FIRST COMMONWEALTH CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MONDAY JUNE 5, 1995
To the Shareholders of:
FIRST COMMONWEALTH CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of First Commonwealth Corporation, (the"Company"),
will be held Monday, June 5, 1995 at 10:00 a.m. at the offices of
the Company, 5250 South 6th Street, Springfield, IL 62703, for
the following purposes:
1. To elect fourteen directors of the Company to serve for
one year and until their successors are elected and
qualified; and
2. To consider and act upon such other business as may
properly be brought before the meeting.
The Board of Directors has fixed the close of business on
April 14, 1995 as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual
Meeting.
Whether or not you plan to attend the Annual Meeting, you
are urged to mark, date and sign the enclosed proxy and return it
promptly so that your vote can be recorded. If you are present
at the meeting and desire to do so, you may revoke your proxy and
vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
FIRST COMMONWEALTH CORPORATION
George E. Francis
Secretary
Dated: May 8, 1995
Springfield, Illinois
YOUR VOTE IS IMPORTANT!
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
IN PERSON.
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS OF
FIRST COMMONWEALTH CORPORATION
GENERAL INFORMATION REGARDING SOLICITATION
The Annual Meeting of the Shareholders of First Commonwealth
Corporation (the "Company") will be held on June 5, 1995 at 10:00
a.m., at the offices of the Company, 5250 South Sixth Street,
Springfield, Illinois. The mailing address of the Company is P.O.
Box 5147, Springfield, Illinois 62705-5147.
This proxy statement is being sent to each holder of record
of the issued and outstanding shares of Common Stock of the
Company, $1.00 par value per share (the "Common Stock"), as of
April 14, 1995, in order to furnish to each shareholder
information relating to the business to be transacted at the
meeting.
This proxy statement and the enclosed proxy are being mailed
to shareholders of the Company on or about May 8, 1995.The
Company will bear the cost of soliciting proxies from its
shareholders. The Company may reimburse brokers and other persons
for their reasonable expenses in forwarding proxy materials to
the beneficial owners of the Company s stock. Solicitations may
be made by telephone, telegram or by personal calls, and it is
anticipated that such solicitations will consist primarily of
requests to brokerage houses, custodians, nominees, and
fiduciaries to forward the soliciting material to the beneficial
owners of shares held of record by such persons. If necessary,
officers and regular employees of the Company may by telephone,
telegram or personal interview request the return of proxies.
VOTING
The enclosed proxy is solicited by and on behalf of the
Board of Directors. If you are unable to attend the meeting on
June 5, 1995, please complete the enclosed proxy and return it to
us in the accompanying envelope so that your shares will be
represented.
When the enclosed proxy is duly executed and returned in
advance of the meeting, and is not revoked, the shares
represented thereby will be voted in accordance with the
authority contained therein. Any shareholder giving a proxy may
revoke it at any time before it is voted by delivering to the
Secretary of the Company a written notice of revocation or a duly
executed proxy bearing a later date, or by attending the meeting
and voting in person. If a proxy fails to specify how it is to be
voted it will be voted "FOR" Proposal 1.
Inspectors of election will be appointed to tabulate the
number of shares of Common Stock represented at the meeting in
person or by proxy, to determine whether or not a quorum is
present and to count all votes cast at the meeting. The
inspectors of election will treat abstentions and broker
non-votes as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. With respect
to the tabulation of votes cast on a specific proposal presented
to the shareholders at the meeting, abstentions will be
considered as present and entitled to vote with respect to that
specific proposal, whereas broker non-votes will not be
considered as present and entitled to vote with respect to that
specific proposal.
<PAGE>
AFFILIATE COMPANIES
The Company is a member of an insurance holding company
system of which United Trust, Inc., an Illinois corporation
("UTI"), is the ultimate parent. The following is the current
organizational chart for the companies that are members of the
UTI insurance holding company system and affiliates of the
Company, and the acronyms that will be used herein to reference
the companies:
The chart presented reflects the ultimate parent company of the
group United Trust, Inc. (UTI). UTI owns 30% of United Income,
Inc. (UII) and 53% of United Trust Group, Inc. (UTG). UII owns
47% of UTG. UTG owns 69% of Commonwealth Industries Corporation
(CIC), 18% of Investors Trust, Inc. (ITI), 33% of Universal
Guaranty Investment Company (UGIC) and 47% of First Commonwealth
Corporation (FCC). CIC owns 42% of ITI. ITI owns 35% of UGIC.
UGIC owns 50% of FCC. FCC owns *21% of CIC and 100% of Universal
Guaranty Life Insurance Company (UG). UG owns 100% of United
Security Assurance Company (USA). USA owns 84% of Appalachian Life
Insurance Company (APPL). APPL owns 100% of Abraham Lincoln
Insurance Company (ABE).
* Represents stock of CIC owned by the Company. This stock is
treated as treasury shares for voting purposes and it cannot
be voted. Therefore, although UTG only owns approximately
69% of the issued stock of CIC, because 21% of the stock of
CIC is owned by the Company and cannot be voted, UTG has
approximately 88% voting control of CIC.
For purposes of this proxy statement, the term "affiliate life
insurance companies" shall mean UG, USA, APPL and ALIC, and the
term "non-insurance affiliate companies" shall mean the
affiliated companies other than UG, USA, APPL and ALIC.
The companies hereinafter are sometimes collectively referred to
as the "Affiliate Companies".
<PAGE>
VOTING SECURITIES OUTSTANDING
April 14, 1995 has been fixed as the record date for the
determination of shareholders entitled to notice of and to vote
at the annual meeting or any adjournments or postponements
thereof. On that date, the Company had outstanding 24,340,051
shares of Common Stock, par value $1.00 per share. No other
voting securities of the Company are outstanding. The holders of
such shares are entitled to one vote per share. There are no
cumulative voting rights. The affirmative vote of the holders of
a majority of the shares of Common Stock represented in person or
by proxy at the annual meeting is required to approve each matter
to be voted on at such meeting.
ANNUAL REPORT
A 1994 Annual Report to Shareholders of the Company has been
furnished to the Company's shareholders under separate cover. The
Annual Report in itself is not to be regarded as proxy soliciting
material or as a communication by means of which any solicitation
is to be made.
PRINCIPAL HOLDERS OF SECURITIES
The following tabulation sets forth the names and addresses
of those entities known to be the beneficial owners of more than
5% of the Company's Common Stock and shows for each: (i) the
total number of shares of Common Stock beneficially owned by such
persons as of March 31, 1994 and the nature of such ownership;
and (ii) the percent of the issued and outstanding shares of
Common Stock so owned as of the same date.
Title Number of Shares Percent
of Name and Address and Nature of of
Class of Beneficial Owner Beneficial Ownership Class(1) (2)
Common Universal Guaranty 12,160,066 50%
Stock Investment Company
$1.00 par 5250 South Sixth Street
value Springfield, Illinois 62703
United Trust Group, Inc. 11,332,849 47%
5250 South Sixth Street
Springfield, Illinois 62703
(1) Based on 24,340,051 shares of the Company's Common Stock
outstanding as of March 31, 1995.
(2) By reason of the ownership of approximately 69% of the
capital stock of CIC, UTG may be deemed to be the beneficial
owner of CIC's 42% stock interest in ITI, which owns 35% of
the capital stock of UGIC which owns 50% of the capital stock
of the Company. Similarly, CIC may be deemed the beneficial
owner of ITI's stock holdings in UGIC. UTG is a holding
company, the capital stock of which is owned 53% by UTI and
47% by UII. UTI in turn owns 30% of the capital stock of UII.
