FIRST COMMONWEALTH CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on on Monday, June 5, 2000
To the Shareholders of:
FIRST COMMONWEALTH CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of First
Commonwealth Corporation, ("FCC"), will be held, on Monday, June 5, 2000 at
10:00 a.m. at the Corporate headquarters, 5250 South Sixth Street Road,
Springfield, Illinois 62703 for the following purposes:
1. To elect eleven directors of FCC 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, 2000 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, 2000
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 ("FCC")
will be held on Monday, June 5, 2000 at 10:00 a.m. at the Corporate
headquarters, 5250 South Sixth Street Road, Springfield, Illinois 62703.
This proxy statement is being sent to each holder of record of the issued and
outstanding shares of Common Stock of FCC, $1.00 par value per share (the
"Common Stock"), as of April 14, 2000, 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
FCC on or about May 8, 2000. The Annual Report has been mailed under separate
cover. FCC will bear the cost of soliciting proxies from its shareholders. FCC
may reimburse brokers and other persons for their reasonable expenses in
forwarding proxy materials to the beneficial owners of FCC'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 FCC 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 Monday, June 5, 2000, 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 FCC 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
FCC is a member of an insurance holding company system of which United Trust
Group, Inc., an Illinois corporation ("UTG"), is the ultimate parent. The
following is the current organizational chart for the companies that are members
of the UTG insurance holding company system and affiliates of FCC, and the
acronyms that will be used herein to reference the companies:
Organizational Chart
United Trust Group, Inc. ("UTG") is the ultimate controlling company. UTG owns
80% of First Commonwealth Corporation ("FCC"), 100% of Roosevelt Equity
Corporation ("REC") and 100% of North Plaza of Somerset, Inc. ("NORTH PLAZA").
FCC owns 100% of Universal Guaranty Life Insurance Company ("UG"). UG owns 86%
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, APPL and ABE, and the term "non-insurance affiliate
companies" shall mean the affiliated companies other than UG, APPL and ABE.
The companies hereinafter are sometimes collectively referred to as the
"Affiliate Companies".
This proxy at times will refer to UTG's largest shareholder, First Southern
Funding LLC, a Kentucky corporation, ("FSF"). Mr. Jesse T. Correll is the
majority shareholder of FSF, which is an affiliate of First Southern Bancorp,
Inc., a bank holding company that operates out of 14 locations in central
Kentucky. Mr. Correll is a member of the Board of Directors of UTG and is
currently UTG's largest shareholder through his approximately 82% ownership
control of FSF.
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VOTING SECURITIES OUTSTANDING
April 14, 2000 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, FCC had outstanding 54,538
shares of Common Stock, par value $1.00 per share. No other voting securities of
FCC 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.
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 FCC's Common Stock and shows: (i)
the total number of shares of Common Stock beneficially owned by such person as
of March 31, 2000 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. 43,850 80.4%
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 FCC, with respect to FCC's chief executive officer and each of FCC's
executive officers whose salary plus bonus exceeded $100,000 for fiscal 1999,
and with respect to all executive officers and directors of FCC as a group: (i)
the total number of shares of all classes of stock of FCC or any of its parents
or subsidiaries, beneficially owned as of March 31, 2000 and the nature of such
ownership; and (ii) the percent of the issued and outstanding shares of stock so
owned, and granted stock options available 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 (1)
----- ----------------------------- --------- ---------
UTG's John S. Albin 10,503 (2) *
Common Randall L. Attkisson 0 (3) *
Stock, no John W. Collins 0 *
par value Robert E. Cook 10,891 *
Jesse T. Correll 1,983,188 (4) 47.5%
Ward F. Correll 98,523 (5) 2.4%
George E. Francis 4,600 (6) *
James E. Melville 52,500 (7) 1.3%
Joseph H. Metzger 6,900 (8) *
Luther C. Miller 0 *
Millard V. Oakley 16,471 *
Robert V. O'Keefe 300 (9) *
Larry E. Ryherd 548,989 (10) 13.8%
Robert W. Teater 7,380 (11) *
Brad M. Wilson 2,800 (12) *
All directors and executive officers
as a group (fifteen in number) 2,743,045 64.8%
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FCC's John S. Albin 0 *
Common Randall L. Attkisson 0 *
Stock,$1.00 John W. Collins 0 *
par value Robert E. Cook 0 *
Jesse T. Correll 1,217 (4) 2.2%
Ward F. Correll 0 *
George E. Francis 0 *
James E. Melville 544 (13) 1.0%
Joseph H. Metzger 0 *
Luther C. Miller 0 *
Millard V. Oakley 0 *
Robert V. O'Keefe 0 *
Larry E. Ryherd 0 *
Robert W. Teater 0 *
Brad M. Wilson 0 *
All directors and executive officers 1,761 3.2%
as a group (fifteen in number)
(1) The percentage of outstanding shares for UTG is based on 3,970,266 shares
of Common Stock outstanding adjusted individually and in total to reflect
the conversion of convertible notes and stock options granted. The
percentage of outstanding shares for FCC is based on 54,538 shares of
Common Stock outstanding.
