<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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
United Companies Financial Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] 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:
- --------------------------------------------------------------------------------
<PAGE> 2
[UNITED COMPANIES FINANCIAL CORPORATION LOGO]
UNITED COMPANIES FINANCIAL CORPORATION
P.O. BOX 1591 -- 4041 ESSEN LANE
BATON ROUGE, LOUISIANA 70821
To the Shareholders of
UNITED COMPANIES FINANCIAL CORPORATION
Enclosed are a Notice, Proxy and Proxy Statement relating to the 1997
Annual Meeting of Shareholders to be held on Wednesday, May 14, 1997, at 9:00
a.m. at One United Plaza, Fifth Floor, 4041 Essen Lane, Baton Rouge, Louisiana.
The Notice and Proxy Statement set forth the matters to be acted upon at the
Annual Meeting.
It is important that your shares be represented at the Annual Meeting,
regardless of whether you plan to attend in person. Therefore, I urge you to
execute, date and return the enclosed proxy card in the enclosed postage-paid
envelope as soon as possible to ensure that your shares will be voted at the
Annual Meeting.
Sincerely,
J. TERRELL BROWN
Chairman and Chief Executive Officer
Baton Rouge, Louisiana
April 14, 1997
<PAGE> 3
NOTICE OF 1997 ANNUAL MEETING OF
SHAREHOLDERS OF
UNITED COMPANIES FINANCIAL CORPORATION
PLEASE TAKE NOTICE that the 1997 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 Wednesday, May 14, 1997, at 9:00 a.m. to consider and act upon:
(1) the election of four persons to the Board of Directors to serve
until the 2000 Annual Meeting of Shareholders or until each of their
successors is duly elected and qualified;
(2) a proposal to approve the Company's 1996 Long-Term Incentive
Compensation Plan;
(3) a proposal to approve the Company's 1996 Non-Employee Director Stock
Plan; and
(4) such other business as may properly come before the Annual Meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on April 2, 1997, as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
SHERRY E. ANDERSON,
Secretary
Baton Rouge, Louisiana
April 14, 1997
IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE 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
INTRODUCTION
The accompanying Proxy is solicited on behalf of the Board of Directors of
United Companies Financial Corporation, a Louisiana corporation (the "Company"),
for use at the 1997 Annual Meeting of Shareholders of the Company (the "Annual
Meeting") to be held on Wednesday, May 14, 1997, at 9:00 a.m., at One United
Plaza, Fifth Floor, 4041 Essen Lane, Baton Rouge, Louisiana, and any
postponements or adjournments thereof. This Proxy Statement is being furnished
in connection with the Annual Meeting. The Company anticipates that this Proxy
Statement and the accompanying Proxy will be first sent or given to shareholders
on approximately April 14, 1997.
Shareholders are being asked at the Annual Meeting to (i) elect four
persons to the Company's Board of Directors to serve until the 2000 Annual
Meeting of Shareholders or until their successors are duly elected and
qualified; (ii) approve the Company's 1996 Long-Term Incentive Compensation Plan
(the "1996 Plan"); and (iii) approve the Company's 1996 Non-Employee Director
Stock Plan (the "Director Plan").
The Board of Directors has fixed the close of business on April 2, 1997, as
the record date (the "Record Date") for the determination of the shareholders
entitled to notice of, and to vote at, the Annual Meeting. On the Record Date,
the Company had issued and outstanding and entitled to vote 28,494,826 shares of
its $2.00 par value common stock (the "Common Stock") and 1,955,000 shares of
its 6 3/4% PRIDES(SM), Convertible Preferred Stock, $2.00 par value (the
"PRIDES"). The Common Stock and the PRIDES are the only outstanding classes of
voting securities of the Company. Each outstanding share of Common Stock will be
entitled to one vote, and each outstanding share of PRIDES will be entitled to
4/5 of a vote, on each matter considered at the Annual Meeting. There is no
cumulative voting. 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 voting power of the
outstanding shares of Common Stock and PRIDES as of 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 Annual Meeting, whether
or not the shareholder abstains on all or any matter to be acted on at the
Annual Meeting. Abstentions are counted toward the calculation of a quorum.
Broker non-votes (which result when a broker holding shares for a beneficial
owner has not yet received voting instructions on certain matters from such
beneficial owner) will also be counted toward fulfillment of quorum
requirements.
The enclosed form of Proxy provides a means for a shareholder to vote for
all the nominees for director listed thereon or to withhold authority to vote
for one or more of such nominees. The form of Proxy also provides a means for a
shareholder to vote for, against or abstain from voting on each of the other
matters to be acted upon at the Annual Meeting. Each Proxy will be voted in
accordance with the shareholder's directions.
The Company's by-laws, as amended, provide that directors are elected by a
plurality of the votes cast. Accordingly, the withholding of authority by a
shareholder (including broker non-votes) will not be counted in computing a
plurality and thus will have no effect on the results of the election of such
nominees. Approval of the 1996 Plan and the Director Plan will require the
affirmative vote of a majority of the total voting power of the Common Stock and
the PRIDES (voting together as a single class) present in person or represented
by proxy and entitled to vote at the Annual Meeting. Approval of any other
matters as may properly come before the meeting will require the affirmative
vote of a majority of the total voting power of the Common Stock and
- ---------------
(SM) Servicemark of Merrill Lynch & Co., Inc.
1
<PAGE> 5
the PRIDES (voting together as a single class) present in person or represented
by proxy and entitled to vote at the Annual Meeting unless otherwise provided by
law or the restatement of the articles of incorporation or by-laws, as amended,
of the Company.
The cost of preparing, assembling, printing and mailing this Proxy
Statement, the form of Proxy, and the Notice of 1997 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. In addition, the Company has retained Morrow &
Co., New York, N.Y., to aid in the solicitation of Proxies for a fee of $7,500
plus disbursements and incremental charges. 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.
The Company's principal executive offices are located at 4041 Essen Lane,
Baton Rouge, Louisiana, 70809, telephone: (504) 987-0000.
2
<PAGE> 6
SECURITY HOLDINGS OF MANAGEMENT AND OTHERS
The following table sets forth the amount and percent of shares of Common
Stock and the amount and percent of shares of PRIDES which, as of March 1, 1997,
are deemed under the rules of the Securities and Exchange Commission (the "SEC")
to be "beneficially owned" by each director and nominee for director of the
Company, by each executive officer of the Company, by all directors, nominees
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, NOMINEES AND EXECUTIVE OFFICERS TITLE OF CLASS OWNERSHIP(1)(2) OF CLASS(3)
------------------------------------------ -------------- --------------- -----------
<S> <C> <C> <C>
James J. Bailey, III........................ Common Stock 181,860(4)(5) --
General Robert H. Barrow (retired).......... Common Stock 65,274(4) --
John W. Barton, Sr.......................... Common Stock 8,400(4) --
J. Terrell Brown............................ Common Stock 1,005,585(5)(6)(7) 3.480%
Jon R. Burke................................ Common Stock 80,000 --
Richard A. Campbell......................... Common Stock 172,703(4) --
PRIDES 9,000 --
Harris J. Chustz, Jr........................ Common Stock 133,041(5) --
John D. Dienes.............................. Common Stock 158,869(6)(7) --
C. Geron Hargon............................. Common Stock 83,178(6)(7) --
Roy G. Kadair, M.D.......................... Common Stock 29,800(4) --
O. Miles Pollard, Jr........................ Common Stock 76,900(4) --
Dale E. Redman.............................. Common Stock 269,357(6)(7) --
William H. Wright, Jr....................... Common Stock 356,974(4)(5) 1.252%
All directors, nominees and executive Common Stock 2,622,141 8.868%
officers 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
Los Angeles, CA 90071-2291................ Common Stock 3,700,129(8) 12.985%
NewSouth Capital Management, Inc.
1000 Ridgeway Loop Rd. -- Suite 233
Memphis, TN 38120......................... Common Stock 1,451,567(9) 5.100%
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) 15.680%
</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
3
<PAGE> 7
"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 March 1, 1997, 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. For Mr. Barton, as of March 1, 1997, also includes
shares underlying an option to purchase 4,000 shares of Common Stock
awarded under the 1996 Non-Employee Director Stock Plan, which award is
contingent upon the approval of such plan by the Company's shareholders at
the 1997 Annual Meeting. See "Proposal 3 -- To Approve the United Companies
Financial Corporation 1996 Non-Employee Director Stock Plan."
(5) Includes shares held by family members and controlled affiliates.
(6) Includes shares which the following named holders as of March 1, 1997, 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
and the Company's 1996 Long-Term Incentive Compensation Plan (awards under
which are contingent upon approval of such plan at the 1997 Annual
Meeting): Mr. Brown, 363,824; Mr. Dienes, 103,998; Mr. Hargon, 50,000; and
Mr. Redman, 173,998; all executive officers as a group (4 persons),
691,820.
(7) Includes shares of restricted stock awarded under the Company's 1996
Long-Term Incentive Compensation Plan as of March 1, 1997, as follows: Mr.
Brown, 38,402 shares; Mr. Dienes, 17,372 shares; Mr. Hargon, 17,899 shares;
and Mr. Redman, 20,007 shares. Such awards are contingent upon shareholder
approval of such plan at the 1997 Annual Meeting. See "Proposal 2 -- To
Approve the United Companies Financial Corporation 1996 Long-Term Incentive
Compensation Plan." Also includes 10,500 shares of restricted stock
previously awarded to Mr. Hargon under the Company's 1993 Stock Incentive
Plan.
(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 March 1, 1997, there were approximately 961,679
unallocated shares held by the ESOP. The Plan Administrator, a committee
composed of four 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 photocopy of a Schedule 13G for the
year ended December 31, 1996, provided to the Company by such beneficial
owner.
(10) This information is based solely upon a photocopy of a Schedule 13G for the
year ended December 31, 1995, provided to the Company by such beneficial
owner.
4
<PAGE> 8
ELECTION OF DIRECTORS
At its March 11, 1997 Board Meeting, in accordance with Section 4.1 of the
Company's by-laws, as amended, the Company's Board of Directors increased the
number of directors of the Company from eleven to twelve, which is divided into
three classes that are equal in number to each other, with terms expiring in
successive years. At such meeting, the Board of Directors nominated Harris J.
Chustz, Jr., Roy G. Kadair, M.D., Dale E. Redman and William H. Wright, Jr. to
the class of directors to hold office for a term of three years expiring with
the 2000 Annual Meeting of Shareholders or until their respective successors are
duly elected and qualified. Each of such nominees is at present a director of
the Company. The terms of office of the other eight directors of the Company
continue after the Annual Meeting as set forth below. Such other directors
include (i) John W. Barton, Sr., who was elected by the Board on February 4,
1997, to serve during the unexpired term of the vacant seat created as a result
of the untimely death in January, 1997 of Robert D. Kilpatrick and (ii) Jon R.
Burke, who was elected by the Board, in accordance with Section 4.13 of the
Company's by-laws, as amended, on April 8, 1997, to the fourth seat in the class
of directors serving until the 1999 Annual Meeting of Shareholders. The
additional seat in such class was created by the increase in the number of
authorized directors from eleven to twelve. The enclosed form of Proxy confers
discretionary authority with respect to the election of directors, but no
authority under the Proxy Statement 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 1997 Annual Meeting. In order to be elected a director, a nominee
must receive a plurality of the votes cast by the holders of the Common Stock
and the PRIDES. The name and age, principal occupation or employment, and other
data regarding each nominee and those directors whose terms continue after the
1997 Annual Meeting, based on information received from the respective nominees
and directors are set forth below:
NOMINEES TO SERVE UNTIL THE 2000 ANNUAL MEETING
HARRIS J. CHUSTZ, JR.