SECURITY OWNERSHIP OF MANAGEMENT
The following tabulation shows with respect to each of the
directors and nominees of the Company, with respect to the
Company's chief executive officer and each of the Company's four
other most highly compensated executive officers for fiscal 1994,
and with respect to all executive officers and directors of the
Company as a group: (i) the total number of shares of all
classes of stock of the Company or any of its parents or
subsidiaries, beneficially owned as of March 31, 1995 and the
nature of such ownership; and (ii) the percent of the issued and
outstanding shares of stock so owned as of the same date.
<PAGE>
Title Directors, Named Executive Number of Shares Percent
of Officers, & All Directors & and Nature of of
Class Executive Officers as a Group Ownership Class (1)
ITI's John S. Albin 0 *
Common John K. Cantrell 0 *
Stock, William F. Cellini 0 *
$.03 par John W. Collins 0 *
value George E. Francis 0 *
Donald G. Geary 0 *
James E. Melville 0 *
Joseph H. Metzger 0 *
Luther C. Miller 0 *
Thomas F. Morrow 0 *
Robert V. O'Keefe 0
Larry E. Ryherd 0 *
Robert W. Teater 0 *
Howard A. Young 11,125 *
All directors and 11,125 *
executive officers as a
group (fourteen in number)
UGIC s John S. Albin 0 *
Common John K. Cantrell 5 *
Stock, William F. Cellini 20 *
$1.00 par John W. Collins 0 *
value George E. Francis 0 *
Donald G. Geary 17,407 *
James E. Melville 4,280 *
Joseph H. Metzger 0 *
Luther C. Miller 0 *
Thomas F. Morrow 0 *
Robert V. O'Keefe 0 *
Larry E. Ryherd 0 *
Robert W. Teater 0 *
Howard A. Young 2,500 *
All directors and 24,212 1.0%
executive officers as a
group (fourteen in number)
UII s John S. Albin 0 *
Common John K. Cantrell 0 *
Stock, no William F. Cellini 0 *
par value John W. Collins 0 *
George E. Francis 0 *
Donald G. Geary 0 *
James E. Melville 0 *
Joseph H. Metzger 0 *
Luther C. Miller 0 *
Thomas F. Morrow 590,625 (2) 3.0%
Robert V. O'Keefe 0 *
Larry E. Ryherd 675,000 (3) 3.4%
Robert W. Teater 104,259 (4) *
Howard A. Young 0 *
All directors and 1,369,884 6.9%
executive officers as a
group (fourteen in number)
<PAGE>
UTI s John S. Albin 105,041 (5) *
Common John K. Cantrell 0 *
Stock, no William F. Cellini 0 *
par value John W. Collins 0 *
George E. Francis 46,000 (6) *
Donald G. Geary 2,000 *
James E. Melville 500,000 (7) 2.7%
Joseph H. Metzger 69,040 (8) *
Luther C. Miller 0 *
Thomas F. Morrow 1,580,600 (9) 8.5%
Robert V. O'Keefe 3,000 (10) *
Larry E. Ryherd 5,903,368 (11) 31.6%
Robert W. Teater 0 *
Howard A. Young 1,000 *
All directors and 8,210,049 44.0%
executive officers as a
group (fourteen in number)
(1) Based on 9,609,816 shares of ITI Common Stock, 2,348,249
shares of UGIC Common Stock, 19,886,572 shares of UII Common
Stock and 18,655,935 shares of UTI Common Stock outstanding
as of March 31, 1995.
(2) Includes 590,625 shares beneficially in trust for the two
children of Thomas F. Morrow, namely Kristi J. Wilkerson and
Amy Suzanne Heath.
(3) Includes 675,000 shares beneficially in trust for the three
children of Larry E. Ryherd and Dorothy LouVae Ryherd,
namely Shari Lynette Serr, Derek Scott Ryherd and Jarad John
Ryherd.
(4) Includes 3,000 shares owned directly by Mr. Teater's spouse.
(5) Includes 3,928 shares owned directly by Mr. Albin's spouse.
(6) Includes 46,000 shares which may be acquired upon exercise of
outstanding stock options.
(7) James E. Melville owns 140,000 shares jointly with his spouse.
Includes; (i) 30,000 shares of UTI's Common Stock which
are held beneficially in trust for his daughter, namely Bonnie J.
Melville; (ii) 30,000 shares of UTI's Common Stock, 7,500 shares
of which are in the name of Matthew C. Hartman, his nephew; 7,500
shares of which are in the name of Zachary T. Hartman, his
nephew; 7,500 shares of which are in the name of Elizabeth A.
Hartman, his niece; and 7,500 shares of which are in the name of
Margaret M. Hartman, his niece; and (iii) 300,000 shares which
may be acquired by James E. Melville upon exercise of outstanding
stock options.
(8) Includes 69,000 shares which may be acquired upon exercise of
outstanding stock options.
(9) Includes 172,000 shares which may be acquired upon exercise of
outstanding stock options. Includes 5,000 shares as custodian
for grandson.
(10) 3,000 shares owned directly by Mr. O'Keefe's spouse.
(11) Larry E. Ryherd owns 2,441,868 shares of UTI s Common Stock in
his own name. Includes; (i) 1,500,500 shares of UTI s
Common Stock in the name of Dorothy LouVae Ryherd, his wife; (ii)
1,500,000 shares of UTI s Common Stock which are held
beneficially in trust for the three children of Larry E. Ryherd
and Dorothy LouVae Ryherd, namely Shari Lynette Serr, Derek Scott
Ryherd and Jarad John Ryherd; (iii) 293,000 shares of UTI s
Common Stock, 97,000 shares of which are in the name of Shari
Lynette Serr, 97,000 shares of which are held in the name of
Derek Scott Ryherd, and 99,000 shares of which are in the name of
Jarad John Ryherd; (iv) 5,000 shares of UTI s Common Stock held
in the name of Larry E. Ryherd as custodian for Charity Lynn
Newby, his niece; (v) 5,000 shares held in the name of Larry E.
Ryherd as custodian for Lesley Carol Newby, his niece; (vi)
20,000 shares held by Dorothy LouVae Ryherd, his wife as
custodian for granddaughter; and (vii) 138,000 shares which may
be acquired by Larry E. Ryherd upon exercise of outstanding stock
options.
* Less than 1%.
None of the directors or executive officers of the Company owns
any shares of Common Stock of the Company or CIC.
Except as indicated above, the foregoing persons hold sole voting
and investment power.
Directors and officers of the Company file periodic reports
regarding ownership of Company securities with the Securities and
Exchange commission pursuant to Section 16(2) of the Securities
Exchange Act of 1934 as amended, and the rules promulgated
thereunder.
<PAGE>
THE BOARD OF DIRECTORS
In accordance with the laws of Virginia and the Certificate
of Incorporation and Bylaws of the Company, as amended, the
Company is managed by its executive officers under the direction
of the Board of Directors. The Board elects executive officers,
evaluates their performance, works with management in
establishing business objectives and considers other fundamental
corporate matters, such as the issuance of stock or other
securities, the purchase or sale of a business and other
significant corporate business transactions. Neither the Company
nor any of its subsidiaries or affiliates have a compensation
committee. In the fiscal year ended December 31, 1994, the board
met four times. All nominees for director attended at least 75%
of all meetings of the board except for Robert V. O'Keefe.
The Board of Directors has an Audit Committee consisting of
Messrs. Albin, Collins, Teater and Young. The Audit Committee
reviews and acts or reports to the Board with respect to various
auditing and accounting matters, the scope of the audit
procedures and the results thereof, the internal accounting and
control systems of the Company, the nature of services performed
for the Company and the fees to be paid to the independent
auditors, the performance of the Company's independent and
internal auditors and the accounting practices of the Company.
The Audit Committee also recommends to the full Board of
Directors the auditors to be appointed by the Board. The Audit
Committee met once in 1994.
