NPS Agency remit premiums to and receive
policy benefits from the Company. In the State of Missouri, a trust (the
Trust) owns the policies, pays the premiums and receives the benefits. An
independent investment advisor to the Trust directs the monies in the Trust as
to the purchase of insurance policies. The policy benefits that are paid in the
ordinary course of business includes death benefits, surrender benefits and
policy loans. The Company is not subject to significant credit risk on the
policy loans, since the Company makes no policy loans which exceed the reserves
held on the policy securing the loan and the Company has the right to deduct the
loan amount from the death benefit payment or from the cash surrender value.
During 1998, substantially all premiums, death benefits and surrender benefits
were received from or paid to NPS, NPS Agency or the Trust. At December 31,
1998, the Company had policyholder loans of $15,556,437 on policies of which NPS
is the beneficiary.
The Company's insurance subsidiaries have a contract with NPS and NPS
Agency that obligates the Company to pay first-year and renewal commissions on
policies written by NPS and NPS Agency. Commissions totaled $16,850,227 in the
year ended December 31, 1998, substantially all of which were paid to NPS or NPS
Agency.
Effective January 1, 1997, the Company entered into a cost sharing
agreement with NPS whereby NPS will reimburse the Company on a monthly basis for
a portion of certain general and administrative costs paid for by the Company
for the benefit of NPS. Costs reimbursed under the agreement were $2,253,644 for
the year ended December 31, 1998.
Amounts receivable from NPS at December 31, 1998 were $1,535,926. Amounts
payable to NPS at December 31, 1998 were $65,000.
The Company entered into an Exclusivity Agreement, dated April 1, 1998,
with NPS and NPS Agency, pursuant to which NPS and NPS Agency agreed to purchase
insurance policies to fund their prearranged funeral business exclusively from
the Company's subsidiaries. The Company agreed to pay, on a monthly basis, an
amount equal to 2% of the face amount of such insurance issued during the prior
month. The agreement expires in April 2003.
The Company also participates in a retirement savings plan with NPS and
other related parties.
The firm of Wittner, Poger, Spewak & Maylack, P.C., of which Mr. Howard A.
Wittner is a member, provided legal services to the Company and its subsidiaries
during 1998. Such firm is continuing to provide legal services to the Company
and its subsidiaries during 1999.
Effective February 1, 1998, the Company purchased all of the assets of C.
Mitchell Co., Inc. (C. Mitchell Co.) for $145,000. The unpaid balance of the
purchase price bears interest at the rate of eight percent (8%). In connection
with the sale of the assets of C. Mitchell Co., Clifton Mitchell, the President
and Chief Executive Officer of the Company, entered into a non-compete agreement
with the Company for the sum of $60,000 payable in 15 equal installments
beginning April 1, 1998. Pursuant to this agreement, the Company paid Mr.
Mitchell $40,000 during 1998. C. Mitchell Co. was engaged in the business of
providing actuarial consulting services to the insurance industry. Mr. Mitchell,
the sole shareholder of C. Mitchell Co., was appointed Executive Vice
President-Actuarial and a director of the Company effective March 12, 1998 and
was appointed President and Chief Executive Officer of the Company on April 8,
1999.
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Security Ownership of Management
The following table sets forth certain information regarding the beneficial
ownership, as of April 19, 1999, of the Common Stock by: (a) each person known
by the Company to be a beneficial owner of more than 5% of the outstanding
shares of Common Stock; (b) each director of the Company; (c) the Named
Executive Officer (as hereinafter defined); and (d) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned (1) Owned
<S> <C> <C>
Howard A. Wittner (2)
7700 Bonhomme, Suite 400
Clayton, Missouri 63105................. 4,000,500 88.5%
Clifton Mitchell.......................... - (3) -
Brent D. Cassity (2) (4)
10 S. Brentwood, Suite 340
Clayton, Missouri 63105................. - (3) -
Randall K. Sutton......................... 3,000 (3) (5)
Paul J. Gallant........................... 200 (5)
Mark A. Turken............................ 2,500 (5)
David R. Wulf, Investment Adviser to
Trust IV, under Trust Agreement for
National Prearranged Services, Inc.
