FIRST COMMONWEALTH CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MONDAY, JUNE 3, 1996
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 3, 1996 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 19, 1996 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
George E. Francis
Secretary
Dated: April 22, 1996
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.
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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 3, 1996 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 19, 1996, in order to furnish to each
shareholder information relating to the business to be transacted at the
meeting.
This proxy statement, the enclosed proxy, and Annual Report are being mailed
to shareholders of the Company on or about April 22, 1996. 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 3, 1996, 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.
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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:
ORGANIZATION CHART
AS OF DECEMBER 31, 1995
United Trust, Inc. ("UTI") is the ultimate controlling company. UTI owns 53% of
United Trust Group ("UTG") and 30% of United Income, Inc. ("UII"). UII owns
47% of UTG. UTG owns 72% of First Commonwealth Corporation ("FCC"). FCC owns
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") and APPL owns 100% of Abraham Lincoln Insurance
Company ("ABE").
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".
VOTING SECURITIES OUTSTANDING
April 19, 1996 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 23,967,885 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.
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PRINCIPAL HOLDERS OF SECURITIES
The following tabulation sets forth the name and address of the entity known
to be the beneficial owners of more than 5% of the Company's Common Stock and
shows: (i) the total number of shares of Common Stock beneficially owned by
such person as of March 31, 1996 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 BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
Common United Trust Group, Inc. 17,321,518 72%
Stock $1.00 5250 South Sixth Street
par value Springfield, Illinois 62703
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 1995, 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, 1996 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.
Title Directors, Named Executive Number of Shares Percent
of Officers, & All Directors & and Nature of of
CLASS EXECUTIVE OFFICERS AS A GROUP OWNERSHIP CLASS
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 (1) 3.0%
Robert V. O'Keefe 0 *
Larry E. Ryherd 675,000 (2) 3.4%
Robert W. Teater 105,430 (3) *
Howard A. Young 0 *
All directors and 1,371,055 6.9%
executive officers as a
group (fourteen in number)
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UTI's John S. Albin 105,041 (4) *
Common John K. Cantrell 0 *
Stock, no William F. Cellini 10,000 *
par value John W. Collins 0 *
George E. Francis 46,000 (5) *
Donald G. Geary 12,000 *
James E. Melville 525,000 (6) 2.8%
Joseph H. Metzger 69,040 (7) *
Luther C. Miller 0 *
Thomas F. Morrow 1,585,600 (8) 8.5%
Robert V. O'Keefe 3,000 (9) *
Larry E. Ryherd 6,172,368 (10) 33.0%
Robert W. Teater 0 *
Howard A. Young 1,000 *
All directors and 8,504,049 45.5%
executive officers as a
group (fourteen in number)
Company's John S. Albin 0 *
Common John K. Cantrell 26 *
Stock, William F. Cellini 104 *
$1.00 par John W. Collins 0 *
value George E. Francis 0 *
Donald G. Geary 90,140 *
James E. Melville 22,163 *
Joseph H. Metzger 207 *
Luther C. Miller 0 *
Thomas F. Morrow 0 *
Robert V. O'Keefe 0 *
Larry E. Ryherd 0 *
Robert W. Teater 0 *
Howard A. Young 17,911 *
All directors and 130,551 1.0%
executive officers as a
group (fourteen in number)
(1) Includes 590,625 shares beneficially in trust for the two children of
Thomas F. Morrow, namely Kristi J. Wilkerson and Amy Suzanne Heath.
(2) 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.
(3) Includes 3,000 shares owned directly by Mr. Teater's spouse.
(4) Includes 3,928 shares owned directly by Mr. Albin's spouse.
(5) Includes 46,000 shares which may be acquired upon exercise of outstanding
stock options.
(6) 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) 325,000 shares which may be acquired by James E. Melville
upon exercise of outstanding stock options.
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(7) Includes 69,000 shares which may be acquired upon exercise of outstanding
stock options.
(8) Includes 172,000 shares which may be acquired upon exercise of outstanding
stock options. Includes 10,000 shares as custodian for grandson.
