<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
UNITED COMPANIES FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
{LOGO}
UNITED COMPANIES FINANCIAL CORPORATION
P. O. BOX 1591
BATON ROUGE, LOUISIANA 70821
To the Shareholders of
UNITED COMPANIES FINANCIAL CORPORATION
Enclosed is a Notice of the 1994 Annual Meeting of Shareholders of United
Companies Financial Corporation (the "Company") and a Proxy and Proxy Statement
relating to the Annual Meeting. The Annual Meeting will be held on April 28,
1994, at 9:00 a.m. at One United Plaza, Fifth Floor, 4041 Essen Lane, Baton
Rouge, Louisiana. The Proxy Statement describes the matters to be acted upon at
the meeting.
You are urged to sign and return the accompanying Proxy so that you may be
sure that your shares will be voted.
Sincerely,
HARRIS J. CHUSTZ
Chairman of the Board
Baton Rouge, Louisiana
March 31, 1994
<PAGE> 3
NOTICE OF ANNUAL MEETING OF THE
SHAREHOLDERS OF
UNITED COMPANIES FINANCIAL CORPORATION
To the Holders of the Common Stock :
PLEASE TAKE NOTICE that the 1994 Annual Meeting of Shareholders of United
Companies Financial Corporation, a Louisiana corporation (the "Company"), will
be held at One United Plaza, Fifth Floor, 4041 Essen Lane, Baton Rouge,
Louisiana, on April 28, 1994, at 9:00 a.m. to consider and act upon:
(1) the election of the Board of Directors of ten (10) members;
(2) a proposal to approve the adoption of the Company's 1993 Stock
Incentive Plan;
(3) a proposal to approve the adoption of the Company's 1993
Non-Employee Director Stock Option Plan;
(4) a proposal to approve the adoption of the Company's Management
Incentive Plan.
(5) the adoption of a proposed amendment to Section 1 of Article III
of the Articles of Incorporation to increase the number of
authorized shares of the Company's $2.00 par value common stock
from 20,000,000 shares to 100,000,000 shares and the number of
authorized shares of the Company's $2.00 par value preferred stock
from 5,000,000 shares to 20,000,000; and
(6) such other business as may properly come before the meeting, or
any adjournments thereof.
The Board of Directors has fixed the close of business on March 18, 1994,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
SHERRY E. ANDERSON,
Secretary
Baton Rouge, Louisiana
March 31, 1994
IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE INDICATE YOUR WISHES, DATE,
SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY FOR WHICH A RETURN ENVELOPE IS
PROVIDED.
<PAGE> 4
UNITED COMPANIES FINANCIAL CORPORATION
P. O. BOX 1591 -- 4041 ESSEN LANE
BATON ROUGE, LOUISIANA 70821
PROXY STATEMENT
The accompanying Proxy is solicited on behalf of the Board of Directors of
United Companies Financial Corporation (the "Company") for use at the 1994
Annual Meeting of Shareholders to be held on Thursday, April 28, 1994, at 9:00
a.m., at One United Plaza, Fifth Floor, 4041 Essen Lane, Baton Rouge, Louisiana,
and any adjournments thereof. The Company anticipates that this Proxy Statement
and the accompanying Proxy will be first sent or given to shareholders on
approximately March 31, 1994.
On March 1, 1994, the Company had issued and outstanding and entitled to
vote 12,340,376 shares of its $2.00 par value common stock (the "Common Stock").
The Common Stock is the only outstanding class of voting security of the Company
and each share is entitled to one vote. There is no cumulative voting. Only
shareholders of record at the close of business on March 18, 1994, will be
entitled to notice of, and to vote at, this Annual Meeting. Any shareholder
giving a Proxy has the power to revoke it at any time before it is exercised by
providing written notice of revocation to the Secretary of the Company or by
filing a Proxy of a later date with the Secretary of the Company. The holders of
a majority of the total shares of Common Stock outstanding on the record date,
whether present in person or represented by proxy, will constitute a quorum for
the transaction of business at the Annual Meeting. The shares held by each
shareholder who signs and returns the enclosed form of Proxy will be counted for
purposes of determining the presence of a quorum at the meeting, whether or not
the shareholder abstains on all or any matter to be acted on at the meeting.
Abstentions are counted toward the calculation of a quorum. Any unvoted position
in a brokerage account will be considered as not voted and will not be counted
toward fulfillment of quorum requirements.
The purpose of the Annual Meeting is to consider and act upon the matters
which are listed in the accompanying Notice of Annual Meeting and set forth in
this Proxy Statement.
The enclosed form of Proxy provides a means for a shareholder to vote for
all the nominees for director listed thereon, to withhold authority to vote for
one or more of such nominees, or to withhold authority to vote for all of such
nominees. The Company's bylaws provide that directors are elected by a plurality
of the votes cast. Accordingly, the withholding of authority by a shareholder
will have no effect on the results of the election of those directors for whom
authority to vote is withheld. Each Proxy will be voted in accordance with the
shareholder's directions. Unless the shareholder specifies otherwise, a Proxy in
the accompanying form which is properly executed and duly returned will be voted
FOR the election of the ten (10) nominees listed hereinafter as directors.
The affirmative vote of a majority of the shares of Common Stock present in
person or represented by proxy and entitled to vote is required for the approval
of the Company's 1993 Stock Incentive Plan, the Company's 1993 Non-Employee
Director Stock Option Plan, the Company's Management Incentive Plan and the
amendment to the Articles of Incorporation of the Company. Approval of any other
matters as may properly come before the meeting will also require the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy and entitled to vote at the meeting. Other than in the
case of the election of directors, abstentions will have the same effect as a
vote against any proposal.
The cost of preparing, assembling, printing and mailing this Proxy
Statement, the form of Proxy, and the Notice of Annual Meeting of Shareholders
will be paid by the Company. In addition to solicitation by use of the mails,
solicitation of Proxies may also be made personally by certain directors,
officers and employees of the Company, and no additional compensation will be
paid to such individuals. Proxies will also be solicited by Chemical Bank, New
York, N.Y., the Company's registrar and transfer agent, whose fee and
out-of-pocket expenses will be paid by the Company. The Company will also supply
brokers or persons holding stock in their names or in the names of their
nominees with such number of Proxies, proxy material and annual reports as they
may require for mailing to beneficial owners, and will reimburse them for their
reasonable expenses incurred in connection therewith.
2
<PAGE> 5
SECURITY HOLDINGS OF MANAGEMENT AND OTHERS
The following table sets forth the amount and percent of shares of Common
Stock which, as of March 1, 1994, are deemed under the rules of the Securities
and Exchange Commission (the "Commission") to be "beneficially owned" by each
director, by all directors and officers as a group, and by any person or "group"
(as that term is used in the Securities Exchange Act of 1934, as amended) known
to the Company as of that date to be a "beneficial owner" of more than 5% of the
outstanding shares of Common Stock of the Company:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE OF
DIRECTORS OWNERSHIP(1)(2) CLASS(3)
----------------------------------------------------- --------------- -------------
<S> <C> <C>
James J. Bailey, III................................. 104,344(4)(5) --
General Robert H. Barrow (retired)................... 20,216(4) --
J. Terrell Brown..................................... 299,050(5)(6) 2.400%
Richard A. Campbell.................................. 74,322(4) --
Harris J. Chustz..................................... 220,295(5)(6) 1.776%
Robert D. Kilpatrick................................. 24,790(4) --
O. Miles Pollard, Jr................................. 37,460(4) --
Charles Prosser, M.D................................. 115,184(4) --
Dale E. Redman....................................... 98,113(6) --
William H. Wright, Jr................................ 208,047(4)(5) 1.683%
All officers and directors as a group (28 persons)... 1,558,305(4)(5)(6) 12.083%
OTHER PERSONS
United Companies Financial Corporation
Employee Stock Ownership Plan and Trust
440 Riverside Mall
Baton Rouge, LA 70801.............................. 2,064,590(7) 16.730%
</TABLE>
- ---------------
(1) Under rules promulgated by the Commission, "beneficial ownership" includes
having or sharing with others the power to vote or direct the investment of
securities. Accordingly, a person having or sharing the power to vote or
direct the investment of securities is deemed to "beneficially own" the
securities even if he has no right to receive any part of the dividends on
or the proceeds from the sale of these securities. Also, because
"beneficial ownership" extends to persons, such as co-trustees under a
trust, who share power to vote or control the disposition of the
securities, the very same securities may be deemed "beneficially owned" by
two or more persons shown in the table. Information with respect to
"beneficial ownership" shown in the table above is based upon information
supplied by the directors and officers of the Company and filings made with
the Commission or furnished to the Company by any stockholder.
(2) Includes pro rata shares, where applicable, that have been allocated to an
individual's accounts in the Company's Employee Stock Ownership Plan and
Trust (the "ESOP") and in the Company's Employees' Savings Plan and Trust
(the "401(k) Plan").
(3) Less than 1% except as otherwise indicated.
(4) Includes shares which the named holder is presently entitled to acquire upon
exercise of options granted under the Company's 1993 and 1989 Non-Employee
Director Stock Option Plans.
(5) Includes shares held by family members and controlled affiliates.
(6) Includes shares which the following named holders as of March 1, 1994, were
entitled to acquire upon exercise of options granted under the Company's
Stock Option Plans: Mr. Brown, 119,920; Mr. Chustz, 64,670; and Mr. Redman,
77,040; all executive officers as a group (6 persons), 367,222; and all
directors, executive officers and senior vice presidents as a group (28
persons), 611,860.
3
<PAGE> 6
(7) Held by Hibernia National Bank as trustee. An ESOP participant exercises
voting rights over shares of Common Stock allocated to the participant's
account, whether or not vested. Voting rights for any unallocated shares of
Common Stock held by the ESOP are voted by the trustee in proportion to the
voting of allocated shares by the ESOP participants. The Plan Administrator,
a committee composed of six officers and directors of the Company, may also
in certain circumstances direct the trustee to purchase, sell, resell or
otherwise dispose of Common Stock. At March 1, 1994, there were 358,040
unallocated shares held by the ESOP.
ELECTION OF DIRECTORS
The number of directors to be elected at the meeting to constitute the
Board of Directors has been fixed at ten (10). Each director is to be elected
for a term of one year and to serve until the next annual meeting of
shareholders or until his successor is elected and qualified. The enclosed form
of Proxy confers discretionary authority with respect to the election of
directors, but no authority under the Proxy will be exercised to vote for the
election of any person as a director, other than the persons named in this Proxy
Statement who have been nominated by the present Board of Directors, unless, for
some reason not presently known, one or more of such nominees should become
unavailable. In such event, it is intended that the Proxy would be voted for a
substitute nominee or nominees who would be designated by the Board of Directors
prior to the shareholders' meeting. In order to be elected a director, a nominee
must receive a plurality of the votes cast by the holders of Common Stock. All
of the ten (10) nominees for director are at present directors of the Company.
The name and age, principal occupation or employment, and other data regarding
each nominee, based on information received from the respective nominees, are
set forth below:
JAMES J. BAILEY, III
Mr. Bailey, age 52, has served as a director of the Company since 1987. Mr.
Bailey is managing partner of Bailey Family Investments and Chairman of Tri-Star
Investments, and he is a member of the Board of Directors of First Commerce
Corporation, City National Bank of Baton Rouge and St. Mary Bank and Trust,
Franklin, Louisiana.
ROBERT H. BARROW, GENERAL (RETIRED)
General Barrow, age 72, has served as a director of the Company since 1983.
He retired as Commandant of the United States Marine Corps in July, 1983.
General Barrow is a member of the Board of Advisors, Baton Rouge Region, Premier
Bank, National Association and of the Board of Directors of Gulf States
Utilities Company. General Barrow also serves on the Board of Trustees of the
Center for Naval Analysis.
J. TERRELL BROWN
Mr. Brown, age 54, is President and Chief Executive Officer of the Company
and Chief Executive Officer of each of the subsidiaries of the Company. He has
served as a director and executive officer since 1972 and was named Chief
Executive Officer in 1985. Mr. Brown is also a director of Hibernia Corporation.
RICHARD A. CAMPBELL
Mr. Campbell, age 62, has served as a director of the Company since 1987.
Mr. Campbell is an oil and gas exploration geologist in Lafayette, Louisiana.
HARRIS J. CHUSTZ
Mr. Chustz, age 78, is Chairman of the Board and of the Executive Committee
of the Company. He has served as an executive officer and director of the
Company since 1972 and was named Chairman of the Board of the Company in 1986.
4
<PAGE> 7
ROBERT D. KILPATRICK
Mr. Kilpatrick, age 70, has served as a director of the Company since 1989.
Mr. Kilpatrick serves as a director of CIGNA Corporation, Allied-Signal, Inc.,
Kuhlman Corporation and is an advisory director of Boardroom Consultants, Inc.
Prior to retirement in 1985, Mr. Kilpatrick served as Chairman of the Board and
Chief Executive Officer of CIGNA Corporation.
O. MILES POLLARD, JR.
Mr. Pollard, age 56, has served as a director of the Company since 1990. He
is engaged in private investments and serves as Secretary-Treasurer of SAS
Exploration, Inc. He is a director of First Commerce Corporation, City National
Bank of Baton Rouge, Coca-Cola Bottling Company West, Inc. and J.I. Jacobs,
P.L.C., London, England.