Mr. Chustz, age 46, has served as a director of the Company since 1995.
Prior to his retirement in 1996, he served as the Manager of Finance and
Accounting with Florida Keys Electric Cooperative since 1976. Mr. Chustz now
engages in private investments. He is the son of the Company's former Chairman
of the Board, Harris J. Chustz.
ROY G. KADAIR, M.D.
Dr. Kadair, age 51, is a practicing physician (Internal Medicine) and has
been associated with the Baton Rouge Clinic for over 19 years. He was first
elected as a director of the Company in 1995. 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.
DALE E. REDMAN
Mr. Redman, age 49, 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.
WILLIAM H. WRIGHT, JR.
Mr. Wright, age 70, 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE ABOVE NOMINEES FOR
DIRECTOR.
5
<PAGE> 9
DIRECTORS WHOSE TERMS CONTINUE AFTER THE ANNUAL MEETING
Directors whose terms continue until the 1999 Annual Meeting
ROBERT H. BARROW, GENERAL (RETIRED)
General Barrow, age 75, has served as a director of the Company since 1983.
He retired as Commandant of the United States Marine Corps in July, 1983.
JON R. BURKE
Mr. Burke, age 49, has served as a director of the Company since April,
1997, when he was elected by the Board of Directors to fill a directorship
created by an increase in the authorized number of directors from eleven to
twelve. He is presently the managing member of Capital Appreciation Management
Company, L.L.C., which is the managing general partner of an Atlanta-based
merchant banking fund specializing in acquiring controlling interests in
companies located in the Southeastern United States. Mr. Burke is also a
principal with Brown, Burke Capital Partners, Inc., which provides financial
advisory services to middle market corporations in connection with mergers and
acquisitions and financing. From 1973-1996, Mr. Burke was employed by The
Robinson-Humphrey Company, Inc. ("R-H"), most recently serving as a Senior Vice
President. Beginning in 1993, R-H provided certain investment banking services
to the Company, including acting, in June 1993, as placement agent for an
offering by the Company of 800,000 shares of convertible preferred stock under
Regulation S promulgated by the Commission under the Exchange Act.
JOHN D. DIENES
Mr. Dienes, age 55, serves as President and Chief Operating Officer of the
Company and is an executive officer of each subsidiary of the Company. He was
first elected as a member of the Company's Board of Directors in 1995. Mr.
Dienes joined the Company in February 1994. He has over 30 years of experience
in the financial services industry. Prior to his employment with the Company, he
served as Executive Vice President of NationsBank Corporation, Dallas, Texas
("NationsBank"). Mr. Dienes began his career in 1964 with Republic National Bank
of Dallas. He participated in the 1988 merger of Republic and InterFirst
National Bank and became a Managing Director of the successor corporation,
FirstRepublic Bank. In 1989, FirstRepublic was acquired by NCNB Corp., which
became NationsBank.
O. MILES POLLARD, JR.
Mr. Pollard, age 59, 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.
Directors whose terms continue until the 1998 Annual Meeting
JAMES J. BAILEY, III
Mr. Bailey, age 55, has served as a director of the Company since 1987. Mr.
Bailey is managing partner of Bailey Family Investments and Chairman of St. Mary
Bank and Trust, Franklin, Louisiana, and he is a member of the Board of
Directors of First Commerce Corporation and City National Bank of Baton Rouge.
JOHN W. BARTON, SR.
Mr. Barton, age 80, has served as a director of the Company since his
election in February, 1997 to fill a vacancy in the Board created by the death
of Mr. Kilpatrick. Mr. Barton serves as a director of First Commerce Corporation
and City National Bank of Baton Rouge. Prior to retirement in 1981, Mr. Barton
served as President and Chief Executive Officer of Jack's Cookie Company, Baton
Rouge, Louisiana and Charlotte, North Carolina.
6
<PAGE> 10
J. TERRELL BROWN
Mr. Brown, age 57, 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 named 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 65, 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.
BOARD MEETINGS, COMMITTEES AND COMPENSATION
During the year ended December 31, 1996, 11 meetings of the Board of
Directors were held. With the exception of Messrs. Barton and Burke, each
incumbent director who is either a nominee for reelection or whose term
continues through the 1997 Annual Meeting 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 following directors presently serve on the Audit Committee: James
J. Bailey, III, General Robert H. Barrow, Roy G. Kadair, M.D., and William H.
Wright, Jr. The Audit Committee met 4 times in 1996. 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: John W.
Barton, Sr., Richard A. Campbell, Harris J. Chustz, Jr. and O. Miles Pollard,
Jr. Mr. Barton, however, did not serve during 1996. The Compensation Committee
met 3 times in 1996. 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 incentive plans (other than plans in which
non-employee directors participate), including approval of all awards
thereunder; to approve an annual aggregate amount that may be used for the
current year's management incentive plan and to administer such plan; and to
report to the Board of Directors on its activities. On January 31, 1995, the
Board of Directors established a Nominating Committee to be comprised of
non-management directors. The following directors presently serve on the
Nominating Committee: James J. Bailey, III, Harris J. Chustz, Jr. and William H.
Wright, Jr. The primary functions of the Nominating Committee are to review the
qualifications of candidates for the Company's Board of Directors suggested by
Board members, management, shareholders and others, to consider the performance
of incumbent directors in determining whether to nominate them for reelection
and to recommend to the Board a slate of nominees for election as directors.
Directors who are full-time employees of the Company receive no additional
compensation for services as a director. Each non-employee director received
$1,000 per Board meeting and $500 per Committee meeting attended during 1996.
Each Committee Chairman received an annual retainer of $1,000. Each director who
is not an employee of the Company also received during 1996 an annual retainer
of $4,800, paid in quarterly increments.
Each director who is not an employee of the Company has been entitled to
participate in the Company's 1993 Non-Employee Director Stock Option Plan (the
"1993 Director Plan"). The 1993 Director Plan provided 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 election or reelection to the Board of
Directors. In 1994, 1995 and 1996, each non-employee director serving in such
capacity was awarded options to purchase 8,800, 8,000 and 4,000 shares of Common
Stock, respectively (as adjusted by a 10% common stock dividend paid on
7
<PAGE> 11
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 Company's 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 March 1, 1997 options to purchase 350,848 shares of Common Stock at an
average exercise price of $12.75 per share were outstanding under the Company's
1989 and 1993 Director Plans. As described below in "Proposal 3 -- To Approve
the United Companies Financial Corporation 1996 Non-Employee Director Stock
Plan," the Board is recommending for approval of the shareholders a new plan for
non-employee directors which, if approved, will replace the 1993 Director Plan,
and awards will no longer be made thereunder. Pursuant to such new plan, upon
their elections to fill certain vacancies in the Board, Messrs. Barton and Burke
were each awarded an option to purchase 4,000 shares of Common Stock at an
exercise price equal to the fair market value of the Company's Common Stock on
the date of grant.
The Company has entered into employment agreements and has executed change
of control contracts with certain of its officer-directors as described below
under "Employment Agreements and Change of Control Arrangements".
EXECUTIVE OFFICERS
In addition to the individuals nominated for director above who are also
executive officers of the Company, the following individual presently serves as
an executive officer of the Company:
C. GERON HARGON
Mr. Hargon, age 51, serves as Executive Vice President of the Company and
President of United Companies Lending Group, Inc. ("UCLG"), United Companies
Lending Corporation ("UC Lending"), 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 over 25 years experience in the financial services industry, and prior to
joining the Company, served 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.
8
<PAGE> 12
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 four 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, 1996, 1995
and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------------------
AWARDS
------------------------
OTHER RESTRICTED
ANNUAL STOCK ALL OTHER
NAME AND BONUS COMPENSATION AWARDS OPTIONS(4)/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2) ($)(3) SARS(#) ($)(5)
------------------ ---- --------- ------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Terrell Brown.......... 1996 416,374 489,966 -- 489,953 -- 36,471
Chairman and Chief 1995 393,750 833,616 -- 304,000 50,000 39,308
Executive Officer 1994 378,304 297,205 -- -- -- 41,240
John D. Dienes,........... 1996 280,792 364,538 -- 196,280 -- 17,535
President and Chief 1995 266,250 475,699 -- 208,000 24,000 20,505
Operating Officer 1994 220,864 241,805(6) -- 54,998 --
C. Geron Hargon........... 1996 203,838 210,314 -- 210,311 -- 2,625
Executive Vice President 1995 66,668 359,025 -- 437,500 30,000 --
and President,
UC Lending 1994 -- -- -- -- -- --
Dale E. Redman,........... 1996 265,013 266,457 -- 266,436 -- 18,848
Executive Vice 1995 246,095 445,298 -- 208,800 24,000 19,592
President and Chief 1994 236,014 189,131 -- -- -- 23,711
Financial Officer
Robert B. Thomas, Jr.,.... 1996 119,438 -- -- -- -- 17,535
Former Executive Vice 1995 219,625 395,818 -- 160,000 -- 20,505
President(7) 1994 209,366 168,116 -- -- -- 21,882
</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 1996, 1995 and 1994 were $16,379, $16,562, and
$16,729, 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, 1997
was $152,402.
(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 on the date of award. The awards of
shares of restricted stock that are reflected in the table for 1996 were
granted under the Company's 1996 Long-Term Incentive Compensation Plan
(which is subject to shareholder approval at the 1997 Annual Meeting) and
vest immediately (but, in no event may vesting occur before six months
elapse from the date of grant) if, during the year ending December 31, 1997,
the closing price for the Company's Common Stock reaches $32.00 per share or
for the year ending December 31, 1997, the Company attains a 15% return on
equity. If the 1996 Plan is not approved by the shareholders, the shares of
restricted stock will be awarded under the Company's 1993 Stock Incentive
Plan and will vest in one year if the Company attains a 15% return on equity
for the year
9
<PAGE> 13
ending December 31, 1997. See "Proposal 2 -- To Approve the 1996 Long-Term
Incentive Compensation Plan." The awards in 1996 were for the following
number of shares of Common Stock: Mr. Brown, 18,402 shares; Mr. Dienes,
7,372 shares; Mr. Hargon, 7,899 shares and Mr. Redman, 10,007 shares. The
shares of the restricted stock awarded in 1995 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 over a
four-year period. Such awards are also subject to certain performance-based
conditions. The 1995 awards of restricted stock were as follows: 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. At December 31, 1996,
the number of shares of restricted stock and the fair market value of such
shares (as of December 31, 1996) that were previously awarded to Messrs.
Brown, Dienes, Hargon, and Redman and which were not vested as of December
31, 1996, were as follows: Mr. Brown, 27,902 shares ($742,891); Mr. Dienes,
13,872 shares ($369,342); Mr. Hargon, 18,399 shares ($489,873); and Mr.
Redman, 16,507 shares ($439,499).
(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, among other things, amounts contributed or accrued
for 1996, 1995 and 1994 for the named officers under the Company's Employee
Stock Ownership Plan ("ESOP") and Employees' Savings Plan. Amounts for Mr.
Brown for 1996, 1995 and 1994 also include $16,562, $16,729 and $16,998,
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 $41,667 paid to Mr. Dienes in the form of a bonus upon commencement
of his employment with the Company.
