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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from .................... to ....................
Commission file number 1-7067
UNITED COMPANIES FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 71-0430414
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4041 Essen Lane 70809
Baton Rouge, Louisiana (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code (504) 924-6007
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $2.00
(Title of Class)
-------------------------
6-3/4% PRIDES(SM), Convertible Preferred Stock, Par Value $2.00
(Title of Class)
---------------------------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The aggregate market value of voting stock held by non-affiliates of
the registrant as reported by the National Association of Securities Dealers
Automated Quotation System/National Stock Market, as of March 11, 1996 was
$589,182,237.
The number of shares of $2.00 par value stock issued and outstanding
as of March 11, 1996 was 28,146,480 excluding 1,159,682 treasury shares.
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AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 12, 13 or 15 (d) of
THE SECURITIES EXCHANGE ACT OF 1934
UNITED COMPANIES FINANCIAL CORPORATION
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Annual Report on Form
10-K for the year ended December 31, 1995, as set forth in the pages attached
hereto:
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
Exhibits
Exhibit No.
-----------
23.1(12) Consent of Deloitte & Touche LLP
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED COMPANIES FINANCIAL CORPORATION
By: /s/ Sherry E. Anderson
-------------------------------------------------
Sherry E. Anderson
Senior Vice President and Secretary
Date: 4-26-96
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
BIOGRAPHICAL INFORMATION
The name and age, principal occupation or employment, and other data
regarding each director and executive officer of the Company, based upon
information received from such directors and executive officers are set forth
below:
JAMES J. BAILEY, III
Mr. Bailey, age 54, 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 74, 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.
J. TERRELL BROWN
Mr. Brown, age 56, is Chairman of the Board of Directors 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 name Chief Executive Officer in 1985. Mr. Brown is also a
director of Hibernia Corporation and Sizeler Property Investors, Inc.
RICHARD A. CAMPBELL
Mr. Campbell, age 64, has served as a director of the Company since
1987. For the past five years, Mr. Campbell has been an independent oil and
gas exploration geologist in Lafayette, Louisiana, and has co-invested with
Camex Operating Company and/or Camex, Inc. in oil and gas exploration
activities.
HARRIS J. CHUSTZ, JR.
Mr. Chustz, age 45, has served as the Manager of Finance and
Accounting with Florida Keys Electric Cooperative since 1976. Mr. Chustz is
the son of the Company's former Chairman of the Board, Harris J. Chustz.
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JOHN D. DIENES
Mr. Dienes, age 54, serves as President and Chief Operating Officer of
the Company and is an executive officer of each Subsidiary of the Company. At
the time Mr. Dienes joined the Company in February 1994, he had over 30 years
of experience in the financial industry. 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, his employer
since 1988.
C. GERON HARGON
Mr. Hargon, age 50, serves as Executive Vice President of the Company
and President of United Companies Lending Group, Inc. ("UCLG"), United
Companies Lending Corporation ("UCLC"), Pelican Mortgage Company, Inc., United
Companies Mortgage of Tennessee, Inc. and Adobe, Inc., wholly-owned
subsidiaries of the Company. Mr. Hargon joined the Company on September 1,
1995. Mr. Hargon has nearly 25 years experience in the financial services
industry, most recently serving as Chairman of Hibernia National Bank's South
Central Region. During his 19 years with Hibernia, Mr. Hargon served as Chief
Operating Officer and also managed its Baton Rouge and Texas commercial banking
operations.
ROY G. KADAIR, M.D.
Dr. Kadair, age 50, is a practicing physician (Internal Medicine) and
has been associated with the Baton Rouge Clinic for over 18 years. He is a
director and member of the executive committee of General Health System, and
serves on the board of directors of Baton Rouge General Hospital and Gulf South
Health Plans.
ROBERT D. KILPATRICK
Mr. Kilpatrick, age 72, has served as a director of the Company since
1989. Mr. Kilpatrick serves as a director of Kuhlman Corporation and is an
advisory director of Boardroom Consultants, Inc. Prior to retirement in 1989,
Mr. Kilpatrick served as Chairman of the Board and Chief Executive Officer of
CIGNA Corporation and served as a director of CIGNA Corporation until 1994.