Pre-Need Plans, dated July 24, 1989 (6)
10 South Brentwood, Suite 315
Clayton, MO 63105...................... 276,200 6.1
All executive officers and directors
(six persons)........................... 4,282,400 94.7%
______________________
<FN>
(1) Except as otherwise indicated, each individual has sole voting and
investment power over the shares listed beside his name. The percentage
calculations for beneficial ownership are based upon 4,520,000 shares of
Common Stock that were issued and outstanding as of April 19, 1999. No
outstanding options are currently exercisable and none will be exercisable
within 60 days of April 19, 1999.
(2) Such shares are held of record by National Heritage Enterprises, Inc.
(National Heritage), which is wholly owned by the RBT Trust II, dated
September 28, 1990, of which Mr.Wittner is the trustee and has sole voting
and investment power. Brent D. Cassity currently serves as President of
National Heritage and NPS.
(3) Each of Mr. Mitchell, Mr. Cassity and Mr. Sutton were granted options to
purchase 23,750 shares of Common Stock on August 18, 1998. These options
vest as to 25% of the shares subject to such options on each anniversary of
the date of grant.
(4) Mr. Cassity is a one-third beneficiary of the RBT Trust II. Mr. Cassity
does not have voting or investment power with respect to such shares.
(5) Less than one percent.
(6) The information shown is based on a Schedule 13G dated April 29, 1999 of
the Trust IV. The information in the Schedule 13G indicates that the
investment adviser of Trust IV has the sole power to vote and dispose of
such shares.
</FN>
</TABLE>
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
During 1998, the Board of Directors of the Company met 11 times, including
regularly scheduled and special meetings. During such year all of the directors
attended at least 75% of all meetings held by the Board of Directors and all
committees upon which they served.
Since November 1998, the Board of Directors has had a standing Audit
Committee and Compensation Committee.
Audit Committee. Paul J. Gallant, Mark A. Turken and Howard A. Wittner are
members of the Audit Committee. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews with the
independent public accountants the scope and results of the audit engagement,
approves professional services provided by the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls. The Audit Committee met one time during 1998.
Compensation Committee. The members of the Compensation Committee are Paul
J. Gallant and Mark A. Turken. The Compensation Committee reviews and recommends
the salaries and other compensation of all directors and executive officers of
the Company. The Compensation Committee did not meet during 1998.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive any remuneration
in their capacity as directors. Non-employee directors receive $500 per meeting
attended and are reimbursed for related travel expenses in attending meetings.
Directors also have received options under the Lincoln Heritage Corporation 1998
Long-Term Incentive Plan (the Plan).
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of the Company (the Board) has issued the
following report for the year ended December 31, 1998.
Compensation Philosophy
For the year ended December 31, 1998, the Board approved the policies for
and structure and amount of compensation of the senior officers of the Company
(the Executive Officers), including the Chief Executive Officer and Chief
Financial Officer. The Board's goal is to establish compensation programs that
will attract and retain highly qualified executives and provide an incentive to
such executives to focus their efforts on the Company's long-term strategic
goals by aligning their financial interests closely with long-term shareholder
interests. A compensation committee composed entirely of independent directors
was formed in November 1998 and will approve future compensation policies.
A significant component of the Company's Executive Officer compensation
program is cash remuneration in the form of base salaries and annual
discretionary bonuses. Bonuses are determined based upon the performance of the
Company and the individual executive during the fiscal year. In evaluating
performance, financial, non-financial and long-term strategic objectives are
considered. Base salaries generally represent a large portion of the Executive
Officers' total cash compensation and the Board believes such salaries are
average relative to comparably sized insurance holding companies. Bonuses make
up a smaller portion of the Executive Officers' total cash compensation. The
Board believes that basing a portion of an Executive Officer's compensation on
performance motivates the executive to perform at the highest possible level.