(7) Information regarding the compensation of Mr. Thomas is included in this
table and those that follow solely because he served as an executive officer
of the Company during 1996. The Company sold all of the outstanding capital
stock of its wholly-owned subsidiary, United Companies Life Insurance
Company, effective on July 24, 1996, and Mr. Thomas' affiliation with
Company ceased as a result of such sale.
OPTIONS GRANTED IN LAST FISCAL YEAR
No options were granted during the year ended December 31, 1996, to the
Named Executive Officers.
10
<PAGE> 14
OPTIONS EXERCISED AND YEAR-END VALUES OF UNEXERCISED OPTIONS
The following table sets forth information, as of December 31, 1996,
regarding the number of shares received and the value realized upon exercise of
stock options, and the number and value of exercisable and unexercisable options
to purchase Common Stock of the Company held by any of the Named Executive
Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END 1996 OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL AT FISCAL
SHARES YEAR-END (#) YEAR-END ($)(1)(2)(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrell Brown.................. -- -- 263,824 50,000 5,795,745 212,500
John D. Dienes.................... -- -- -- 78,998 -- 563,858
Dale E. Redman.................... 20,000 594,664 127,488 24,000 2,820,771 102,000
C. Geron Hargon................... -- -- -- 30,000 -- --
Robert B. Thomas, Jr.............. 44,000 1,241,849 -- -- -- --
</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 New
York Stock Exchange, of the Company's Common Stock on December 31, 1996
($26.625).
(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 $10.35 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors during
1996 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 1996. No executive
officer of the Company served during 1996 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 programs of the Company for its executives and key
employees are administered by the Compensation Committee (the "Committee") of
the Company's Board of Directors. During 1996, the Committee was comprised of
the following members, each of whom were outside, independent directors of the
Company and each of whom, during 1996, qualified as a "Non-Employee Director"
under Rule 16b-3(b)(3)(i) of the Exchange Act: Richard A. Campbell, Chairman,
Harris J. Chustz, Jr., Robert D. Kilpatrick and O. Miles Pollard, Jr. The
present Committee members are deeply saddened by the death of Mr. Kilpatrick in
January 1997, and wish to acknowledge herein the invaluable service of Mr.
Kilpatrick as a member of the Committee since 1990.
In accordance with the rules and regulations of the Commission, the
Committee offers the following report on the compensation policies for the
Company's executive officers and key employees. 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 1996
compensation was
11
<PAGE> 15
determined for the executive officers of the Company, with particular focus on
the 1996 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 regarding and ultimately approving the
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 Company's incentive
stock plans for employees. In performing these duties, the Committee focuses on
the following: (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 remains one of
attempting 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 such pay delivery system.
MANAGEMENT COMPENSATION
Base Salary. The salary levels of the Company's executive officers and key
employees 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, geographic location of the executive as well as business
conditions generally prevailing in the mortgage industry.
Even though the Company had record earnings for the year ended 1995, the
base salary levels of executives were not increased substantially for 1996. The
Committee believes that the cash bonuses paid in 1996 as a result of 1995
earnings provided sufficient incentive to the executives and that a significant
increase in base salary levels was not warranted as a result.
Cash Bonuses. Annual awards of cash bonuses are made to executives and key
employees pursuant to the Company's Management Incentive Plan (the "MIP"). 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. While net income for
the year ended December 31, 1996, totaled $81.7 million compared to $69.5
million during 1995, total cash bonuses paid to 159 individuals participating in
the Management Incentive Plan during 1996 was only approximately $4.0 million,
compared to cash bonuses of approximately $5.2 million paid to 145 individuals
participating in such plan during 1995. The reasons for the decrease in
aggregate cash bonuses paid for 1996 over 1995, notwithstanding the record
earnings of the Company for 1996 include, but are not limited to, the following:
(i) the number of key employees designated in higher participation levels
decreased with the sale of United Companies Life Insurance Company and otherwise
and (ii) only part of the bonuses of Messrs. Brown, Dienes, Hargon and Redman
were actually paid to such persons in cash. The Committee, in its discretion
under the MIP, awarded only a portion of the bonus (50% for each of Messrs.
Brown, Hargon and Redman and 65% for Mr. Dienes) to such persons. The Committee
did, however, award to such persons shares of restricted stock under the 1996
Plan (as defined below), which awards are discussed below.
12
<PAGE> 16
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 Committee 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. The 1993 Plan also provides for the award of shares of
restricted stock with such vesting periods and other terms and conditions as the
Committee determines in its discretion, except, in no event shall an award of
restricted stock have a vesting period of less than six months. At December 31,
1996, 170,164 shares were available for award under the 1993 Plan.
In addition, during 1996, the Committee and the Board of Directors of the
Company adopted the Company's 1996 Long-Term Incentive Compensation Plan (the
"1996 Plan"). The 1996 Plan is being submitted to the Company's shareholders for
approval at the 1997 Annual Meeting of Shareholders. Unlike the 1993 Plan, the
1996 Plan provides greater discretion to the Committee with respect to the terms
and conditions that may be included in awards of stock options or restricted
stock thereunder. For example, with respect to exercise or vesting period of
options or restricted stock, the only plan limitation is that such period be no
less than six months for awards to an "officer" as defined in the 1996 Plan. The
Committee believes that such discretion allows it to tailor awards under the
1996 Plan to the specific facts and circumstances of each individual participant
and the Committee's intentions with respect to each such participant. A detailed
discussion of the terms and provisions of the 1996 Plan is contained below in
"Proposal 2 -- To Approve the United Companies Financial Corporation 1996
Long-Term Incentive Compensation Plan."
No awards of options were made to Messrs. Brown, Dienes, Hargon or Redman
during 1996. As noted above, shares of restricted stock were awarded to such
persons in 1997, with an effective date of December 31, 1996 in lieu of a
portion of the cash bonus not paid under the MIP. Such awards of restricted
stock are equal in value, as of December 31, 1996, to the bonus portion not
paid. The shares of restricted stock will vest only if the Company's Common
Stock reaches, during 1997, a price of $32.00 per share, or, for year-end 1997,
the Company attains a 15% return on equity. The closing prices of the Company's
Common Stock on December 31, 1996, and March 31, 1997, were $26.625 and $20.625
per share, respectively. The number of shares of restricted stock awarded were
as follows: Brown, 18,402 shares; Dienes, 7,372 shares; Hargon, 7,899 shares;
and Redman, 10,007 shares. If the shareholders do not approve the 1996 Plan at
the 1997 Annual Meeting of Shareholders, the awards will be forfeited. Under
such circumstances, the Committee has determined that it will award such shares
of restricted stock under the 1993 Plan, such shares vesting in one year only if
the Company attains a 15% return on equity for 1997. As of December 31, 1996,
options to purchase an aggregate of approximately 1.3 million shares of the
Company's Common Stock were held by the Company's employees under its stock
option plans. Included in this amount as of December 31, 1996, were options to
purchase 574,310 shares of the Company's Common Stock at an average exercise
price of $10.35 per share held by Messrs. Brown, Dienes, Hargon and Redman.
Further, as of February 23, 1997, 9,500 shares, 6,500 shares and 6,500 shares of
restricted stock previously awarded to Messrs. Brown, Dienes and Redman,
respectively, became vested. On November 1, 1996, 3,500 shares of restricted
stock previously awarded to Mr. Hargon became vested.
During 1997, the Committee recommended and the Board of Directors approved
awards of options to purchase an aggregate of 347,500 shares of Common Stock
under the 1996 Plan. The options have an exercise price equal to the fair market
value on the date of award and may be exercised three years after the date of
grant. Further, pursuant to the 1996 Plan, the Committee recommended and the
Board of Directors approved the award of an aggregate of 128,900 shares of
restricted stock, the vesting of which is subject to the attainment during the
next three years of a market price of $60.00 per share for the Company's Common
Stock. Such awards are contingent upon the approval of the 1996 Plan by the
Company's shareholders at the 1997 Annual Meeting of Shareholders. If the
requisite approval is not obtained, the foregoing awards will be forfeited.
13
<PAGE> 17
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 1996, the base salary of Mr. Brown was increased by the
guaranteed increase in base salary under his employment contract with the
Company, which is discussed in greater detail below in "Employment Agreements
and Change of Control Arrangements". Mr. Brown's total cash compensation for
1996 decreased as a result of the Committee's discretionary determination that
the bonus to which Mr. Brown was otherwise entitled under the Management
Incentive Plan would be reduced by 50%, with the remainder to be paid in
restricted shares, vesting only upon the attainment of certain performance goals
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.
O. Miles Pollard, Jr.
14
<PAGE> 18
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 also has in effect supplemental retirement agreements (entitled
"deferred compensation agreements" for Messrs. Brown and Redman) with Messrs.
Brown, Dienes, Hargon and Redman pursuant to which, upon retirement at or after
age 55 (age 56 for Mr. Dienes), the employee will receive monthly payments for
10 years. The 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 their rights under such agreements at age 55, they will
receive $35,000 per annum for the 10-year period, and for Mr. Dienes at age 56
and Mr. Hargon at age 55, they will receive $10,700 and $22,500 per annum,
respectively for the 10-year period. Should Messrs. Brown, Dienes, Hargon or
Redman wait until age 65 to exercise their rights under the agreements, they
will receive $200,000, $150,000, $120,000 and $135,000 per annum, respectively,
for the 10-year period. The Company has purchased life insurance on the lives of
Messrs. Brown, Dienes, Hargon and Redman to fund its obligations under these
supplemental retirement agreements. Under separate split dollar agreements, the
beneficiaries of Messrs. Brown, Dienes, Hargon and Redman will receive a death
benefit equal to the policy value, $1,365,000, $1,131,000, $1,069,000 and
$1,168,000, 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
1996 Mr. Brown's compensation, as reflected in the Bonus section of the Summary
Compensation Table, includes $16,379 which was deferred pursuant to this
agreement.
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.
The Company has entered into change of control contracts with Messrs.
Brown, Dienes and Redman. The contracts provide, in general, that each executive
will be entitled to a lump sum payment of three years salary and bonus (Mr.
Dienes will also receive cash payments in the amount of $8,333 per month until
he reaches age 65) 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.
15
<PAGE> 19
STOCK PERFORMANCE GRAPHS
For the period commencing January 1, 1992 and ending December 31, 1996, the
following line graphs provide a comparison of the total shareholder return on
the Company's Common Stock with (i) the return of (A) the NASDAQ Index for U.S.