O. MILES POLLARD, JR.
Mr. Pollard, age 58, has served as a director of the Company since
1990. He is engaged in private investments and serves as President of Cadogan
Properties, Inc. and Secretary of Randall Management Services, Inc. He is a
director of First Commerce Corporation and City National Bank of Baton Rouge.
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DALE E. REDMAN
Mr. Redman, age 48, 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. Mr.
Redman is also a director of Picadilly Cafeterias, Inc.
ROBERT B. THOMAS, JR.
Mr. Thomas, age 49, serves as Executive Vice President of the Company
and Chairman and President of UCLIC, a wholly-owned subsidiary of the Company.
Mr. Thomas joined UCLIC 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.
WILLIAM H. WRIGHT, JR.
Mr. Wright, age 69, has served as a director of the Company since
1972. He serves as Chairman of the Board and Chief Executive Officer of Wright
Insurance Agency, Inc. and is a director of City National Bank of Baton Rouge.
Compliance with Section 16 of the Exchange Act
Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no Form
5 reports were required to be filed, the Company believes that, during 1995,
all of its directors and pertinent officers complied with all applicable filing
requirements under Section 16(a) of the Securities Exchange Act of 1934, as
amended.
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ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth certain information on the annual and
long-term compensation for the Chief Executive Officer and each of the five
most highly compensated executive officers of the Company (collectively, the
Chief Executive Officer and such other executive officers shall be referred to
herein as the "Named Executive Officers") for the years ended December 31,
1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ------------
AWARDS
------
OTHER RESTRICTED ALL OTHER
ANNUAL STOCK OPTIONS COMPEN-
NAME AND BONUS COMPENSATION AWARDS (4)/ SATION
PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2) ($)(3) SARS(#) ($)(5)
------------------ ---- --------- ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Terrell Brown 1995 393,750 833,616 --- 304,000 50,000 35,442
Chairman and Chief 1994 378,304 297,205 --- --- --- 41,240
Executive Officer 1993 375,625 76,395 --- --- 110,000 32,114
W. Roger Clark (7) 1995 135,106 --- --- 160,000 20,000 16,565
Executive Vice 1994 168,702 136,094 --- --- --- 23,164
President and 1993 155,269 39,027 --- --- 44,000 12,382
President, UCLC
John D. Dienes, 1995 266,250 475,699 --- 208,000 24,000 16,499
President and Chief 1994 220,864 241,805(6) --- --- 54,998 ---
Operating Officer 1993 --- --- --- --- --- ---
C. Geron Hargon (8) 1995 66,668 359,025 --- 437,500 30,000 ---
Executive Vice 1994 --- --- --- --- --- ---
President and 1993 --- --- --- --- --- ---
President, UCLC
Dale E. Redman, 1995 246,095 445,298 --- 208,000 24,000 17,723
Executive Vice 1994 236,014 189,131 --- --- --- 23,711
President and Chief 1993 218,333 55,793 --- --- 44,000 14,218
Financial Officer
Robert B. Thomas, Jr. 1995 219,625 395,818 --- 160,000 --- 16,499
Executive Vice 1994 209,366 168,116 --- --- --- 21,882
President and 1993 175,269 49,732 --- --- 44,000 ---
Chairman and
President, UCLIC
</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 1995, 1994 and 1993 were $16,562,
$16,729, and $16,998, 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 February 29, 1996 was $136,023.
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(2) No personal benefits, which are non-cash compensation, are 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) Reflects the value of the shares of restricted stock based upon the
closing price of the Company's Common Stock reported on the National
Association of Securities Dealers Quotations National Stock Market
(the "Nasdaq Stock Market") on the date of award. The shares of the
restricted stock vest in 50% increments on the anniversary date of the
award in each of the two years thereafter, except the shares awarded
to Mr. Hargon, which vest in 25% increments on each of November 1,
1996, 1997, 1998 and 1999. The awards are also subject to certain
performance-based conditions. During the restriction period for the
shares of restricted stock, the named executive officer is entitled to
receive dividends and exercise voting privileges on such restricted
shares. At December 29, 1995, the shares of restricted stock held by
Messrs. Brown, Clark, Dienes, Hargon, Redman and Thomas had a fair
market value of $501,125, $263,750, $342,875, $369,250, $342,875 and
$263,750, respectively.
