FIRST COMMONWEALTH CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Monday, July 21, 1997
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, July 21, 1997 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
May 27, 1997 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: June 18, 1997
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
Corporation (the "Company") will be held on July 21, 1997 at
10:00 a.m., at the offices of the Company, 5250 South 6th,
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
May 27, 1997, 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 June 18, 1997. The
Annual Report has been mailed under separate cover. 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
July 21, 1997, 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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<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:
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 79% of
First Commonwealth Corporation ("FCC") and 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
May 27, 1997 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 54,628 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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<PAGE>
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, 1997 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
Common United Trust Group, Inc. 43,303 79%
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 1996,
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, 1997 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 31,500 (1) 2.4%
Robert V. O'Keefe 0 *
Larry E. Ryherd 47,250 (2) 3.4%
Robert W. Teater 7,380 (3) *
Howard A. Young 0 *
All directors and 86,130 6.2%
executive officers as a
group (fourteen in number)
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<PAGE>
UTI's John S. Albin 10,504 (4) *
Common John K. Cantrell 0 *
Stock, no William F. Cellini 1,000 *
par value John W. Collins 0 *
George E. Francis 4,600 (5) *
Donald G. Geary 1,200 *
James E. Melville 52,500 (6) 2.8%
Joseph H. Metzger 6,900 (7) *
Luther C. Miller 0 *
Thomas F. Morrow 159,060 (8) 8.4%
Robert V. O'Keefe 300 (9) *
Larry E. Ryherd 617,236 (10) 32.5%
Robert W. Teater 0 *
Howard A. Young 100 *
All directors and 853,400 45.0%
executive officers as a
group (fourteen in number)
Company's John S. Albin 0 *
Common John K. Cantrell 0 *
Stock, William F. Cellini 0 *
$1.00 par John W. Collins 0 *
value George E. Francis 0 *
Donald G. Geary 225 *
James E. Melville 431 (11) *
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 44 *
All directors and 700 1.3%
executive officers as a
group (fourteen in number)
(1) Includes 31,500 shares beneficially in trust for the
two children of Thomas F. Morrow, namely Kristi J. Wilkerson and
Amy Suzanne Heath.
(2) Includes 47,250 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 210 shares owned directly by Mr. Teater's
spouse.
(4) Includes 392 shares owned directly by Mr. Albin's
spouse.
(5) Includes 4,600 shares which may be acquired upon
exercise of outstanding stock options.
(6) James E. Melville owns 2,500 shares individually and
14,000 shares jointly with his spouse. Includes; (i) 3,000
shares of UTI's Common Stock which are held beneficially in trust
for his daughter, namely Bonnie J. Melville; (ii) 3,000 shares
of UTI's Common Stock, 750 shares of which are in the name of
Matthew C. Hartman, his nephew; 750 shares of which are in the
name of Zachary T. Hartman, his nephew; 750 shares of which are
in the name of Elizabeth A. Hartman, his niece; and 750 shares
of which are in the name of Margaret M. Hartman, his niece; and
(iii) 30,000 shares which may be acquired by James E. Melville
upon exercise of outstanding stock options.
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<PAGE>
(7) Includes 6,900 shares which may be acquired upon
exercise of outstanding stock options.
(8) Includes 17,200 shares which may be acquired upon
exercise of outstanding stock options. Includes 1,000 shares as
custodian for grandson.
(9) 300 shares owned directly by Mr. O'Keefe's spouse.
(10) Larry E. Ryherd owns 271,086 shares of UTI's Common
Stock in his own name. Includes; (i) 150,050 shares of UTI's
Common Stock in the name of Dorothy LouVae Ryherd, his wife; (ii)
150,000 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) 29,300 shares of UTI's Common Stock,
9,700 shares of which are in the name of Shari Lynette Serr,
9,700 shares of which are held in the name of Derek Scott Ryherd,
and 9,900 shares of which are in the name of Jarad John Ryherd;
(iv) 500 shares of UTI's Common Stock held in the name of Larry
E. Ryherd as custodian for Charity Lynn Newby, his niece; (v) 500
shares held in the name of Larry E. Ryherd as custodian for
Lesley Carol Newby, his niece; (vi) 2,000 shares held by Dorothy
LouVae Ryherd, his wife as custodian for granddaughter; and (vii)
13,800 shares which may be acquired by Larry E. Ryherd upon
exercise of outstanding stock options.
(11) James E. Melville owns 55 shares individually and 376
shares jointly with his spouse.
* 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, 1996, the board met four times. All nominees
for director attended at least 75% of all meetings of the board
except for Messers. Cantrell, Cellini and Teater.
The Board of Directors has an Audit Committee consisting of
Messrs. Albin, Collins, Geary, 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 1996.
The Board of Directors has a Nominating Committee consisting
of Messrs. Cantrell, Young 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 1996.
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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<PAGE>
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
69 Director of the Company since 1992; Director of
United Trust, Inc. since 1984; 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
72 Chairman of Board of Directors of the Company 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
62 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
71 Consultant and past President of Collins-Winston
Group since 1976; past Director of the Company
and certain affiliate companies from 1982 to
1992.
George E. Francis
53 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
73 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
51 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
58 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
66 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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<PAGE>
Thomas F. Morrow
52 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.