Companies and (B) the NASDAQ Index of Financial Stocks and (ii) the return of
(B) the Standard & Poor's 500 Index and (B) a Company-selected peer group of
thirteen (13) other companies engaged primarily in consumer lending, namely:
Aames Financial Corporation, Cityscape Financial Corporation, ContiFinancial
Corporation., Delta Financial Corporation, Green Tree Financial Corporation, IMC
Mortgage Company, Imperial Credit Industries, Inc., Litchfield Financial
Corporation, Mego Financial Corporation, The Money Store, Inc., North American
Mortgage Company, Southern Pacific Funding Corporation. On September 20, 1996,
the Company's Common Stock began trading on the New York Stock Exchange. Prior
to that date the Company's Common Stock traded on the Nasdaq Stock Market. The
Company, therefore, as a broad equity market index, has chosen the S&P 500
Index, rather than the NASDAQ Index for U.S. Companies, to compare total
shareholder return. Moreover, the Company sold 100% of the outstanding capital
stock of its wholly-owned life insurance subsidiary, United Companies Life
Insurance Company, effective as of July 24, 1996, and, as a result, the
Company's operations are now focused on consumer lending. Thus, the Company has
also chosen to compare its total shareholder return with the peer group
companies listed above, all of which engage in consumer lending similar to the
Company. 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 COMPANIES NASDAQ STOCK NASDAQ STOCK
MEASUREMENT PERIOD FINANCIAL MARKET (U.S. MARKET FINANCIAL
(FISCAL YEAR COVERED) CORPORATION COMPANIES) STOCKS
<S> <C> <C> <C>
1991 100.0 100.0 100.0
1992 88.5 116.4 143.0
1993 397.3 133.6 166.2
1994 303.4 130.6 166.6
1995 594.8 184.7 242.6
1996 606.1 227.1 311.1
</TABLE>
16
<PAGE> 20
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL RETURN OF THE COMPANY, S&P 500 INDEX
AND COMPANY-SELECTED PEER GROUP
<TABLE>
<CAPTION>
UNITED COMPANIES
MEASUREMENT PERIOD FINANCIAL
(FISCAL YEAR COVERED) CORPORATION S&P 500 INDEX PEER GROUP
<S> <C> <C> <C>
1991 100.0 100.0 100.0
1992 88.5 107.7 128.3
1993 397.3 118.2 221.9
1994 303.4 119.8 247.8
1995 594.8 164.8 484.7
1996 606.1 203.2 784.9
</TABLE>
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 were secured by a first
mortgage on the residence, and/or commercial or other real estate. There were no
such loans outstanding during 1996 or through March 15, 1997.
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,
1997, the aggregate principal and accrued interest owed by Mr. Brown on such
loans was $152,402.
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 $2.2 million for the
year ended December 31, 1996. 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, 1996, the Company guaranteed loans to the ESOP made by a
financial institution with an aggregate principal balance outstanding of $11.1
million. The loans are to be repaid with interest at rates which range from 7.1%
to 8.2% per annum. The proceeds of the loans were used by the ESOP for purchases
of the Company's Common Stock.
17
<PAGE> 21
PROPOSAL 2 -- TO APPROVE THE UNITED COMPANIES FINANCIAL
CORPORATION 1996 LONG-TERM INCENTIVE COMPENSATION PLAN
The Board of Directors of the Company approved and adopted effective as of
November 11, 1996, subject to approval by the shareholders of the Company, the
United Companies Financial Corporation 1996 Long-Term Incentive Compensation
Plan (the "1996 Plan"). The following description of the 1996 Plan is qualified
in its entirety by the complete text thereof, a copy of which is attached hereto
as Exhibit "A," and which should be carefully reviewed in connection with your
consideration thereof.
PURPOSE. The purpose of the 1996 Plan is to encourage stock ownership by
certain employees of and advisors to the Company and its subsidiaries and 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
through the award of equity interests thereunder.
TYPES OF AWARDS. The Committee will have the authority to award, under the
1996 Plan, (i) options to purchase Common Stock of the Company ("Options"),
including options intended to qualify as incentive stock options ("incentive
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
("NQSOs") and (ii) restricted shares of Common Stock ("Restricted Stock").
LIMITATION ON NUMBER OF SHARES AND AWARDS. The aggregate number of shares
of Common Stock that may be issued as awards under the 1996 Plan as of November
11, 1996 is 1,500,000 shares, approximately 5.3% of the outstanding shares of
Common Stock as of March 1, 1997. Further, on January 1, 1998, and annually
thereafter, the aggregate number of shares of Common Stock which may be awarded
pursuant to the 1996 Plan shall be increased by one and one-half (1 1/2%)
percent of the number of shares of Common Stock that are outstanding as of such
date. The maximum number of shares that may be awarded as Options over the term
of the 1996 Plan is 500,000 shares plus annual amounts equal to the lesser of
(i) 2% of the total issued and outstanding shares of Common Stock as of January
1 of each plan year or (ii) such amount calculated as of November 11, 1996. As
of November 11, 1996, the total issued and outstanding Common Stock of the
Company was 28,467,942 shares. The maximum number of shares of Common Stock that
may be allotted by the Committee pursuant to Options awarded to any individual
participant may not exceed 50,000 shares per year. In addition, the number of
shares of Common Stock that may be allotted pursuant to Restricted Stock granted
to any individual participant is limited to 30,000 shares per year.
PARTICIPATION AND ADMINISTRATION. Individuals eligible for awards under the
1996 Plan shall include those officers, key employees of and consultants to the
Company and its subsidiaries as may be designated by the Compensation Committee
(the "Committee") of the Board of Directors. The 1996 Plan shall be
administered, construed and interpreted by the Committee.
TERMS AND CONDITIONS OF AWARDS. Options. The Committee shall have the full
and complete discretion to provide the terms and conditions (including
performance conditions) of awards of Options, except that Options awarded to
"officers" (as defined in the 1996 Plan) may not be exercisable until the
expiration of six months from the date of award. The exercise price may be paid
(a) in cash (by certified check, bank draft or money order); (b) with the
consent of the Committee, by delivering the participant's duly executed
promissory note and related documents; (c) with the consent of the Committee, by
delivering shares of Common Stock already owned by the participant; or (d) with
the consent of the Committee, by electing to have the Company withhold from the
shares otherwise issued upon exercise that number of shares valued at fair
market value as of the exercise date.
Restricted Stock. The Committee shall have the full and complete authority
to establish the terms and conditions of awards of Restricted Stock. However,
Restricted Stock awarded to an "officer" (as defined in the 1996 Plan) shall not
vest until six months elapse from the date of grant. Further, shares of
Restricted Stock may not be transferred until such shares are fully vested and
the certificate representing such shares shall contain a legend, which
certificate shall be held by the Company until the shares represented thereby
have vested. Shares of Restricted Stock shall vest immediately upon the death,
retirement or disability of the
18
<PAGE> 22
participant; provided however, that the shares shall not vest unless and until
any performance condition placed upon such award has been met.
TRANSFERABILITY OF OPTIONS. Options awarded under the 1996 Plan, generally,
may not be transferred other than by will, the laws of descent and distribution
or pursuant to a qualified domestic relations order, as defined in the Code.
However, the Committee has the authority to award NQSOs that are transferable to
(i) members of a participant's immediate family, including trusts for the
benefit of such family members and partnerships in which such family members are
the only participants and (ii) approved charitable organizations.
CHANGE OF CONTROL. All Options shall become fully exercisable, and all
shares of Restricted Stock shall fully vest free of restrictions upon the
occurrence of a change of control as defined in the 1996 Plan. In no event,
however, will Options or shares of Restricted Stock awarded to "officers" (as
defined in the 1996 Plan) become exercisable or vest, respectively, less than
six months after the date such are awarded.
PERFORMANCE GOALS FOR RESTRICTED STOCK AWARDS. The performance measures
that the Committee may utilize when setting performance objectives for an award
of Restricted Stock that is made to a "covered executive" (as defined in the
1996 Plan) are limited to the Company's achievement of return on equity, stock
price, earnings per share and market share. As part of the approval of the 1996
Plan by the shareholders, the Board of Directors is seeking shareholder approval
of the foregoing performance objectives in order to qualify awards of Restricted
Stock to covered executives as performance-based compensation under Section
162(m) of the Code so that such compensation is tax deductible to the Company.
ADJUSTMENT OF SHARES AND PRICE. In the event that the shares of Common
Stock 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, then the
number of shares subject to the 1996 Plan and to awards granted thereunder and
the purchase or exercise price for such shares shall be equitably adjusted by
the Committee to prevent the dilution or enlargement of awards, 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 the 1996 Plan and to
awards granted thereunder.
TERM OF PLAN; AMENDMENTS. The 1996 Plan shall terminate automatically on
November 11, 2006, and the Board of Directors may suspend or terminate the 1996
Plan at any earlier time. The Board of Directors may amend the 1996 Plan from
time to time in its sole discretion unless the amendment would, under applicable
federal, state or local law, require shareholder approval. Further, no amendment
may impair the rights of any participant without his or her consent.
AWARDS GRANTED. Since the 1996 Plan was approved and adopted by the Board
of Directors, effective November 11, 1996, the following awards have been made
to the persons and groups described in the table below, subject to approval by
the shareholders of the 1996 Plan at the 1997 Annual Meeting of Shareholders. If
the 1996 Plan is not approved in the 1997 Annual Meeting, all of the awards
included in the table below will be forfeited.
NEW PLAN BENEFITS UNDER THE 1996
LONG-TERM INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
UNDERLYING STOCK OF RESTRICTED
NAME OPTIONS(1) STOCK(2)
---- ---------------- ----------------
<S> <C> <C>
J. Terrell Brown............................................ 50,000 38,402
John D. Dienes.............................................. 25,000 17,372
C. Geron Hargon............................................. 20,000 17,899
Dale E. Redman.............................................. 22,500 20,007
All current executive officers as a group................... 117,500 93,680
All employees other than executive officers as a group...... 230,000 85,106
</TABLE>
19
<PAGE> 23
- ---------------
(1) The Options were awarded as of February 4, 1997, and have an exercise price
of $27.375, the fair market value of the shares of Common Stock on the date
of award.
(2) 20,000, 10,000, 10,000 and 10,000 shares of the total shares of Restricted
Stock awarded to Messrs. Brown, Dienes, Hargon and Redman, respectively, and
all the shares awarded to other employees as reflected in the above table
vest only if, during the three-year period following award, the closing
price of a share of Common Stock reaches $60.00. The remaining shares
awarded to Messrs. Brown, Dienes, Hargon and Redman vest immediately, but in
no event earlier than six months after the date of award, if the closing
price of a share of the Company's Common Stock reaches $32.00 per share
during 1997 or the Company attains a 15% return on equity for 1997. The
closing price of a share of the Common Stock reported on the NYSE on March
31, 1997 was $20.625 per share.
FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS.
The following summary sets forth, in general, certain United States income tax
consequences on the issuance and exercise of Options under the Plan. The
following statements are based on current interpretations of existing United
States income tax law. The law is technical and complex and the statements below
represent only a general summary of some of the applicable provisions.
Incentive Stock Options. An employee who receives an ISO generally does not
recognize taxable income on the date that the ISO is granted or exercised
(except that the alternative minimum tax provisions may apply to the employee).
If an ISO is granted, the Company cannot deduct compensation expense. If the ISO
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.
With respect to the disposition of the Common Stock received pursuant to
the exercise of an ISO, the tax treatment depends upon whether the shares of
Common Stock were disposed of within the statutory holding period. The holding
period is the later of two years from the date of the grant of the ISO 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 ISO 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 shares 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.
NQSOs. A participant who is awarded an NQSO will generally incur no taxable
income as a result of the grant thereof. The Company can claim no tax deduction
on the date of the NQSO is granted. With the exception of those instances
allowed in the 1996 Plan, and discussed above, a NQSO is not transferable by the
participant. If the NQSO is transferred in a non-arm's length transaction, the
participant 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 NQSO.
Upon the exercise of the NQSO, the participant 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 NQSO. The
Company will be entitled to a corresponding deduction in the amount of the
income recognized by the participant. At disposition of the Common Stock, any
appreciation (or depreciation) after the date the NQSO was exercised is treated
as short-term or long-term capital gain or loss, depending upon the length of
time that the participant has held the shares of Common Stock.
REQUIRED VOTE. Approval of the 1996 Plan requires the affirmative vote of a
majority of the total voting power of the Common Stock and the PRIDES (voting
together as a single class) present in person or represented by proxy at the
1997 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE 1996 LONG-TERM INCENTIVE COMPENSATION PLAN.