(4) Represents options granted under the Company's stock option plans for
employees after giving effect to 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. For additional
information regarding options granted during the last fiscal year, see
"Option Grants in Last Fiscal Year," and for information regarding
current holdings of options, see "Options Exercised and Year-End
Values of Unexercised Options."
(5) Amounts reported include amounts contributed or accrued for 1995, 1994
and 1993 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 1995, 1994 and 1993 also include
$16,729, $16,998 and $17,134, respectively, in loans to Mr. Brown for
payment of a portion of the premium on a life insurance policy. The
loans were made without interest and are secured by an assignment of
the policy. See "Transactions with Management and Others."
(6) Includes $41,667 paid to Mr. Dienes in the form of a bonus upon
commencement of his employment with the Company.
(7) Information regarding the compensation of Mr. Clark is included in
this table and those that follow because he served as an executive
officer during 1995, even though he retired effective as of August 31,
1995.
(8) Information regarding the compensation of Mr. Hargon is included in
this table and those that follow because he served as an executive
officer during 1995, even though he did not join the Company until
September 1, 1995.
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OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth information regarding the options
granted during the year ended December 31, 1995, to the Named Executive
Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE
OPTIONS EMPLOYEES EXERCISE APPRECIATION
GRANTED IN FISCAL PRICE EXPIRATION FOR OPTION TERM
NAME (#)(1) YEAR ($/SH)(1) DATE 5% ($) 10% ($)
-------- ---------- -------- ------------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
J. Terrell Brown 50,000 7.5 22.375 June 14, 2005 703,576 1,782,999
W. Roger Clark 20,000 3.0 22.375 June 14, 2005 281,430 713,200
John D. Dienes 24,000 3.6 22.375 June 14, 2005 337,716 855,840
C. Geron Hargon 30,000 4.5 31.25 September 1, 2005 589,589 1,494,134
Dale E. Redman 24,000 3.6 22.375 June 14, 2005 337,716 855,840
</TABLE>
- -------------------------
(1) The options granted to the Named Executive Officer were awarded under
the Company's 1993 Stock Incentive Plan (the "1993 Plan"). The
options granted under the 1993 Plan are not exercisable, except in
limited circumstances, until three years have elapsed from the date
such options are granted. The exercise price of the options, which
can be no less than 100% of the fair market value of a share of Common
Stock on the date of grant, has been adjusted to reflect a 100% stock
dividend paid by the Company on October 20, 1995. The number of
shares underlying the above options have also been adjusted to reflect
such stock dividend. The options will expire ten years from the date
of grant.
OPTIONS EXERCISED AND YEAR-END VALUES OF UNEXERCISED OPTIONS
The following table sets forth information, as of December 31, 1995,
regarding the number of shares received and the value realized upon exercise of
stock options, and the number and value of exercisable and unexercisable
options to purchase Common Stock of the Company held by any of the Named
Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END 1995
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT FISCAL
YEAR-END (#) YEAR-END ($)(1)(2)(3)
--------------------- ------------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrell Brown --- --- 153,824 160,000 $3,534,794 $2,394,995
W. Roger Clark 69,060 $1,598,962 --- 64,000 --- 957,998
John D. Dienes --- --- --- 78,998 --- 534,109
Dale E. Redman --- --- 103,488 68,000 2,383,065 973,998
C. Geron Hargon --- --- --- 30,000 --- ---
Robert B. Thomas, Jr. --- --- 22,000 22,000 489,625 438,999
</TABLE>
- -------------------------
(1) All options were awarded at the fair market value of the shares of
Common Stock on the date of the grant.