(2) Includes 392 shares owned directly by Mr. Albin's spouse.
(3) Randall L. Attkisson is an associate and business partner of Mr. Jesse T.
Correll and holds minority ownership positions in certain of the companies
listed as owning UTG Common Stock including First Southern Funding LLC and
First Southern Bancorp, Inc.. Ownership of these shares are reflected in
the ownership of Jesse T. Correll.
(4) Jesse T. Correll owns 112,704 shares of UTG stock individually. In
addition, Mr. Correll is a director and officer of First Southern Funding,
LLC & related parties which owns directly and indirectly 1,870,484 shares
of UTG (does not include 98,523 shares listed in this section under Ward F.
Correll) and 1,217 shares of FCC's common stock.
(5) Cumberland Lake Shell, Inc. owns 98,523 shares of UTG Common Stock, all of
the outstanding voting shares of which are owned by Ward F. Correll and his
wife. As a result Ward F. Correll may be deemed to share the voting and
dispositive power over these shares. Ward F. Correll is the father of Jesse
T. Correll. 72,750 shares of UTG Common Stock are owned by WCorrell Limited
Partnership in which Jesse T. Correll serves as managing general partner
and, as such, has sole voting and dispositive power over the shares of
Common Stock held by it. The aforementioned 72,750 shares are deemed to be
beneficially owned by and listed under Jesse T. Correll in this section.
(6) Includes 4,600 shares which may be acquired upon exercise of outstanding
stock options.
(7) James E. Melville owns 2,500 shares individually and 14,000 shares jointly
with his spouse. Includes: (i) 3,000 shares of UTG's Common Stock which are
held beneficially in trust for his daughter, namely Bonnie J. Melville;
(ii) 3,000 shares of UTG'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.
(8) Includes 6,900 shares which may be acquired upon exercise of outstanding
stock options.
(9) 300 shares owned directly by Mr. O'Keefe's spouse.
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(10) Larry E. Ryherd owns 181,091 shares of UTG's Common Stock in his own name.
Includes: (i) 150,050 shares of UTG's Common Stock in the name of Dorothy
LouVae Ryherd, his wife; (ii) 150,000 shares of UTG'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) 4,638 shares of UTG's Common Stock, 2,700
shares of which are in the name of Shari Lynette Serr, 1,900 shares of
which are in the name of Jarad John Ryherd and 38 shares which are in the
name of Derek Scott Ryherd; (iv) 2,000 shares held by Dorothy LouVae
Ryherd, his wife as custodian for granddaughter, 160 shares held by Larry
E. Ryherd as custodian for granddaughter; (v) 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 and
(vi) 13,800 shares which may be acquired by Larry E. Ryherd upon exercise
of outstanding stock options.
(11) Includes 210 shares owned directly by Mr. Teater' s spouse.
(12) Includes 2,800 shares which may be acquired upon exercise of outstanding
stock options.
(13) James E. Melville owns 168 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 FCC 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 FCC, as amended, FCC 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, 1999, the Board met four times. All directors attended at least 75%
of all meetings of the board except for Mr. Oakley.
The Board of Directors has an Audit Committee consisting of Messrs. Albin,
Collins, and Melville. 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 FCC, the nature of services performed for FCC and the fees to be paid
to the independent auditors, the performance of FCC's independent and internal
auditors and the accounting practices of FCC. 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 1999.
The compensation of FCC's executive officers is determined by the full Board of
Directors (see report on Executive Compensation).
Under FCC's Certificate of Incorporation, the Board of Directors may be
comprised of between five and twenty-one directors. The Board currently has
twelve directors. Shareholders elect Directors to serve for a period of one year
at FCC's Annual Shareholders' meeting.
The following information with respect to business experience of the Board of
Directors has been furnished by the respective directors or obtained from the
records of FCC.
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ELECTION OF DIRECTORS
At the annual meeting of shareholders of FCC, eleven 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 FCC, Business Experience and Other Directorships
John S. Albin 71
Director of UTG 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.