As another component of the Company's Executive Officer compensation
program, the Board may, based upon the consideration of the above factors, award
Executive Officers options to acquire shares of Common Stock. The Board believes
that stock options provide a highly efficient form of compensation from both a
cost and an accounting perspective, and that such awards provide an incentive to
achieve the Company's longer-term strategic goals by aligning the long-term
financial interests of the Executive Officers with those of the Company's
shareholders. The Board also believes that significant levels of stock ownership
and ownership potential will assist the Company in retaining the services of the
Executive Officers.
Determination of 1998 Executive Officer Compensation
The Board met one time to determine annual bonuses and long-term incentive
compensation for the Executive Officers for 1998. In preparation for this
meeting, the Board reviewed the overall profitability, growth and financial
performance of the Company, its subsidiaries and their various business lines.
In determining each Executive Officer's bonus, the Board considered factors it
had identified to measure profitability and growth.
The Board compared the Company's financial performance during 1998 against
the objectives set by management and the Board of Directors at the beginning of
the year. Based on this information, the Board determined a compensation range
that it believed fairly reflected the Company's overall and relative financial
performance and was reasonably competitive with other comparable companies in
the burial insurance industry. The Board then reviewed the specific
non-financial objectives established for each Executive Officer by the Board of
Directors at the beginning of the year and evaluated each Executive Officer's
performance with respect to such objectives.
Mr. Powling became Chief Executive Officer and President of the Company in
April 1996. In 1998, Mr. Powling received a salary of $200,000, and a bonus of
$3,903 and options to purchase 23,750 shares of stock pursuant to the Plan.
Effective April 9, 1999, Mr. Powling resigned from his positions as Chief
Executive Officer and President and from his directorship. Upon his resignation,
Mr. Powling's stock options lapsed.
Mr. Mitchell became Chief Financial Officer of the Company in March 1998
and President and Chief Executive Officer of the Company in April 1999 upon Mr.
Powling's resignation from the Company. For 1998, Mr. Mitchell received a salary
of $183,333, and was granted a bonus of $62,500 which will be payable in 1999.
Mr. Mitchell also received options to purchase 23,750 shares of stock pursuant
to the Plan.
Conclusion
Through the program described above, a significant portion of the Company's
executive compensation is linked directly to individual and corporate
performance, earnings per share and stock price appreciation. The Board intends
to continue the policy of linking executive compensation to individual and
corporate performance and returns to shareholders, recognizing that the business
cycle from time to time may result in an imbalance for a particular period.
THE BOARD OF DIRECTORS
April 19, 1999
Brent D. Cassity
Clifton Mitchell
Paul J. Gallant
Randall K. Sutton
Mark A. Turken
Howard A. Wittner
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid to Clifton Mitchell,
the Company's President and Chief Executive Officer, and Nicholas M. Powling,
the Company's former President and Chief Executive Officer (collectively, the
Named Executive Officers), for services rendered to the Company in all
capacities. Mr. Mitchell was appointed President and Chief Executive Officer of
the Company on April 9, 1999. Prior thereto, Mr. Mitchell served as Executive
Vice President-Actuarial of the Company. Mr. Mitchell and Mr. Powling were the
only officers of the Company whose aggregate annual salary and bonus exceeded
$100,000 during 1998.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Annual Compensation Securities
Other Restricted Underlying
Name and Annual Stock Options/ All Other
Principal Fiscal Salary Bonus Compensation Awards SARs Compensation
Position Year ($) ($) ($)(1) ($) (#) ($)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Clifton
Mitchell (2) 1998 $183,333 $62,500(3) - - 23,750/0 -
President
and
Chief 1997 - - - - - -
Executive
Officer 1996 - - - - - -
Nicholas M.
Powling(4) 1998 200,000 3,903 - - 23,750/0 -
Former
President
and Chief 1997 100,000 1,951 - - - -
Executive
Officer 1996 - - - - - -
_________________
<FN>
(1) The Named Executive Officers received certain perquisites in 1998,
1997 and 1996, the amount of which did not exceed the lesser of
$50,000 or 10% of any such officer's salary and bonus.