(2) Values in each column are based on the closing price, as reported on
the Nasdaq Stock Market, of the Company's Common Stock on December 29,
1995 ($26.375).
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(3) The exercise prices of the reported options range from $2.77 to $31.25
per share (as adjusted for stock dividends) with a weighted average
exercise price of $9.91 per share.
COMPENSATION OF DIRECTORS
Directors who are full-time employees of the Company receive no
additional compensation for services as a director. The Company has entered
into employment agreements and has executed change of control contracts
with each of its officer-directors as described below under "Employment
Agreements and Change of Control Arrangements". Each non-employee director
received $1,000 per Board meeting and $500 per Committee meeting attended during
1995. Each Committee Chairman received an annual retainer of $1,000. Each
director who is not an employee of the Company also received during 1995 an
annual retainer of $4,800, paid in quarterly increments.
Each director who is not an employee of the Company is entitled to
participate in the Company's 1993 Non-Employee Director Stock Option Plan (the
"1993 Director Plan"). The 1993 Director Plan provides for the automatic grant
of stock options to purchase 4,000 shares of the Company's Common Stock to each
non-employee director each year upon his or her election or reelection to the
Board of Directors. In 1993, 1994 and 1995, each non-employee director has
been awarded options to purchase 17,600, 8,800 and 8,000 shares of Common
Stock, respectively (after an adjustment for a 100% common stock dividend paid
on October 18, 1993, a 10% common stock dividend paid on January 10, 1995 and a
100% common stock dividend paid on October 20, 1995), under the 1993 Director
Plan. The Company also has another option plan for non-employee directors, the
1989 Non-Employee Director Stock Option Plan (the "1989 Director Plan"). All
shares reserved for issuance under the 1989 Director Plan, however, have been
awarded pursuant to options. The exercise prices of options awarded under the
1993 and 1989 Director Plans are based upon 100% of the fair market value of
the Common Stock on the date of the grants. As of February 1, 1996, options to
purchase 380,360 shares of Common Stock at an average exercise price of $9.76
per share are outstanding under the Company's 1989 and 1993 Director Plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors
during 1995 were Richard A. Campbell, Harris J. Chustz, Jr., 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
1995. No executive officer of the Company served during 1995 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
GENERAL
The compensation program for executives and key employees of the
Company is administered by the Compensation Committee (the "Committee") of the
Company's Board of Directors. During 1995, the Committee was comprised of the
following members, each of whom were outside, independent directors of the
Company: Richard A. Campbell, Chairman, Harris J. Chustz, Jr., Robert D.
Kilpatrick and O. Miles Pollard, Jr. In accordance with the rules and
regulations of the Securities and Exchange Commission, the Committee offers the
following report on the compensation policies for the executive officers and
key employees of the Company. This report outlines the duties of the Committee
with respect to executive compensation, the components of the Company's
executive officer compensation program and the basis on which 1995 compensation
was determined for the executive officers of the Company, with particular focus
on the 1995 compensation for the Company's Chief Executive Officer (the "CEO").
Duties of the Committee include establishing the compensation program
for the CEO, consulting with the CEO and approving compensation for other
executive officers, administering the Company's Management Incentive Plan
including the approval of annual amounts to be distributed as bonuses
thereunder, and administering the
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Company's stock option plans for employees. In performing these duties, the
Committee focuses upon: (i) providing a competitive compensation program that
enables the Company to attract, retain and motivate a high-quality executive
management team focused on enhancing shareholder value; (ii) coordinating
compensation programs with the Company's annual and long-term objectives and
strategies; and (iii) providing compensation opportunities that are based on
the performance of the Company.
The Committee's overall philosophy on executive compensation, of
course, is to link compensation to the value and level of performance of the
executive. To achieve this, various pay delivery systems are utilized,
including principally base salary, cash bonuses, and equity-based incentives,
which include the award of stock options and restricted stock. The
compensation decisions of the Committee relative to the Company's executive
officers and key employees are described below as to each pay delivery system.