(9) 3,000 shares owned directly by Mr. O'Keefe's spouse.
(10) Larry E. Ryherd owns 2,710,868 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%.
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(a) of the Securities Exchange Act of 1934 as amended, and the
rules promulgated thereunder.
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. In the fiscal year ended December 31, 1995, the board
met four times. All nominees for director attended at least 75% of all
meetings of the board except for John K. Cantrell.
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 1995.
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 1995.
The compensation of the Company's executive officers is determined by the
full Board of Directors (see report on Executive Compensation).
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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:
POSITION WITH THE COMPANY, BUSINESS EXPERIENCE AND OTHER
NAME, AGE DIRECTORSHIPS
John S. Albin
68 Director of the Company since 1992; Director of 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
71 Chairman of Board of Directors of the Company and 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
61 Director of the Company and certain affiliate 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
70 Consultant and past President of Collins-Winston Group
since 1976; past Director of the Company and certain
affiliate companies from 1982 to 1992; past Director of CIC
from 1976 to 1992.
George E. Francis
52 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
72 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
50 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
57 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
65 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.
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Thomas F. Morrow
51 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
74 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
56 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
69 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
76 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.
EXECUTIVE OFFICERS OF THE COMPANY
More detailed information on the following officers of the Company appear
under "Election of Directors":
Larry E. 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
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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
ANNUAL COMPENSATION (1) Long Term
COMPENSATION
Securities
Other Annual Underlying
NAME AND Compensation (3) Stock Options
PRINCIPAL POSITION SALARY($) BONUS($) ($) AWARDED (#)(2)
Larry E. Ryherd 1995 400,000 - 13,324 -
President, Chief 1994 400,000 - 7,909 -
Executive Officer 1993 240,000 169,365 2,393 138,000
Thomas F. Morrow 1995 300,000 - 16,654 -
Vice Chairman, Chief 1994 300,000 - 9,886 -
Operating Officer 1993 200,000 107,576 2,992 172,000
James E. Melville 1995 237,000 - 38,206 (4) -
Sr. Executive Vice 1994 237,000 - 13,181 -
President, Chief 1993 237,000 - 14,506 (4) 325,000
Financial Officer
Joseph H. Metzger 1995 87,000 67,013 6,181 -
Sr. Vice President, 1994 87,000 98,000 3,932 -
Real Estate 1993 87,000 82,000 1,276 69,000
George E. Francis 1995 119,000 - 4,441 -
Sr. Vice President, 1994 119,000 - 2,636 -
Secretary 1993 119,000 - 798 46,000
(1) Compensation deferred at the election of named officers is included in
this section.
(2) Reflects stock option to purchase UTI Common Stock pursuant to their
employment agreements.
(3) All other compensation consists of interest earned on deferred
compensation amounts pursuant to their employment
agreements.
(4) Includes $10,517 and $16,000 in 1993 and 1995 respectively for the value
of personal perquisites owing Mr. Melville.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
The following table summarizes for fiscal year ending, December 31, 1995, the
number of shares subject to unexercised options and the value of unexercised
options of the Common Stock of UTI held by the named executive officers. The
values shown were determined by multiplying the applicable number of
unexercised share options by the difference between the per share market
price on December 31, 1995 and the applicable per share exercise price.
There were no options granted to the named executive officers during 1995. No
named executive officers exercise any options.
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Number of Securities Underlying Value of Unexercised In the
Unexercised Options/SARs Money Options/SARs at
at FY-End(#) FY-End ($)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Larry E. Ryherd 138,000 - 0 -
Thomas F. Morrow 172,000 - 0 -
James E. Melville 300,000 25,000 (1) 0 8,875 (1)
Joseph H. Metzger 69,000 - 0 -
George E. Francis 46,000 - 0 -
(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
The Company's standard arrangement for the compensation of directors provide
that each director shall receive an annual retainer of $2,400, plus $300 for
each meeting attended and reimbursement for reasonable travel expenses. The
Company's director compensation policy also provides that directors who are
employees or past employees of the Company do not receive any compensation for
their services as directors except for 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. On May 1, 1995, Mr. Celini and Mr.