CHARLES PROSSER, M.D.
Dr. Prosser, age 74, has served as a director of the Company since 1972. He
is a retired physician in Baton Rouge, Louisiana.
DALE E. REDMAN
Mr. Redman, age 46, is Executive Vice-President, Chief Financial Officer
and Assistant Secretary of the Company and Vice Chairman of each of the
subsidiaries of the Company. Prior to his appointment as Chief Financial Officer
and Executive Vice President in 1988, Mr. Redman served as Secretary and
Treasurer of the Company. He has served as a director since 1983.
WILLIAM H. WRIGHT, JR.
Mr. Wright, age 67, has served as a director of the Company since 1972. He
has served as President and Chief Executive Officer of Wright Insurance Agency,
Inc. since 1968 and is a director of City National Bank of Baton Rouge,
Louisiana.
BOARD MEETINGS, COMMITTEES AND COMPENSATION
During the year ended December 31, 1993, eleven (11) meetings of the Board
of Directors were held. Each incumbent director who is a nominee for re-election
attended at least 75% of the aggregate of the meetings of the Board of Directors
and committees of the Board held during the period for which he was a director
or a member of a particular committee. The Board of Directors has no nominating
or other committee performing similar functions at this time. The following
Directors presently serve on the Audit Committee: James J. Bailey, III, General
Robert H. Barrow, Charles Prosser, M.D. and William H. Wright, Jr. The Audit
Committee met nine (9) times in 1993. The primary functions of the Audit
Committee are as follows: to review the scope and timing of the audit and
non-audit services to be rendered by the Company's independent accountants; to
approve the audit plans of the independent accountants and internal auditors and
to review their reports upon completion of their audits; to review the
appropriateness of the Company's accounting policies, the adequacy of its
financial controls and the reliability of the financial information reported to
the public; and to report to the Board of Directors on its activities. The
following Directors presently serve on the Compensation Committee: Richard A.
Campbell, Robert D. Kilpatrick and O. Miles Pollard, Jr. The Compensation
Committee met five (5) times in 1993. The primary functions of the Compensation
Committee are as follows: to review and approve, subject to ratification by the
Board of Directors, the Chief Executive Officer's compensation; to consult with
the Chief Executive Officer and approve compensation for members of senior
management; to administer the Company's stock option plans (other than plans in
which non-employee directors participate), including approval of all grants of
options thereunder; to approve an annual aggregate amount that may be used for
the current year's management incentive plan; and to report to the Board of
Directors on its activities.
5
<PAGE> 8
Each Director who is not an employee of the Company received $1,000 per
Board meeting and $500 per Committee meeting attended during 1993. Each
Committee Chairman received an annual retainer of $1,000. Each Director who is
not an employee of the Company or any of its subsidiaries also received during
1993 an annual retainer of $4,800, paid quarterly. For a description of stock
options granted to non-employee Directors, see "Stock Option Plans -- 1989
Non-Employee Director Plan and 1993 Plans."
EXECUTIVE OFFICERS
In addition to the individuals identified above as executive officers of
the Company, the following three (3) individuals presently serve as executive
officers of the Company:
W. ROGER CLARK
Mr. Clark, age 47, serves as Executive Vice President of the Company and
President of United Companies Lending Corporation ("UCLC"), a wholly-owned
subsidiary of the Company. Mr. Clark joined the Company in 1983 and was named
Executive Vice President of the Company in 1988 and President of UCLC in 1990.
JOHN D. DIENES
Mr. Dienes, age 52, serves as Executive Vice President of the Company and
President of Southern Mortgage Acquisition, Inc. ("SMA"), a wholly-owned
subsidiary of the Company. Mr. Dienes joined the Company in February of 1994.
Prior to his employment with the Company, Mr. Dienes served as Executive Vice
President and Director of Western Corporate Banking for NationsBank Corporation,
Dallas, Texas.
ROBERT B. THOMAS, JR.
Mr. Thomas, age 47, serves as Executive Vice President of the Company and
Chairman of United Companies Life Insurance Company ("UCLIC"), a wholly-owned
subsidiary of the Company. Mr. Thomas joined UCLIC as Chairman in February of
1993. Prior to his employment with UCLIC, Mr. Thomas served as a principal of
Lewis and Ellis, Inc., a Dallas, Texas actuarial consulting firm and, through
Lewis and Ellis, served as consulting actuary to UCLIC for approximately 15
years.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information on
the annual and long-term compensation for the Chief Executive Officer and each
of the other six (6) most highly compensated executive officers of the Company
for the years ended December 31, 1993, 1992 and 1991.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
------------------------------------- COMPENSATION
OTHER ------------
ANNUAL AWARDS
NAME AND COMPENSA- ------------ ALL OTHER
PRINCIPAL TION OPTIONS(3)/ COMPENSA-
POSITION YEAR SALARY($) BONUS ($)(1) ($)(2) SARS (#) TION(4)($)
- ---------------------------- ----- --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
J. Terrell Brown............ 1993 $ 375,625 $ 76,395 -- 50,000 $32,114
President and Chief 1992 373,437 69,677 -- -- 43,498
Executive Officer 1991 260,417 86,544 -- 13,800 53,315
Harris J. Chustz............ 1993 150,000 -- -- 12,000 9,359
Chairman of the Board 1992 262,500 -- -- -- 30,649
1991 260,417 57,696 -- 9,200 42,482
W. Roger Clark.............. 1993 155,269 39,027 -- 20,000 12,382
Executive Vice President 1992 142,188 30,509 -- -- 6,473
President, UCLC 1991 135,416 37,958 -- 9,200 17,394
James H. Poythress(5)....... 1993 181,453 -- -- -- 10,664
President, FMC 1992 179,995 37,159 -- -- 8,624
1991 175,000 49,053 -- 9,200 14,447
Dale E. Redman.............. 1993 218,333 55,793 -- 20,000 14,218
Executive Vice President, 1992 182,167 39,381 -- -- 13,403
Chief Financial Officer 1991 166,667 46,717 -- 9,200 22,375
John E. Smith(6)............ 1993 135,416 23,940 -- 20,000 11,578
Executive Vice President 1992 127,500 27,673 -- -- 4,550
President, SMA 1991 93,550 30,000 -- 3,450 9,002
Robert B. Thomas, Jr........ 1993 175,769 49,732 -- 20,000 --
Executive Vice President, 1992 -- -- -- -- --
Chairman, UCLIC 1991 -- -- -- -- --
</TABLE>
(1) Amounts awarded under the Company's Management Incentive Plan for the
respective fiscal years, even if deferred. Included in the amounts awarded
to J. Terrell Brown in 1993, 1992 and 1991 were $16,998, $17,134 and
$17,259, respectively, which were deferred pursuant to an unfunded salary
deferral agreement entered into between the Company and Mr. Brown in 1989.
The aggregate amount payable by the Company to Mr. Brown at March 1, 1994
was $102,463.
(2) Personal benefits, which are non-cash compensation, are not disclosed in the
"Other Annual Compensation" column since they did not exceed the lesser of
either $50,000 or 10% of the total annual salary and bonus for any of the
named executive officers.
(3) Represents options granted under the Company's Stock Option Plans after
giving effect for stock dividends. All options have been granted at an
exercise price equal to 100% of the fair market value of the Common Stock
on the date of the grant. See "Stock Option Plans."
(4) Amounts reported include amounts contributed or accrued for 1993, 1992 and
1991 for the named officers under the Company's Employee Stock Ownership
Plan ("ESOP") and Employees' Savings Plan and Trust. Amounts for J. Terrell
Brown for 1993, 1992 and 1991 also include $17,134, $17,259 and $17,695,
respectively, in loans to Mr. Brown for payment of a portion of the premium
on a life insurance
7
<PAGE> 10
policy. The loans were made without interest and are secured by an
assignment of the policy. See "Transactions with Management and Others."
(5) Information regarding the compensation of Mr. Poythress is included in this
table and those that follow because he served as an executive officer
during 1993, but was not serving in such capacity as of December 31, 1993
nor at present.
(6) John E. Smith is no longer employed by the Company or any of its
subsidiaries.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding the options granted
during the year ended December 31, 1993 to the Chief Executive Officer and the
other six (6) most highly compensated executive officers of the Company.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
---------------------------------------------------------- REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS/SARS EMPLOYEES EXERCISE OR FOR OPTION TERM
GRANTED IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- --------------------- ------------ ------------ ----------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
J. Terrell Brown..... 50,000 12.5% $14.125 July 22, 2003 $ 444,250 $ 1,125,750
Harris J. Chustz..... 12,000 3.0% $14.125 July 22, 2003 106,596 270,200
W. Roger Clark....... 20,000 5.0% $14.125 July 22, 2003 177,700 450,332
James H. Poythress... -- -- -- -- -- --
Dale E. Redman....... 20,000 5.0% $14.125 July 22, 2003 177,700 450,332
John E. Smith........ 20,000 5.0% $14.125 July 22, 2003 177,700 450,332
Robert B. Thomas,
Jr................. 20,000 5.0% $14.125 July 22, 2003 177,700 450,332
</TABLE>
OPTIONS EXERCISED AND YEAR-END VALUES OF UNEXERCISED OPTIONS
The following table sets forth information as of December 31, 1993
regarding the number of shares received, the value realized upon exercise of
stock options and the value of unexercised options to purchase Common Stock of
the Company held by the Company's Chief Executive Officer and the other six (6)
most highly compensated executive officers of the Company.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END 1993 OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrell Brown......... 56,120 63,800 $1,817,678 $1,688,600
Harris J. Chustz......... -- -- 49,470 15,200 1,549,253 432,150
W. Roger Clark........... -- -- 31,392 29,200 1,008,849 787,400
James H. Poythress....... 18,400 $ 145,600 -- 9,200 -- 279,900
Dale E. Redman........... -- -- 47,840 29,200 1,549,180 787,400
John E. Smith............ 7,244 103,153 3,448 20,000 112,304 507,500
Robert B. Thomas, Jr..... -- -- -- 20,000 -- 507,500
</TABLE>
- ---------------
(1) Based on the closing price, as reported on the National Association of
Securities Dealers Quotations National Stock Market ("NASDAQ NSM"), of the
Company's Common Stock on December 31, 1993 ($39.50).
(Footnotes on following page)
8
<PAGE> 11
(2) The exercise prices of the reported options range from $6.085 to $14.125 per
share with a weighted average exercise price of $9.94 per share.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
There were no long-term incentive plan awards or payouts during the year
ended December 31, 1993 for any of the executive officers named in the Summary
Compensation Table.
TEN YEAR OPTION/SAR REPRICINGS
There were no option/SAR repricings during the year ended December 31, 1993
for any of the executive officers named in the Summary Compensation Table.
PENSION PLANS
The Company did not have a defined benefit plan during the year ended
December 31, 1993 for any of the executive officers named in the Summary
Compensation Table.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors during
1993 were Richard A. Campbell, Robert D. Kilpatrick and O. Miles Pollard, Jr. No
member of the Compensation Committee was an officer or employee of the Company
or any of its subsidiaries during 1993. No executive officer of the Company
served during 1993 as a director or as a member of the compensation committee of
another entity, one of whose executive officers served as a director or on the
Compensation Committee of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee ("the Committee") of the Company's Board of
Directors is pleased to present its report on executive compensation. This
report describes the components of the Company's executive officer compensation
and the basis on which 1993 compensation was determined for the Chief Executive
Officer and other executive officers of the Company.
During 1993, the Committee was comprised of the following Board members,
each of whom were outside directors of the Company: Richard A. Campbell,
Chairman, Robert D. Kilpatrick, and O. Miles Pollard, Jr.
Duties of the Committee include establishing the compensation program for
the Chief Executive Officer, consulting with the Chief Executive Officer and
approving compensation for other executive officers, approving the annual amount
to be distributed under the Management Incentive Plan, and administering the
Company's Incentive Stock Option Plans. The following guidelines are observed by
the Committee in pursuit of this goal: (i) provide a competitive compensation
program that enables the Company to attract and retain key executives; (ii)
coordinate compensation programs with the Company's annual and long-term
objectives and strategies; and (iii) provide compensation opportunities that are
based on the performance of the Company.
Principal components of the Company's compensation program for executive
officers and key employees are base salary, incentive compensation and stock
option programs.
BASE SALARY levels are determined in consideration of executive
compensation extant in the financial services industry. An individual
officer's base salary is adjusted based on initiative, performance,
responsibility, tenure and other factors determined by the Committee, as
well as by business conditions prevailing in the mortgage and insurance
industries. During 1993, the base salary of the Company's Chief Executive
Officer ("CEO") remained substantially the same as the previous year as Mr.
Brown waived the guaranteed increase in base salary under his employment
contract. The increase in the total compensation of the CEO was the result
of his participation in the Company's Management Incentive Plan discussed
below.