Randall L. Attkisson 54
Director of UTG and FCC since 1999; Chief Financial Officer,
Treasurer, Director of First Southern Bancorp, Inc. since
1986; Director of The Galilean Home, Liberty, KY since 1996;
Treasurer, Director of First Southern Funding, Inc. since
1992; Director of The River Foundation, Inc. since 1990;
Treasurer, Director of Somerset Holdings, Inc. since 1987;
President of Randall L. Attkisson & Associates from 1982 to
1986; Commissioner of Kentucky Department of Banking &
Securities from 1980 to 1982; Self-employed Banking
Consultant in Miami, FL from 1978 to 1980.
John W. Collins 73
Director of FCC and certain affiliate companies since 1982.
Consultant and past President of Collins-Winston Group since
1976.
Robert E. Cook 74
Director of UTG since 1984 and certain affiliate companies
since 1991; President of Cook-Witter, Inc., a governmental
consulting and lobbying firm with offices in Springfield,
Illinois, from 1985 until 1990.
Jesse T. Correll 43
Chairman and CEO of UTG since 2000; Director of UTG and FCC
since 1999; Chairman, President, Director of First Southern
Bancorp, Inc. since 1983; President, Director of First
Southern Funding, Inc. since 1992; President, Director of
Somerset Holdings, Inc., Lancaster Life Reinsurance Company
and First Southern Insurance Agency since 1987; President,
Director of The River Foundation since 1990; President,
Director of Dyscim Holdings Company, Inc. since 1990;
Director of Adamas Diamond Corporation since 1980;
Secretary, Director Lovemore Holding Company since 1987;
President, Director of North Plaza of Somerset since 1990;
Director of St. Joseph Hospital, Lexington, KY since 1997;
Managing Partner of World Wide Minerals from 1978 to 1983.
Jesse T. Correll is the son of Ward F. Correll.
Ward F. Correll 71
Director of UTG since 1999; President, Director of Tradeway,
Inc. of Somerset, KY since 1973; President, Director of
Cumberland Lake Shell, Inc. of Somerset, KY since 1971;
President, Director of Tradewind Shopping Center, Inc. of
Somerset, KY since 1966; Director of First Southern Bancorp,
Inc. of Stanford, KY since 1988; Director of First Southern
Funding, Inc. of Stanford, KY since 1991; Director of The
River Foundation of Stanford, KY since 1990; Director of
Somerset Holdings, Inc., Lancaster Life and First Southern
Insurance Agency of Stanford, KY since 1987. Ward F. Correll
is the father of Jesse T. Correll.
James E. Melville 54
President and Chief Operating Officer since July 1997; Chief
Financial Officer of UTG since 1993, Senior Executive Vice
President of UTG since September 1992; President of certain
Affiliate Companies from May 1989 until September 1991;
Chief Operating Officer of FCC from 1989 until September
1991; Chief Operating Officer of certain Affiliate Companies
from 1984 until September 1991; Senior Executive Vice
President of certain affiliate companies from 1984 until
1989; Consultant UTG from March 1992 through 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.
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Luther C. Miller 69
Director of FCC since 1984; Executive Vice President and
Secretary of FCC from 1984 until 1992; officer and director
of certain affiliate companies for more than the past five
years.
Millard V. Oakley 69
Director of UTG and FCC since 1999; Presently serves on
Board of Directors and Executive Committee of Thomas Nelson,
a publicly held publishing company based in Nashville, TN;
Director of First National Bank of the Cumberlands,
Livingston-Cooksville, TN; Lawyer with limited law practice
since 1980; State Insurance Commissioner for State of
Tennessee from 1975 to 1979; Served as General Counsel,
United States House of Representatives, Washington, D.C.,
Congressional Committee on Small Business from 1971-1973;
Served four elective terms as County Attorney for Overton
County, Tennessee; Elected delegate to National Democratic
Convention in 1964; Served four elective terms in the
Tennessee General Assembly from 1956 to 1964; Lawyer in
Livingston, TN from 1953 to 1971; Elected to the Tennessee
Constitutional Convention in 1952.
Robert V. O'Keefe 78
Director of FCC since 1993; Director and Treasurer of UTG
from 1988 to 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.
Robert W. Teater 72
Director of UTG since 1987; Director of UTG and certain
affiliate companies since 1992; member of Columbus School
Board since 1991, President of Columbus School Board since
1992; President of Robert W. Teater and Associates, a
comprehensive consulting firm in natural resources
development and organization management since 1983.
Others not seeking another term:
William F. Cellini 65
Director of UTG since 1999; Director of FCC and certain
affiliate companies since 1984; Chairman of the Board of New
Frontier Development Group, Chicago, Illinois for more than
the past five years; Chairman of Argosy Gaming Company for
more than the past five years; Executive Director of
Illinois Asphalt Pavement Association.