MANAGEMENT COMPENSATION
Base Salary. The salary levels of the Company's executive officers
are reviewed by the Committee annually. In determining appropriate base-salary
levels, the Committee considers such factors as duties and responsibilities
inherent in the position in question, initiative, performance, tenure and pay
practices for executives of other companies in the financial services industry,
as well as business conditions generally prevailing in the mortgage and
insurance industries.
While the Company achieved record earnings in 1994, the base salary
levels of executives were not increased substantially for 1995. Rather, for
year-end 1995, executives received cash bonuses that were significantly higher
than in prior years as a result of Company performance.
Cash Bonuses. Annual awards are made to executives and key employees
of cash compensation pursuant to the Company's Management Incentive Plan. The
cash bonuses are based upon the attainment by the Company 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. Net
income for the year ended December 31, 1995, totaled $69.5 million compared to
$49.5 million during 1994. As a result, total cash bonuses paid to 145
individuals participating in the Management Incentive Plan during 1995 was
approximately $5.2 million, compared to cash bonuses of approximately $2.6
million paid to 102 individuals participating in the plan during 1994. An
amendment to the Management Incentive Plan approved at the 1995 Annual Meeting
of Shareholders allows a participant to submit an advance written election to
the Committee requesting that all or part of the award otherwise payable
thereunder in cash, be paid in shares of the Company's Common Stock. The
Committee believes that this election mechanism further facilitates a tie
between employee compensation and the Company's performance as reflected in the
value of its Common Stock.
Equity-Based Incentives. The Company maintains stock incentive plans
to provide officers, supervisory personnel, other key employees and consultants
with additional incentive to promote the financial success of the Company
through the award of stock options and shares of restricted stock. Options
granted under the Company's 1993 Stock Incentive Plan ("the 1993 Plan") have
generally been long-term (10 years) and vest three years after the date of
grant. With such features, the Company considers stock options as a way of
aligning the interests of management with the long-term interests of the
Company's shareholders and inducing such executives to remain with the Company
on a long-term basis. During 1995, options (as adjusted for the 100% common
stock dividend paid on October 20, 1995) to purchase the Company's Common Stock
were awarded as follows: Mr. Brown, 50,000 shares; Mr. Clark, 20,000; Mr.
Dienes, 24,000; Mr. Hargon, 30,000; and Mr. Redman, 24,000. The exercise
price of such options is $22.375 per share, the fair market value of the shares
of Common Stock on the date of grant (as adjusted for stock dividends), except
for the options awarded to Mr. Hargon, which have an exercise price of $31.25
per share (as adjusted), the fair market value on the date of award, the
effective date of Mr. Hargon's employment. As of December 31, 1995, options to
purchase in the aggregate approximately 1.5 million shares of the Company's
Common Stock were held by 323 employees under the Company's stock option
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plans for employees. Included in this amount as of December 31, 1995, were
options to purchase 702,310 shares of the Company's Common Stock at an average
exercise price of $9.91 per share held by the executive officers named in the
Summary Compensation Table. On February 23, 1995, the Committee and the Board
of Directors authorized an amendment to the 1993 Plan to allow the award of
restricted stock thereunder, and the Company's shareholders approved such
amendment at the 1995 Annual Meeting of Shareholders. The Committee has made
the following awards of restricted stock (as adjusted to reflect a 100% Common
Stock dividend paid by the Company on October 20, 1995) under the 1993 Plan:
Mr. Brown, 19,000 shares; Mr. Clark, 10,000 shares; Mr. Dienes, 13,000 shares;
Mr. Hargon, 14,000 shares; Mr. Redman, 13,000 shares; and Mr. Thomas, 10,000
shares. With the exception of the award to Mr. Hargon, each of the awards to
the foregoing executives vest in 50% increments on the first and second
anniversary date of the award, if (i) the executive is still in the employ of
the Company on each date and (ii) the Company reaches certain performance levels
established by the Committee which, for the awards above, is a 10% annual return
on equity for each year ending December 31. Mr. Hargon's award vests in 25%
increments on each of November 1, 1996, 1997, 1998 and 1999, if (i) Mr. Hargon
is still employed by the Company on such date; and (ii) the Company attains a
10% return on equity for the twelve month period ending on each of September 30,
1996, 1997, 1998 and 1999. On February 23, 1996, a restriction period lapsed,
and because the Company reached the performance level established for the year
ended December 31, 1995, 50% of the shares of restricted stock awarded to
Messrs. Brown, Clark, Dienes, Redman and Thomas vested. If the Proposed Sale is
consummated, the Committee has decided to waive the restriction period and
performance goal condition for the remaining restricted shares of Mr. Thomas.