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<PAGE> 12
INCENTIVE COMPENSATION provides annual awards to executives and
certain key employees of cash compensation in addition to base salary for
attainment of financial objectives based on return on equity during the
prior year. Awards are made from a bonus pool determined as a percentage of
the Company's prior year net income as specified by the Committee, however
funding of the bonus pool is capped at 10% of after tax net income. Plan
participants are assigned to one of five eligibility levels based on the
participant's contribution to and impact upon the success of the Company.
Bonuses are not paid unless a specified threshold level of financial
performance is achieved by the Company, which is presently set at a minimum
of a 10% return on equity. Accordingly, compensation of executive officers
and key employees is generally higher during years in which Company
performance meets or exceeds the specified goals. Eighty-four individuals
received awards for the year ended 1993.
STOCK OPTION PLANS are maintained by the Company to provide officers,
supervisory personnel, other key employees and consultants with additional
incentive to promote the financial success of the Company as reflected in
increased value of the Company's Common Stock. During 1993, the Board of
Directors approved the adoption of a 1993 employee stock option plan (see
Exhibit A) and granted thereunder the following options to the Chief
Executive Officer and other executive officers to purchase shares of the
Common Stock: Mr. Brown, 50,000 shares, Mr. Redman, 20,000 shares, Mr.
Thomas, 10,000 shares, Mr. Clark, 20,000 shares and Mr. Smith, 20,000
shares. In addition, during 1993 the Compensation Committee also granted to
Mr. Chustz and Mr. Thomas options to purchase 12,000 shares and 10,000
shares, respectively, and to other key employees of the Company options to
purchase 51,500 shares under the Company's 1986 and 1993 stock option plans
for employees. As of December 31, 1993, options to purchase in the
aggregate 683,326 shares of the Company's Common Stock were held by 396
employees under the Company's stock option plans for employees. The
Company's executive officers have also received awards in prior years under
the Company's 1989 Stock Incentive Plan pursuant to which a total of
379,500 shares of the Company's Common Stock may be issued, in the
discretion of the Committee, to the executive officers and other key
employees of the Company. As of December 31, 1993, the executive officers
named in the Summary Compensation Table held options under the Company's
1986, 1989 and 1993 stock option plans for employees to purchase 374,870
shares of the Company's Common Stock at an average exercise price of $9.94
per share.
The Committee has recommended to the Board of Directors that the Company
take steps necessary to conform the Company's compensation structure to comply
with the newly established $1 million limitation on deductibility by the Company
of compensation paid to certain executive officers. This new limitation,
applicable to compensation paid during 1994 forward, contains an exclusion from
the $1 million limitation for qualified performance-based compensation. As a
result, the Company's 1993 Stock Incentive Plan and its Management Incentive
Plan contain specific provisions and are being submitted for approval by the
shareholders of the Company in an attempt to render compensation paid thereunder
to be classified as qualified performance-based compensation and therefore be
excluded from such $1 million limitation.
Richard A. Campbell, Chairman
Robert D. Kilpatrick
O. Miles Pollard, Jr.
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STOCK PERFORMANCE GRAPH
The following line graph provides a comparison of the total shareholder
return on the Company's Common Stock with the return of the NASDAQ Index for
U.S. Companies and the NASDAQ Index of Financial Stocks for the period
commencing January 1, 1989 and ending December 31, 1993. All amounts have been
calculated as if all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL RETURN OF THE COMPANY, NASDAQ (U.S. COMPANIES)
AND NASDAQ FINANCIAL STOCKS
<TABLE>
<CAPTION>
UNITED COM- NASDAQ STOCK
PANIES FINAN- NASDAQ STOCK MARKET
MEASUREMENT PERIOD CIAL MARKET (U.S. FINANCIAL
(FISCAL YEAR COVERED) CORPORATION COMPANIES) STOCKS
<S> <C> <C> <C>
1988 100.0 100.0 100.0
1989 103.9 121.2 115.0
1990 96.6 103.0 88.1
1991 141.1 165.2 136.4
1992 124.9 192.2 194.9
1993 560.7 219.4 226.6
</TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN
Under the ESOP, the Company makes tax deductible contributions, either of
its Common Stock or cash, to a trust for the benefit of participating employees.
The cash contributions are used to acquire the Company's Common Stock or to
repay loans obtained by the ESOP for the purpose of acquiring the Company's
Common Stock. All employees who meet minimum age and service requirements
participate in the ESOP, and contributions are allocated among them based upon
years of service and compensation.
EMPLOYEES' SAVINGS PLAN AND TRUST
The Company's Employees' Savings Plan and Trust (the "401(k) Plan")
provides participating employees with an opportunity and incentive to accumulate
savings to supplement retirement accounts. Participation in the 401(k) Plan is
available to full-time employees who have completed one year of service to the
Company or its subsidiaries. Contributions under the 401(k) Plan for the account
of each participant are made in the form of (i) pre-tax contributions withheld
by the Company from the participant's salary at the election of each participant
("elective deferrals"), and (ii) matching contributions by the Company based on
the amount of elective deferrals by the participant. A participant may defer up
to the lesser of 15% of his compensation or $8,240 for the calendar year 1994
(or such larger dollar amount as may from time to time be permitted under the
Internal Revenue Code of 1986, as amended). Effective January 1, 1994, for each
$1.00 of elective deferrals contributed on behalf of a participant, the Company
contributes $1.00 (subject to an overall maximum in any one year of not more
than 5% of such employee's compensation). All funds
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<PAGE> 14
contributed to the Plan on behalf of the participants are held by The Principal
Financial Group, except for the funds invested in the Common Stock of the
Company, which are held by Banker's Trust as custodian. The trustee directs the
participant's elective deferrals in Common Stock of the Company or in one or
more of eight investment funds selected and designated by the participants. The
matching contribution by the Company is invested in Common Stock of the Company.
Each participant has a 100% vested interest in his elective deferrals account
from the date of contribution until distribution, subject only to the possible
losses on investments. Each participant is vested in his matching contribution
account, together with earnings thereon and forfeitures attributable thereto, if
any, after five years of service to the Company or its subsidiaries. The 401(k)
Plan is administered by the Plan Administrator, a committee of from one to ten
persons appointed by and serving at the discretion of the Board of Directors.
STOCK OPTION PLANS
During 1993 the Company had in effect an employee incentive stock option
plan adopted by the Board of Directors and approved by the stockholders in 1986
(the "1986 Plan") and a plan adopted by the Board of Directors and approved by
the stockholders in 1989 (the "1989 Plan"). In addition, during 1989, the Board
of Directors adopted and the stockholders approved the Company's 1989
Non-Employee Director Stock Option Plan (the "1989 Non-Employee Director Plan").
Following is a discussion of each of these stock option plans under which, as of
March 1, 1994, options were outstanding for the purchase of 514,962 shares of
the Company's Common Stock at a weighted average exercise price of $8.61 per
share. Also discussed below are two stock option plans approved and adopted by
the Board of Directors of the Company in 1993, under which options have been
granted to purchase 307,938 shares of the Company's Common Stock at a weighted
average exercise price of $16.31 per share. (See "1993 Plans" below and Exhibits
A and B). On March 18, 1994 the closing price of the Company's Common Stock was
$45.25 as reported by NASDAQ NSM.
1986 Plan. The 1986 Plan permits grants of options to officers, executives
and supervisory personnel as well as other employees of the Company and its
subsidiaries, of up to 516,120 shares of Common Stock (as adjusted for stock
dividends). Recipients of options awarded under the 1986 Plan are selected by
the Compensation Committee of the Board of Directors (the "Committee"). The 1986
Plan is administered by the Committee, which has authority to select the
eligible employees to whom options will be granted, to determine the amount of
Common Stock for which options shall be granted to each awardee and, subject to
the provisions of the 1986 Plan, to establish the terms and the conditions of
the options. The option price may not be less than one hundred percent (100%) of
the fair market value of the shares of Common Stock on the date of the grant of
the options. The fair market value is determined as the mean between the "bid"
and "ask" prices of the Common Stock on the date of award. As of March 1, 1994,
there were 35,740 shares of the Company's Common Stock available for grant under
the 1986 Plan.
1989 Plan. The 1989 Plan permits the issuance of up to 379,500 shares of
the Company's Common Stock (as adjusted for stock dividends) to officers and key
employees of the Company and its subsidiaries in the form of various incentive
awards. The 1989 Plan is administered by the Committee which, except as
expressly limited by the 1989 Plan, has complete authority and discretion to
establish the terms and conditions of the 1989 Plan, to select the employees to
whom awards may be granted, and to take such other actions as may be reasonably
required to administer the 1989 Plan. In the discretion of the Committee, stock
appreciation rights may be granted in conjunction with stock options granted
under the 1989 Plan or independent of any option. A stock appreciation right
granted in conjunction with all or part of an option shall have an exercise
price equal to that of the underlying option, shall be exercisable only when the
underlying option is exercisable and shall expire no later than the underlying
option. Upon exercise of a stock appreciation right, the Committee will pay the
value thereof to the holder in cash, Common Stock, or a combination thereof, as
the Committee in its discretion shall determine. The exercise price of any
option granted under the 1989 Plan may not be less than either (i) 60% of the
fair market value (determined as set forth in the 1989 Plan) per share on the
date of grant or (ii) the par value per share of the Common Stock. All options
thus far granted under the 1989 Plan have been at an exercise price equal to
100% of fair market value of the Common Stock on the date of grant. As of March
1, 1994, there were 5,094 shares available for grant under the 1989 Plan.
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<PAGE> 15
1989 Non-Employee Director Plan. The 1989 Non-Employee Director Plan
provides for the automatic grant of options to purchase shares of the Common
Stock to each director of the Company who is not an employee of the Company. The
exercise price of options awarded under the 1989 Non-Employee Director Plan is
the mean of the "bid" and "ask" price of the Common Stock on the date of award.
As of March 1, 1994, options to purchase 95,680 shares of Common Stock at an
average exercise price of $8.27 are outstanding and exercisable under the 1989
Non-Employee Director Plan.
1993 Plans. During 1993, the Board of Directors approved and adopted
effective July 22, 1993 two additional stock option plans. A copy of each of
these plans is attached to this Proxy Statement as Exhibits A and B. The United
Companies Financial Corporation 1993 Stock Incentive Plan (the "1993 Stock
Incentive Plan") permits grants of both statutory and non-statutory stock
options to employees or consultants of the Company and its subsidiaries of up to
600,000 shares of Common Stock of the Company. The Compensation Committee of the
Board of Directors of the Company administers the 1993 Stock Incentive Plan.
Effective as of July 22, 1993, employees of the Company were awarded options to
purchase 247,158 shares of Common Stock of the Company at an exercise price of
$14.125 per share. A stock option granted pursuant to the 1993 Stock Incentive
Plan is not exercisable, except in limited circumstances, until three years
elapse from the date the option is granted. The option price may not be less
than one hundred percent (100%) of the fair market value of the shares of Common
Stock on the date of grant of the options.
The United Companies Financial Corporation 1993 Non-Employee Director Stock
Option Plan (the "1993 Non-Employee Director Plan") provides for the automatic
grant of non-statutory stock options to purchase 4,000 shares of the Common
Stock of the Company per year to each non-employee director of the Company upon
his or her election or re-election to the Board of Directors. On July 22, 1993,
each non-employee director of the Company was awarded an option to purchase
8,000 shares of Common Stock of the Company (after adjustment for a 100% stock
dividend paid October 18, 1993) at an exercise price of $14.125 per share. A
stock option granted under the 1993 Non-Employee Director Plan is not
exercisable, except in limited circumstances, until three years elapse from the
date the option is granted. The Company has reserved 400,000 shares of Common
Stock of the Company for issuance under the 1993 Non-Employee Director Plan. The
option price may not be less than one hundred percent (100%) of the fair market
value of the shares of Common Stock on the date of the grant of the options.
MANAGEMENT INCENTIVE PLAN
The Company's Management Incentive Plan permits awards to executives and
certain key employees of cash compensation in addition to base salary for
achievement by the Company of financial objectives based on return on equity.
The Company implemented the Management Incentive Plan in January, 1989 and from
time to time has made minor modifications to such plan. The minimum return on
equity required for any distribution under the plan is 10%. The plan is
administered by the Compensation Committee which has authority to designate
management employees who shall be eligible to participate in the plan, to
establish financial objectives for the Company upon which to determine
eligibility for awards, and to interpret the provisions of the plan. Plan
participants must be employees of the Company as of the date awards are paid. A
participant who terminates employment for any reason except death, disability or
retirement prior to actual payment of an award forfeits all rights to the award.
Eighty-four individuals received awards under the Management Incentive Plan for
1993. An employee's participation during any plan year does not assure
participation by the employee in any subsequent year. Cash awards are made under
the plan from a bonus fund established as a percentage (not to exceed 10%) of
the Company's net income. The total of all awards to the Management Incentive
Plan participants for a plan year does not exceed the bonus fund established for
that plan year. Eligibility of individual employees for participation in the
bonus fund is based on the Compensation Committee's assessment of an employee's
contribution to the success of the Company. All awards under the Management
Incentive Plan are payable in cash within one hundred twenty (120) days of the
end of the year for which an award is made.