20
<PAGE> 24
PROPOSAL 3 -- TO APPROVE THE UNITED COMPANIES FINANCIAL
CORPORATION 1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
The Board of Directors of the Company approved and adopted effective as of
November 11, 1996, subject to the approval of the shareholders of the Company,
the United Companies Financial Corporation 1996 Non-Employee Director Stock Plan
(the "Director Plan"). The Director Plan supersedes and replaces the Company's
1993 Non-Employee Director Stock Option Plan and automatic awards thereunder
terminated with the adoption of the Director Plan. If, however, the shareholders
do not approve the Director Plan at the 1997 Annual Meeting, awards under the
1993 Plan will continue without interruption. The following description is
qualified in its entirety by the complete text of the Director Plan, a copy of
which is attached hereto as Exhibit "B," and which should be carefully reviewed
in connection with your consideration thereof.
PURPOSE. The purpose of the Director Plan is to assist the Company in
attracting and retaining highly qualified and experienced non-employee directors
by providing such directors with a proprietary interest in the Company's success
through the award of NQSOs and shares of Restricted Stock of the Company.
SHARES SUBJECT TO THE DIRECTOR PLAN. The total number of shares of Common
Stock available for awards under the Director Plan is 400,000, approximately
1.4% of the total shares of Common Stock outstanding as of March 1, 1997.
PARTICIPATION AND ADMINISTRATION. Members of the Company's Board of
Directors who are not, and who have not been during the one (1) year period
immediately preceding November 11, 1996, 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 Director Plan. The
Director Plan will be administered, construed and interpreted by a committee
(the "Committee") of two or more members of the Board of Directors who are not
eligible to participate in the Director Plan.
TYPE AND NUMBER OF AWARDS. Options. Beginning after November 11, 1996, each
eligible director shall be automatically awarded an NQSO to purchase 4,000
shares of Common Stock on an annual basis on the date of each annual meeting of
the shareholders of the Company. Further, an eligible director that is elected
by the Board of Directors to fill a newly-created directorship that results from
an increase in the authorized number of directors or a vacancy in the Board
shall be awarded an NQSO to purchase 4,000 shares of Common Stock on the date of
election.
Restricted Stock. Effective as of each annual meeting of shareholders after
November 11, 1996, each eligible director shall receive an award of 1,000 shares
of Restricted Stock. In addition, an eligible director that is elected by the
Board of Directors, after the 1997 Annual Meeting to fill a newly-created
directorship that results from an increase in the authorized number of directors
or a vacancy in the Board shall be awarded 1,000 shares of Restricted Stock.
TERMS AND CONDITIONS OF AWARDS. Options. Each NQSO awarded shall have an
exercise price equal to the fair market value of a share of Common Stock on the
date of award. The exercise price may be paid (a) in cash (by certified check,
bank draft or money order); with the consent of the Committee, by delivering the
participant's duly executed promissory note and related documents; (b) with the
consent of the Committee, by delivering shares of Common Stock already owned by
the participant; or (c) with the consent of the Committee, by electing to have
the Company withhold from the shares otherwise issued upon exercise that number
of shares valued at fair market value as of the exercise date. No NQSO granted
under the Director Plan may be exercised for a period of six months 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 NQSO shall terminate. In
the event that an optionee ceases to be a member of the Board of Directors
within six months of the date an option is granted, the option will be
forfeited.
Restricted Stock. Shares of Restricted Stock awarded under the Director
Plan shall have a vesting period of six months from the date of award; may not
be transferred until such shares are fully vested; and the certificate
representing such shares shall contain a restrictive legend, which certificate
shall be held by the
21
<PAGE> 25
Company until such shares represented thereby have fully vested. The shares
shall fully vest upon the death of an eligible director.
TRANSFERABILITY OF OPTIONS. Options awarded under the Director Plan,
generally, may not be transferred other than by will, the laws of descent and
distribution or pursuant to a qualified domestic relations order, as defined in
the Code. However, the Committee has the authority to award NQSOs that are
transferrable to (i) members of a participant's immediate family, including
trusts for the benefit of such family members and partnerships in which such
family members are the only participants and (ii) approved charitable
organizations.
CHANGE OF CONTROL. All options shall become fully exercisable, and all
shares of Restricted Stock shall fully vest free of restrictions upon the
occurrence of a change of control as defined in the Director Plan.
ADJUSTMENT OF SHARES AND PRICE. In the event that the shares of Common
Stock 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, then the
number of shares subject to the Director Plan and the awards granted hereunder
and the purchase or exercise price for such shares shall be equitably adjusted
by the Committee to prevent the dilution or enlargement of awards, 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 the Director Plan and
to awards granted thereunder.
AWARDS GRANTED. Since the Director Plan was approved and adopted effective
November 11, 1996, the following stock options and shares of Restricted Stock
have been awarded to the persons and groups described in the table below,
subject to approval by the shareholders of the Director Plan at the 1997 Annual
Meeting. If the Director Plan is not approved by the shareholders at the 1997
Annual Meeting, all awards included in the following table will be forfeited.
NEW PLAN BENEFITS UNDER THE 1996
NON-EMPLOYEE DIRECTOR STOCK PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
UNDERLYING STOCK OF RESTRICTED
NAME OPTIONS STOCK
---- ---------------- ----------------
<S> <C> <C>
J. Terrell Brown.................................... -- --
John D. Dienes...................................... -- --
C. Geron Hargon..................................... -- --
Dale E. Redman...................................... -- --
All current directors who are not executive officers
as a group........................................ 8,000(1) --
All employees other than executive officers as a
group............................................. -- --
</TABLE>
- ---------------
(1) Awards to Messrs. Barton and Burke, who were each elected by the Board to
fill certain vacancies.
TERM OF PLAN; AMENDMENT. The Director Plan shall terminate automatically on
November 11, 2006, and the Board of Directors may suspend or terminate such plan
at any earlier time. The Board of Directors may amend the Director Plan from
time to time in its sole discretion unless the amendment would, pursuant to any
federal, state or local law, require shareholder approval. Further, no amendment
may impair the rights of any participant without his or her consent.
FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS. An
eligible director who is awarded an NQSO under the 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. If the NQSO 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 NQSO. Upon the exercise of the NQSO, the participant will be
required to recognize ordinary income equal to the excess of the fair market
value of the
22
<PAGE> 26
shares on the exercise date over the option price. The Company will be entitled
to a corresponding deduction in the amount of the income recognized by the
participant.
REQUIRED VOTE. Approval of the Director Plan requires the affirmative vote
of a majority of the total voting power of the Common Stock and the PRIDES
(voting together as a single class) present in person or represented by proxy at
the 1997 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE 1996 NON-EMPLOYEE DIRECTOR STOCK PLAN.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and certain officers and
persons who own more than ten percent of the Company's Common Stock to file with
the SEC reports of ownership and changes in ownership of the Common Stock.
Directors, certain officers and greater than ten percent beneficial owners are
required by applicable regulations to furnish the Company with all Section 16(a)
forms they file.
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, except as provided below, the Company
believes that, during 1996 all of its directors and pertinent officers complied
with all applicable filing requirements under Section 16(a).
Mr. Brown inadvertently failed to report, in his Form 5 report for the year
ended December 31, 1996, a gift of 3,000 shares of Common Stock made in December
1996. Mr. Brown, upon discovery of such error, promptly filed an amended Form 5
report with the SEC.
Robert B. Thomas, Jr., who ceased any affiliation with the Company on July
24, 1996, failed to file timely a Form 4 report with respect to his sale, in
August 1996, of an aggregate of 5,500 shares of Common Stock.
AUDITOR SERVICES
The Company's consolidated financial statements for the year ended December
31, 1996, were audited by the firm of Deloitte & Touche LLP. Such firm has been
selected as the Company's auditors until replaced by the Board of Directors and
is not being submitted for approval or ratification by the shareholders. A
representative of such firm will be present at the 1997 Annual Meeting to
respond to any appropriate questions and will have the opportunity to make a
statement, if he or she so desires.
SHAREHOLDER PROPOSALS
Any shareholder's proposal to be considered by the Company for inclusion in
the proxy material for the 1998 Annual Meeting of Shareholders must be submitted
in accordance with applicable regulations of the SEC and received by the Company
at its principal executive offices no later than December 15, 1997.
In order for a shareholder to bring any business or nominations before the
1997 Annual Meeting, certain conditions set forth in Section 2.8 and Subsection
4.9.2 of the by-laws of the Company, as amended must be complied with,
including, but not limited to, the delivery of a notice to the Secretary of the
Company not less than 60 days in advance of the Annual Meeting, or if fewer than
70 days notice or prior disclosure of the date of the Annual Meeting is given or
made to the shareholders, not later than the tenth day following the day on
which the notice of the date of the Annual Meeting was mailed or such prior
disclosure was made. The requirements as to the form and content of such advance
notice are set forth in Section 2.8 and Subsection 4.9.2 of the Company's
amended by-laws, a copy of which is available upon request from the Company's
Secretary, at (504) 987-0000.
23
<PAGE> 27
OTHER MATTERS
The Board of Directors knows of no other matters which may be properly, or
are likely to be, brought before the 1997 Annual 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
April 14, 1997
24
<PAGE> 28
EXHIBIT A
UNITED COMPANIES FINANCIAL CORPORATION
1996 LONG-TERM INCENTIVE COMPENSATION PLAN
1. PURPOSE OF PLAN
The United Companies Financial Corporation 1996 Long-Term Incentive
Compensation Plan is intended to encourage stock ownership by certain employees
of and advisors to the Company or its Affiliates so that they may acquire or
increase their proprietary interest in the success of the Company, to encourage
them to remain in the employ of or as advisors to the Company or its Affiliates,
and to provide substantial motivation for superior performance.
2. DEFINITIONS
Unless otherwise required by the context, the following terms when used in
the Plan shall have the meanings set forth in this Section 2:
(a) "Affiliate": Any "parent corporation" or "subsidiary corporation"
of the Company, as such terms are defined in Sections 424(e) and (f),
respectively, of the Code.
(b) "Agreement": A Restricted Stock Agreement or an Option Agreement
evidencing an Award in such form as adopted from time to time by the
Committee pursuant to the Plan.
(c) "Award": An award of Restricted Stock or an Option or any
combination thereof, under the Plan.
(d) "Board of Directors": The Board of Directors of the Company.
(e) "Change of Control": For the purposes of the Plan, the term Change
in Control shall mean the happening of any of the following:
(i) When any "person" as defined in Section 3(a)(9) of the Exchange
Act, and as used in Section 13(d) and 14(d) thereof, including a "group"
as defined in Section 13(d) of the Exchange Act (but excluding any
shareholder of record of the Company as of January 1, 1995, owning 10%
or more of the Company's securities which are entitled to vote in the
election of directors of the Company) directly or indirectly becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of
securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding securities which are
entitled to vote with respect to the election of directors;
(ii) When, during any period of 24 consecutive months, the
individuals who, at the beginning of such period, constitute the Board
of Directors of the Company (the "Incumbent Directors") cease for any
reason other than death or disability to constitute at least a majority
thereof; provided, however, that a director who was not a director at
the beginning of such 24-month period shall be deemed to have satisfied
such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with approval
of, at least two-thirds of the directors who then qualified as Incumbent
Directors either actually (because they were directors at the beginning
of such 24-month period) or by operation of this provision;
(iii) The acquisition of the Company or all or substantially all of
the Company's assets by an entity other than the Company (or a 50% or
more owned subsidiary of the Company) through purchase of assets, or by
merger, or otherwise, except in the case of a transaction pursuant to
which, immediately after the transaction, the Company's shareholders
immediately prior to the transaction own immediately after the
transaction at least a majority of the combined voting power of the
surviving entity's then outstanding securities which are entitled to
vote with respect to the election of directors of such entity; or
A-1
<PAGE> 29
(iv) The Company files a report or proxy statement with the
Commission pursuant to the Exchange Act disclosing in response to Form
8-K, Form 10-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Company has or
may have occurred or will or may occur in the future pursuant to any
then-existing contract or transaction.