As noted above, an amendment to the Management Incentive Plan allows
participants to elect to receive shares of Common Stock in lieu of cash
thereunder. This amendment allows employees of the Company to increase their
equity interests in the Company at no cost to the employee, and concomitantly
reduces the cash necessary for the Company to pay bonuses. Further, the
Company considers this amendment as well as the amendment to the Company's 1993
Plan, which allows the award of restricted stock thereunder, as additional
means of (i) providing compensation through equity-based incentives; and (ii)
linking the interests of management with the long-term interests of the Company
and its shareholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In establishing the compensation for Mr. Brown, the Committee observes
the same guidelines as set forth for executive officers generally. No specific
weighting is assigned to these guidelines, or factors, in determining the CEO's
compensation. During 1995, the base salary of Mr. Brown was increased by 5%
pursuant to the guaranteed increase in base salary under his employment
contract with the Company, which is discussed in greater detail below. The
most significant increase in total compensation of Mr. Brown for 1995 resulted
from his participation in the Management Incentive Plan, which is based upon
the performance of the Company as discussed above.
POLICY WITH RESPECT TO QUALIFYING COMPENSATION FOR DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code of 1986, as amended,
limits the deduction allowable to the Company for compensation paid to the
Chief Executive Officer and each of the four other most highly compensated
executive officers to $1 million. Qualified performance-based compensation is
excluded from this limitation if certain requirements are met. The Company's
policy is generally to preserve the Federal income tax deductibility of
compensation paid, to the extent feasible. The Committee believes that awards
under the Company's Management Incentive Plan and its awards of options made
under stock option plans for employees will qualify as performance-based
compensation and thereby be excluded from the $1 million limitation.
Notwithstanding the Company's policy to preserve the Federal income tax
deductibility of compensation payments, under certain circumstances, the
Committee, in its discretion, may authorize payments, such as salary, bonuses
or otherwise that may cause an executive officer's income to exceed the
deductible limits.
Richard A. Campbell, Chairman
Harris J. Chustz, Jr.
Robert D. Kilpatrick
O. Miles Pollard, Jr.
11
<PAGE> 12
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company has employment contracts with key management employees,
including Messrs. Brown and Redman. An employment contract between the Company
and Mr. Dienes expired in February 1996. The term of the contracts with
Messrs. Brown and Redman extends to June 1, 1997. The contracts with Messrs.
Brown and Redman, which were originally executed in 1981, generally require
payment of a minimum base salary with a 5% guaranteed annual increase for the
term of the contracts. The Company plans to execute, during 1996, an
employment contract with Mr. Hargon that will provide for a minimum base salary
with a guaranteed award increase 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 1995 Mr. Brown's compensation, as reflected
in the Bonus section of the Summary Compensation Table, includes $16,562 which
was deferred pursuant to this agreement.
In addition, the Company has supplemental retirement agreements with
Messrs. Clark, Dienes and Thomas pursuant to which, upon retirement, the
employee will receive monthly payments for 15 years. The annual amounts
payable under such agreements are as follows: Mr. Clark, $60,000; Mr. Dienes,
$84,000; and Mr. Thomas, $60,000. The Company has purchased life insurance on
the lives of Messrs. Clark, Dienes and Thomas to fund its obligations under
these agreements.
Although not the purpose of these employment, deferred compensation
and supplemental retirement agreements, a possible effect of such contracts may
be to discourage or deter a potential tender offer for the Company.