The Board of Directors has a Nominating Committee consisting
of Messrs. Cantrell, Geary and Miller. The Nominating Committee
reviews, evaluates and recommends directors, officers and
nominees for the Board of Directors. There is no formal
mechanism by which shareholders of the Company can recommend
nominees for the Board of Directors, although any recommendations
by shareholders of the Company will be considered. Shareholders
desiring to make nominations to the Board of Directors should
submit their nominations in writing to the Chairman of the Board
no later than February 1st of the year in which the nomination is
to be made. The Committee did not meet in 1994.
ELECTION OF DIRECTORS
At the annual meeting of shareholders of the Company,
fourteen directors are to be elected, each director to hold
office until the next annual meeting and until his successor is
elected and qualified. Each nominee will be elected director by
a majority of votes cast for such nominee. The persons named in
the proxy intend to vote the proxies as designated for the
nominees listed below. Should any of the nominees listed below
become unable or unwilling to accept nomination or election, it
is intended, in the absence of contrary specifications, that the
proxies will be voted for the balance of those named and for a
substituted nominee or nominees; however, the management now
knows of no reason to anticipate such an occurrence. All of the
nominees have consented to be named as nominees and to serve as
directors if elected. The following individuals are nominees for
the election of directors:
Name, Age Position with the Company, Business Experience
and Other Directorships
John S. Albin Director of the Company since 1992; Director of
67 United Trust, Inc. since 1984; Director of United
Trust Group, Inc., Investors Trust, Inc.,
Universal Guaranty Investment Co. and Commonwealth
Industries Corp. since 1992; farmer in Douglas and
Edgar counties, Illinois, since 1951; Chairman of
the Board of Longview State Bank since 1978;
President of the Longview Capitol Corporation, a
bank holding company, since 1978; Chairman of
First National Bank of Ogden, Illinois, since
1987; Chairman of the State Bank of Chrisman since
1988; Director and Secretary of Illini Community
Development Corporation since 1990; Chairman of
Parkland College Board of Trustees since 1990;
board member of the Fisher National Bank, Fisher,
Illinois, since 1993.
John K. Cantrell Chairman of Board of Directors of the Company and
70 CIC and certain affiliate companies since 1984;
Chief Executive Officer of the Company and certain
affiliate companies from 1984 until 1992; officer
and director of certain affiliate companies for
more than five years.
William F. Cellini Director of the Company and certain affiliate
60 companies since 1984; Chairman of the Board of
New Frontier Development Group, Chicago, Illinois
for more than the past five years; Executive
Director of Illinois Asphalt Pavement Association.
John W. Collins Consultant and past President of Collins-Winston
69 Group since 1976; past Director of the Company
and certain affiliate companies from 1982 to 1992;
past Director of CIC from 1976 to 1992.
<PAGE>
George E. Francis Secretary of the Company and certain affiliate
companies since 1993; Director of the Company and
certain affiliate companies since 1992; Treasurer
and Chief Financial Officer of certain affiliate
companies from 1984 until 1992; Senior Vice
President and Chief Administrative Officer of
certain affiliate companies since 1989.
Donald G. Geary Director of the Company and certain affiliate
companies since 1984; industrial warehousing
developer and founder of Regal 8 Inns for more
than the past five years.
James E. Melville Chief Financial Officer of the Company since
1993, a Director since 1992, Chief Operating
Officer from 1989 to 1991 and Senior Executive
Vice President from 1984 until 1989; President of
the Company and certain affiliate companies from
1989 until 1991; Chief Operating Officer of
certain affiliate companies from 1984 until
1991; Senior Executive Vice President of
certain affiliate companies from 1984 until 1989;
consultant to UTI and UTG from March -
September, 1992; President and Chief Operating
Officer of certain affiliate life insurance
companies and Senior Executive Vice President
of non-insurance affiliate companies since 1992.
Joseph H. Metzger Director of the Company since 1992, Senior Vice
President, Real Estate since 1989; Senior Vice
President, Real Estate of certain affiliate
companies since 1983.
Luther C. Miller Director of the Company since 1984; Executive
Vice President and Secretary of the Company from
1984 until 1992; officer and director of certain
affiliate companies for more than the past five
years.
Thomas F. Morrow Vice Chairman, Chief Operating Officer,
Director of the Company since 1992 and Treasurer
since 1993; President and COO of UTI since 1991,
Treasurer since 1993 and a Director since 1984;
Vice Chairman and Chief Operating Officer of
UII since 1992, Director since 1987; President,
Chief Operating Officer, Treasurer and Director
of UTG since 1992; Vice Chairman, Chief
Operating Officer and Director of certain
affiliate companies since 1992 and Treasurer since
1993; Executive Vice President, Secretary and
Director of UFI since 1990; Executive Vice
President, Secretary and Director of FFMC since
1991. Mr. Morrow has served as Vice Chairman and
Director of certain affiliate life insurance
companies since 1992 as well as having held
similar positions with other affiliate life
insurance companies from 1987 to 1992.
Robert V. O'Keefe Director of the Company since 1993; Director
and Treasurer of UTI from 1988 to 1992; Director
and Treasurer of UFI from 1990 until 1992;
Director of Cilcorp, Inc. from 1982 to 1994;
Director of Cilcorp Ventures, Inc. from 1985
to 1994; Director of Environmental Science and
Engineering Co. since 1990.
Larry E. Ryherd President, CEO and Director of the Company
since 1992; UTI Chairman of the Board of
Directors and a Director since 1984, CEO since
1991; Chairman of the Board of UII since 1987,
CEO since 1992 and President since 1993; Chairman,
CEO and Director of UTG since 1992; President,
CEO and Director of certain affiliate companies
since 1992; Chairman of the Board and Director
of UFI since 1990; Director of FFMC since 1991.
Mr. Ryherd has served as Chairman of the Board,
CEO, President and COO of certain affiliate
life insurance companies since 1992 and 1993.
He has also been a Director of the National
Alliance of Life Companies since 1992 and is
the 1994 Membership Committee Chairman; he is a
member of the American Council of Life
Companies and Advisory Board Member of its
Forum 500 since 1992.
Robert W. Teater Director of the Company since 1992; Director
of UTG and certain affiliate companies since
1992; Director of UII since 1987; Director of
certain affiliate companies since 1992; member
of Columbus School Board since 1991 and President
since 1992; President of Robert W. Teater and
Associates, a comprehensive consulting firm in
natural resources development and organization
management since 1983.
Howard A. Young Director of the Company since 1984; Director
of certain affiliate companies for more than
the past five years; retired from Harris
Broadcast Products Corporation, Quincy, Illinois.
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
More detailed information on the following officers of the Company
under "Election of Directors":
Larry Ryherd President and Chief Executive Officer
Thomas F. Morrow Vice Chairman and Chief Operating
Officer and Treasurer
James E. Melville CFO and Senior Executive Vice President
George E. Francis Senior Vice President and Secretary
EXECUTIVE COMPENSATION
Executive Compensation Table
The following table sets forth certain information regarding
compensation paid to or earned by the Company's chief executive officer
and each of the four other most highly compensated executive officers
of the Company during each of the Company's last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and
Principal Position Salary ($) Bonus ($) Awarded (#)
<S> <C> <C> <C> <C>
Larry E. Ryherd 1994 407,909 (1) 29,535 (3) -
President, Chief 1993 242,393 (1) 140,000 (3) 138,000 (5)
Executive Officer 1992 132,126 (2) - -
Thomas F. Morrow 1994 309,886 (1) 19,576 (3) -
Vice Chairman, Chief 1993 202,992 (1) 88,000 (3) 172,000 (5)
Operating Officer 1992 105,458 (2) - -
James E. Melville 1994 250,181 (1) - -
Sr. Executive Vice 1993 251,506 (1,4) - 325,000 (5)
President, Chief 1992 206,765 (4) - -
Financial Officer
Joseph H. Metzger 1994 87,000 101,932 (1,3) -
Sr. Vice President 1993 87,000 83,276 (1,3) 69,000 (5)
Real Estate 1992 125,250 - -
George E. Francis 1994 121,636 (1) - -
Sr. Vice President, 1993 119,798 (1) - 46,000 (5)
Secretary 1992 124,041 - -
(1) The amount shown includes deferred compensation paid
pursuant to a deferred compensation plan instituted by the
Company and UTI effective May 1, 1993. Under the plan, an
officer of the Company or affiliates of the Company may defer a
portion of his or her income over the next two and one-half years
in return for a deferred compensation payment payable at the end
of seven years in an amount equal to the total income deferred
plus interest at a rate of approximately 8.5% per year.