(f) "Code": The Internal Revenue Code of 1986, as amended from time to
time.
(g) "Common Stock": The $2.00 par value per share common stock of the
Company.
(h) "Commission": The Securities and Exchange Commission.
(i) "Committee": The Compensation Committee of the Board of Directors
or such other committee appointed by the Board of Directors which meets the
requirements set forth in Section 11(a) hereof.
(j) "Company": United Companies Financial Corporation, a Louisiana
corporation.
(k) "Consultant": Any director of or professional advisor to the
Company or its Affiliates, as well as any employee, officer or director of
a corporation that serves as an advisor, consultant or independent
contractor to the Company or its Affiliates. The term "Consultant" shall
not, however, include any officer or employee of the Company or its
Affiliates.
(l) "Covered Executive": Any individual who, on the last day of the
Company's applicable taxable year, meets the definition of a "covered
employee" under Section 162(m) of the Code and applicable regulations
thereunder.
(m) "Effective Date": The date on which the Plan shall become
effective as set forth in Section 14 hereof.
(n) "Exchange Act": The Securities Exchange Act of 1934, as amended,
together with all regulations and rules issued thereunder.
(o) "Exercise Price": In the case of an Option, the price per Share at
which the Shares subject to such Option may be purchased upon exercise of
such Option.
(p) "Fair Market Value": As applied to a specific date, the fair
market value of a Share on such date 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 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, 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.
(q) "ISO": An Option intended to qualify as an "incentive stock
option," as defined in Section 422 of the Code or any statutory provision
that may replace such Section and designated as an incentive stock option
by the Committee.
(r) "Officer": An officer of the Company or its Affiliates meeting the
definition of "officer" in Rule 16a-1(f) (or any successor provision)
promulgated by the Commission under the Exchange Act.
(s) "NQSO": An Option not intended to be an ISO and designated as a
nonqualified stock option by the Committee.
(t) "Option": Any ISO or NQSO granted under the Plan.
A-2
<PAGE> 30
(u) "Option Agreement": The written agreement evidencing the Award of
an Option.
(v) "Participant": An officer or other key employee of or Consultant
to the Company or any of its Affiliates who has been granted an Award under
the Plan.
(w) "Plan": This United Companies Financial Corporation 1996 Long-Term
Incentive Compensation Plan, as the same may be amended from time to time.
(x) "Restricted Stock": Shares which have been awarded to a
Participant under Section 8 hereof.
(y) "Restricted Stock Agreement": The written agreement evidencing an
Award of Restricted Stock.
(z) "Restriction Period": The time period during which Restricted
Stock awarded under the Plan must be held before it becomes fully vested,
unless additional conditions have been placed upon the vesting thereof.
(aa) "Shares": Shares of the Company's authorized but unissued or
reacquired Common Stock (including treasury shares), or such other class or
kind of shares or other securities as may be applicable pursuant to the
provisions of Section 4(d) hereof.
(ab) "Subsidiary": Any "subsidiary corporation" of the Company, as
such term is defined in Section 424(f) of the Code.
3. PARTICIPATION
Participants shall be selected by the Committee from the officers (whether
or not they are directors), key employees of the Company or its Affiliates
(either full or part-time) and Consultants who have the capability of making a
substantial contribution to the success of the Company.
4. COMMON STOCK SUBJECT TO THE PLAN
(a) Shares Subject to the Plan. As of the Effective Date, the aggregate
number of Shares which may be issued as Awards pursuant to the Plan is 1,500,000
Shares. Further, on January 1, 1998, and annually thereafter, the aggregate
number of Shares which may be awarded pursuant to the Plan shall be increased by
one and one-half (1 1/2%) percent of the number of shares of Common Stock that
are outstanding as of such dates. The limitations set forth in this Section 4(a)
shall be subject to adjustment as provided in Section 4(d) below.
(b) Accounting for Number of Shares. For purposes of determining the
aggregate number of Shares available to be issued as Awards pursuant to the
Plan, the number of outstanding Options and shares of Restricted Stock shall
reduce the maximum number of Shares available to be issued as Awards. However,
any Shares subject to an Award that is forfeited, terminates or expires
unexercised shall be added to the maximum number of Shares available to be
issued as Awards under the Plan.
(c) Maximum Total Option Awards. Notwithstanding the provisions of Section
4(a), over the term of the Plan, the total number of Shares that may be issued
upon exercise of all Options granted under the Plan shall not exceed the sum of:
(i) 500,000 shares; plus (ii) annual amounts beginning January 1, 1998 equal to
the lesser of (A) two (2%) percent of the total issued and outstanding shares of
Common Stock as of January 1 of each full or partial year during which the Plan
is in effect; or (B) such amount calculated as of the Effective Date. The
limitations in this Section 4(c) shall be subject to adjustment as provided in
Section 4(d) below.
(d) Adjustment Of Shares And Price. 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, then the
number of Shares subject to this Plan and to Awards granted hereunder and the
purchase or Exercise Price for such Shares shall be equitably adjusted by the
Committee to prevent the dilution or enlargement of Awards, and any new stock or
securities into which the Shares are
A-3
<PAGE> 31
changed or for which they are exchanged shall be substituted for the Shares
subject to this Plan and to Awards granted hereunder; provided, however, that
fractional shares may be deleted from any such adjustment or substitution. Any
shares of stock or other securities received as a result of any of the foregoing
by a Participant with respect to Restricted Stock shall be subject to the same
restrictions and the certificate(s) or other instruments representing or
evidencing such shares or securities shall be legended and deposited with the
Company in the manner provided in Section 8(e) hereof.
5. GENERAL TERMS, CONDITIONS AND LIMITATIONS OF AWARDS OF OPTIONS
(a) Terms And Conditions. The Committee shall have full and complete
authority and discretion, except as expressly limited by the Plan, to grant
Options and to provide the terms and conditions (which need not be identical
among the Participants) thereof. In particular, the Committee shall set forth in
the Option Agreement the following terms and conditions:
(i) The Exercise Price of the Option, which may not be less than
either (A) 100% of the Fair Market Value per Share at the date of grant of
the Option or (B) the par value per Share;
(ii) The number of Shares subject to, and the expiration date of, the
Option;
(iii) The manner, time and rate (cumulative or otherwise) of exercise
of the Option; provided, however, that except as otherwise specified in the
Plan, no Option awarded to a Participant who is an Officer shall be
exercisable prior to the expiration of six months from the date of grant;
and
(iv) The restrictions or conditions (such as performance goals), if
any, to be placed upon the grant of the Option, the exercisability of the
Option or upon the Shares which may be issued upon exercise of the Option.
The Committee may, as a condition of granting an Option, require that a
Participant agree not to thereafter exercise one or more Options previously
granted to such Participant.
(b) Maximum Award Of Options. The number of Shares that may be allotted by
the Committee pursuant to Options awarded to any individual Participant shall
not exceed, in any calendar year, 50,000 Shares (subject to adjustment pursuant
to Section 4(d) of the Plan).
6. EXERCISE OF OPTIONS
(a) General Exercise Rights. Except as provided in Section 9(a)(ii), an
Option granted under the Plan shall be exercisable during the lifetime of the
Participant to whom such Option was granted only by such Participant, and except
as provided in Section 6(c) and Section 9(a)(ii) hereof, no Option may be
exercised unless at the time such Participant exercises such Option, such
Participant is an employee of and has continuously since the grant thereof been
an employee of, the Company or an Affiliate. Transfer of employment between
Affiliates or between an Affiliate and the Company shall not be considered an
interruption or termination of employment for any purpose under this Plan.
Neither shall a leave of absence at the request, or with the approval, of the
Company or an Affiliate be deemed an interruption or termination of employment,
so long as the period of such leave does not exceed 90 days, or, if longer, so
long as the Participant's right to re-employment with the Company or an
Affiliate is guaranteed by contract. An Option also shall contain such
conditions upon exercise (including, without limitation, conditions limiting the
time of exercise to specified periods) as may be required to satisfy applicable
regulatory requirements, including, without limitation, Rule 16b-3 (or any
successor rule) promulgated by the Commission.
(b) Notice Of Exercise. An Option may not be exercised with respect to less
than 100 Shares, unless the exercise relates to all Shares covered by the Option
at the date of exercise. An Option may be exercised by delivery of a written
notice to the Company, which shall state the election to exercise the Option and
the number of whole Shares in respect of which it is being exercised, and shall
be signed by the person or persons so exercising the Option. In the case of an
exercise of an Option, such notice shall either: (i) be accompanied by payment
of the full Exercise Price and all applicable withholding taxes, in which event
the Company shall deliver any certificate(s) representing Shares to which the
Participant is entitled as a result of the exercise as soon as practicable after
the notice has been received; or (ii) fix a date (not less than 5 nor more than
15 business days from the date such notice has been received by the Company) for
the payment of the full
A-4
<PAGE> 32
Exercise Price and all applicable withholding taxes, against delivery by the
Company of any certificate(s) representing Shares to which the Participant is
entitled to receive as a result of the exercise. Payment of such Exercise Price
and withholding taxes shall be made as provided in Sections 6(d) and 11,
respectively. In the event the Option shall be exercised pursuant to Section
6(c)(i) or Section 9(a)(ii) 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 Option.
(c) Exercise After Termination Of Employment. Except as otherwise
determined by the Committee at the date of grant of the Option and as is
provided in the applicable Option Agreement evidencing the Option, upon
termination of a Participant's employment with the Company or any of its
Affiliates, such Participant (or in the case of death, the person(s) to whom the
Option is transferred by will or the laws of descent and distribution) may
exercise such Option during the following periods of time (but in no event after
the expiration date of such Option) to the extent that such Participant was
entitled to exercise such Option at the date of such termination:
(i) In the case of termination as a result of death, disability or
retirement of the Participant, the Option shall remain exercisable until
the normal expiration date of the Option; for this purpose, "disability"
shall exist when the Participant 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,
as determined by the Committee in its sole discretion, and "retirement"
shall mean voluntary retirement at or after the Participant's normal
retirement date as determined by the Committee in its sole discretion;
(ii) In the case of termination for cause, the Option shall
immediately terminate and shall no longer be exercisable; and
(iii) In the case of termination for any reason other than those set
forth in subparagraphs (i) and (ii) above, the Option shall remain
exercisable for three months after the date of termination.
To the extent the Option is not exercised within the foregoing periods of time,
the Option shall automatically terminate at the end of the applicable period of
time. Notwithstanding the foregoing provisions, failure to exercise an ISO
within the periods of time prescribed under Sections 421 and 422 of the Code
shall cause an ISO to cease to be treated as an "incentive stock option" for
purposes of Section 421 of the Code.