George E. Francis 56
Director of UTG since 1999; Executive Vice President since
July 1997; Secretary of UTG and certain affiliate companies
since 1993; Director of UTG 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.
Larry E. Ryherd 59
Chairman and CEO of UTG 1984 - 2000, and Director of UTG
since 1992; Chairman and CEO of certain affiliate companies
1992-2000, and Director of certain affiliate companies since
1992; Chairman of the Board, .CEO, President and COO of
certain affiliate life insurance companies 1992 -2000;
Director of the National Alliance of Life Companies since
1992; 1994 NALC Membership Committee Chairman; Member of the
American Council of Life Companies and Advisory Board Member
of its Forum 500 since 1992.
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EXECUTIVE OFFICERS OF FCC
More detailed information on the following officers of FCC appear under
"Election of Directors":
Jesse T. Correll Chairman of the Board and Chief Executive Officer
James E. Melville President and Chief Operating Officer
George E. Francis Executive Vice President, Secretary and
Chief Administrative Officer
Other officers of FCC are set forth below:
Name, Age Position with FCC, Business Experience and Other Directorships
Theodore C. Miller 37
Senior Vice President and Chief Financial Officer since July
1997; Vice President and Treasurer since October 1992; Vice
President and Controller of certain Affiliate Companies from
1984 to 1992.
Joseph H. Metzger 61
Director of FCC from 1992 - 1999, Senior Vice President,
Real Estate since 1989; Senior Vice President, Real Estate
of certain affiliate companies since 1983
Brad M. Wilson 48
Senior Vice President and Chief Information Officer since
1992.
EXECUTIVE COMPENSATION
Executive Compensation Table
The following table sets forth certain information regarding compensation paid
to or earned by FCC's Chief Executive Officer and each of the Executive Officers
of FCC whose salary plus bonus exceeded $100,000 during each of FCC's last three
fiscal years: Compensation for services provided by the named executive officers
to FCC and its affiliates is paid by FCC as set forth in their employment
agreements. (See EMPLOYMENT CONTRACTS).
SUMMARY COMPENSATION TABLE
Annual Compensation (1)
Other
Name and Compensation (2)
Principal Position Salary($) Bonus ($) $
Larry E. Ryherd (3) 1999 400,000 - 21,230
Chairman of the Board 1998 400,000 - 20,373
Chief Executive Officer 1997 400,000 - 18,863
James E. Melville 1999 238,200 - 33,084
President, Chief 1998 238,200 - 31,956
Operating Officer 1997 238,200 - 29,538
George E. Francis 1999 126,200 - 9,077
Executive Vice 1998 126,200 - 8,791
President, Secretary 1997 123,200 - 8,187
Joseph H. Metzger 1999 126,200 49,800 12,657
Senior Vice President 1998 126,200 20,123 11,644
Director of Real Estate 1997 121,000 - 10,817
Brad M. Wilson 1999 147,700 3,000 6,815
Senior Vice President 1998 139,000 2,900 6,506
Chief Information Officer 1997 131,000 2,700 6,222
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(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 FCC's
matching contribution to the First Commonwealth Corporation Employee
Savings Trust 401(k) Plan.
(3) On March 27, 2000 Mr. Larry E. Ryherd resigned as Chairman of the Board and
Chief Executive Officer of UTG and each of its affiliates.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
The following table summarizes for fiscal year ending, December 31, 1999, the
number of shares subject to unexercised options and the value of unexercised
options of the Common Stock of UTG 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, 1999 and the applicable per share exercise price. There were no options
granted to the named executive officers for the past three fiscal years.
<TABLE>
<S> <C> <C> <C> <C>
Number of
Shares Value Number of Securities Underlying Value of Unexercised In the
Acquired on Realized ($) Unexercised Options/SARs at Money Options/SARs at
Exercise (#) FY-End (#) FY-End ($)
Name Exercisable Unexercisable Exercisable Unexercisable
Larry E. Ryherd - - 13,800 - - -
James E. Melville - - 30,000 - - -
George E. Francis - - 4,600 - - -
Joseph H. Metzger - - 6,900 - - -
Brad M. Wilson - - 2,800 - - -
</TABLE>
Compensation of Directors
FCC'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. FCC's director
compensation policy also provides that directors who are employees of FCC or
directors or officers of First Southern Funding, LLC and related parties do not
receive any compensation for their services as directors except for
reimbursement for reasonable travel expenses for attending each meeting.
Employment Contracts
FCC entered into an employment agreement dated July 31, 1997 with Larry E.