Additionally, each participant will receive an option to purchase
23,000 shares of UTI Common Stock at $1.75 per share for each
$25,000 ($10,000 per year for two and one-half years) of total
income deferred. The option is immediately exercisable and
expires on December 31, 2000.
(2) Mr. Ryherd's and Mr. Morrow's employment with the Company
began after the acquisition of the Company by UTG in June of
1992.
(3) Includes bonus compensation as set forth in their employment
agreements.
(See Employment Contracts.)
(4) Includes $75,765 and $10,517 in 1992 and 1993 respectively
for amounts owing Mr. Melville pursuant to a consulting agreement
between CIC, UTI and Mr. Melville.
(5) Reflects stock options to purchase UTI Common Stock pursuant
to their employment agreements.
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values
The following table summarizes for fiscal year ending, December 31, 1994, the value of unexercised options
of the Common Stock of UTI held by the named executive officers.
The values shown were determined by multiplying the applicable
number of share options times the difference between the per share
market price on December 31, 1994 and the applicable exercise price
per share. There were no options granted to the named executive
officers during 1994 nor did the named executive officers exercise
any options.
</TABLE>
<TABLE>
Number of Securities Underlying
Unexercised Options/SARs
at FY-End(#)
Shares Acquired Realized
Name on Exercise (#) ($) Exercisable Unexercisable
<S> <C> <C> <C> <C>
Larry E. Ryherd 0 0 138,000 - 0
Thomas F. Morrow 0 0 172,000 - 0
James E. Melville 0 0 300,000 25,000 (1)
Joseph H. Metzger 0 0 69,000 -
George E. Francis 0 0 46,000 -
Value of Unexercised In the
Money Options/SARs at
at FY-End($)
Exercisable Unexercisable
0 -
0 -
0 12,000 (1)
0 -
0 -
</TABLE>
(1) Mr. Melville's employment agreement with the Company provides
that he will be granted an option to purchase 25,000 shares of
UTI's Common Stock at $.02 a share if he is employed pursuant to
the terms of the employment agreement through December 31, 1997.
COMPENSATION OF DIRECTORS
During fiscal year 1994, each director receives an annual
retainer of $2,400, plus $300 for each meeting attended and
reimbursement for reasonable travel expenses. The directors'
compensation policy also provides that directors who are
employees or past employees of the Company do not receive any
compensation excepting reimbursement for reasonable travel
expenses for attending each meeting. Mr. Cantrell, Chairman of
the Board of Directors of the Company receives compensation
pursuant to an agreement which is described in the following
section.
EMPLOYMENT CONTRACTS
On April 15, 1993, Larry E. Ryherd entered into an
employment agreement with the Company and UTI. Mr. Ryherd has
served as Chairman of the Board and Chief Executive Officer of
UTI and its affiliates for the past several years. Under the
terms of the agreement, Mr. Ryherd agreed to serve as President
and Chief Executive Officer of the Company at an annual salary of
$240,000. In addition, Mr. Ryherd agreed to serve as Chairman of
the Board and Chief Executive Officer of UG if elected, and to
serve in other positions if appointed or elected to serve in
such positions without additional compensation. The term of the
agreement began January 1, 1993 and ends June 30, 1995. The
agreement provides that Mr. Ryherd receives bonus compensation on
the basis of a formula as determined by the Boards of Directors
of UTI and certain of its affiliates. The amount of bonus
compensation as determined is related to the marketing of the
business of its affiliates and is based on percentages of new
premiums written and unearned commissions of terminated agents.
Effective January 1, 1995, the Board of Directors approved a
change to this agreement setting Mr. Ryherd's annual salary at
$400,000 without bonus awards through the end of the contract
term. The agreement also provides that if Mr. Ryherd is employed
for the entire term, he will receive a deferred compensation
payment on January 2, 2000 in the amount of $240,000 which
includes interest at the rate of approximately 8.5% per year.
Additionally, Mr. Ryherd was granted an option to purchase up to
138,000 of UTI Common Stock at $1.75 per share. The option was
immediately exercisable and transferable. The option will expire
December 31, 2000. The provisions for the deferred compensation
payment and stock option are pursuant to the deferred
compensation plan as described in the Executive Compensation
Table.
On April 15, 1993, Thomas F. Morrow entered into an
employment agreement with the Company and UTI. Mr. Morrow has
served as President and Chief Operating Officer of UTI and its
affiliates for the past several years. Under the terms of the
agreement, Mr. Morrow agreed to serve as Vice Chairman and Chief
Operating Officer of the Company at an annual salary of $200,000.
In addition, Mr. Morrow agreed to serve as Vice Chairman of the
Board of Directors of UG if elected, and to serve in other
positions if appointed or elected to serve in such positions
without additional compensation. The term of the agreement began
January 1, 1993 and ends June 30, 1995. The agreement provides
that Mr. Morrow receives bonus compensation on the basis of a
<PAGE>
formula as determined by the Boards of Directors of UTI and
certain of its affiliates. The amount of bonus compensation as
determined is related to the marketing of the business of its
affiliates and is based on percentages of new premiums written
and unearned commissions of terminated agents. Effective January
1, 1995, the Board of Directors approved a change to this
agreement setting Mr. Morrow's annual salary at $300,000 without
bonus awards through the end of the contract term. The agreement
also provides that if Mr. Morrow is employed for the entire term,
he will receive a deferred compensation payment on January 2,
2000 in the amount of $300,000 which includes interest at the
rate of approximately 8.5% annually. Additionally, Mr. Morrow
was granted an option to purchase up to 172,000 of UTI Common
Stock at $1.75 per share. The option was immediately exercisable
and transferable. The option will expire December 31, 2000. The
provisions for the deferred compensation payment and stock option
are pursuant to the deferred compensation plan as described in
the Executive Compensation Table.
The Company and UTI entered into an agreement dated April
15, 1993 with James E. Melville pursuant to which Mr. Melville is
employed as Senior Executive Vice President of the Company. In
addition, Mr. Melville agreed to serve as President and Chief
Operating Officer of UG if elected, and to serve in other
positions if appointed or elected without additional
compensation. The term of the agreement consists of two time
periods. The first period, January 1, 1993 through June 30, 1995
at an annual salary of $137,000. The second period, July 1, 1995
through December 31, 1997, Mr. Melville's employment will be on a
limited time basis at an annual base salary of $75,000. If Mr.
Melville is employed for the entire first period he will be
entitled to a deferred compensation payment on January 2, 2000 of
$400,000 which includes interest at the rate of approximately
8.5% annually. Additionally, Mr. Melville was granted an option
to purchase up to 300,000 shares of UTI Common Stock at $1.75 per
share. The option was immediately exercisable and transferable.
The option will expire December 31, 2000. The deferred
compensation payment and stock option are pursuant to the
deferred compensation plan as described in the Executive
Compensation Table. Additionally, if Mr. Melville is employed
for the entire term of the contract, he will be allowed to
purchase 25,000 shares of UTI Common Stock at $.02. This option
will expire December 31, 1998.