(d) Payment Of Option Exercise Price. Upon the exercise of an Option,
payment of the Exercise Price shall be made either (i) in cash (by a certified
check, bank draft or money order), (ii) with the consent of the Committee and
subject to Section 6(e) hereof, by delivering the Participant's duly-executed
promissory note and related documents, (iii) with the consent of the Committee,
by delivering Shares already owned by the Participant valued at Fair Market
Value, (iv) with the consent of the Committee, 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 (v)
by a combination of the foregoing forms of payment. Any consent of the Committee
required by this Section 6(d) may be given or withheld by the Committee in its
absolute discretion.
(e) Payment With Loan. The Committee may, in its sole discretion, assist
any Participant in the exercise of one or more Options granted to such
Participant under the Plan by authorizing the extension of a loan to such
Participant from the Company. Except as otherwise provided in this Section 6(e),
the terms of any loan (including the interest rate and terms of repayment) shall
be established by the Committee in its sole discretion. Any such loan by the
Company shall be with full recourse against the Participant to whom the loan is
granted, shall be secured in whole or in part by the Shares so purchased, and
shall bear interest at a rate not less than the minimum interest rate required
at the time of purchase of the Shares in order to avoid having imputed interest
or original issue discount under Sections 483 or 1272 of the Code. In addition,
any such loan by the Company shall become immediately due and payable in full,
at the option of the Company, upon termination of the Participant's employment
with the Company or its Affiliates for any reason or upon the sale of any Shares
acquired with such loan to the extent of the cash and fair market value of any
property received by the Participant in such sale. The Committee may make
arrangements for the application of payroll
A-5
<PAGE> 33
deductions from compensation payable to the Participant to amounts owing to the
Company under any such loan. Until any loan by the Company under this Section
6(e) is fully paid in cash, the Shares shall be pledged to the Company as
security for such loan and the Company shall retain physical possession of the
stock certificates evidencing the Shares so purchased together with a duly
executed stock power for such Shares. No loan shall be made hereunder unless
counsel for the Company shall be satisfied that the loan and the issuance of
Shares funded thereby will be in compliance with all applicable federal, state
and local laws, and such counsel shall be consulted prior to the funding of any
such loan.
(f) Options Awarded To Consultants. Any provision of this Section 6 to the
contrary notwithstanding, (i) an Option may be exercised at any time by a
Participant who is a Consultant during the applicable period in the manner
provided in Section 6(b) above; provided, that in the event of the death of a
Participant who is a Consultant, the Option may be exercised by the executors or
administrators of the estate of such Participant or by the person or persons who
shall have acquired the Option directly by bequest or inheritance; and (ii) the
Exercise Price for an Option awarded to a Consultant must be paid in cash (by a
certified check, bank draft or money order).
(g) Rights As A Shareholder. A Participant shall have no rights as a
shareholder with respect to any Shares issuable on exercise of an Option until
the date of the issuance of a stock certificate to the Participant 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(d) hereof.
7. SPECIAL PROVISIONS FOR ISOS
Any provision of the Plan to the contrary notwithstanding, the following
special provisions shall apply to all ISOs granted under the Plan:
(i) The Option must be expressly designated as an ISO by the Committee
and in the Option Agreement;
(ii) No ISO shall be granted more than ten years from the Effective
Date of the Plan and no ISO shall be exercisable more than ten years from
the date such ISO is granted;
(iii) The Exercise Price of any ISO shall not be less than the Fair
Market Value per Share on the date such ISO is granted;
(iv) Any ISO shall not be transferable by the Participant to whom such
ISO is granted other than by will or the laws of descent and distribution
and shall be exercisable during such Participant's lifetime only by such
Participant;
(v) No ISO shall be granted to any individual who, at the time such
ISO is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any Affiliate unless
the Exercise Price of such ISO is at least 110% of the Fair Market Value
per Share at the date of grant and such ISO is not exercisable after the
expiration of five years from the date such ISO is granted;
(vi) The aggregate Fair Market Value (determined as of the time any
ISO is granted) of any Company stock with respect to which any ISOs granted
to a Participant are exercisable for the first time by such Participant
during any calendar year (under this Plan and all other stock option plans
of the Company and any of its Affiliates and any predecessor of any such
corporations) shall not exceed $100,000 as required under Section 422(d)(i)
of the Code. (To the extent the $100,000 limit is exceeded, the $100,000 in
Options, measured as described above, granted earliest in time will be
treated as ISOs); and
(vii) any other terms and conditions as may be required in order that
the ISO qualifies as an "incentive stock option" under Section 422 of the
Code or successor provision.
A-6
<PAGE> 34
Notwithstanding the provisions of Section 6(c)(i), the favorable tax treatment
available pursuant to Section 422 of the Code upon the exercise of an ISO will
not be available to a Participant who exercises any ISO more than (i) 12 months
after the date of termination of employment due to the Participant's disability
or (ii) three months after the date of termination of employment due to
retirement of the Participant.
8. RESTRICTED STOCK
(a) Restricted Stock Awards. The Committee may, in its discretion, grant
one or more Awards of Restricted Stock to any Participant. Each Award of
Restricted Stock shall be evidenced by a Restricted Stock Agreement which shall
specify the number of Shares to be issued to the Participant, the date of such
issuance, the price, if any, to be paid for such Shares by the Participant, the
Restriction Period and any other conditions imposed on such Shares as the
Committee, in its discretion, shall determine. Notwithstanding the foregoing,
the Committee shall impose upon each Award of Restricted Stock made to a
Participant who is an Officer a Restriction Period expiring no earlier than six
months after the date of grant of the Restricted Stock. Shares of Restricted
Stock shall be evidenced by a stock certificate registered only in the name of
the Participant, which stock certificate shall be held by the Company until the
restrictions on such Shares shall have lapsed and those Shares shall have
thereby vested in full.
(b) Maximum Award Of Restricted Stock. The maximum number of Shares that
may be allotted by the Committee pursuant to Restricted Stock awarded to any
individual Participant shall not exceed, in any calendar year, 30,000 Shares
(subject to adjustment pursuant to Section 4(b) of the Plan).
(c) Restrictions And Forfeitures.
(i) Shares included in Restricted Stock Awards may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered,
either voluntarily or involuntarily, until such Shares have fully vested.
(ii) Participants receiving Restricted Stock shall be entitled to
dividend and voting rights for the Shares issued even though they are not
vested, provided that such rights shall terminate immediately as to any
forfeited Restricted Stock.
(iii) In the event that the Participant shall have paid any cash for
the Restricted Stock, the Agreement shall specify whether and to what
extent such cash shall be returned upon a forfeiture (with or without an
earnings factor).
(iv) The Restricted Stock shall be evidenced by a stock certificate
registered only in the name of the Participant, which stock certificate
shall be held by the Company until the Restricted Stock has fully vested.
(v) The occurrence of any of the following events shall cause the
immediate vesting of the Restricted Stock:
A. the death of the Participant;
B. the retirement of the Participant on or after the Participant's
normal retirement date;
C. the disability of the Participant.
For the purposes of this Subsection, the term "disability" shall be defined
as such term is defined in Section 6(c)(i). Notwithstanding the foregoing,
to the extent a condition(s) other than a Restriction Period has been
imposed by the Committee upon the Restricted Stock, the occurrence of the
foregoing shall not cause immediate vesting unless and until such
condition(s) has been met.
(vi) A Restricted Stock Award shall be entirely forfeited by the
Participant in the event that prior to vesting, the Participant breaches
any terms or conditions of the Plan, the Participant resigns from or is
terminated by the Company, or any condition(s) imposed upon vesting are not
met.
(d) Performance or Other Conditions. The Committee may, in its absolute
discretion, make the vesting of any Restricted Stock Award subject to the
fulfillment of a performance or other condition. The Committee
A-7
<PAGE> 35
shall have the absolute discretion in determining the terms of any such
condition; provided, however, if the Committee chooses to impose a
performance-based condition upon a Restricted Stock Award made to a Participant
who is a Covered Executive, then the Committee must select one or more of the
following performance-based factors, in the Committee's sole discretion: return
on equity, stock price, earnings per share or market share. For purposes of this
Section 8(d), "return on equity" shall mean the return or equity of the Company
for the specified period, computed on a consolidated basis in accordance with
generally accepted accounting principles. With respect to grants of Restricted
Stock to a Covered Executive, before a performance-based condition will be
considered fulfilled, the Committee must certify, in writing, that such
condition has been met.
(e) Legend On Certificates. Each certificate evidencing a Restricted Stock
Award under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Company and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the United Companies Financial Corporation 1996
Long-Term Incentive Compensation Plan and a Restricted Stock Agreement
entered into between the registered owner and United Companies Financial
Corporation. Copies of such Plan and Agreement are on file in the offices
of the Secretary of United Companies Financial Corporation, 4041 Essen
Lane, Baton Rouge, Louisiana 70809."
(f) Section 83(b) Elections. Within 30 days after the issuance of shares of
Restricted Stock to a Participant under the Plan, the Participant shall decide
whether or not to file an election pursuant to Section 83(b) of the Code and
Treasury Regulation Section 1.83-2 (and state law counterparts) with respect to
such Restricted Stock. If the Participant does file such an election, the
Participant shall promptly furnish the Company with a copy of such election.
9. RESTRICTIONS ON TRANSFERS OF AWARDS; GOVERNMENT REGULATIONS
(a) Awards Generally Not Transferable.
(i) No Award nor any right or interest of a Participant under the Plan
in any instrument evidencing any Award under the Plan may be assigned,
encumbered, or transferred, except, (i) in the event of the death of a
Participant, by will or the laws of descent and distribution; or (ii)
pursuant to a qualified domestic relations order as defined in the Code,
Title I of the Employee Retirement Income Security Act, or the rules and
regulations thereunder.
(ii) Notwithstanding the foregoing, the Committee shall have the
authority, in its absolute discretion, to add (originally or by way of
amendment) as a term of any NQSO awarded hereunder, that such NQSO may be
transferred, no less than six (6) months after it is granted, to members of
a Participant's immediate family, including trusts for the benefit of such
family members and partnerships in which such family members are the only
partners as well as to charitable organizations that are approved in
advance by the Committee. A transfer pursuant to this Subsection may only
be effected by the Company at the written request of a Participant and
shall become effective only when recorded in the Company's record of
outstanding NQSOs. In the event an NQSO is transferred pursuant to this
Subsection, such NQSO may not be subsequently transferred by the transferee
except by will or the laws of descent and distribution. In the event of a
transfer pursuant to this Subsection, such NQSO shall continue to be
governed by and subject to the terms and conditions of this Plan and the
relevant grant.
(b) Government Regulations. This Plan, the granting of Awards under this
Plan and the issuance or transfer of Shares (and/or the payment of money)
pursuant thereto 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 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
Awards may be granted under this Plan, and no Shares shall be issued by the
Company, pursuant to or in connection with any such Award, unless and until, in
each such case, all legal requirements applicable to the
A-8
<PAGE> 36
issuance or payment have, in the opinion of counsel to the Company, been
complied with. In connection with any stock issuance or transfer, the person
acquiring the Shares shall, if requested by the Company, give assurances
satisfactory to counsel to the Company in respect of 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 or for quotation on any stock
exchange or automated quotation system on which Shares may then be listed or
quoted, and (ii) the completion and effectiveness 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.
10. CONSULTANTS
An Award made to a Consultant hereunder must be supported by bona fide
services rendered by the Consultant to the Company. However, in no event may an
Award to a Consultant be made for services rendered by the Consultant in
connection with the offer or sale of securities in a capital raising transaction
for the Company.