Ryherd. Formerly, Mr. Ryherd had served as Chairman of the Board and Chief
Executive Officer of FCC and its affiliates. Pursuant to the agreement, Mr.
Ryherd agreed to serve as Chairman of the Board and Chief Executive Officer of
FCC 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 is for a period
of five years. 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
the Common Stock of UTG at $17.50 per share. The option is immediately
exercisable and transferable. The option will expire December 31, 2000.
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Effective March 27, 2000 the Board of Directors of UTG and each of its
affiliates accepted the resignation of Larry E. Ryherd as Chairman of the Board
of Directors and Chief Executive officer. Mr. Jesse T. Correll was appointed as
Chairman of the Board of Directors and Chief Executive Officer of each of the
companies. Mr. Correll is Chairman of the Board of Directors and President of
First Southern Funding, LLC and First Southern Bancorp, Inc., an affiliate of
First Southern Funding, LLC. First Southern Bancorp, Inc. owns First Southern
National Bank, which operates out of 14 locations in central Kentucky. Mr.
Correll is United Trust Group, Inc.'s largest shareholder through his
approximately 82% ownership control of First Southern Funding, LLC and related
parties. The terms of any compensation to Mr. Ryherd for the remaining period of
his aforementioned employment agreement are yet to be finalized.
FCC entered into an employment agreement dated July 31, 1997 with James E.
Melville pursuant to which Mr. Melville is employed as President and Chief
Operating Officer and in addition, to serve in other positions of the affiliated
companies if appointed or elected at an annual salary of $238,200. The term of
the agreement expires July 31, 2002. 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
30,000 shares of the Common Stock of UTG at $17.50 per share. The option is
immediately exercisable and transferable. The option will expire December 31,
2000.
FCC entered into an employment agreement with George E. Francis on July 31,
1997. Under the terms of the agreement, Mr. Francis is employed as Executive
Vice President of FCC at an annual salary of $126,200. Mr. Francis also agreed
to serve in other positions if appointed or elected to such positions without
additional compensation. The term of the agreement expires July 31, 2000. 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% per year. Additionally, Mr. Francis
was granted an option to purchase up to 4,600 shares of the Common Stock of UTG
at $17.50 per share. The option is immediately exercisable and transferable.
This option will expire on December 31, 2000.
FCC entered into an employment agreement with Joseph H. Metzger on July 31,
1997. Under the terms of the agreement, Mr. Metzger is employed as Senior Vice
President - Real Estate at an annual salary of $126,200. The agreement provides
that Mr. Metzger receives cash bonuses if certain real estate goals are
attained. The term of the agreement expires July 31, 2000. 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 6,900 shares
of UTG Common Stock at $17.50 per share. The option is immediately exercisable
and transferable. This option will expire on December 31, 2000.
FCC entered into an employment agreement with Brad M. Wilson on July 31, 1997.
Under the terms of the agreement, Mr. Wilson is employed as Senior Vice
President and Chief Information Officer at a minimum salary of $133,000. The
term of the agreement expires July 31, 2000. Mr. Wilson also agreed to serve in
other positions if appointed or elected to such positions without additional
compensation. Mr. Wilson has deferred portions of his income under a plan
entitling him to a deferred compensation payment on May 1, 2000 of $48,000 which
includes interest at the rate of approximately 8.5% annually. Additionally, Mr.
Wilson was granted an option to purchase up to 2,800 shares of UTG Common Stock
at $17.50 per share. The option will expire on December 31, 2000.
REPORT ON EXECUTIVE COMPENSATION
Introduction
The compensation of FCC's executive officers is determined by the full Board of
Directors. The Board of Directors strongly believes that FCC's executive
officers directly impact the short-term and long-term performance of FCC. With
this belief and the corresponding objective of making decisions that are in the
best interest of FCC's shareholders, the Board of Directors places significant
emphasis on the design and administration of FCC's executive compensation plans.
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 material changes in the base salaries of
the named executive officers.
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Stock Options. One of FCC'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 FCC's other shareholders. The Board of Directors
believes that this strategy motivates executives to remain focused on the
overall long-term performance of FCC. 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 UTG's 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.
Chief Executive Officer
Larry E. Ryherd was the Chairman of the Board and Chief Executive Officer from
1984 until his resignation on March 27, 2000. (see Employment Contracts). The
Board of Directors used the same compensation plan elements described above for
all executive officers to determine Mr. Ryherd's 1999 compensation.
In setting both the cash-based and equity-based elements of Mr. Ryherd's
compensation, the Board of Directors made an overall assessment of Mr. Ryherd's
leadership in achieving FCC's long-term strategic and business goals.