The Company entered into an employment agreement with Joseph
H. Metzger on June 16, 1992. Under the terms of the agreement,
Mr. Metzger is employed as Senior Vice President - Real Estate of
the Company for a period of 36 months at an annual salary of
$87,000. The agreement provides that Mr. Metzger receives cash
bonuses if certain real estate sales goals are attained. Mr.
Metzger also agreed to serve in other positions if appointed or
elected to such positions without additional compensation.
Effective January 1, 1993, UTI became a party to the employment
agreement which was amended to reflect a deferred compensation
plan as described in the Compensation Table. Pursuant to the
employment contract, Mr. Metzger's bonuses will be reduced by
$30,000 annually to the end of the contract. If Mr. Metzger
remains employed to the end of the contract he will be entitled
to a deferred compensation payment on January 2, 2000 of $120,000
which includes interest at the rate of approximately 8.5%
annually. Additionally, Mr. Metzger was granted an option to
purchase up to 69,000 shares of UTI Common Stock at $1.75 per
share. The option is immediately exercisable and transferable.
This option will expire on December 31, 2000.
The Company entered into an employment agreement with George
E. Francis on June 16, 1992. Under the terms of the agreement,
Mr. Francis is employed as Senior Vice President of the Company
for a period of 36 months at an annual salary of $119,000. Mr.
Francis also agreed to serve in other positions if appointed or
elected to such positions without additional compensation.
Effective January 1, 1993, UTI became a party to the employment
agreement which was amended to reflect a deferred compensation
plan as described in the Compensation Table. If Mr. Francis
remains employed to the end of the contract, he will be entitled
to a deferred compensation payment on January 2, 2000 of $80,000
which includes interest at the rate of approximately 8.5%
annually. Additionally, Mr. Francis was granted an option to
purchase up to 46,000 shares of UTI Common Stock at $1.75 per
share. The option was immediately exercisable and transferable.
This option will expire on December 31, 2000.
On June 16, 1992, the Company entered into an employment
agreement with John K. Cantrell, Chairman of the Board of
Directors and a Director of the Company. Mr. Cantrell has agreed
to continue as Chairman of the Board of Directors and a Director
of the Company, CIC, ITI and UGIC until April 30, 2002. In
consideration for this commitment, the Company has agreed to pay
Mr. Cantrell $12,500 each month for the first sixty months of the
term and $8,333.33 each month for the last sixty months of the
term. After Mr. Cantrell's retirement and until the death of the
first to die of Mr. Cantrell or his wife, the Company will pay
Mr. Cantrell the sum of $6,250 per month.
<PAGE>
From and after the death of the first to die of Mr. and Mrs.
Cantrell, the Company will pay $4,166.67 per month to the
survivor until death of the survivor. Mrs. Cantrell will receive
the death benefits described above from and after Mr. Cantrell's
death regardless of whether he died while employed or after
retirement. If Mr. Cantrell becomes disabled prior to
retirement, the Company will continue to make payments described
above while he is disabled until April 30, 2002. This agreement
has been entered into for the purpose of securing Mr. Cantrell's
extremely valuable services over the ten years and to relieve Mr.
Cantrell of pressures to provide for his wife and himself in the
event of his disability or death. Mr. Cantrell's prior
employment agreement with CIC was terminated on June 16, 1992.
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The compensation of the Company's executive officers is
determined by the Board of Directors. The Board of Directors
strongly believes that the Company's executive officers directly
impact the short-term and long-term performance of the Company.
With this belief and the corresponding objective of making
decisions that are in the best interest of the Company's
shareholders, the Board of Directors places significant emphasis
on the design and administration of the Company's executive
compensation plans.
EXECUTIVE COMPENSATION CONSIDERATIONS
The purpose of the Company's executive compensation plans is
to ensure that the compensation levels provided to the Company's
executive officers integrate with the Company's annual and
long-term performance objectives, to align the financial
interests of the executive officers with the interests of the
Company's shareholders, to reward for superior financial
performance, and to assist the Company in attracting, retaining
and motivating executives with exceptional leadership abilities.
Consistent with this purpose, the Board of Directors establishes
appropriate compensation elements in each of the executive
officers compensation plan to include a base salary, annual
bonus, stock options and deferred compensation alternatives.
Compensation levels are reviewed annually by the Board of
Directors relative to other life insurance companies and
companies of similar size in the financial industry.
("comparable companies") Based upon analysis of total
compensation paid by comparable companies, total compensation
paid to the Company's executive officers were found to be within
the same ranges. Accordingly, the Board of Directors feel that
the Company's maintaining a competitive position to retain the
talent necessary to meet the challenges in the life insurance
industry.
EXECUTIVE COMPENSATION PLAN ELEMENTS
BASE SALARY. The Board of Directors establishes base
salaries each year at a level intended to be within the
competitive market range of comparable companies. In addition to
the competitive market range, many factors are considered in
determining base salaries, including the responsibilities assumed
by the executive, the scope of the executive's position,
experience, length of service, individual performance and
internal equity considerations. During fiscal year 1994, the
Board of Director's approved an increase on the base salaries of
Mr. Ryherd and Mr. Morrow to reflect a compensation level
inclusive of the factors considered in Base Salary; additionally,
Mr. Ryherd's and Mr. Morrow's bonus compensation was reduced.
This alteration resulted from a change in the scope of their
duties occurring since the acquisition of the Company by UTI in
1992, which focuses more on overall Company performance with a
lessor focus on marketing upon which they were directly
responsible for and upon which the bonus was based. There were
no other changes in the base salaries of the named executive
officers during fiscal year 1994.
ANNUAL BONUS. The Company does not have a bonus plan that
directly ties executive compensation to the Company's earnings
performance on a near term basis; however, the bonus compensation
element is considered if the executive officer is responsible for
a specific business unit of the Company. Mr. Ryherd and Mr.
Morrow received bonus compensation derived from percentages of
the Company's new premiums written and unearned commissions of
terminated agents. During 1994 the Board of Directors ratified a
reduction in the bonus compensation of Mr. Ryherd and Mr. Morrow
as discussed above.
STOCK OPTIONS. One of the Company's priorities is for the
executive officers to be significant shareholders so that the
interest of the executives are aligned with the interests of the
Company's other shareholders. The Board of Directors believes
that this strategy motivates executives to remain focused on the
overall long-term performance of the Company. Stock options are
granted at the discretion of the Board of Directors and are
intended to be granted at levels within the competitive market
range of comparable companies. During 1993, each of the named
executive officers were granted options as part of a Deferred
Compensation Plan, as shown in the Summary Compensation Table.
There were no options granted to the named executive officers
during fiscal year 1994.
<PAGE>
DEFERRED COMPENSATION. A very significant component of
overall Executive Compensation Plans is found in the flexibility
afforded to participating officers in the receipt of their
compensation. The availability, on a voluntary basis, of the
Deferred Compensation Plan as described in the Summary
Compensation Table may prove to be critical to certain officers,
depending upon their particular financial circumstance.
CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN
During 1994, the Company's most highly compensated executive
officers were Larry E. Ryherd, Chief Executive Officer and
President, and Thomas F. Morrow, Vice Chairman and Chief
Operating Officer. In deciding Mr. Ryherd's and Mr. Morrow's
compensation, the Board of Directors did not affix specific
weights or values to the various factors considered in the
executive compensation plan elements. The Board of Directors
considered the significant progress made in 1992, 1993 and 1994
as it relates to the Company's growth through acquisitions and
marketing new business. The Board of Directors also considered
key decisions and actions taken to ensure the Company's long term
profitability such as the continued restructuring of the Company
in response to changes in the industry in order to remain
competitive, and the consolidation of operations to achieve cost
savings. Mr. Ryherd's cash compensation for 1994 was $400,000 of
which $60,000 was deferred; he also received a cash bonus of
$29,368 based on 1993 marketing objectives. Mr. Morrow's cash
compensation for 1994 was $300,000 of which $75,000 was deferred;
he also received a cash bonus of $19,576 based on 1993 marketing
objectives. No stock options were granted to Mr. Ryherd or Mr.