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<PAGE> 16
EMPLOYMENT AND DEFERRED COMPENSATION CONTRACTS
The Company has employment contracts with key management employees,
including Messrs. Brown, Chustz, and Redman. The term of each of these contracts
extends to June 1, 1997, and each contract generally requires payment of a
minimum base salary with guaranteed annual increases for the term of the
contract. The Company also has in effect deferred compensation agreements with
Messrs. Brown and Redman pursuant to which, upon retirement at or after age 55,
the employee will receive deferred compensation payments in monthly payments for
10 years. The deferred compensation amount increases based on the number of
years of service after age 55, with a cap at age 70. For Messrs. Brown and
Redman, should they elect to exercise this agreement at age 55, they will
receive $35,000 per annum for the 10 year period. Should they wait until age 65
to exercise this agreement, they will receive $200,000 and $135,000 per annum,
respectively, for the 10 year period. The Company has purchased life insurance
on the lives of Messrs. Brown and Redman to fund its obligations under these
deferred compensation agreements. Under a separate split dollar agreement, the
beneficiaries of Messrs. Brown and Redman will receive a death benefit equal to
the policy value, $1,365,000 and $1,120,000, respectively, minus the lesser of
the cash value of the policy or premiums paid and any policy indebtedness to the
insurer. Under an additional unfunded salary deferral agreement entered into in
1989, a specified amount of compensation otherwise payable to Mr. Brown is
credited to an account to be paid to Mr. Brown or beneficiaries designated by
him on the earlier of Mr. Brown's death or termination of employment. During
1993, Mr. Brown's compensation, as reflected in the Bonus section of the Summary
Compensation Table, includes $16,698 which was deferred pursuant to this
agreement. The employment and deferred compensation agreement with Mr. Chustz
provides for payment by the Company for the lifetimes of Mr. Chustz and his
spouse of all hospitalization and medical expenses of Mr. Chustz and his spouse
in excess of the benefits received from medicare and any insurance carriers. In
addition, the Company is obligated to make deferred compensation payments to Mr.
Chustz for his lifetime and thereafter to his surviving spouse for her lifetime
upon termination of his employment by the Company for any reason in the amount
of $100,000 per annum and, upon his death, $60,000 per annum to his spouse.
Although not the purpose of these employment and deferred compensation
contracts, a possible effect of such contracts may be to discourage or deter a
potential tender offer for the Company.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company and its subsidiaries have, from time to time, made loans to
certain of its executive officers and directors and/or to entities in which such
persons have a material interest. Each of these loans is secured by a first
mortgage on the residence, and/or commercial or other real estate. Each such
loan in which the indebtedness exceeded $60,000 at any time since the beginning
of 1993 is listed below with the following information indicated for each: (i)
the name of the borrower, (ii) the nature of the borrower's relationship with
the Company, (iii) the largest aggregate amount of indebtedness outstanding at
any time since the beginning of 1993, (iv) the nature of the loan and of the
transaction in which it was incurred, (v) the amount outstanding on March 1,
1994 and (vi) the interest rate charged thereon.
(i) Wright Insurance Agency, Inc., (ii) Controlled by William H. Wright,
Jr. a Director of the Company, (iii) $1,083,939, (iv) first mortgage on
commercial building, (v) -0-, (vi) 11.25%.
Since 1989, the Company has made loans to Mr. Brown without interest,
secured by an assignment of a life insurance policy owned by Mr. Brown. The
loans were incurred to pay a portion of the premium on the assigned life
insurance policy. The Company has agreed to make annual loans of comparable
amounts for payment of a portion of these insurance premiums through the earlier
of the date of termination of Mr. Brown's employment or 2004. As of March 1,
1994, the aggregate amount owed by Mr. Brown on such loans was $102,463.
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<PAGE> 17
In the ordinary course of business, the Company and its subsidiaries have
purchased liability, worker's compensation, fidelity bond and various property
and other insurance coverage from the Wright Insurance Agency, Inc. of which Mr.
Wright is the majority owner. Premiums paid by the Company and its subsidiaries
for this insurance coverage were approximately $1,873,700 million for the year
ended December 31, 1993. The Company and its subsidiaries expect to purchase
additional insurance coverage in the future from the Wright Insurance Agency,
Inc. The Company believes that the premiums paid to the Wright Insurance Agency,
Inc. for the above-described coverage are comparable to those premiums that
would be charged by an unaffiliated third party for insurance of similar
coverage.
At December 31, 1993, the Company had loans to the ESOP in the amounts of
$1.7 million and $.5 million. The loans are to be repaid with interest at the
rate of 9.5% and 8.5% per annum, respectively. The proceeds of the loans were
used by the ESOP for purchases of the Company's Common Stock.
PROPOSAL TO APPROVE ADOPTION OF THE UNITED COMPANIES FINANCIAL
CORPORATION 1993 STOCK INCENTIVE PLAN
The Board of Directors of the Company approved and adopted effective as of
July 22, 1993, subject to approval by the shareholders of the Company, the
United Companies Financial Corporation 1993 Stock Incentive Plan (the "1993
Plan"). The Board of Directors of the Company believes that the 1993 Plan will
assist the Company and its subsidiaries in attracting and retaining highly
qualified employees and consultants and will provide officers and other key
employees of and consultants to the Company and its subsidiaries with additional
incentive to promote the financial success of the Company and its subsidiaries
through the award of stock options (the "Awards") under the 1993 Plan.
The following description of the 1993 Plan is qualified in its entirety by
the complete text of the 1993 Plan, a copy of which is attached hereto as
Exhibit "A", which should be carefully reviewed in connection with your
consideration of the 1993 Plan.
SHARES SUBJECT TO ISSUANCE UNDER THE 1993 PLAN. The aggregate number of
shares of Common Stock with respect to which Awards may be made under the 1993
Plan is 600,000 shares (such amount being adjusted to reflect a 100% Common
Stock dividend paid October 18, 1993), approximately 4.9% of the outstanding
shares of Common Stock as of March 1, 1994. The maximum number of shares
reserved for issuance pursuant to the 1993 Plan is subject to adjustment in the
event of a stock dividend, split or combination or to reflect a merger,
capitalization or other change in capital structure of or by the Company. In the
event that any option under the Plan expires or is terminated, the shares of
Common Stock allocable to the unexercised portion of such option may again be
subject to an award under the 1993 Plan.
ELIGIBILITY AND AWARDS. Individuals eligible for Awards under the 1993 plan
shall include those officers, key employees of and consultants to the Company
and its subsidiaries as may be designated by the Compensation Committee of the
Board of Directors.
ADMINISTRATION. The 1993 Plan will be administered, construed and
interpreted by the Compensation Committee (the "Committee") of the Board of
Directors of the Company or such other committee appointed by the Board of
Directors from time to time. No director while a member of the Committee shall
be eligible to receive an award under the 1993 Plan.
NUMBER OF AWARDS. The number of shares of Common Stock subject to grants
under the 1993 Plan made to any individual employee may not exceed 150,000
shares over any three year period. In addition, the number of shares of Common
Stock that may be alloted pursuant to options granted to consultants is limited
to an aggregate of 10,000 shares of Common Stock per year.
TYPES OF AWARDS UNDER THE PLAN. The Committee will have the authority to
award, under the 1993 Plan, options to purchase Common Stock of the Company
("Options"), including options intended to qualify as incentive stock options
("statutory stock options" or "ISOs") under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") and those not intended by the Committee to
be ISOs ("nonstatutory stock options").
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<PAGE> 18
TERMS AND CONDITIONS OF AWARDS. All Options issued under the 1993 Plan
shall be for such period as the Committee shall determine, but for not more than
10 years from the date the option is granted. With exceptions only in the case
of death, disability or retirement of the optionee, each Option granted under
the 1993 Plan shall become exercisable only after 3 years of continued
employment of the optionee with the Company or a subsidiary immediately
following the date the option is granted.
AWARDS GRANTED. Since the 1993 Plan was approved and adopted by the Board
of Directors, effective July 22, 1993, the following Awards have been made to
the persons and groups described in the table below, subject to approval by the
shareholders of the 1993 Plan at the 1994 Annual Meeting of Shareholders. If the
1993 Plan is not approved in the 1994 Annual Meeting, all of the Awards included
in the table below will be forfeited.
NEW PLAN BENEFITS UNDER THE 1993
STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME STOCK OPTIONS
------------------------------------------------------------------------ -------------
<S> <C>
J. Terrell Brown........................................................ 50,000
Harris J. Chustz........................................................ --
W. Roger Clark.......................................................... 20,000
James H. Poythress...................................................... --
Dale E. Redman.......................................................... 20,000
John E. Smith........................................................... 20,000
Robert B. Thomas, Jr.................................................... 10,000
All current executive officers as a group............................... 125,000
All current directors who are not executive officers as a group......... --
All employees other than executive officers as a group.................. 117,158
</TABLE>
TERM OF PLAN. Options may be granted by the Committee pursuant to the Plan
from time to time within a period of 10 years from the date of the adoption of
the 1993 Plan.
FEDERAL INCOME TAX CONSEQUENCES. The following statements are based on
current interpretations of existing federal income tax law. The law is technical
and complex and the statements below represent only a general summary of some of
the applicable provisions. The following discussion sets forth federal tax
consequences on the grant and exercise of an option under the 1993 Plan.
INCENTIVE STOCK OPTIONS. An employee who receives a statutory stock option
granted under the provisions of Article III of the Plan generally does not
recognize taxable income on the date that the statutory stock option is granted
or exercised (except that the alternative minimum tax provisions may apply to
the employee). If a statutory stock option is granted, the Company can not
deduct the related compensation expense. If the statutory stock option is
exercised more than three months after the employee has left the employ of the
Company (the three month period is extended to 12 months in the event of
disability and is waived in the event of death), the favorable tax treatment is
not available to the employee. The statutory stock option can not be transferred
by the employee except upon the employee's death.
With respect to the disposition of the stock received pursuant to the
exercise of a statutory stock option, the tax treatment depends upon whether the
stock was disposed of within the statutory holding period. The holding period is
the later of two years from the date of the granting of the statutory stock
option or one year from the date that the shares were transferred to the
employee upon exercise. If the employee disposes of the stock received pursuant
to the exercise of the statutory stock option after the expiration of the
holding period, the employee will recognize as capital gain, income on the
difference between the amount received as a result of the disposition over the
employee's basis in the stock. If the employee disposes of the stock prior to
the expiration of the holding period, the employee must recognize as ordinary
compensation income the gain on the disposition of the Common Stock and the
Company may deduct from income an amount equal to the amount that the employee
recognized as ordinary compensation income.
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<PAGE> 19
NON-STATUTORY STOCK OPTIONS. An employee of or consultant to the Company
who is awarded a stock option under Article II of the 1993 Plan will generally
incur no taxable income as a result of the grant. The Company can claim no tax
deduction on the date the non-statutory stock option is granted. The
non-statutory stock option cannot be transferred by the optionee except as
provided in Section 2.08(b) of the 1993 Plan. If the non-statutory stock option
is transferred in a non-arm's length transaction, the optionee may be required
to realize ordinary income at the time of the transfer to the extent of the
amount realized from the disposition of the nonstatutory stock option. Upon the
exercise of the non-statutory stock option, the optionee will be required to
recognize ordinary income equal to the excess of the fair market value of the
shares of Common Stock on the exercise date over the exercise price of the
non-statutory stock option. The Company will be entitled to a corresponding
deduction in the amount of the income recognized by the optionee.
AMENDMENT. The Board of Directors may amend the 1993 Plan from time to time
in its sole discretion provided that no such amendment shall, without the
approval of shareholders of the Company, change the class of persons eligible to
receive options or otherwise materially modify the requirements as to
eligibility for participation under the 1993 Plan; increase, decrease or
otherwise alter the aggregate number of shares with respect to which options may
be granted under the 1993 Plan or which may be granted to any eligible
participant; materially increase the benefits accruing to an eligible
participant under the 1993 Plan; or remove the administration of the 1993 Plan
from the Committee or render any member of the Committee eligible to participate
in the 1993 Plan while serving thereon. However, the Plan may not be amended
more than once in any six month period except to comply with the Code, the
Employee Retirement Income Security Act, or the rules and regulations
thereunder.
REQUIRED VOTE.
Approval of the adoption of the 1993 Plan requires the affirmative vote of
the holders of a majority of the shares of Common Stock present or represented
at the Annual Meeting. The Board of Directors recommends that the shareholders
vote FOR the approval of the 1993 Plan.
PROPOSAL TO APPROVE ADOPTION OF THE UNITED COMPANIES FINANCIAL
CORPORATION 1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors of the Company approved and adopted effective as of
July 22, 1993 subject to the approval of the shareholders, the United Companies
Financial Corporation 1993 Non-Employee Director Stock Option Plan (the "1993
Director Plan"). The purpose of the 1993 Director Plan is to assist the Company
in attracting and retaining highly qualified non-employee directors by the
granting of nonstatutory stock options to acquire Common Stock of the Company.
The following description of the 1993 Director Plan is qualified in its entirety
by the complete text of the 1993 Director Plan, a copy of which is attached
hereto as Exhibit "B", which should be carefully reviewed in connection with
your consideration thereof.