(2) Mr. Mitchell joined the Company in March 1998 as Executive Vice
President-Actuarial and became President and Chief Executive Officer
in April 1999. Prior thereto, Mr. Mitchell provided actuarial
consulting services to the Company.
(3) The bonus amount for performance for 1998 will be paid in 1999.
(4) Mr. Powling joined the Company in April 1996 as President, Chief
Executive Officer and a director and resigned from such positions as
of April 8, 1999.
</FN>
</TABLE>
<PAGE>
OPTION/SAR GRANTS IN LAST YEAR
The following table sets forth information concerning stock option grants
made in 1998 to the Named Executive Officers. No SARs were granted to such
individuals in 1998.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Number of Percent Value at Assumed
Securities of Total Annual Rates of
Underlying Options/SARs Exercise Stock Price
Options/SARs Granted to or Base Appreciation for
Granted Employees in Price Expiration Option Term(1)
Name (#)(2) Year ($/Sh) Date (3) 0% ($) 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Clifton
Mitchell 23,750 5.95% $ 3.75 8/17/08 $89,063 $201,084 $372,948
Nicholas M.
Powling(4) 23,750 5.95 3.75 8/17/08 89,063 201,084 372,948
<FN>
(1) The indicated 5% and 10% rates of appreciation are provided to comply
with Commission regulations and do not necessarily reflect the views of the
Company as to the likely trend in the price of the Common Stock. The effect of
5% and 10% rates of appreciation on Common Stock held for ten years is
demonstrated by the following: a share of Common Stock purchased on August 18,
1998 at a price per share of $3.75 and held until August 17, 2008 would have a
value of $12.22 at a 5% rate of appreciation and a value of $19.45 at a 10% rate
of appreciation. Actual gains, if any, on stock option exercises and Common
Stock holdings will be dependent on, among other things, the future performance
of the Common Stock and overall market conditions. There can be no assurance
that the amounts reflected herein will be achieved. Additionally, these values
do not take into consideration the provisions of the options providing for
nontransferability or delayed exercisability.
(2) Each option will become exercisable with respect to 25% of the shares
subject to the option on each anniversary date of the grant.
(3) The options terminate on the earlier of ten years from the date of
grant, twelve months from the date of termination for death, retirement or
disability or three months from termination of employment for any other reason.
(4) Mr. Powling resigned from the Company on April 8, 1999. Mr. Powling's
options lapsed upon termination of his employment.
</FN>
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning the aggregate dollar
value realized upon exercise of options during 1998, the number of securities
underlying options outstanding at year-end 1998 and the value of options
outstanding at year-end 1998 having an exercise price lower than the market
price of the Common Stock held by the Named Executive Officers.
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired On Value Options/SARs at In-the-Money Options/SARs
Exercise Realized Year-End (#) at Year-End ($) (1)
Un- Un-
Name (#) ($) Exercisable Exercisable Exercisable Exercisable
<S> <C> <C> <C> <C> <C> <C>
Clifton Mitchell - - - 23,750 - $29,687.50
Nicholas M. Powling - - - 23,750 - 29,687.50
<FN>
(1) Based on the Common Stock closing price of $5.00 on December 31, 1998.
</FN>
</TABLE>
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock during the period from November 2, 1998 (the date the
Company began trading on the Pacific Exchange) through December 31, 1998 with
the cumulative total return of the Nasdaq National Market and the Nasdaq
National Market Insurance Index during such period, assuming a $100 investment
on November 2, 1998. The Company has not paid any dividends on the Common Stock,
and no dividends are included in the representation of the Company's
performance.