Mr. Ryherd's base salary reflects a consideration of both competitive forces and
FCC's performance. The Board of Directors does not assign specific weights to
these categories.
FCC surveys total cash compensation for chief executive officers at the same
group of companies described under "Base Salary" above. Based upon its survey,
FCC then determines a median around which it builds a competitive range of
compensation for the CEO. As a result of this review, the Board of Directors
concluded that Mr. Ryherd's base salary was in the low end of the competitive
market, and his total direct compensation (including stock incentives) was
competitive for CEOs running companies comparable in size and complexity to FCC.
The Board of Directors considered FCC's financial results as compared to other
companies within the industry, financial performance for fiscal 1999 as compared
to fiscal 1998, FCC's progress as it relates to FCC's growth through
acquisitions and simplification of the organization, the fact that since FCC
does not have a Chief Marketing Officer, Mr. Ryherd assumes additional
responsibilities of the Chief Marketing Officer, and Mr. Ryherd's salary
history, performance ranking and total compensation history.
Through fiscal 1999, Mr. Ryherd's annual salary was $400,000, the amount the
Board of Directors set in January 1998. Following a review of the above factors,
the Board of Directors decided to recognize Mr. Ryherd's performance by placing
a greater emphasis on long-term incentive awards, and therefore retained Mr.
Ryherd's base salary at $400,000.
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 FCC 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 James E. Melville
Randall L. Attkisson Luther C. Miller
William F. Cellini Millard V. Oakley
John W. Collins Robert V. O'Keefe
Jesse T. Correll Larry E. Ryherd
George E. Francis Robert W. Teater
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PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on FCC's
Common Stock during the five fiscal years ended December 31, 1999, with the
cumulative total return on the NASDAQ Composite Index Performance and the NASDAQ
Insurance Stock Index (1). The graph assumes that $100 was invested on December
31, 1994 in each of the Company's common stock, the NASDAQ Composite Index, and
the NASDAQ Insurance Stock Index, and that any dividends were reinvested.
1994 1995 1996 1997 1998 1999
FCC 100 100 100 224 310 220
NASDAQ 100 142 174 214 301 543
NASDAQ Insurance 100 142 162 237 212 165
(1) FCC selected the NASDAQ Composite Index Performance as an appropriate
comparison because FCC's Common Stock is not listed on any exchange but
FCC's Common Stock is traded in the over-the-counter market. Furthermore,
FCC 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 FCC's Common Stock is limited, which may
be in part a result of FCC's low profile from not being listed on any
exchange, and its reported operating losses. The Return Chart is not
intended to forecast or be indicative of possible future performance of
FCC's stock.
The foregoing graph shall not be deemed to be incorporated by reference into any
filing of FCC under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that FCC specifically incorporates such information
by reference.
Compensation Committee Interlocks and Insider Participation
The following persons served as directors of FCC during 1999 and were officers
or employees of FCC or its subsidiaries during 1999: George E. Francis, James E.
Melville, Joseph H. Metzger, and Larry E. Ryherd. Accordingly, these individuals
have participated in decisions related to compensation of executive officers of
FCC and its subsidiaries.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATED PARTY TRANSACTIONS
Under the current structure, FCC pays a majority of the general operating
expenses of the affiliated group. FCC then receives management, service fees and
reimbursements from the various affiliates.
United Income, Inc. ("UII") had a service agreement with United Security
Assurance Company ("USA"). The agreement was originally established upon the
formation of USA which was a 100% owned subsidiary of UII. Changes in the
affiliate structure have resulted in USA no longer being a direct subsidiary of
UII, though still a member of the same affiliated group. The original service
agreement remained in place without modification. USA paid UII monthly fees
equal to 22% of the amount of collected first year premiums, 20% in second year
and 6% of the renewal premiums in years three and after. UII had a subcontract
agreement with UTG to perform services and provide personnel and facilities. The
services included in the agreement were claim processing, underwriting,
processing and servicing of policies, accounting services, agency services, data
processing and all other expenses necessary to carry on the business of a life
insurance company. UII's subcontract agreement with UTG states that UII pay UTG
monthly fees equal to 60% of collected service fees from USA as stated above.
The service fees received from UII were recorded in UTG's financial statements
as other income. With the merger of UII into UTG in July 1999, the sub-contract
agreement ended and UTG assumed the direct contract with USA. This agreement was
terminated upon the merger of USA into UG in December 1999.
USA paid $677,807, $835,345 and $989,295 under their agreement with UII for
1999, 1998 and 1997, respectively. UII paid $223,753, $501,207 and $593,577
under their agreement with UTG for 1999, 1998 and 1997, respectively.