SHARES SUBJECT TO AWARD. The total number of shares of Common Stock
available for awards under the 1993 Director Plan is 400,000 (such amount being
adjusted to reflect a 100% Common Stock dividend paid on October 18, 1993),
approximately 3.2% of the total shares of Common Stock outstanding as of March
1, 1994. Shares issued pursuant to the exercise of options under the 1993
Director Plan may be either authorized but unissued shares or treasury shares.
Shares released upon forfeiture of an option shall be again available for grants
of future options. The aggregate number of shares subject to the 1993 Director
Plan and to options granted thereunder shall be adjusted in the event of a stock
split, dividend, combination, or exchange of shares or to reflect a merger,
consolidation, reorganization, recapitalization or other change in the capital
structure of the Company.
ELIGIBILITY AND AWARDS. Members of the Company's Board of Directors who are
not, and who have not been during the one (1) year period immediately preceding
July 22, 1993, or the date a director is first elected to the Board, whichever
is later, officers or employees of the Company or any of its subsidiaries shall
be eligible to participate in the 1993 Director Plan. Under the 1993 Director
Plan, each eligible director as of July 22, 1993, has been granted as of that
date nonstatutory stock options for the purchase of 8,000 shares of the
Company's Common Stock (as adjusted to reflect the 100% Common Stock dividend
paid on October 18,
17
<PAGE> 20
1993), subject to shareholder approval of the 1993 Director Plan. In addition,
each eligible director shall also be granted an option to acquire 4,000 shares
on an annual basis upon his or her election or re-election to the Board of
Directors of the Company.
AWARDS GRANTED. Since the 1993 Director Plan was approved and adopted
effective July 22, 1993, the following stock options have been awarded to the
persons and groups described in the table below, subject to approval by the
shareholders of the 1993 Director Plan at the 1994 Annual Meeting of
Shareholders. If the 1993 Director Plan is not approved by the shareholders at
the 1994 Annual Meeting, all stock options included in the following table will
be forfeited.
NEW PLAN BENEFIT UNDER THE 1993
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME STOCK OPTIONS
------------------------------------------------------------------------ -------------
<S> <C>
J. Terrell Brown........................................................ --
Harris J. Chustz........................................................ --
W. Roger Clark.......................................................... --
James H. Poythress...................................................... --
Dale E. Redman.......................................................... --
John E. Smith........................................................... --
Robert B. Thomas, Jr.................................................... --
All current executive officers as a group............................... --
All current directors who are not executive officers as a group......... 56,000
All employees other than executive officers as a group.................. --
</TABLE>
ADMINISTRATION. The 1993 Director Plan will be administered, construed and
interpreted by a committee comprised of two (2) or more members of the Board of
Directors who are not eligible to receive grants under the 1993 Director Plan.
The committee does not have discretion with respect to determination of eligible
recipients of options or the number of options to be granted to each eligible
director.
TERMS AND CONDITIONS OF AWARDS. No option granted under the 1993 Director
Plan may be exercised for a period of three years after the date of grant.
Thereafter, each option shall be fully exercisable and shall remain exercisable
for a period of ten (10) years from the date such option is granted, at which
time any unexercised portion of the option shall terminate. The 1993 Director
Plan shall terminate automatically on July 22, 2003, and the Board of Directors
may suspend or terminate the 1993 Director Plan at any earlier time. Upon
termination of the 1993 Director Plan, no additional options shall be granted,
but the terms of the 1993 Director Plan shall continue in full force and effect
with respect to unexercised options issued prior to termination. In the event
that an optionee ceases to be a member of the Board of Directors within six (6)
months of the date an option is granted, the option will be forfeited. The
exercise price of each option shall be the fair market value determined as set
forth in the 1993 Director Plan, as of the date of grant of the option. Upon
exercise of an option, the exercise price must be paid in full in the form of
cash or by the delivery of shares of the Common Stock already owned by the
optionee valued at the fair market value thereof; or by electing to have the
Company withhold from the shares of Common Stock otherwise issuable upon
exercise of the option that number of shares valued at the fair market value (as
defined in the 1993 Director Plan) as of the date of exercise; or by a
combination of the foregoing forms of payment.
FEDERAL INCOME TAX CONSEQUENCES. A non-employee director who is awarded a
non-statutory stock option under the 1993 Director Plan will generally incur no
taxable income as a result of the grant. The Company can claim no tax deduction
on the date the option is granted. The non-statutory stock option cannot be
transferred except as provided in Section 6(a) of the 1993 Director Plan. If the
non-statutory stock option is transferred in a non-arm's length transaction, the
optionee may be required to realize ordinary income at the time of the transfer
to the extent of the amount realized from the disposition of the non-statutory
stock option. Upon the exercise of the non-statutory stock option, the optionee
will be required to recognize ordinary income equal to the excess of the fair
market value of the shares on the exercise date over the option price.
18
<PAGE> 21
The Company will be entitled to a corresponding deduction in the amount of the
income recognized by the optionee.
AMENDMENT. The Board of Directors may amend the 1993 Director Plan from
time to time in its sole discretion provided that no such amendment shall,
without the approval of shareholders of the Company, change the class of persons
eligible to receive options or otherwise materially modify the requirements as
to eligibility for participation under the 1993 Director Plan; increase,
decrease or otherwise alter the aggregate number of shares with respect to which
options may be granted under the 1993 Director Plan or which may be granted to
any eligible director; materially increase the benefits accruing to an eligible
director under the 1993 Director Plan; or remove the administration of the 1993
Director Plan from the committee or render any member of the committee eligible
to participate in the 1993 Director Plan while serving thereon. The 1993
Director Plan, however, may not be amended more than once in any six (6) month
period except to comply with the Code, the Employee Retirement Income Security
Act, or the rules and regulations thereunder.
REQUIRED VOTE.
Approval of the adoption of the 1993 Director Plan requires the affirmative
vote of the holders of a majority of the shares of Common Stock present or
represented at the Annual Meeting. The Board of Directors recommends that the
shareholders vote FOR the approval of the 1993 Director Plan.
PROPOSAL TO APPROVE THE ADOPTION OF THE UNITED COMPANIES FINANCIAL CORPORATION
MANAGEMENT INCENTIVE PLAN
The Company's Management Incentive Plan provides awards to executives and
certain key employees of the Company of cash compensation in addition to base
salary for achievement by the Company of financial objectives based on return on
equity during the year. The Management Incentive Plan is intended to unite the
interests of such employees with the interests of the owners of the Company. The
Company implemented the Management Incentive Plan in 1989 and has made minor
modification to such plan from time to time. Under regulations enacted in 1993
pursuant to the Internal Revenue Code of 1986, as amended, (the "Code"),
beginning in 1994, compensation paid to certain executive officers of public
companies is limited to $1 million annually. An exclusion from the $1 million
limitation is available for compensation that satisfies the requirements in new
Section 162(m) of the Code for qualified performance-based compensation. The
compensation paid under the Company's Management Incentive Plan will qualify as
performance based compensation if, in addition to the satisfaction of certain
other requirements, such amounts are earned as the result of the achievement of
performance goals pre-established in writing and the material terms of the
performance goals are disclosed to and approved by the shareholders. The Company
is seeking shareholder approval of the Management Incentive Plan solely in an
attempt to exclude compensation awarded thereunder from the newly established $1
million cap. Although total compensation paid in prior years to top executives
of the Company has not neared the $1 million cap, there can be no assurance that
the Company's performance in the future will not dictate that level of
compensation. The following summary describes the major provisions of the
Management Incentive Plan.
The Compensation Committee of the Board of Directors (the "Committee")
administers the Management Incentive Plan and has the authority to interpret the
terms and provisions of the plan, to designate key employees who shall be
eligible to participate in the plan and to determine a threshold level of
Company performance to be achieved in order for a fund to be established (the
"bonus pool") and for any awards to be paid. The plan requires a minimum return
on equity of 10% for the establishment of the bonus pool available for awards
under the plan. The allocation of the bonus pool at or above the threshold
return on equity will be determined by the Committee; however, awards may not
exceed and funding is capped at 10% of after tax net income. Plan participants
are assigned to one of five eligibility levels based on such participant's
contribution to and impact on the success of the overall organization. An
employee participating in any plan year does not assure participation in any
subsequent plan year. Eighty-four individuals received awards under the Manage-
19
<PAGE> 22
ment Incentive Plan in 1993. A participant who terminates employment for any
reason other than death, disability or retirement prior to actual payment of an
award forfeits all rights to the award. All awards under the Management
Incentive Plan are payable in cash within one hundred twenty (120) days of the
end of the year for which an award is made. Prior to the payment of any award
under the Management Incentive Plan, the Committee must certify in writing that
the performance goals and all applicable conditions have been met.
The following table reflects the amounts paid to persons named in the
Summary Compensation Table, all executive officers as a group and all
non-executive officers and employees as a group under the Company's Management
Incentive Plan for the achievement of financial objectives for the year ended
December 31, 1993.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
J. Terrell Brown.................................. $ 76,395
Harris J. Chustz.................................. --
W. Roger Clark.................................... 39,027
James H. Poythress................................ --
Dale E. Redman.................................... 55,793
John E. Smith..................................... 23,940
Robert B. Thomas.................................. 49,732
Executive Officer Group........................... 254,647
Non-Executive Officer and Employee Group.......... 253,109
</TABLE>
Approval of the Management Incentive Plan requires the affirmative vote of
the holders of a majority of the shares of Common Stock present or represented
at the Annual Meeting. The Board of Directors recommends that the shareholders
vote FOR the approval of the Management Incentive Plan.
PROPOSED AMENDMENT TO ARTICLE III OF THE ARTICLES OF
INCORPORATION OF UNITED COMPANIES FINANCIAL CORPORATION
On February 24, 1994, subject to shareholder approval, the Board of
Directors adopted a resolution setting forth a proposed amendment to Section 1
of Article III of the Company's Articles of Incorporation to increase the number
of authorized shares of the Common Stock from 20,000,000 shares to 100,000,000
shares and the number of authorized shares of the $2.00 par value preferred
stock (the "Preferred Stock") from 5,000,000 shares to 20,000,000 shares. On
March 1, 1994, 12,340,376 shares of Common Stock were issued and outstanding and
no shares of Preferred Stock were issued and outstanding. The authorized but
unissued Preferred Stock may be issued with such rights, preferences and
limitations as the Board of Directors may determine from time to time.
The purpose of increasing the number of authorized shares of Common Stock
and Preferred Stock is to provide additional shares that could be used for
proper corporate purposes, including corporate financings, investments and
acquisitions, stock dividends, shareholder rights plan, employee and management
incentive, benefit, and savings plans, dividend reinvestment plans, responses to
takeover attempts, and other purposes. Except for shares reserved for issuance
pursuant to the Company's stock option plans, the Company has no present plans,
understandings, or agreements for the issuance or use of the proposed additional
shares of Common Stock or Preferred Stock. The Board of Directors believes that
the proposed increase in authorized shares is desirable in order to increase its
flexibility in issuing shares of Common Stock or Preferred Stock as the need may
arise without the expense and delay of a special shareholders' meeting for
increasing the number of authorized shares.
If the proposed amendment to the Articles of Incorporation is approved, the
Board of Directors will have authority to issue the additional authorized shares
of Common Stock or any part thereof to such persons and for such consideration
as it may deem appropriate without further action by the shareholders except as
shareholder action may be required by applicable law. Each additional share of
Common Stock authorized by the proposed amendment will have the same rights and
privileges as each share of the outstanding Common
20
<PAGE> 23
Stock. Shareholders of Common Stock have no preemptive rights to receive or
purchase any shares of the presently authorized but unissued Common Stock or the
shares authorized by the proposed amendment. With respect to the Preferred
Stock, the Board of Directors will have authority to amend the Articles of
Incorporation to fix and determine the terms, limitations and relative rights
and preferences of the Preferred Stock including, without limitation, any voting
rights, dividends and terms, redemption rights and price, conversion features,
and to divide and issue the Preferred Stock in series and to fix and determine
the variations among series to the extent permitted by law.
Although the Board of Directors has no present intention of doing so, the
Company's authorized but unissued Common Stock and Preferred Stock could be
issued in one or more transactions which would make more difficult or costly,
and less likely, a takeover of the Company. Issuing additional shares of stock
could also have the effect of diluting the stock ownership of persons seeking to
obtain control of the Company. The proposed amendment to the Company's Articles
of Incorporation is not being recommended in response to any specific effort of
which the Company is aware to obtain control of the Company, nor is the Board of
Directors currently proposing to shareholders any anti-takeover measures.
The directors of the Company have unanimously approved the proposed
amendment. However, the proposed amendment will not be adopted unless the
holders of at least a majority of the shares of Common Stock present or
represented at the Annual Meeting of the Shareholders vote "FOR" the adoption of
such amendment. The enclosed form of Proxy provides a means for shareholders to
vote for the proposed amendment, to vote against the proposed amendment, or to
abstain from voting with respect to the proposed amendment. Each properly
executed Proxy received in time for the Annual Meeting will be voted as
specified therein. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
ADOPTION OF THE ABOVE DESCRIBED AMENDMENT TO THE ARTICLES OF INCORPORATION.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and certain officers to file with the Securities and
Exchange Commission reports of ownership and changes in ownership of the Common
Stock. During 1993, the Company believes that all such reports were timely
filed.