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
75 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
57 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. 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
70 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
77 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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<PAGE>
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:
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation (1)
Other Annual
Name and Compensation (2)
Principal Position Salary ($) Bonus ($) ($)
<S> <C> <C> <C>
Larry E. Ryherd 1996 400,000 - 17,681
President, Chief 1995 400,000 - 13,324
Executive Officer 1994 400,000 - 7,909
Thomas F. Morrow 1996 300,000 - 21,405
Vice Chairman, Chief1995 300,000 - 16,654
Operating Officer 1994 300,000 - 9,886
James E. Melville 1996 237,000 - 27,537
Sr. Executive Vice 1995 237,000 - 38,206 (3)
President, Chief 1994 237,000 - 13,181
Financial Officer
Joseph H. Metzger 1996 87,000 70,633 10,290
Sr. Vice President, 1995 87,000 67,013 6,181
Real Estate 1994 87,000 98,000 3,932
George E. Francis 1996 119,000 - 7,348
Sr. Vice President, 1995 119,000 - 4,441
Secretary 1994 119,000 - 2,636
</TABLE>
(1) Compensation deferred at the election of named officers is
included in this section.
(2) Other annual compensation consists of interest earned on
deferred compensation amounts pursuant to their employment
agreements and the Company's matching contribution to the First
Commonwealth Corporation Employee Savings Trust 401(k) Plan.
(3) Includes $16,000 for the value of personal perquisites owing
Mr. Melville.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
The following table summarizes for fiscal year ending,
December 31, 1996, the number of shares subject to unexercised
options and the value of unexercised options of the Common Stock
of UTI held by the named executive officers. The values shown
were determined by multiplying the applicable number of
unexercised share options by the difference between the per share
market price on December 31, 1996 and the applicable per share
exercise price. There were no options granted to the named
executive officers during 1996.
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<PAGE>
<TABLE>
Number of Number of Securities
Shares Value Underlying Unexercised
Acquired on Realized($) Options/SARs at
Exercise (#) FY-End(#)
Name Exercisable Unexercisable
<S> <C> <C> <C> <C>
Larry E. Ryherd - - 13,800 -
Thomas F. Morrow - - 17,200 -
James E. Melville 2,500 13,563 30,000 -
Joseph H. Metzger - - 6,900 -
George E. Francis - - 4,600 -
Value of Unexercised In
the Money Options/
SARs at FY-End ($)
Exercisable Unexercisable
Larry E. Ryherd 0 -
Thomas F. Morrow 0 -
James E. Melville 0 -
Joseph H. Metzger 0 -
George E. Francis 0 -
</TABLE>
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.
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. Pursuant to the agreement,
Mr. Ryherd agreed to serve as President and Chief Executive
Officer of the Company and in addition, to serve in other
positions of the affiliated companies if appointed or elected.
The agreement provides for an annual salary of $400,000 as
determined by the Board of Directors. The term of the agreement
has been continuous. 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
13,800 of UTI Common Stock at $17.50 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. Pursuant to the agreement, Mr. Morrow agreed
to serve as Chief Operating Officer of the Company and in
addition, to serve in other positions of the affiliated companies
if appointed or elected. The agreement provides for an annual
salary of $300,000 as determined by the Board of Directors. The
term of the agreement has been continuous. Mr. Morrow has
deferred portions of his income under a plan entitling him to 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 17,200 of UTI Common Stock at $17.50 per share.
The option is immediately exercisable and transferable. The
option will expire December 31, 2000.
The Company and UTI entered into an employment agreement
dated April 15, 1993 with James E. Melville pursuant to which Mr.
Melville is employed as Senior Executive Vice President and in
addition, to serve in other positions of the affiliated companies
if appointed or elected at an annual salary of $237,000. The
term of the agreement expires December 31, 1997. 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 32,500 shares of UTI Common Stock at $17.50 per
share. The option is immediately exercisable and transferable.
The option will expire December 31, 2000.
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 at an annual salary of $87,000. The agreement
provides that Mr. Metzger receives cash bonuses if certain real
estate sales goals are attained. The term of the agreement has
been continuous. Mr. Metzger also agreed to
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<PAGE>
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 6,900 shares of
UTI Common Stock at $17.50 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
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. The term of the
agreement has been continuous. 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 4,600 shares of UTI Common Stock at $17.50 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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<PAGE>
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 plans 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 the last three fiscal
years, 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 the last three fiscal
years.
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.
-11-
CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN
During 1996, 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 1994, 1995 and 1996
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 1996 was $400,000.
Mr. Morrow's cash compensation for 1996 was $300,000. No stock
options were granted to Mr. Ryherd or Mr. Morrow during 1996 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
shareholders 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.
-12-
<PAGE>
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, 1996, with the cumulative total
return on the NASDAQ Composite Index Performance and the NASDAQ
Insurance Stock Index (1):
FIVE YEAR TOTAL RETURN CHART
NASDAQ
NASDAQ Insurance FCC
1991 100.00 100.00 100.00
1992 116.58 135.76 100.00
1993 133.69 145.03 44.64
1994 130.48 136.42 22.32
1995 185.03 194.04 22.32
1996 227.27 221.19 22.32
(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 $233 million
in 1991 to approximately $337 million in 1996. 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 1996 and were officers or employees of the Company or its
subsidiaries during 1996: 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 1996, 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 1996, Larry E. Ryherd, Thomas F. Morrow, and James
E. Melville, 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.
-13-
<PAGE>
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, 1996 and fiscal year ended December 31, 1995. 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 1997 because the Company generally
chooses accountants shortly before the commencement of the annual
audit work.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
1998 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 1998
Annual Meeting of Shareholders, the proposal must be received by
the Company at its principal office on or before December 15,
1997.
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 1996 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: June 18, 1997