<TABLE>
<CAPTION>
11/2/1998 12/31/1998
<S> <C> <C>
- ------------------------------------------------------------------------------
Lincoln Heritage Corporation $ 100.00 $ 66.67
- ------------------------------------------------------------------------------
Nasdaq 100.00 106.38
- ------------------------------------------------------------------------------
Nasdaq Insurance Index 100.00 110.68
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who own more than ten
percent of the Company's outstanding stock (Reporting Persons) to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. To the Company's knowledge, based solely on its review of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to the
Reporting Persons were complied with during the year ended December 31, 1998,
except for Randall K. Sutton and Howard A. Wittner, each of whom filed a late
Form 5 to report the purchase of shares of Common Stock.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP (D&T) served as the Company's independent public
accountants for the year ended December 31, 1998 and has been selected by the
Board of Directors to continue in such capacity during 1999. Representatives of
D&T are expected to be present at the Annual Meeting to answer appropriate
questions from shareholders, and such representatives will have the opportunity
to make statements if they so desire.
On December 21, 1998, with the approval of the Audit Committee of the Board
of Directors of Company, the Company approved the appointment of D&T as its
independent accountants to audit the Company's consolidated financial statements
as of December 31, 1998, and for the year then ended. The firm of Killman,
Murrell & Company, P.C. (Killman) was dismissed as the Company's independent
accountants as of such date. The Company effected the change in auditor because
it determined that it would benefit from the expertise and resources of a larger
auditing firm.
The report of Killman on the Company's financial statements as of
December 31, 1997 and 1996 and for the years then ended did not contain an
adverse opinion or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles. Such financial statements
were the first financial statements prepared by the Company in accordance with
generally accepted accounting principles (GAAP) and Regulation S-X, and were
necessitated by the Company's initial public offering. Prior thereto, the
Company's principal operating subsidiaries prepared financial statements under
statutory accounting principles required for filings with state insurance
administrators.
During the course of preparing the Company's consolidated financial
statements in accordance with GAAP and clearing Securities and Exchange
Commission Staff accounting comments on the registration statement filed by the
Company in connection with its initial public offering, there were numerous
discussions between Company management personnel and representatives of Killman
regarding various issues, some of which were unique to the Company's particular
facts and circumstances. Certain of these discussions led to material
adjustments to the Company's internally prepared statements. However, the
Company does not believe that such discussions included disagreements with
Killman on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of Killman, would have caused Killman to make reference to the
subject matter of such disagreement in its reports during the years covered by
such audited financial statements or from the period January 1, 1998 to the date
of their dismissal. The Company has authorized Killman to fully respond to any
inquires of D&T concerning its audit.
During the two-year period ended December 31, 1997 and through the date of
the appointment, D&T did not provide any consultations to the Company regarding
the application of accounting principles to specific transactions and the type
opinion that they may have rendered on the financial statements.
PROPOSALS OF SHAREHOLDERS
Under applicable regulations of the Securities and Exchange Commission, all
proposals of shareholders to be considered for inclusion in the proxy statement
for the 2000 Annual Meeting of Shareholders must be received at the offices of
the Company, c/o Secretary, 1250 Capital of Texas Highway, Building 3, Suite
100, Austin, Texas 78746, by no later than December 21, 1999. The Company s
By-Laws provide that shareholder proposals, including nominations of directors,
that do not appear in the proxy statement may be considered at a meeting of
shareholders only if written notice of the proposal is received by the Company s
Secretary not less than 60 days and not more than 90 days prior to the
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is more than 30 days before or
more than 60 days after such anniversary date, notice by the shareholder must be
delivered not earlier than the 10th day prior to such annual meeting and not
later than the 60th day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such meeting is first made
by the Company. Under the By-laws of the Company, the date by which written
notice of a proposal must be received by the Company to be considered at the
2000 Annual Meeting of Shareholders is March 21, 2000.
Any written notice of a shareholder proposal must include the following
information: (a) as to each person whom the shareholder proposes to nominate for
election or reelection as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business that the
shareholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the shareholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made, (i) the name and
address of such shareholder, as they appear on the Company's books, and of such
beneficial owner, and (ii) the class and number of shares of the Company which
are owned beneficially and of record by such shareholder and such beneficial
owner.