Additionally, UII paid FCC $30,000, $0 and $150,000 in 1999, 1998 and 1997,
respectively for reimbursement of costs attributed to UII. UTG paid FCC
$600,000, $0 and $575,000 in 1999, 1998 and 1997, respectively for reimbursement
of costs attributed to UTG. These reimbursements are reflected as a credit to
general expenses.
On January 1, 1993, FCC entered an agreement with UG pursuant to which FCC
provides management services necessary for UG to carry on its business. UG paid
$6,251,340, $8,018,141 and $8,660,481 to FCC in 1999, 1998 and 1997,
respectively.
ABE pays fees to FCC pursuant to a cost sharing and management fee agreement.
FCC provides management services for ABE to carry on its business. The agreement
requires ABE to pay a percentage of the actual expenses incurred by FCC based on
certain activity indicators of ABE business to the business of all the insurance
company subsidiaries plus a management fee based on a percentage of the actual
expenses allocated to ABE. ABE paid fees of $392,005, $399,325 and $443,726 in
1999, 1998 and 1997, respectively under this agreement.
APPL has a management fee agreement with FCC whereby FCC provides certain
administrative duties, primarily data processing and investment advice. APPL
paid fees of $300,000 in 1999, 1998 and 1997, under this agreement.
Respective domiciliary insurance departments have approved the agreements of the
insurance companies and it is Management's opinion that where applicable, costs
have been allocated fairly and such allocations are based upon generally
accepted accounting principles. The costs paid by the Company for services
include costs related to the production of new business, which are deferred as
policy acquisition costs and charged off to the income statement through
"Amortization of deferred policy acquisition costs". Amounts recorded by USA as
deferred acquisition costs are no greater than what would have been recorded had
all such expenses been directly incurred by USA. Also included are costs
associated with the maintenance of existing policies that are charged as current
period costs and included in "general expenses".
On December 31, 1999, UTG and Jesse T. Correll entered a transaction whereby Mr.
Correll, in combination with other individuals, made an equity investment in
UTG. Under the terms of the Stock Acquisition Agreement, the Correll group
contributed their 100% ownership of North Plaza of Somerset, Inc. to UTG in
exchange for 681,818 authorized but unissued shares of UTG common stock. The
Board of Directors of UTG approved the transaction at their regular quarterly
board meeting held on December 7, 1999. North Plaza of Somerset, Inc. owns a
shopping center in Somerset, Kentucky and approximately 23,000 acres of
timberland in Kentucky. North Plaza has no debt. The net assets have been valued
at $7,500,000, which equates to $11.00 per share for the new shares issued.
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Mr. Correll is a member of the Board of Directors of UTG and currently UTG's
largest shareholder through his ownership control of FSF and its related
parties. Mr. Correll is the majority shareholder of FSF, which is an affiliate
of First Southern Bancorp, Inc., a bank holding company that operates out of 14
locations in central Kentucky. Following the above transaction, as of December
31, 1999, Mr. Correll owns or controls directly and indirectly approximately 46%
of UTG. The 46% referenced includes 171,273 shares owned by Mr. Correll's
father, Ward F. Correll, who is on the Board of Directors of UTG, and does not
include stock options granted totaling 370,904 shares, which would facilitate
ultimate ownership of over 51% of UTG.
Following necessary regulatory approval, on December 29, 1999, UG was the
survivor to a merger with its 100% owned subsidiary, USA. The merger was
completed as a part of management's efforts to reduce costs and simplify the
corporate structure.
On July 26, 1999, the shareholders of UTG and UII approved a merger transaction
of the two companies. Prior to the merger, UTG owned 53% of UTGL99 (refers to
the former United Trust Group, Inc., which was formed in February of 1992 and
liquidated in July of 1999) an insurance holding company, and UII owned 47% of
UTGL99. Additionally, UTG held an equity investment in UII. At the time the
decision to merge was made, neither UTG nor UII had any other significant
holdings or business dealings. The Board of Directors of each company thus
concluded a merger of the two companies would be in the best interests of the
shareholders by creating a larger more viable life insurance holding group with
lower administrative costs, a simplified corporate structure, and more readily
marketable securities. Following the merger approval, UTG issued 817,517 shares
of its authorized but unissued common stock to former UII shareholders, net of
any dissenter shareholders in the merger. Immediately following the merger,
UTGL99, which was then 100% owned by UTG, was liquidated and UTG changed its
name to United Trust Group, Inc. ("UTG").
On January 16, 1998, UTG acquired 7,579 shares of its common stock from the
estate of Robert Webb, a former director, for $26,527 and a promissory note
valued at $41,819 due January 16, 2005. The note was paid in full on November
23, 1998.