Morrow during 1994 and neither exercised any stock options during
the year.
CONCLUSION
The Board of Directors believes the mix of structured
employment agreements with certain key executives, conservative
market based salaries, competitive cash incentives for short-term
performance and the potential for equity-based rewards for long
term performance represents an appropriate balance. This
balanced Executive Compensation Plan provides a competitive and
motivational compensation package to the executive officer team
necessary to continue to produce the results the Company strives
to achieve. The Board of Directors also believes the Executive
Compensation Plan addresses both the interests of the
stockholders and the executive team.
BOARD OF DIRECTORS
John S. Albin Joseph H. Metzger
John K. Cantrell Luther C. Miller
William F. Cellini Thomas F. Morrow
John W. Collins Robert V. O'Keefe
George E. Francis Larry E. Ryherd
Donald G. Geary Robert W. Teater
James E. Melville Howard A. Young
The foregoing Report on Executive Compensation shall not be
deemed to be incorporated by reference into any filing of the
Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company
specifically incorporates such information by reference.
PERFORMANCE GRAPH
The following graph compares the cumulative total
shareholder return on the Company's Common Stock during the five
fiscal years ended December 31, 1994, with the cumulative total
return on the NASDAQ Composite Index Performance and the NASDAQ
Insurance Stock Index (1):
<PAGE>
The five year total return chart presented reflects the stock
performance of First Commonwealth Corporation, the NASDAQ composite
index and the NASDAQ Insurance Stock index, assuming $100 invested
on December 31, 1989. The chart reflects the following results; First
Commonwealth Corporation, 100, 75, 75, 33, 17 for 1989, 1990, 1991,
1992, 1993 and 1994, respectively; the NASDAQ composite index, 100,
85, 136, 159, 181, 177 for 1989, 1990, 1991, 1992, 1993, and 1994,
respectively; and the NASDAQ insurance stock index, 100, 85, 120,
162, 173 and 163, respectively.
(1) The Company selected the NASDAQ Composite Index Performance
as an appropriate comparison because the Company's Common Stock
is not listed on any exchange but the Company's Common Stock is
traded in the over-the-counter market. Furthermore, the Company
selected the NASDAQ Insurance Stock Index as the second
comparison because there is no similar single "peer company" in
the NASDAQ system with which to compare stock performance and the
closest additional line-of-business index which could be found
was the NASDAQ Insurance Stock Index. Trading activity in the
Company's Common Stock is limited, which may be in part a result
of the Company's low profile from not being listed on any
exchange, and its reported operating losses. The Company has
experienced a tremendous growth rate over the period shown in the
Return Chart with assets growing from approximately $232 million
in 1989 to approximately $332 million in 1994. The growth rate
has been the result of other company acquisitions and new
insurance writings. The Company has incurred costs of
conversions and administrative consolidations associated with the
acquisitions which has contributed to the operating losses. The
Return Chart is not intended to forecast or be indicative of
possible future performance of the Company's stock.
The foregoing graph shall not be deemed to be incorporated
by reference into any filing of the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates such
information by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither the Company nor any of its subsidiaries or
affiliates have compensation committees. The following persons
served as directors of the Company during 1994 and were officers
or employees of the Company or its subsidiaries during 1994:
John K. Cantrell, George E. Francis, James E. Melville, Joseph H.
Metzger, Thomas F. Morrow and Larry E. Ryherd. Accordingly,
these individuals have participated in decisions related to
compensation of executive officers of the Company and its
subsidiaries.
During 1994, the following executive officers of the Company
were also members of the Board of Directors of UGIC, CIC and ITI,
six of whose executive officers served on the Board of Directors
of the Company: Messrs. Cantrell, Francis, Melville, Metzger,
Morrow and Ryherd.
During 1994, the following executive officers of the Company
were also members of the Board of Directors of UII, three of
whose executive officers served on the Board of Directors of the
Company: Messrs. Cantrell, Morrow and Ryherd.
During 1994, Larry E. Ryherd and Thomas F. Morrow, executive
officers of the Company, were also members of the Board of
Directors of UTI, four of whose executive officers served on the
Board of Directors of the Company: Messrs. Francis, Melville,
Morrow and Ryherd.
<PAGE>
CERTAIN TRANSACTIONS
SALE OF FARMERS AND RANCHERS LIFE INSURANCE COMPANY ("F&R")
On March 30, 1994, APPL sold 98% of the outstanding capital
stock of F&R (the "F&R Shares"), to an unrelated party, Franklin
American Life Insurance Company (the "Buyer"), a Tennessee Life
Insurance Company. The sale was subject to a definitive
agreement signed by APPL and the Buyer dated September 16, 1993.
Pursuant to the agreement APPL received $4,190,747 in cash from
the Buyer in exchange for the F&R Shares. The sales price
approximates the GAAP carrying value of F&R. Regulatory approval
was granted by the Oklahoma Department of Insurance on March 14,
1994.
MERGER OF INVESTORS TRUST ASSURANCE COMPANY AND ABRAHAM LINCOLN
INSURANCE COMPANY
Pursuant to an Agreement of Merger dated July 7, 1994
between Investors Trust Assurance Company, an Illinois life
insurance company ("ITAC"), and ALIC, on July 31, 1994, ITAC
merged with and into ALIC and ALIC was the surviving company. On
the effective date of the merger, ALIC succeeded to all the
rights and property of ITAC and assumed all of the liabilities
and obligations and became subject to all of the debts of ITAC in
the same manner as if ALIC had itself incurred them. The merger
was approved by the Illinois Director of Insurance.
CHANGE IN DIRECT BENEFICIAL OWNERSHIP OF UGIC
Prior to the merger of ITAC into ALIC, ITAC owned 1,549,549
(approximately 66%) of the issued and outstanding common stock of
UGIC. Within the holding company system UGIC is an indirect
parent of ALIC. In order to facilitate the ITAC/ALIC merger,
ITAC's parent ITI, acquired the 1,549,549 common shares of UGIC
owned by ITAC so that after the merger, ALIC would not own stock
in its indirect parent. This was accomplished to satisfy
regulatory requirements. In this regard, the Boards of
Directors, including a majority of disinterested directors,
approved the following transactions which were deemed as fair to
the Affiliated companies as could have been made with
unaffiliated companies. On July 31, 1994, immediately prior to
the effective date of the merger of ITAC with and into ALIC, ITI
purchased 758,946 shares of the UGIC common stock owned by ITAC.
The total purchase price was $2,276,793. On July 31, 1994, ITAC
also transferred to ITI at no cost 790,603 shares of the common
stock of UGIC. On such date, ITI became the direct beneficial
owner of all 1,549,549 shares of the common stock of UGIC. In
order to purchase the 758,946 shares of UGIC Common Stock, ITI
received a loan from UTI and UII in the aggregate principal
amount of $2,164,293. ITI transferred 721,431 shares of the
common stock of UGIC that it purchased from ITAC to UTI and UII
in payment of the loan. These shares were then contributed by
UTI and UII to their subsidiary, UTG.