During 1995, the Company entered into change of control contracts with
Messrs. Brown, Dienes, Hargon and Redman. The contracts provide, in general,
that each executive will be entitled to a lump sum payment of two years salary
and bonus plus the continuation of certain benefits if the executive is
terminated without cause or his duties or responsibilities are diminished
within 24 months after a change of control of the Company. The Company
believes that these contracts are important in retaining qualified management
through a transition in ownership, if a change were to occur, by providing such
executives with a certain comfort level during such transition so that they can
focus on what is in the best interests of the shareholders rather than on their
position with the Company.
12
<PAGE> 13
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, 1991 and ending December 29, 1995. 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
[GRAPH]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
United Companies Financial Corporation 100.0 146.1 129.3 580.6 443.3 869.3
Nasdaq Stock Market (U.S. Companies) 100.0 160.5 186.9 214.5 209.7 296.5
Nasdaq Stock Market Financial Stocks 100.0 154.7 221.3 257.2 257.8 375.6
</TABLE>
13
<PAGE> 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the amount and percent of shares of
Common Stock (as adjusted to reflect a 100% Common Stock dividend paid by the
Company on October 20, 1995) and the amount and percent of shares of PRIDES
which, as of February 29, 1996, are deemed under the rules of the Securities
and Exchange Commission (the "SEC") to be "beneficially owned" by each director
of the Company, by each executive officer of the Company, by all directors and
executive officers of the Company 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 or PRIDES:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
DIRECTORS AND EXECUTIVE OFFICERS TITLE OF CLASS OWNERSHIP(1)(2) OF CLASS(3)
-------------------------------- -------------- --------------- -----------
<S> <C> <C> <C>
James J. Bailey, III Common Stock 177,860(4)(5) ---
General Robert H. Barrow (retired) Common Stock 61,274(4) ---
J. Terrell Brown Common Stock 917,449(5)(6)(7) 3.223%
Richard A. Campbell Common Stock 166,703(4) ---
PRIDES 9,000 ---
Harris J. Chustz, Jr. Common Stock 123,027(5) ---
John D. Dienes Common Stock 115,489(6)(7) ---
C. Geron Hargon Common Stock 45,170(6)(7) ---
Roy G. Kadair, M.D. Common Stock 25,800(4) ---
Robert D. Kilpatrick Common Stock 45,026(4) ---
O. Miles Pollard, Jr. Common Stock 72,900(4) ---
Dale E. Redman Common Stock 245,013(6)(7) ---
Robert B. Thomas, Jr. Common Stock 58,576(6)(7) ---
William H. Wright, Jr. Common Stock 396,790(4)(5) 1.407%
All directors and executive officers Common Stock 2,525,962 8.648%
as a group (13 persons) PRIDES 9,000 ---
OTHER PERSONS
-------------
United Companies Financial Corporation Employee
Stock Ownership Plan and Trust
515 South Flower Street, Suite 2700 Common Stock 4,003,494(8) 14.224%
Los Angeles, CA 90071-2291
AIM Management Group, Inc.
AIM Advisors, Inc.
AIM Capital Management, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046 Common Stock 1,680,399(9) 6.0%
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
Highbridge Capital Corporation
Highbridge Capital Management, Inc.
Dubin & Swieca Capital Management, Inc.
c/o Highbridge Capital Corporation
The Residence, Unit #2, South Church Street
Grand Cayman, Cayman Islands
British West Indies PRIDES 306,550(10) 15.68%
</TABLE>
(1) Under rules promulgated by the SEC, "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 such person 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 executive officers of the Company and filings made with the SEC or
furnished to the Company by any shareholder.
(2) Includes pro rata shares, where applicable, that have been allocated
to an individual's account 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 as of February 29, 1996, was
entitled to acquire upon the exercise of options granted (whether or
not such options are vested) 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 February 29,
1996, were entitled to acquire upon exercise of options granted
(whether or not such options are vested) under the Company's 1993 and
1989 Stock Incentive Plans: Mr. Brown, 313,824; Mr. Dienes, 78,998;
Mr. Hargon, 30,000; Mr. Redman, 171,488; and Mr. Thomas, 44,000; all
executive officers as a group (5 persons), 638,310; and all directors,
executive officers and senior vice presidents as a group (27 persons),
774,368.