AUDITOR SERVICES
The Company's consolidated financial statements for the year ended December
31, 1993 were audited by the firm of Deloitte & Touche, and such firm will
remain as the Company's auditors until replaced by the Board of Directors. A
representative of such firm will be present at the 1994 Annual Meeting of
Shareholders to respond to any appropriate questions and will have the
opportunity to make a statement, if he so desires.
SHAREHOLDER PROPOSALS
Any shareholder's proposal to be considered by the Company for inclusion in
the 1995 Annual Meeting of Shareholders proxy material must be submitted in
accordance with applicable regulations of the Securities and Exchange Commission
and received by the Company at its principal executive offices no later than
December 31, 1994.
21
<PAGE> 24
OTHER MATTERS
The Board of Directors knows of no other matters which may be properly, or
are likely to be, brought before the meeting. However, if any proper matters are
brought before the meeting, the persons named in the enclosed Proxy will vote
thereon as the Board of Directors recommends.
BY ORDER OF THE BOARD OF DIRECTORS
SHERRY E. ANDERSON,
Secretary
Baton Rouge, Louisiana
March 31, 1994
22
<PAGE> 25
EXHIBIT A
UNITED COMPANIES FINANCIAL CORPORATION
1993 STOCK INCENTIVE PLAN
ARTICLE I -- GENERAL
1.01 PURPOSE
The 1993 Stock Incentive Plan (the "Plan") is intended to encourage stock
ownership by certain employees of and advisors to United Companies Financial
Corporation (the "Company") or its present or future subsidiaries as that term
is defined in Section 1.03 below (the "Subsidiaries") so that they may acquire
or increase their proprietary interest in the success of the Company and the
Subsidiaries, to encourage them to remain in the employ of or advisors to the
Company or its Subsidiaries, and to provide substantial motivation for superior
performance. To this end, the Company may from time to time grant options under
the Plan to purchase shares of common stock of the Company, par value, $2.00, on
the terms and conditions hereafter established.
1.02 ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board of Directors")
or such other committee appointed by the Board of Directors from time to time.
The Committee shall consist of not less than 3 members of the Board of Directors
each of whom shall be a "disinterested person" as defined in Rule 16b-3 (or any
successor provision) promulgated by the Securities and Exchange Commission.
Actions approved by a majority of the members of the Committee shall be the
valid acts of the Committee. No director while a member of the Committee shall
be eligible to receive an option under the Plan. The Committee shall have full
authority to act in selecting the persons eligible to participate in the Plan,
in determining the amount of common stock for which options shall be granted to
each subject to the limitations in Articles II and III, and the terms and
conditions of the options, in interpreting the Plan, in adopting, amending and
rescinding rules and regulations relating to the Plan, and in making all other
determinations and taking all other action necessary or advisable for the
implementation and administration of the Plan.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it, and all actions taken by the
Committee, shall be final, binding and conclusive on the Company, its
shareholders, the Subsidiaries, all recipients of options hereunder, their
respective legal representatives, successors and assigns and upon all other
persons claiming under or through any of them. Members of the Board of
Directors, the Committee and officers and employees of the Company who may take
actions relating to the Plan shall not be liable for any action or determination
made in good faith upon the advice of counsel with respect to the Plan or any
option granted under it, and shall incur no liability except for gross
negligence or willful misconduct in the performance of their duties.
1.03 ELIGIBILITY
Participants in the Plan shall be selected by the Committee from the
officers (whether or not they are directors), key employees of the Company or
its Subsidiaries (as such term is defined in sec. 424 of the Internal Revenue
Code of 1986, as amended (the "Code")) (either full or part-time) and
consultants (as defined below) who have the capability of making a substantial
contribution to the success of the Company. The term "consultants" shall include
directors of the Company and professional advisors to the Company or its
Subsidiaries, as well as employees, officers or directors of any corporation
which serves as an advisor, consultant or independent contractor to the Company;
provided, however, that Incentive Stock Options under Article III hereof shall
only be granted to employees of the Company. An optionee may hold more than one
option, but only on the terms and subject to the restrictions hereafter set
forth. No person shall be eligible to receive an option for a larger number of
shares than is established for him by the Committee.
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<PAGE> 26
1.04 TYPES OF AWARDS UNDER THE PLAN
Awards of options under the Plan may be in the form of any one or more of
the following: (i) Stock Options, as described in Article II, or (ii) Incentive
Stock Options, as described in Article III.
1.05 AGGREGATE SHARES OF COMMON STOCK
The stock subject to the options shall be shares of the Company's
authorized but unissued or reacquired $2 par value common stock, hereafter
sometimes called the "Common Stock". The aggregate number of shares of Common
Stock which may be issued under options granted pursuant to the Plan shall not
exceed 600,000 (after giving effect to the 100% Common Stock dividend paid on
October 18, 1993). The limitations established by the preceding sentence shall
be subject to adjustment as provided in Section 4.01 of the Plan. Any shares of
Common Stock subject to an option awarded under the Plan which for any reason is
terminated, unexercised, or expires shall again be available for issuance under
the Plan.
1.06 EFFECTIVE DATE AND TERM OF THE PLAN
(a) The Plan shall be effective on July 22, 1993 (the "Effective Date"),
subject to approval by the holders of a majority of the shares of Common Stock
present in person or by proxy and entitled to vote at the 1994 Annual or other
Meeting of Shareholders of the Company (but in no event shall such approval be
later than July 22, 1994).
(b) No awards shall be made under the Plan after July 22, 2003, provided,
however, that all awards made under the Plan prior to such date shall remain in
effect until such awards have been satisfied or terminated in accordance with
the Plan and the terms of such awards.
ARTICLE II -- STOCK OPTIONS
2.01 AWARD OF STOCK OPTIONS
The Committee may from time to time, and subject to the provisions of the
Plan and such other terms and conditions as the Committee may prescribe, grant
to any participant in the Plan one or more options (each, a "Stock Option") to
purchase the number of shares of Common Stock allotted by the Committee.
However, the number of shares of Common Stock that may be allotted by the
Committee pursuant to Stock Options awarded to participants who are consultants
shall be limited to an aggregate of 10,000 shares of Common Stock per year
(subject to the adjustment pursuant to Section 4.01 of the Plan). Further, the
number of shares of Common Stock that may be allotted by the Committee pursuant
to Stock Options awarded to any individual participant shall not exceed, in any
three year period, 150,000 shares of Common Stock, (subject to adjustment
pursuant to Section 4.01 of the Plan).
2.02 STOCK OPTION AGREEMENTS
The grant of a Stock Option shall be evidenced by a written stock option
agreement, executed by the Company and the holder of a Stock Option, stating the
number of shares of Common Stock subject to the Stock Option evidenced thereby,
the exercise price thereof, and in such form, and with such other terms and
conditions not inconsistent with the provisions of the Plan, as the Committee
may from time to time determine in its discretion.
2.03 STOCK OPTION PRICE
The option price per share of Common Stock deliverable upon the exercise of
a Stock Option shall be as established by the Committee, but shall not be less
than either (i) 100% of the fair market value per share at the date of grant of
the Stock Option or (ii) the par value per share, whichever is greater. During
such time as the Common Stock is not listed upon any national or regional stock
exchange or traded in the over-the-counter market and prices are quoted on the
NASDAQ National Stock Market, the fair market value per share shall be the mean
between the bid and ask prices of the Common Stock quoted by a market maker or
A-2
<PAGE> 27
other recognized specialist in the Common Stock at the close of the date in
question. If the Common Stock is listed upon any national or regional stock
exchange or exchanges or traded in the over-the-counter market and prices are
quoted on the NASDAQ National Stock Market, such fair market value shall be
deemed to be the last quoted sales price of the Common Stock on the date in
question or if no sale of the Common Stock shall have been reported on that day,
on the last preceding day on which there was a sale reported of the Common
Stock. In the absence of either of the foregoing, the fair market value of the
Common Stock shall be determined by the Committee in its absolute discretion
after giving consideration to the book value, the revenues, the earnings history
and the prospects of the Company in light of market conditions generally. The
determination of such fair market value is to be made without regard to any
restriction affecting the Common Stock, other than a restriction which, by its
terms, will never lapse. Subject to the foregoing, the Committee in fixing the
option price shall have full authority and discretion and shall be fully
protected in doing so.
2.04 MEDIUM AND TIME OF PAYMENT
The option price per share shall be payable upon the exercise of the Stock
Option according to the provisions of Section 2.05 hereinafter.
2.05 TERM AND LIMITATIONS ON RIGHT TO AND MANNER OF EXERCISE OF OPTIONS
(a) All Stock Options issued under the Plan shall be for such period as the
Committee shall determine, but for not more than 10 years from the date of grant
thereof.
(b) Each Stock Option granted under the Plan shall become exercisable only
after 3 years immediately following the date the Stock Option is granted. Except
as provided in Section 2.06 or 2.07, no Stock Option granted to a participant
who is an officer or an employee may be exercised unless the optionee is at the
time of such exercise in the employ of the Company or a Subsidiary and shall
have been continuously so employed since the grant of his option. Absence or
leave approved by the management of the Company shall not be considered an
interruption of employment for any purpose under the Plan.
(c) Not less than 100 shares may be purchased under a Stock Option at any
one time unless the number of shares purchased is the total number of shares at
the time purchasable under the Stock Option. Except as provided in Section 2.08,
during the lifetime of the optionee, the Stock Option shall be exercisable only
by him and shall not be assignable or transferable by him, voluntarily or
involuntarily, and no other person shall acquire any rights therein (by
operation of law or otherwise) except, the Stock Option may be transferred
pursuant to a qualified domestic relations order as defined by the Code, Title I
of the Employee Retirement Income Security Act, or the rules thereunder. No
Stock Option shall be subject to execution, attachment, or similar process. Upon
any attempt to so transfer, assign, pledge, hypothecate, or otherwise dispose of
the Stock Option, or any right or privilege conferred thereby, contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
such Stock Option, right or privilege, the Stock Option and such rights and
privileges shall immediately become null and void. The Stock Option may be
exercised by written notice to the Company, Attn: Chairman, Compensation
Committee, at its headquarters. Such notice shall state the election to exercise
the Stock Option under the Plan and the number of shares in respect of which is
being exercised, and shall be signed by the person or persons so exercising the
Stock Option. Such notice shall either: (i) be accompanied by payment of the
full purchase price of such shares, in which event the Company shall deliver a
certificate or certificates representing such shares as soon as practicable
after the notice shall be received; or (ii) fix a date (not less than 5 nor more
than 10 business days from the date such notice shall be received by the
Company) for the payment of the full purchase price of such shares at the Stock
Transfer Department, against delivery of a certificate or certificates
representing such shares. Payment of such purchase price shall, in either case,
be made (w) in cash; (x) with the consent of the Committee, by delivering shares
already owned by the optionee valued at fair market value (as defined in Section
2.03 hereof) as of the date of exercise; (y) by electing to have the Company
withhold from the shares otherwise issuable upon exercise of the Stock Option
that number of shares valued at fair market value (as defined in Section 2.03
hereof) as of the date of exercise; or (z) by a combination of the foregoing
forms of payment. The certificate or certificates for the shares as to which the
Stock Option shall have been so exercised shall be registered in the name of the
person or persons so exercising the Stock Option and shall be delivered as
provided above to or upon the
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<PAGE> 28
written order of the person or persons exercising the Stock Option. In the event
that a Stock Option shall be exercised, pursuant to Section 2.07 hereof, by any
person or persons other than the participant, such notice shall be accompanied
by appropriate proof of the right of such person or persons to exercise the
Stock Option. All shares that shall be purchased upon the exercise of the Stock
Option as provided herein shall be fully paid and nonassessable.
2.06 TERMINATION OF EMPLOYMENT OF OPTIONEE EXCEPT UPON DEATH
(a) In the event of the termination of employment of an optionee for any
reason other than the optionee's death, disability, or retirement of the
optionee on or after his normal retirement date, any Stock Option or Stock
Options granted to him under the Plan to the extent not theretofore exercised
and which are otherwise exercisable within the provisions of Section 2.05(b)
hereof, may exercised within 3 months after such termination.
(b) Notwithstanding the provisions of Section 2.05(b), if the employment of
an optionee shall be terminated by reason of the optionee's retirement on or
after his normal retirement date, the optionee shall have the right to exercise
such Stock Option or Stock Options held by him to the extent that such options
have not expired at any time before the normal expiration date of the Stock
Options. The transfer of an optionee from the employ of the Company to a
Subsidiary or vice versa, or from one Subsidiary to another, shall not be deemed
to constitute a termination of employment for purposes of the Plan.
(c) Notwithstanding the provisions of Section 2.05(b), in the event of the
termination of employment of an optionee by reason of the optionee's disability,
the optionee shall have the right to exercise all Stock Options held by him, to
the extent such Stock Options have not previously expired or been exercised, at
any time prior to the normal expiration date of such Stock Option. For purposes
of this Plan, a qualifying "disability" shall exist when the optionee is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
(d) The provisions of this Section 2.06 shall not be applicable to Stock
Options awarded to consultants.