PROPOSED PLAN OF LIQUIDATION AND DISSOLUTION OF CERTAIN
AFFILIATES
The Board of Directors of the Company's affiliates, CIC, ITI
and UGIC ("the Affiliates"), by resolution adopted at their
meetings of the Board of Directors on June 7, 1994, unanimously
approved a Plan of Liquidation and Dissolution ("the Plan"). The
affirmative vote of the majority of the outstanding shares of the
Affiliates will be required for adoption of the Plan. Subject to
proxy requirements the matter will be brought before the
Affiliate's shareholders at a Special Meeting of Shareholders of
the Affiliates planned in mid 1995. Each Affiliate is currently
the indirect owner of the Company's common stock. The only
assets held by the Affiliates is stock in its subsidiary (see
Organizational Chart on page 2) and enough cash to cover costs
associated with the liquidation. If the Plan is adopted, each
shareholder of the Affiliates will own directly the same
proportionate share of the Company's common stock.
UGIC, ITI and CIC became incorporated in 1965, 1973 and 1964
respectively. Each company was organized for the same reason of
forming and holding a life insurance company. Through
acquisitions, UGIC and ITI became part of the CIC holding company
system in 1983 and 1986 respectively. Through a subsequent
acquisition in 1992, UGIC, ITI and CIC became part of the UTI
holding company system. The acquisitions over the years have
affected the autonomy of each company as being identified
separately as holding an individual life insurance company, and
has made the holding company structure complex. The liquidation
and dissolution of the Affiliates, will simplify the UTI holding
company organization and significantly streamline the system.
The elimination of the Affiliates will reduce the administrative
expenses of the holding company system associated with the
continued existence of such companies, including fees and
expenses in connection with the filing of annual, quarterly and
periodic reports with the Securities and Exchange Commission. In
this regard, the companies expect to reduce costs by
approximately $75,000 annually in associated franchise taxes,
auditing and accounting fees and legal costs.
<PAGE>
The following is the organizational chart for the UTI holding
company system subsequent to the proposed dissolution of the
Affiliates:
The chart presented reflects the ultimate parent company of the
group UTI. UTI owns 30% of UII and 53% of UTG. UII owns 47% of
UTG. UTG owns 72% of FCC. FCC owns 100% of UG. UG owns 100% of
USA. USA owns 84% of APPL, and APPL owns 100% of ABE.
ASSUMPTION OF LIABILITIES OF CERTAIN AFFILIATES
In connection with the "Plan" and in order to prepare for
the liquidation and dissolution, CIC's and UGIC's only means of
satisfying their liabilities were the assets of their underlying
subsidiaries of ITI and FCC respectively. Accordingly, the
Boards of Directors, including a majority of disinterested
directors approved the following transactions which were deemed
as fair to the Affiliated companies as could have been made with
unaffiliated companies. The balance sheet of CIC for the quarter
ended June 30, 1994, included liabilities in the aggregate amount
of $402,861 comprised of a future liability under a consulting
agreement, escheat funds and an account payable. On July 31,
1994, these liabilities were assumed by UTG in exchange for
1,558,318 shares of the common stock of ITI. The balance sheet
of UGIC for the quarter ended June 30, 1994, included liabilities
in the aggregate amount of $461,102. On July 31, 1994, these
liabilities were assumed by UTG in exchange for 106,392 shares of
the common stock of the Company and 315 shares of the common
stock of CIC.
PROPOSED SALE OF APPALACHIAN LIFE INSURANCE COMPANY
In keeping with the Company's objectives of continued
restructuring and simplification, on December 12, 1994, the Board
of Directors of USA authorized the company to initiate
negotiations for the sale of its subsidiary APPL. On February
25, 1995, USA and Atlantic International Resources Corp., a
Maryland corporation, or its affiliated designee ("Buyer")
entered into an Agreement of Purchase and Sale ("Agreement")
whereby USA proposes to sell its approximate 85% ownership of
APPL. Under the terms of the Agreement, USA shall sell its
ownership of 1,132,764 shares of common stock of APPL to the
Buyer in exchange for $11,000,000, which shall be adjusted upon
completion of the Closing Balance Sheet. The sales price
approximates the GAAP carrying value of APPL. APPL owns 100% of
the outstanding common stock of ALIC. Simultaneously with the
closing, USA will purchase from APPL the common stock of ALIC for
a price equal to the statutory carrying value of ALIC as of the
end of the preceding quarter. At December 31, 1994, the
statutory carrying value of ALIC approximated $2,492,000.
Additionally at closing, USA will purchase from APPL all of the
mortgages owned by APPL for a price equal to the principal and
accrued interest. At December 31, 1994, APPL mortgage loans and
accrued interest approximated $5,415,000. Closing of the sale is
scheduled no later than July 31, 1995 and is subject to the Buyer
seeking required consents and regulatory approval of the West
Virginia Insurance Department.
<PAGE>
PLEDGE SHARES
UTG is currently the owner of approximately 69% of the
outstanding shares of CIC's Common Stock. On June 16, 1992,
pursuant to a Stock Purchase Agreement dated February 20, 1992,
as amended April 20, 1992 (the "Purchase Agreement"), UTG
purchased 6,771 outstanding shares of CIC's Common Stock and
options to purchase 1,300 shares of CIC's Common Stock
(collectively, the "CIC Shares") from certain former shareholders
of CIC (the "Sellers"). UTG exercised the options and became the
holder of 8,071 shares (approximately 60%) of CIC's Common Stock.
A portion of the purchase price for the CIC Shares was paid by
delivery of UTG's interest-bearing promissory notes. UTG, the
Sellers, CIC and the Company entered into a Security Agreement
pursuant to which repayment of UTG's promissory notes to the
Sellers is secured by a security interest granted by UTG in (i)
the CIC Shares, (ii) 11,134,000 shares of the Company's Common
Stock (the "FCC Shares"), (iii) certain promissory notes of the
Company issued to UTG (the "FCC Notes"), and (iv) any additional
securities of CIC or its subsidiaries or a survivor thereof which
is issued after the date of the Security Agreement. The security
interest is subject to the prior security interest of the Senior
Lenders described under "Certain Transactions - Senior Loan
Agreement."
MANAGEMENT AND COST SHARING ARRANGEMENTS
The employees of the Company have extensive experience and
expertise in acquiring, managing and operating corporations and
other business entities engaged in the general life insurance
business as well as other financial and investment companies. On
January 1, 1993, the Company entered into an agreement with UG
pursuant to which the Company provides management services
necessary for UG to carry on its business, and UG pays the
Company a monthly fee. In 1994, UG paid a total of $10,587,000
to the Company. The agreement was approved by the Ohio
Department of Insurance, UG's domiciliary state regulatory
authority. Additionally the Company and its affiliates have
either directly or indirectly entered into various management
and/or cost-sharing arrangements whereby the Company provides its
management services. In 1994 the Company received net management
fees of $1,047,000 under these additional arrangements.
USA entered into a service agreement with UII pursuant to
which UII provides personnel and facilities and performs
services, including claim processing, underwriting, processing
and servicing policies, accounting services, agency services and
data processing. Under this service agreement, USA paid UII
$1,357,000 in 1994. In connection with the service agreement
between UII and USA, UII and UTI entered into an agreement
pursuant to which UII sub-contracted to UTI the services which
UII is required to provide to USA pursuant to the agreement. UTI
agreed to supply the services for USA in exchange for fees in an
amount equal to 60% of the amount that UII is entitled to receive
from USA. UII paid UTI $814,000 in 1994.