(7) Includes shares of restricted stock awarded to the named holder under
the Company's 1993 Stock Incentive Plan: Mr. Brown, 19,000 shares; Mr.
Dienes, 13,000 shares; Mr. Hargon, 14,000 shares; Mr. Redman, 13,000
shares; and Mr. Thomas, 10,000 shares. On February 23, 1996, a
restriction lapsed and because a performance goal of the Company was
met as of December 31, 1995, 50% of the restricted shares awarded to
Messrs. Brown, Dienes, Redman and Thomas became fully vested.
(8) Held by U.S. Trust Company of California 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. At February 29, 1996, there were
approximately 815,000 unallocated shares held by the ESOP. The Plan
Administrator, a committee composed of five officers and directors of
the Company, may, in certain circumstances, direct the trustee to
purchase, sell, resell or otherwise dispose of shares of Common Stock.
(9) This information is based solely upon a Schedule 13G for the year
ended December 31, 1995. However, in correspondence to the Company
accompanying the Schedule 13G, this group of shareholders indicated
that they owned shares of PRIDES which they included in the number of
shares of Common Stock set forth in the Schedule 13G (which is the
number of shares set forth in the table above). While the shareholder
15
<PAGE> 16
group did not provide to UCFC the number of PRIDES they beneficially
owned, they did indicate that the PRIDES had been converted, as of
December 31, 1995, into shares of Common Stock and added into the
total number disclosed in the Schedule 13G. Without such conversion,
the group of shareholders provided that their ownership percentage in
the Common Stock would be only 4.9%.
(10) This information is based solely upon a Schedule 13G for the year
ended December 31, 1995.
16
<PAGE> 17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 were secured by a
first mortgage on the residence, and/or commercial or other real estate. There
were no such loans outstanding during 1995 or through March 15, 1996.
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, 1996, the aggregate principal and interest owed by Mr. Brown on such
loans was $136,023.
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 $1.9 million
for the year ended December 31, 1995. 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, 1995, the Company guaranteed loans to the ESOP made by
a financial institution with an aggregate principal balance outstanding of $6.0
million. The loans are to be repaid with interest at rates which range from
7.5% to 7.7% per annum. The proceeds of the loans were used by the ESOP for
purchases of the Company's Common Stock.
17
<PAGE> 18
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
23.1 Consent of Deloitte & Touche LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our opinion dated February 29,
1996 appearing in this Annual Report on Form 10-K/A-1 of United Companies
Financial Corporation for the year ended December 31, 1995 in the following:
Registration Statement No. 33-15326 on Form S-8 pertaining to the United
Companies Financial Corporation 1986 Employee Incentive Stock Option Plan,
Registration Statement No. 33-17366 on Form S-8 pertaining to the United
Companies Financial Corporation Employees' Savings Plan and Trust, Registration
Statement No. 33-29994 on Form S-8 pertaining to the 1989 Stock Incentive Plan
and the 1989 Non-Employee Director Stock Option Plan, Registration Statement
No. 33-54955 on Form S-8 pertaining to the 1993 Stock Incentive Plan and the
1993 Non-Employee Director Stock Option Plan, Registration Statement No.
33-68626 on Form S-3 pertaining to the registration of 1,951,204 shares of
United Companies Financial Corporation Common Stock, Registration Statement No.
33-60367 on Form S-3 pertaining to the registration of $200 million of United
Companies Financial Corporation Debt Securities and Preferred Stock, and
Registration Statement No. 33-52739 on Form S-3 pertaining to the registration
of 200,000 shares of United Companies Financial Corporation Common Stock and
Registration Statement No. 33-63069 on Form S-8 pertaining to the United
Companies Financial Corporation Management Incentive Plan.
DELOITTE & TOUCHE LLP
Baton Rouge, Louisiana
April 26, 1996
18