2.07 DEATH OF OPTIONEE AND TRANSFER OF STOCK OPTION
(a) Notwithstanding the provisions of Section 2.05(b), if an optionee who
is an officer or employee on the date of the grant shall die (i) while in the
employ of the Company or a Subsidiary or (ii) within a period of 3 months after
the termination of his employment with the Company and all Subsidiaries or (iii)
within a period of 3 months after retirement (on or after his normal retirement
date) from his employment with the Company and all Subsidiaries and shall not
have fully exercised any Stock Options theretofore granted to him, subject to
the condition that no Stock Option shall be exercisable after the expiration of
10 years from the date it is granted, to the extent that the Stock Option had
not previously been exercised, it may be exercised at any time before the normal
expiration date of the Stock Option, by the executors or administrators of the
optionee or by any person or persons who shall have acquired the Stock Option
directly from the optionee by bequest or inheritance.
(b) If an optionee who is a consultant shall die, then, subject to the
condition that no Stock Option shall be exercisable after the expiration of 10
years from the date it is granted, such Stock Option may be exercised at any
time before the normal expiration date of the Stock Option by the executors or
administrators of such optionee or by any person or persons who shall have
acquired the Stock Option directly from the optionee by bequest or inheritance.
2.08 LIMITATIONS ON TRANSFER
(a) Except as provided in Section 2.08(b), no Stock Option granted under
the Plan may be assigned, encumbered or transferred, except by will or the laws
of descent and distribution in the event of the death of the optionee, or
pursuant to a qualified domestic relation order as defined by the Internal
Revenue Code of 1986, as amended or Title I of the Employee Retirement Income
Security Act, or the rules thereunder.
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<PAGE> 29
(b) The Committee shall have the discretionary authority to grant Stock Options
which would be transferable to members of an optionee's immediate family,
including trusts for the benefit of such family members and partnerships in
which such family members are the only partners. For purposes of Section 2.05, a
transferred Stock Option may be exercised by the transferee to the extent that
the optionee would have been entitled had the Stock Option not been transferred.
ARTICLE III -- INCENTIVE STOCK OPTIONS
3.01 AWARD OF INCENTIVE STOCK OPTIONS
The Committee may, from time to time and subject to the provisions of the
Plan and such other terms as the Committee may prescribe, grant to any
participant who is an officer or employee of the Company one or more incentive
stock options (intended to qualify as such under the provisions of Section 422
of the Code) (each, an "Incentive Stock Option") to purchase the number of
shares of Common Stock allotted by the Committee. For the purposes of the
limitation on the number of shares of Common Stock that may be allotted by the
Committee to individual participants who are not consultants pursuant to Stock
Options set forth in Section 2.01, the shares of Common Stock that may be
allotted pursuant to Incentive Stock Options shall be aggregated with the shares
underlying Stock Options for the purposes of complying with such limitation.
3.02 INCENTIVE STOCK OPTION AGREEMENTS
The grant of an Incentive Stock Option shall be evidenced by a written
incentive stock option agreement, executed by the Company and the holder of the
Incentive Stock Option, stating the number of shares of Common Stock subject to
the Incentive Stock Option evidenced thereby, the exercise price thereof, and in
such form, and with such other terms and conditions not inconsistent with the
provisions of the Plan, as the Committee may from time to time determine in its
discretion.
3.03 INCENTIVE STOCK OPTION PRICE
The option price per share of Common Stock deliverable upon the exercise of
an Incentive Stock Option shall be not less than 100% of the fair market value
(as defined in Section 2.03) of the shares of Common Stock of the Company on the
date of the granting of the Incentive Stock Option; provided, however, if the
optionee owns more than 10% of the Common Stock (or in the event that there are
other classes of voting stock outstanding, of the total combined voting power of
all such classes of voting stock) at the time the Incentive Stock Option is
granted, the option price for each such optionee shall be no less than 110% of
the fair market price (as defined in Section 2.03) of the shares of the Common
Stock and such Incentive Stock Option shall not be exercisable after the
expiration of 5 years from the date such Incentive Stock Option is granted.
3.04 MAXIMUM AMOUNT OF INCENTIVE STOCK OPTIONS
The aggregate fair market value (as defined in Section 2.03) (determined as
of the date the Incentive Stock Option is granted) of any Common Stock with
respect to which any Incentive Stock Options granted to an optionee are
exercisable for the first time by such optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any of
its Subsidiaries) shall not exceed $100,000 as required under Section 422(d)(i)
of the Code. To the extent that the $100,000 limit is exceeded, the $100,000, in
options, measured as described above, granted earliest in time will be treated
as Incentive Stock Options. Any amount exceeding the $100,000 limit as
calculated pursuant to this Section 3.04 shall be treated as Stock Options under
the Plan.
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3.05 SPECIAL PROVISIONS FOR INCENTIVE STOCK OPTIONS
In addition to the provisions of Article III of the Plan, and any other
provision of the Plan notwithstanding, the following special provisions shall
also apply to all Incentive Stock Options granted under the Plan:
(a) The option must be expressly designated as an Incentive Stock
Option by the Committee and in the related incentive stock option
agreement.
(b) No Incentive Stock Option shall be granted more than 10 years from
the Effective Date of the Plan (as defined in Section 1.06(a)) and no
Incentive Stock Option shall be exercisable more than 10 years from the
date the Incentive Stock Option is granted.
3.06 APPLICABILITY OF STOCK OPTIONS SECTIONS
Section 2.04 (Medium and Time of Payment), 2.05 (Term and Limitations on
Right to and Manner of Exercise of Stock Options), applicable to Stock Options
shall apply equally to Incentive Stock Options. These Sections are incorporated
by reference in this Article III as though fully set forth herein.
3.07 TERMINATION OF OPTIONEE EXCEPT UPON DEATH
(a) In the event of the termination of employment of an optionee (otherwise
than by reason of the optionee's death or disability or retirement of the
optionee on or after his normal retirement date), any Incentive Stock Option or
Incentive Stock Options granted to him under the Plan which have not then
expired and which are otherwise exercisable within the provisions of Section
2.05(b) hereof, may be exercised by the optionee within three months of such
termination.
(b) Notwithstanding the provisions of Section 2.05(b), if the employment of
an optionee shall be terminated by reason of the optionee's retirement on or
after his normal retirement date, the optionee shall have the right to exercise
such Incentive Stock Option or Incentive Stock Options held by him to the extent
that such options have not expired, at any time before the normal expiration
date of the Incentive Stock Option or Incentive Stock Options. The transfer of
an optionee from the employ of the Company to a Subsidiary or vice versa, or
from one Subsidiary to another, shall not be deemed to constitute a termination
of employment for purposes of the Plan.
(c) Notwithstanding the provisions of Section 2.05(b), in the event of the
termination of employment of an optionee by reason of the optionee's disability
as defined in Section 2.06(c), the optionee shall have the right to exercise all
Incentive Stock Options held by him, to the extent such Incentive Stock Options
have not previously expired or been exercised, at any time before the normal
expiration date of such Incentive Stock Option.
(d) Notwithstanding the provisions of Section 3.07(b) and (c), the tax
treatment available pursuant to Section 422 of the Code upon the exercise of an
Incentive Stock Option will not be available to an optionee who exercises any
Incentive Stock Option more than (i) 12 months after the date of termination of
employment due to the optionee's disability or (ii) three months after the date
of termination of employment due to retirement.
3.08 DEATH OF OPTIONEE AND TRANSFER OF STOCK OPTION
Notwithstanding the provisions of Section 2.05(b), if an optionee shall die
(i) while in the employ of the Company or a Subsidiary or (ii) within a period
of 3 months after the termination of his employment with the Company and all
Subsidiaries or (iii) within a period of 3 months after retirement (on or after
his normal retirement date) from his employment with the Company and all
Subsidiaries and shall not have fully exercised any Incentive Stock Options
theretofore granted to him, subject to the condition that no Incentive Stock
Option shall be exercisable after the expiration of 10 years from the date it is
granted, to the extent that the Incentive Stock Option had not previously been
exercised, it may be exercised at any time before the normal expiration date of
the Incentive Stock Option, by the executors or administrators of the optionee
or by
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any person or persons who shall have acquired the Incentive Stock Option
directly from the optionee by bequest or inheritance.
3.09 LIMITATIONS ON TRANSFER
Except as provided in this Section 3.09, no Incentive Stock Option granted
under the Plan may be assigned, encumbered or transferred, except by will or the
laws of descent and distribution in the event of the death of the optionee, or
pursuant to a qualified domestic relation order as defined by the Internal
Revenue Code of 1986, as amended or Title I of the Employee Retirement Income
Security Act, or the rules thereunder.
ARTICLE IV -- MISCELLANEOUS
4.01 RECAPITALIZATION.
Subject to any required action by the shareholders of the Company, the
number of shares of Common Stock covered by each Stock Option or Incentive Stock
Option (collectively for purposes of this Article IV, an "Option") and the
exercise price per share thereof for each such Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock of the Company resulting from a subdivision or consolidation of shares or
the payment of a stock dividend (but only on the Common Stock) or any other
increase or decrease in the number of such shares effected without receipt of
consideration by the Company.
In the event of a merger, consolidation, combination, exchange of shares,
separation, reorganization, or liquidation of the Company, each outstanding
Option shall pertain to and apply to the securities to which a holder of the
number of shares of Common Stock subject to the Option would have been entitled.
In the event of a change in the Common Stock of the Company as presently
constituted, which is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without
par value, the shares resulting from any such change shall be deemed to be
Common Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive, provided
that each Incentive Stock Option granted pursuant to this Plan shall not be
adjusted in a manner that causes the Incentive Stock Option to fail to continue
to qualify as an "incentive stock option" within the meaning of 422 of the Code.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassification,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
4.02 RIGHTS AS A SHAREHOLDER
An optionee or transferee of an Option shall have no rights as a
shareholder with respect to any shares covered by his Option until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 4.01 hereof.
4.03 MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS
Subject to the terms and conditions and within the limitations of the Plan,
the Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
therefor (to the extent not theretofore exercised). The Committee shall not,
however, modify any outstanding Options or
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authorize the granting of new Options in substitution therefor specifying a
lower price. Notwithstanding the foregoing, no modification of an Option shall,
without the consent of the optionee, alter or impair any rights or obligations
under any Option theretofore granted under the Plan.
4.04 INVESTMENT PURPOSE
Each Option under the Plan shall be granted on the condition that the
purchase of Common Stock thereunder shall be for investment purposes, and not
with a view to resale or distribution except in the event the Common Stock
subject to such Option is registered under the Securities Act of 1933, as
amended, or in the event a resale of such Common Stock without such registration
would otherwise be permissible; provided, however, that such condition shall be
inoperative if in the opinion of counsel for the Company such condition is not
required under the Securities Act of 1933, as amended, or any other applicable
law, regulation, or rule of any governmental agency.
4.05 INDEMNIFICATION
In addition to such other rights of indemnification as they may have, the
members of the Committee and the officers and employees of the Company who may
take action relating to the Plan shall be indemnified by the Company to the
fullest extent permitted by law against the reasonable expenses, including
attorney's fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
thereof, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee member, officer
or employee is liable for gross negligence or willful misconduct in the
performance of his duties; provided that within sixty (60) days after
institution of any such action, suit or proceeding, a Committee member, officer
or employee shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
4.06 AMENDMENT OF THE PLAN
The Board of Directors may, insofar as permitted by law, from time to time,
with respect to any shares at the time not subject to Options, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever except
that, without approval of a majority of the shares of Common Stock present in
person or by proxy and entitled to vote at a duly held meeting of the
shareholders of the Company, no such revision or amendment shall change the
number of shares of Common Stock subject to the Plan, change the designation of
the class of persons eligible to receive Options, decrease the price at which
Options may be granted, remove the administration of the Plan from the
Committee, or render any member of the Committee eligible to receive an Option
under the Plan while serving thereon. However, in no case shall the Plan be
amended more than once in any six month period except for those amendments that
are made solely for the purpose of complying with the Code, Title I of the
Employee Retirement Income Security Act or the rules thereunder.
4.07 APPLICATION OF FUNDS
The proceeds received by the Company from the sale of the Common Stock
pursuant to the Options will be used for general corporate purposes.
4.08 NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the optionee to
exercise such Option.
4.09 APPROVAL OF SHAREHOLDERS AND REGISTRATION OF COMMON STOCK
The Plan shall be subject to the approval of the shareholders of the
Company as set forth in Section 1.06 above. Any options granted prior to such
shareholders' approval shall be expressly conditioned on and shall be
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subject to such approval. Further, any options granted pursuant to the Plan
shall not become exercisable until a registration statement filed with the
Securities and Exchange Commission for the Common Stock pertaining thereto has
become effective (unless an exemption from registration for the Common Stock
pertaining thereto is available in the opinion of counsel for the Company) and
the requirements, if any, of the National Association of Securities Dealers,
Inc. are met. The Company shall undertake to use its best efforts to cause a
registration statement to become and remain effective and to meet the applicable
requirements of the National Association of Securities Dealers, Inc.