SENIOR LOAN AGREEMENT
The Company has loans (the "FCC Senior Debt") with the First
Bank of Missouri, (First Bank of Missouri was the successor bank
to a merger with First Bank of Gladstone, Citizen's Bank and
Trust Co. and the Bank of St. Joseph, all Missouri Banks)
Massachusetts General Life Insurance Company and Philadelphia
Life Insurance Company (the "Senior Lenders"). The loan is
subject to a certain Credit Agreement between the parties
stipulating the terms of the loan. The FCC Senior Debt bears
interest at a variable per annum rate equal to 1% over the
variable per annum rate of interest most recently announced by
the First Bank of Missouri as its "Base Rate". As of March 1,
1995, the "Base Rate" was 9%. The principal balance of the FCC
Senior Debt is payable in installments on June 1st of each year
commencing June 1, 1994 and ending June 1, 1998. The June 1,
1995 principal payment in the amount of $2,900,000 has been
prepaid. At March 31, 1995, the principal amount of the FCC
Senior Debt was $10,400,000.
The Credit Agreement includes an earnings covenant which
provides that the Company will not permit the sum of (i) the
combined pre-tax earnings of the subsidiaries of the Company,
excluding the results of any surplus relief reinsurance and any
intercompany dividends, determined in accordance with statutory
accounting practices, and (ii) the pre-tax earnings of the
Company plus interest expense and non-cash charges, determined in
accordance with generally accepted accounting practices, to be
less than the amounts specified in the Credit Agreement. The
Credit Agreement requires that the earnings as specified above be
not less than $900,000 for 1994. The Company has satisfied the
1994 earnings requirement.
<PAGE>
Pursuant to the Credit Agreement, the Company, CIC, ITI,
UGIC and the Cantrells have pledged the shares they hold of UG,
ITI, ITAC, the Company and CIC, respectively, to the Senior
Lenders as collateral security for the Senior Debt. In addition,
the Company and UGIC have each pledged the shares of CIC's Common
Stock issued to them pursuant to the Agreement. The Cantrells
pledged to the Senior Lenders the collateral pledged to them by
UTG as security for UTG's indebtedness to the Cantrells under the
Purchase Agreement, including a security interest in the shares
of CIC's Common Stock which the Cantrells sold to UTG, the FCC
Shares, and the FCC Notes issued to UTG mirroring the promissory
notes issued to the Cantrells by UTG in connection with the
purchase of the Cantrells shares of CIC.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Kerber, Eck and Braeckel served as the Company's independent
certified public accounting firm for the fiscal year ended
December 31, 1994 and fiscal year ended December 31, 1993. In
serving its primary function as outside auditor for the Company,
Kerber, Eck and Braeckel performed the following audit services:
examination of annual consolidated financial statements;
assistance and consultation on reports filed with the Securities
and Exchange Commission and; assistance and consultation on
separate financial reports filed with the State insurance
regulatory authorities pursuant to certain statutory
requirements. The Company does not expect that a representative
of Kerber, Eck and Braeckel will be present at the Annual Meeting
of Shareholders of the Company. No accountants have been
selected for fiscal year 1995 because the Company generally
chooses accountants shortly before the commencement of the annual
audit work.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
1996 ANNUAL MEETING
In order for a proposal by a shareholder to be included in
the Company's proxy statement and form of proxy for the 1996
Annual Meeting of Shareholders, the proposal must be received by
the Company at its principal office on or before December 15,
1995.
OTHER MATTERS TO COME BEFORE THE MEETING
The management does not intend to bring any other business
before the meeting of the Company's shareholders and has no
reason to believe that any will be presented to the meeting. If,
however, any other business should properly be presented to the
meeting, the proxies named in the enclosed form of proxy will
vote the proxies in accordance with their best judgement.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company has filed its 1994 Annual Report on Form 10-K
with the Securities and Exchange Commission. A copy of the
report may be obtained without charge by any shareholder.
Requests for copies of the report should be sent to George E.
Francis, First Commonwealth Corporation, 5250 South 6th Street,
P.O. Box 5147, Springfield, Illinois, 62705-5147.
BY ORDER OF THE BOARD OF DIRECTORS
FIRST COMMONWEALTH CORPORATION
George E. Francis, Secretary
Dated: May 8, 1995
<PAGE>
May 8, 1995
Dear Stockholders:
The 1995 Annual Meeting of Shareholders of Fires Commonwealth
Corporation will be held at the offices of the Company, 5250
South Sixth Street, Springfield, Illinois 62703, on June 5,
1995, at 10:00 a.m. At the meeting, shareholders will act to
elect fourteen directors and to vote upon such other business
as may properly come before the meeting.
Your vote is important. Whether or not you plan to attend the
meeting, please review the enclosed proxy statement, complete the
proxy form below and return it promptly in the envelope provided.
It is important to keep your stock portfolio current. Registrations
should be kept up-to-date. Remember to notify the Company of a
change in address. Our stock transfer department is available to
assist you with these and other shareholder questions.
Sincerely,
George E. Francis
Corporate Secretary
Fold & Tear Here Fold & Tear Here
PROXY FORM FIRST COMMONWEALTH CORPORATION PROXY FORM
Annual Meeting of Shareholders - To be Held June 5, 1995
THE BOARD OF DIRECTORS SOLICITS THIS PROXY
The undersigned hereby appoints Larry E. Ryherd and Thomas F. Morrow,
or either of them, the attorneys and proxies with full power of
substitution and revocation to represent and to vote, as designated
below, all the shares of common stock of the Company held of record
by the undersigned on April 14, 1995 at the annual meeting of
shareholders to be held at the offices of the Company, 5250 South
Sixth Street, Springfield, Illinois 62703, on June 5, 1995 at 10:00
a.m., or at any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSAL NUMBER 1.
Please sign exactly as your name appears on the form and mail the
proxy promptly. When signing as an attorney, executor, administrator,
trustee or guardian, please give your full title as such. If shares
are held jointly, both owners should sign. If a corporation, please
sign in full corporate name by President and other authorized officer.
If a partnership, please sign in partnership name by authorized
person.
CONTINUED AND TO BE VOTED AND SIGNED ON REVERSE.
<PAGE>
Our Stock Transfer Department is available to assist you with the
following changes or questions concerning your account.
ADDRESS CHANGES - Notification of shareholder address changes must be
made in writing. If your address has changed or should change in the
future, please give us your new address below.
Your name
(Print or type, Last name, first name, middle initial.)
(Old Address) - Street
City State Zip
(New Address) - Street
City State Zip
Date new address in effect Signature
REGISTRATION CHANGES - A change in certificate registration is needed
because of:
marriage divorce
death of a tenant establishment of a trust
remove custodian other - Explain
LOST CERTIFICATE - Notification of a lost stock certificate must be
made in writing.
MARKET INFORMATION - To obtain current quotes or buy/sell information,
contact any local broker. The stock is listed on the broker's "pink
sheet" and the symbol code is "FCVA".
ACCOUNT SUMMARY - The number of shares in your account is the number
printed in black above the date on the signature side of this proxy
ballot.
Additional information can be found on pages 4 & 5 of the First
Commonwealth Corporation 1994 Annual Report. For instructions about
your specific situation, contact our Stock Transfer Department by
phone at (217) 786-4770 or by writing to First Commonwealth
Corporation, Attn: Stock Transfer Department, 5250 South Sixth
Street, P.O. Box 5147, Springfield, IL 62705-5147.
Signature
Date
The Board of Directors Recommends a vote FOR items 1 and 2.
1. ELECTION OF DIRECTORS: John S. Albin, John K. Cantrell, William
F. Cellini, John W. Collins, George E. Francis, Donald G. Geary,
James E. Melville, Joseph H. Metzger, Luther C. Miller, Thomas
F. Morrow, Robert V. O'Keefe, Larry E. Ryherd, Robert W. Teater
and Howard A. Young.
FOR all nominees listed above (except as marked to the contrary
below).
WITHHOLD AUTHORITY to vote for the nominees listed above.
(INSTRUCTION: To withhold authority to vote for any individual
nominee write that nominee's name in the space provided.)
2. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
Signature Date
Signature Date