DISCRETIONARY VOTING
At the 2000 Annual Meeting of Shareholders, the individuals named in the
proxy relating to such meeting will exercise discretionary authority to vote on
any matter brought before the meeting with respect to which the Company was
provided with notice after December 30, 1999, and before March 30, 2000. In
addition, the Company will include in the proxy statement advice on the nature
of the matter and how the individuals named in the proxy relating to such
meeting intend to exercise their discretion to vote on each mater.
Notwithstanding the above, the individuals named in the proxy relating to such
meeting will not exercise discretionary authority over a matter if: (i) the
Company receives notice of such matter by March 30, 2000; (ii) by March 30,
2000, the proponent of such matter (the Proponent) provides the Company with a
written statement that the Proponent intends to deliver a proxy statement and
form of proxy to holders of at least the percentage of the Companys voting
shares required under Texas law to carry the proposal; (iii) the Proponent
includes the same statement in its proxy materials filed under Rule 14a-6 of the
Securities Exchange Act of 1934, as amended; and (iv) immediately after
soliciting the percentage of shareholders required to carry the proposal, the
Proponent provides the Company with a statement from any solicitor or other
person with knowledge that the necessary steps have been taken to deliver a
proxy statement and form of proxy to holders of at least the percentage of the
Company's voting shares required under Texas law to carry the proposal.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, nor has it been informed that other persons intend to
present, any matters for action at the Annual Meeting, other than those
specifically referred to herein. If, however, any other matters should properly
come before the Annual Meeting, it is the intention of the persons named on the
proxy to vote the shares represented thereby in accordance with their judgment
as to the best interest of the Company on such matters.
By Order of the Board of Directors,
Howard A. Wittner
Secretary
April 30, 1999
<PAGE>
LINCOLN HERITAGE CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1999
The undersigned hereby appoints Randall K. Sutton and Howard A. Wittner,
and each of them, with or without the other, proxies, with full power of
substitution to vote, as designated below, all shares of common stock, $0.01 par
value, of Lincoln Heritage Corporation (the Company) that the undersigned
signatory hereof is entitled to vote at the Annual Meeting of Shareholders of
the Company to be held at the Clayton Holiday Inn, 7730 Bonhomme, Clayton,
Missouri 63105, on Thursday, May 20, 1999, at 10:00 a.m., and all adjournments
thereof, all in accordance with and as more fully described in the Notice and
accompanying Proxy Statement for such meeting, receipt of which is hereby
acknowledged.
1. ELECTION OF DIRECTORS
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY
CLASS I (three-year term)
Clifton Mitchell Paul J. Gallant
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THE PROXY WILL BE
VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The Board of Directors recommends voting For the election of Clifton
Mitchell and Paul J. Gallant as directors set forth in Proposal No. 1 above.
DATED: _____________________________, 1999
Signature
Signature, if held jointly
Please sign exactly as name appears on this Proxy Card. When shares are
held by joint tenants, both should sign. When signing as attorney-in-fact,
executor, administrator, personal representative, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
April 30, 1999
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Lincoln Heritage Corporation (Commission File No. 000-14067) -
Definitive Proxy Materials for the 1999 Annual Meeting of Shareholders
Dear Sir or Madam:
On behalf of Lincoln Heritage Corporation, a Texas corporation (the
Company), we are pleased to transmit via EDGAR the Company's definitive proxy
soliciting materials, including the Notice of Annual Meeting of Shareholders,
the Proxy Statement and the form of Proxy, to be used in connection with the
Company's Annual Meeting of Shareholders to be held on May 20, 1999.
The annual meeting involves only the non-contested election of directors.
The materials will first be mailed or delivered to the shareholders of the
Company on April 30, 1999.
Should you have any questions or comments, please contact the undersigned
at (512) 329-7185.
Very truly yours,
Janette Williams
cc: Clifton Mitchell
Howard A. Wittner, Esq.
Jean H. Maylack, Esq.
Thomas A. Litz, Esq.
David F. Morris, Esq.
Rebecca S. Robeson, Esq.