4.10 GOVERNMENT REGULATIONS
The Plan, and the granting and exercise of Options thereunder, and the
obligations of the Company to sell and deliver shares under such Options, shall
be subject to all applicable laws, rules and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required. Notwithstanding anything contained herein to the contrary, Options
shall be granted and exercised in such a manner as to conform to the provisions
of Rule 16b-3, or any replacement rule, adopted pursuant to the provisions of
the Securities Exchange Act of 1934 as the same now exists or may, from time to
time, be amended.
4.11 GOVERNING LAW; SEVERABILITY
The Plan shall be governed by and construed in all respects in accordance
with the laws of the State of Louisiana. If any provision of the Plan shall be
held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereof shall continue to be fully effective.
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EXHIBIT B
UNITED COMPANIES FINANCIAL CORPORATION
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This 1993 Non-Employee Director Stock Option Plan (the "Plan") is intended
to assist United Companies Financial Corporation (the "Company") in attracting
and retaining highly qualified and experienced persons, who are not officers or
employees of the Company or any of its subsidiaries or affiliates, for service
as directors of the Company by providing such directors with a proprietary
interest in the Company's success through the grant to such directors of
nonstatutory stock options (the "Options") to acquire shares of the common stock
of the Company (the "Shares").
2. PARTICIPATION.
Each member of the Company's Board of Directors (the "Board") who is not,
and who has not been during the one-year period immediately preceding the
Effective Date (as defined below), or the date the director is first elected to
the Board, whichever is later, an officer or employee of the Company or of any
of its subsidiaries or affiliates (each, an "Eligible Director") shall be
eligible to participate in the Plan.
3. ADMINISTRATION OF PLAN.
The Plan shall be administered, construed and interpreted by a committee
(the "Committee") which shall be comprised of two or more members of the Board
appointed by the Board, who are not eligible under Section 2 hereof to receive
grants of Options under the Plan. The Committee shall prescribe the form of
stock option agreement to be used to evidence grants of Options under the Plan,
consistent with the terms of the Plan and all applicable laws and regulations,
including, without limitation, Rule 16b-3 (or successor provision) promulgated
by the Securities and Exchange Commission.
4. SHARES SUBJECT TO PLAN.
(a) Maximum Shares. The maximum number of Shares with respect to which
Options may be granted and which are hereby reserved for purposes of the
Plan shall be, in the aggregate, 400,000 Shares (adjusted pursuant to
Section 4(b) hereof to reflect 100% Common Stock dividend paid on October
18, 1993), subject to further adjustment as provided in Section 4(b)
hereof. Shares issued under the Plan may be either authorized but unissued
Shares or Shares which have been or may be reacquired by the Company,
including treasury shares. Shares released upon forfeiture of an Option
shall again be available for grants of future Options under the Plan.
(b) Adjustments in Event of Changes in Capitalization. In the event
that the Shares are changed into or exchanged for a different kind or
number of shares of stock or securities of the Company as the result of any
stock dividend, stock split, combination of shares, exchange of shares,
merger, consolidation, reorganization, recapitalization or other change in
capital structure of the Company (each, a "Capitalization Change"), then
the number of Shares subject to this Plan and the number of shares subject
to Options previously granted hereunder shall be equitably adjusted by the
Committee to prevent the dilution or enlargement of such previously granted
Options, and any new stock or securities into which the Shares are changed
or for which they are exchanged shall be substituted for the Shares subject
to this Plan and to Options granted hereunder; provided, however, that
fractional shares may be deleted from any such adjustment or substitution.
There shall be no such equitable adjustment for the number of Shares
subject to Options as set forth in Section 5(a) in the event the effective
date of the Capitalization Change occurs prior to the grant of the Option.
5. OPTIONS GRANTED UNDER THE PLAN.
(a) Option Grants. On the Effective Date, each Eligible Director shall
be and hereby is granted an Option to acquire 8,000 Shares (as adjusted
pursuant to Section 4(b) to reflect the 100% Common Stock
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<PAGE> 35
dividend paid on October 18, 1993). In addition, each Eligible Director
shall be granted an Option to acquire 4,000 Shares on an annual basis upon
his or her election or re-election to the Board. The price at which Shares
may be acquired pursuant to each Option (the "Exercise Price") shall be the
Fair Market Value of the Shares, as defined in Section 5(d) hereof, as of
the date such Option is granted.
(b) Exercise Rights. An Option granted under the Plan shall not be
exercisable for a period of three years after the date of grant.
Thereafter, subject to Section 10 hereof, the Option shall be fully
exercisable, and shall remain exercisable for a period of ten years from
the date such Option is granted, at which time any unexercised portion of
the Option shall terminate. In the event that the optionee ceases to be a
member of the Board within six months of the date an Option is granted, the
Option shall be forfeited.
(c) Exercise of Options. Subject to Section 5(b), an Option may be
exercised with respect to all or part of the Shares covered by the Option,
but in no event with respect to less than 100 Shares, unless the exercise
relates to all Shares covered by the Option at the date of exercise.
Options may be exercised by delivery of a signed written notice to the
Company, which notice shall state the election to exercise the Option and
the number of whole Shares in respect to which it is being exercised,
together with payment in full of the Exercise Price, which payment shall be
made either (i) in cash (by a certified check, bank draft or money order);
(ii) with the consent of the Committee, by delivering Shares already owned
by the optionee valued at Fair Market Value; (iii) by electing to have the
Company withhold from the Shares otherwise issuable upon exercise of the
Option that number of Shares valued at Fair Market Value as of the date of
exercise; or (iv) by a combination of the foregoing forms of payment.
Notice of exercise and payment of the Exercise Price shall be delivered to
the Company at the following address:
United Companies Financial Corporation
P. O. Box 1591
4041 Essen Lane
Baton Rouge, La 70821
Attn: Secretary
(d) Fair Market Value. The term "Fair Market Value" means the fair
market value of a Share as determined in good faith by the Committee in the
following manner:
(i) If the Shares are then listed on any national or regional stock
exchange or traded in the over-the-counter market and prices are quoted
on the NASDAQ National Stock Market, the Fair Market Value shall be the
last quoted sales price of a Share on the date in question, or if there
are no reported sales on such date, on the last preceding date on which
sales were reported;
(ii) If the Shares are not so listed or quoted, then the Fair
Market Value shall be the mean between the bid and ask prices quoted by
a market maker or other recognized specialist in the Shares at the close
of the date in question; or
(iii) In the absence of either of the foregoing, the Fair Market
Value shall be determined by the Committee in its absolute discretion
after giving consideration to the book value, the revenues, the earnings
history and the prospects of the Company in light of market conditions
generally.
The Fair Market Value determined in such manner shall be final, binding and
conclusive on all parties.
6. RESTRICTIONS ON TRANSFERS.
(a) Limitations on Transfer. (i) Except as provided in Section
6(a)(ii), no Option granted under the Plan may be assigned, encumbered or
transferred, except by will or the laws of descent and distribution in the
event of the death of the optionee, or pursuant to a qualified domestic
relation order as defined by the Internal Revenue Code of 1986, as amended
or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. (ii) The Committee shall have the discretionary authority to
grant Options which would be transferable to members of an Eligible
Director's immediate family, including trusts for the benefit of such
family members and partnerships in which such family members
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are the only partners. For purposes of Section 5(c), a transferred Option
may be exercised by the transferee to the extent that the Eligible Director
would have been entitled had the Option not been transferred.
(b) Government Regulations. This Plan and Options granted under the
Plan are subject to all applicable federal and state laws, rules and
regulations and to such approvals by any regulatory or governmental agency
(including without limitation "no action" positions of the Securities and
Exchange Commission) which may, in the opinion of counsel for the Company,
be necessary or advisable in connection therewith. Without limiting the
generality of the foregoing, no Options may be granted or exercised under
the Plan unless and until all applicable legal requirements have, in the
opinion of counsel to the Company, been complied with. In connection with
any Shares issued pursuant to the exercise of Options, the person acquiring
such Shares shall, if requested by the Company, give assurances
satisfactory to counsel to the Company in respect to such matters as the
Company may deem desirable to assure compliance with all applicable legal
requirements. The Company shall not be required to deliver any Shares under
the Plan prior to (i) the admission of such Shares to listing on any stock
exchange or NASDAQ, as applicable, on which Shares may then be listed, and
(ii) the completion of such registration or other qualification of such
Shares under any state or federal law, rule or regulation, as the Committee
shall determine to be necessary or advisable.
7. TERMINATION.
The Plan shall terminate automatically on the tenth anniversary of the
Effective Date, and the Board may suspend or terminate the Plan at any earlier
time. Upon termination of the Plan, no additional Options shall be granted under
the Plan; provided, however, that the terms of the Plan shall continue in full
force and effect with respect to outstanding and unexercised Options issued
under the Plan.
8. AMENDMENT.
The Board may amend the Plan from time to time in its sole discretion, but
in no case shall the Plan be amended more than once in any six month period,
except for those amendments solely for the purpose of complying with the
Internal Revenue Code of 1986, as amended, Title I of the Employee Retirement
Income Security Act, or the rules thereunder. Additionally, no such amendment
shall, without the approval of the shareholders of the Company in accordance
with the laws of the State of Louisiana and Rule 16b-3 under the Securities and
Exchange Act of 1934, as amended: (a) change the class of persons eligible to
receive Options or otherwise materially modify the requirements as to
eligibility for participation in the Plan; (b) increase, decrease or otherwise
alter the aggregate number of Shares with respect to which Options may be
granted under the Plan or which may be granted to Eligible Directors; (c)
materially increase the benefits accruing to Eligible Directors under the Plan;
or (d) remove the administration of the Plan from the Committee or render any
member of the Committee eligible to participate in the Plan while serving
thereon. Any purported amendment in violation of these restrictions shall be
void and of no effect. Furthermore, no amendment shall impair the rights of any
Eligible Director or other person or persons to whom an Option has been granted,
without such person's consent.
9. INDEMNIFICATION.
In addition to such other rights of indemnification as they may have, the
members of the Committee and the officers and employees of the Company who may
take actions relating to the Plan shall be indemnified by the Company to the
fullest extent permitted by law against the reasonable expenses, including
attorney's fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
thereof, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee member, officer
or employee is liable for gross negligence or willful misconduct in the
performance of his duties, provided that within sixty (60) days after
institution of any such action, suit or
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proceeding, a Committee member, officer or employee shall in writing offer the
Company the opportunity, at its own expense, to handle and defend the same.
10. EFFECTIVE DATE.
The Effective Date of the Plan shall be July 22, 1993, subject to receipt
within one year of that date of the approval of the holders of a majority of the
shares of common stock of the Company present or represented at a meeting of the
shareholders at which the Plan is considered. All Options granted prior to such
shareholder approval shall be subject to receipt of such approval and may not be
exercised prior to receipt of such approval. If such shareholder approval is not
received, all such Options shall automatically terminate.
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PROXY
UNITED COMPANIES FINANCIAL CORPORATION
P.O. BOX 1591, BATON ROUGE, LA 70821
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY APPOINTS J. TERRELL BROWN AND DALE E. REDMAN AS
PROXIES, EACH WITH THE POWER TO APPOINT HIS SUBSTITUTE, AND HEREBY AUTHORIZES
THEM TO REPRESENT AND TO VOTE, AS DESIGNATED BELOW, ALL THE SHARES OF COMMON
STOCK OF UNITED COMPANIES FINANCIAL CORPORATION HELD OF RECORD BY THE
UNDERSIGNED ON MARCH 18, 1994, AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
ON APRIL 28, 1994 OR ANY ADJOURNMENT THEROF.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
(PLEASE DATE AND SIGN ON REVERSE)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
_________________ _____________________ {X} PLEASE MARK
ACCOUNT NUMBER COMMON YOUR VOTES
AS THIS
1. ELECTION OF DIRECTORS: James J. Bailey, III, General Robert H. Barrow
(Retired), J. Terrell Brown, Richard A. Campbell, Harris J. Chustz, Robert D.
Kilpatrick, O. Miles Pollard, Jr., Charles Prosser, M.D., Dale E. Redman,
William H. Wright, Jr.
FOR all WITHHOLD (INSTRUCTION: To withhold authority
nominees listed AUTHORITY to vote for any individual nominee,
above (except as to vote for all write that nominee's name in the
indicated to the nominees listed space provided below.)
contrary below) above
{ } { } _________________________________
{ } I PLAN TO
ATTEND
MEETING
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4, 5 AND 6.
FOR AGAINST ABSTAIN
2. Proposal to approve adoption of the United Companies { } { } { }
Financial Corporation 1993 Stock Incentive Plan.
3. Proposal to approve adoption of the United Companies { } { } { }
Financial Corporation 1993 Non-Employee Director Stock
Option Plan.
4. Proposal to approve adoption of the United Companies { } { } { }
Financial Corporation Management Incentive Plan.
5. Proposal to amend Section 1 of Article III of the { } { } { }
Articles of Incorporation of United Companies Financial
Corporation.
6. In their discretion, the Proxies are authorized to { } { } { }
vote upon such other business as may properly come
before the meeting.
___________________________________
(Signature)
___________________________________
(Signature)
Dated _______________________, 1994
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
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