On September 23, 1997, UTG acquired 10,056 shares of its common stock from Paul
Lovell, a director, for $35,000 and a promissory note valued at $61,000 due
September 23, 2004. The note was paid in full on November 23, 1998. Simultaneous
with the stock purchase, Mr. Lovell resigned his position on the UTG board.
On July 31, 1997, UTG issued convertible notes for cash received totaling
$2,560,000 to seven individuals, all officers or employees of UTG. The notes
bear interest at a rate of 1% over prime, with interest payments due quarterly
and principal due upon maturity of July 31, 2004. The conversion price of the
notes are graded from $12.50 per share for the first three years, increasing to
$15.00 per share for the next two years and increasing to $20.00 per share for
the last two years. Conditional upon the seven individuals placing the funds
with the Company were the acquisition by UTG of a portion of the holdings of UTG
owned by Larry E. Ryherd and his family and the acquisition of common stock of
UTG and UII held by Thomas F. Morrow and his family and the simultaneous
retirement of Mr. Morrow. Neither Mr. Morrow nor Mr. Ryherd was a party to the
convertible notes. On March 1, 1999, the individuals holding the convertible
notes sold their interests in said notes to First Southern Bancorp, Inc. in
private transactions.
Approximately $1,048,000 of the cash received from the issuance of the
convertible notes was used to acquire stock holdings of UTG and United Income,
Inc. of Mr. Morrow and to acquire a portion of the UTG holdings of Larry E.
Ryherd and his family. The remaining cash received will be used by UTG to
provide additional operating liquidity and for future acquisitions of life
insurance companies. On July 31, 1997, UTG acquired a total of 126,921 shares of
its common stock and 47,250 shares of United Income, Inc. common stock from
Thomas F. Morrow and his family. Mr. Morrow simultaneously retired as an
executive officer of the Company. In exchange for his stock, Mr. Morrow and his
family received approximately $348,000 in cash, promissory notes valued at
$140,000 due in eighteen months, and promissory notes valued at $1,030,000 due
January 31, 2005. These notes bear interest at a rate of 1% over prime, with
interest due quarterly and principal due upon maturity. The notes do not contain
any conversion privileges. Additionally, on July 31, 1997, UTG acquired a total
of 97,499 shares of its common stock from Larry E. Ryherd and his family. Mr.
Ryherd and his family received approximately $700,000 in cash and a promissory
note valued at $251,000 due January 31, 2005. The acquisition of approximately
16% of Mr. Ryherd's stock holdings in UTG was completed as a prerequisite to the
convertible notes placed by other management personnel to reduce the total
holdings of Mr. Ryherd and his family in the Company to make the stock more
attractive to the investment community. Following the transaction, Mr. Ryherd
and his family owned approximately 31% of the outstanding common stock of UTG.
The market price of UTG common stock on July 31, 1997 was $6.00 per share. The
stock acquired in the above transaction was from the largest two shareholders of
UTG stock. There were no additional stated or unstated items or agreements
relating to the stock purchase. The promissory notes to Mr. Morrow and his
family and Mr. Ryherd and his family were paid in full on November 23, 1998.
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On July 31,1997, the Company entered employment agreements with eight
individuals, all officers or employees of the Company. The agreements have a
term of three years, excepting the agreements with Mr. Ryherd and Mr. Melville,
which have five-year terms. The agreements secure the services of these key
individuals, providing the Company a stable management environment and
positioning for future growth.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Kerber, Eck and Braeckel LLP served as FCC's independent certified public
accounting firm for the fiscal year ended December 31, 1999 and fiscal year
ended December 31, 1998. In serving its primary function as outside auditor for
FCC, Kerber, Eck and Braeckel LLP 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. FCC
does not expect that a representative of Kerber, Eck and Braeckel will be
present at the Annual Meeting of Shareholders of FCC. No accountants have been
selected for fiscal year 2000 because FCC generally chooses accountants shortly
before the commencement of the annual audit work.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
In order for a proposal by a shareholder to be included in FCC's proxy statement
and form of proxy for the 2001 Annual Meeting of Shareholders, the proposal must
be received by FCC at its principal office on or before December 15, 2000.
Shareholder proposals submitted after March 24, 2001, will be considered
untimely, and the proxy solicited by FCC for next year's annual meeting may
confer discretionary authority to vote on any such matters without a description
of them in the proxy statement for that meeting.
OTHER MATTERS TO COME BEFORE THE MEETING
The management does not intend to bring any other business before the meeting of
FCC'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
FCC has filed its 1999 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, 2000
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