Geary were each granted options to purchase 10,000 shares of UTI Common Stock
at $.02 per share. The options were granted pursuant to an agreement under
which UTI provided incentives for their continued service. Under the terms of
the grants, the options were immediately exercisable and Messrs. Celini and
Geary exercised those options on May 1, 1995.
EMPLOYMENT CONTRACTS
On April 15, 1993, Larry E. Ryherd entered into an employment agreement with
the Company and UTI. Formerly, Mr. Ryherd had served as Chairman of the
Board and Chief Executive Officer of UTI and its affiliates. Under the terms
of the agreement, Mr. Ryherd agreed to serve as President and Chief Executive
Officer of the Company for a period of 36 months 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 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.
Mr. Ryherd has deferred portions of his income under a plan entitling him to
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 is immediately exercisable
and transferable. The option will expire December 31, 2000.
On April 15, 1993, Thomas F. Morrow entered into an employment agreement with
the Company and UTI. Formerly, Mr. Morrow had served as President and Chief
Operating Officer of UTI and its affiliates. Under the terms of the
agreement, Mr. Morrow agreed to serve as Vice Chairman and Chief Operating
Officer of the Company for a period of 36 months 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 agreement provides that Mr. Morrow 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. Morrow's annual
salary at $300,000 without bonus awards through the end of the contract term.
Mr. Morrow has deferred portions of his income under a plan entitling him to
a deferred compensation payment on
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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 is immediately exercisable and transferable. The option will expire
December 31, 2000.
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 $237,000. The second
period, July 1, 1995 through December 31, 1997, Mr. Melville's employment
will be on a specified time basis. Mr. Melville has deferred portions of his
income under a plan entitling him 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 is immediately exercisable and transferable. The option
will expire December 31, 2000. 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. Mr. Metzger
has deferred portions of his income under a plan entitling him 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. Mr.
Francis has deferred portions of his income under a plan entitling him 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 is 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 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.
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 next
ten years.
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REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The compensation of the Company's executive officers is determined by the full
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 feels that the Company is 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 years 1994 and 1995 there were no changes in the base salaries
of the named executive officers.
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 (see
Employment Contracts).
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
closely 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 under their employment agreements for UTI Common Stock as described
in the Employment Contracts section. There were no options granted to the
named executive officers during fiscal years 1994 and 1995.
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 arrangements as described in
the Employment Contracts section, may prove to be critical to certain
officers, depending upon their particular financial circumstance.
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CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN
During 1995, 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 1993, 1994 and 1995 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 1995 was $400,000 of which $30,000 was deferred. Mr.
Morrow's cash compensation for 1995 was $300,000 of which $37,500 was
deferred. No stock options were granted to Mr. Ryherd or Mr. Morrow during
1995 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.
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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, 1995,
with the cumulative total return on the NASDAQ Composite Index Performance
and the NASDAQ Insurance Stock Index (1):
The five year total return chart reflects Company stock performance compared
to the NASDAQ stock market and the NASDAQ insurance stock market. The base
year is 1990 with subsequent years reflecting a percentage change from the
base year. The Company's stock price percentage changes were 64, 64, 29, 14
and 14 for 1991, 1992, 1993, 1994 and 1995, respectively. The NASDAQ
insurance composite stock price percentage changes were 141, 191, 204, 193
and 274 for 1991, 1992, 1993, 1994 and 1995 respectively.
Assumes $100 Invested on December 31, 1991.
(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 $231 million in 1990 to
approximately $334 million in 1995. 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
The following persons served as directors of the Company during 1995 and were
officers or employees of the Company or its subsidiaries during 1995: 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 1995, 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 1995, 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.
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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, 1995 and fiscal year
ended December 31, 1994. 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 1996 because the Company generally chooses accountants
shortly before the commencement of the annual audit work.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
1997 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 1997 Annual Meeting of
Shareholders, the proposal must be received by the Company at its principal
office on or before December 15, 1996.
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 1995 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
George E. Francis, Secretary
Dated: April 22, 1996
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