11. TAX WITHHOLDING
The Company shall have the right to withhold from amounts due Participants,
or to collect from Participants directly, the amount which the Company deems
necessary to satisfy any taxes required by law to be withheld at any time by
reason of participation in the Plan, and the obligations of the Company under
the Plan shall be conditional on payment of such taxes. The Participant may,
prior to the due date of any taxes, pay such amounts to the Company in cash, or
with the consent of the Committee, in Shares (which shall be valued at their
Fair Market Value on the date of payment). There is no obligation under this
Plan that any Participant be advised of the existence of the tax or the amount
required to be withheld. Without limiting the generality of the foregoing, in
any case where it determines that a tax is or will be required to be withheld in
connection with the issuance or transfer or vesting of Shares under this Plan,
the Company may pursuant to such rules as the Committee may establish, reduce
the number of such Shares so issued or transferred by such number of Shares as
the Company may deem appropriate in its sole discretion to accomplish such
withholding or make such other arrangements as it deems satisfactory.
Notwithstanding any other provision of this Plan, the Committee may impose such
conditions on the payment of any withholding obligation as may be required to
satisfy applicable regulatory requirements, including, without limitation, Rule
16b-3 (or successor provision) promulgated by the Commission.
12. ADMINISTRATION OF PLAN
(a) The Committee. The Plan shall be administered by the Committee, which
shall be comprised of two or more members of the Board of Directors, each of
whom shall be a "Non-Employee Director" as defined in rule 16b-3(b)(3) (or any
successor provision) promulgated by the Commission.
(b) Committee Action. A majority of the members of the Committee at the
time in office shall constitute a quorum for the transaction of business, and
any determination or action may be taken at a meeting by a majority vote or may
be taken without a meeting by a written resolution signed by all members of the
Committee. All decisions and determinations of the Committee shall be final,
conclusive and binding upon all Participants and upon all other persons claiming
any rights under the Plan with respect to any Restricted Stock or Options.
Members of the Board of Directors and members of the Committee acting under the
Plan shall be fully protected in relying in good faith upon the advice of
counsel and shall incur no liability except for willful misconduct in the
performance of their duties.
(c) Committee Authority. In amplification of the Committee's powers and
duties, but not by way of limitation, the Committee shall have full authority
and power to:
(i) Construe and interpret the provisions of the Plan and make rules
and regulations for the administration of the Plan not inconsistent with
the Plan;
(ii) Decide all questions of eligibility for Plan participation and
for the grant of Awards;
A-9
<PAGE> 37
(iii) Adopt forms of agreements and other documents consistent with
the Plan;
(iv) Engage agents to perform legal, accounting and other such
professional services as it may deem proper for administering the Plan; and
(v) Take such other actions as may be reasonably required or
appropriate to administer the Plan or to carry out the Committee activities
contemplated by other sections of this Plan.
(d) Indemnification. In addition to such other rights of indemnification as
they may have as directors or as members of the Committee, the Board of
Directors and the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including court costs and reasonable attorneys'
fees, actually incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, 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 Award granted hereunder, and against all amounts
paid by them in settlement thereof or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except where such indemnification is
expressly prohibited by applicable law.
13. CHANGE OF CONTROL.
All Options shall become fully exercisable, and all Restricted Stock shall
fully vest free of restrictions, upon the occurrence of any Change of Control,
whether or not such Options are then exercisable or such Restricted Stock is
then vested under the provisions of the applicable Agreements relating thereto.
Notwithstanding the foregoing, in no event will Options awarded to Officers be
exercisable or Restricted Stock awarded to Officers vest less than six months
after the date on which they are granted.
14. EFFECTIVE DATE AND SHAREHOLDER APPROVAL
The Effective Date of the Plan shall be November 11, 1996 (the date it was
approved by the Board of Directors), subject to receipt within one year of that
date of the approval of the holders of a majority of the total voting power of
the voting securities of the Company present in person or represented by proxy
at the meeting of the shareholder at which the Plan is considered. All Awards
pursuant to the Plan prior to the receipt of shareholder approval shall be
effective when made but shall be subject to receipt of such approval. If such
approval is not received, all Awards shall be forfeited.
15. AMENDMENT AND TERMINATION
(a) The Plan
(i) Amendment. The Board of Directors may amend the Plan from time to
time in its sole discretion unless the amendment would, pursuant to any
applicable federal, state or local law, require shareholder approval, in
which event such approval shall be obtained. However, no amendment shall
impair the rights of any Participant under any Award theretofore made under
the Plan, without the Participant's consent.
(ii) Termination. The Plan shall terminate automatically on the tenth
anniversary of the Effective Date, and the Board of Directors may suspend
or terminate the Plan at any earlier time. Upon termination of the Plan, no
additional Awards 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 Restricted Stock and outstanding and unexercised Options
granted under the Plan and Shares issued under the Plan.
(b) Awards. Subject to the terms and conditions and the limitations of the
Plan, the Committee may in the exercise of its sole discretion modify, extend or
renew the terms of outstanding Awards granted under the Plan, or accept the
surrender of outstanding Awards (to the extent not theretofore exercised) and
authorize the granting of new Awards in substitution therefor (to the extent not
theretofore exercised). Without limiting the generality of the foregoing, the
Committee may in its discretion at any time accelerate the time at which any
Option is exercisable or the date on which any Restricted Stock vests, subject
to compliance with the
A-10
<PAGE> 38
requirements of Rule 16b-3 (or successor provision) promulgated by the
Commission. Notwithstanding the foregoing, however, no modification of an Award
shall, without the consent of the Participant, impair any rights or obligations
under any Awards theretofore granted under the Plan.
16. MISCELLANEOUS
(a) Employment. Neither the establishment of the Plan nor any amendments
thereto, nor the granting of any Award under the Plan, shall be construed as in
any way modifying or affecting, or evidencing any intention or understanding
with respect to, the terms of the employment of any Participant with the Company
or any of its Affiliates. No person shall have a right to be granted Awards or,
having been selected as a Participant for one Award, to be so selected again.
(b) Multiple Awards. Subject to the terms and restrictions set forth in the
Plan, a Participant may hold more than one Award.
(c) Written Notice. As used herein, any notices required hereunder shall be
in writing and shall be given on the forms, if any, provided or specified by the
Committee. Written notice shall be effective upon actual receipt by the person
to whom such notice is to be given; provided, however, that in the case of
notices to Participants and their transferees, heirs, legatees and legal
representatives, notice shall be effective upon delivery if delivered personally
or three business days after mailing, registered first class postage prepaid to
the last known address of the person to whom notice is given. Written notice
shall be given to the Committee and the Company at the following address or such
other address as may be specified from time to time:
United Companies Financial Corporation
P. O. Box 1591 (70821)
4041 Essen Lane (70809)
Baton Rouge, Louisiana
Attention: Secretary
(d) Applicable 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 of the Plan shall
continue to be fully effective.
A-11
<PAGE> 39
EXHIBIT B
UNITED COMPANIES FINANCIAL CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
1. PURPOSE OF THE PLAN.
This 1996 Non-Employee Director Stock 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 award to such directors of (i)
nonqualified stock options (the "Options") to acquire shares of the common
stock, par value $2.00 per share, of the Company (the "Common Stock") and (ii)
shares of restricted Common Stock (the "Restricted Stock"). The Options and the
shares of Restricted Stock shall be referred to herein collectively as an
"Award" or "Awards".
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 THE 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 do not qualify as Eligible Directors under the Plan.
The Committee shall prescribe the forms of agreement to be used to evidence
Awards 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 (the
"Commission.")
4. SHARES SUBJECT TO THE PLAN.
(a) Maximum Shares. The maximum number of shares of Common Stock with
respect to which Awards may be granted and which are hereby reserved for
purposes of the Plan shall be, in the aggregate, 400,000 shares, 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 Award shall again be available for future grant under the
Plan.
(b) Adjustments in Event of Changes in Capitalization. In the event that
the Common Stock is 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 of Common Stock subject to this Plan and the number of shares of Common
Stock subject to awards previously granted hereunder shall be equitably adjusted
by the Committee to prevent the dilution or enlargement of such previous awards,
and any new stock or securities into which the shares of Common Stock are
changed or for which they are exchanged shall be substituted for the shares of
Common Stock subject to this Plan and to awards made 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 of Common Stock 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.
B-1
<PAGE> 40
5. OPTIONS GRANTED UNDER THE PLAN.
(a) Option Grants. Beginning after the Effective Date, each Eligible
Director shall be granted an Option to acquire 4,000 shares of Common Stock on
an annual basis effective on the date of each annual meeting of shareholders of
the Company. In addition to the foregoing annual grant, each Eligible Director
that is elected, subsequent to the Effective Date, by the Board to fill a newly
created directorship that results from either an increase in the authorized
number of directors or a vacancy in the Board resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be
granted an Option to acquire 4,000 shares of Common Stock effective on the date
of such election by the Board. The price at which shares of Common Stock may be
acquired pursuant to each Option (the "Exercise Price") shall be the Fair Market
Value of the Common Stock, 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 six months after the date of grant. Thereafter,
subject to Section 8 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. An Option shall
be exercisable during the lifetime of the optionee to whom such Option was
granted only by the optionee.
(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 defined below) 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 (70821)
4041 Essen Lane (70809)
Baton Rouge, Louisiana
Attn: Secretary
(d) Fair Market Value. The term "Fair Market Value" means the fair market
value of a share of Common Stock as determined in good faith by the Committee in
the following manner:
(i) If the Common Stock is then listed on any national or regional
stock exchange or traded in the over-the-counter market and prices are
quoted on the Nasdaq Stock Market, the Fair Market Value shall be the last
quoted sales price of a share of Common Stock 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 Common Stock is 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 Common Stock 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.
(e) Transferability. (i) Except as provided in Subsection 5(e)(ii) below,
no Option granted under the Plan may be assigned, encumbered or transferred,
except by will or the laws of descent and distribution in the
B-2
<PAGE> 41
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 authority, in its absolute discretion, to add
(originally, or by way of amendment to an outstanding Option) as a term of any
Option awarded hereunder, that such Option may be transferred, no earlier than
six (6) months after it is granted, 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 are the only partners as well as to
charitable organizations that are approved in advance by the Committee. A
transfer pursuant to this Subsection may only be effected by the Company at the
written request of an Eligible Director and shall become effective only when
recorded in the Company's record of outstanding Options. In the event an Option
is transferred pursuant to this Subsection, such Option may not be subsequently
transferred by the transferee except by will or the laws of descent and
distribution. In the event of a transfer pursuant to this Subsection, such
Option shall continue to be governed by and subject to the terms and conditions
of this Plan and the relevant grant.
6. RESTRICTED STOCK AWARDED UNDER THE PLAN.
(a) Restricted Stock Awards. Beginning after the Effective Date, each
Eligible Director shall be granted 1,000 shares of Restricted Stock on an annual
basis effective on the date of each annual meeting of shareholders of the
Company. In addition to the foregoing annual grant, each Eligible Director that
is elected by the Board to fill a newly-created directorship that results from
either an increase in the authorized number of directors or a vacancy in the
Board resulting from death, resignation, retirement, disqualification, removal
from office or other cause shall be granted 1,000 shares of Restricted Stock (an
"Interim Restricted Stock Award") effective on the date of such election by the
Board; provided, however, that an Eligible Director that is elected by the Board
prior to the date of the 1997 annual meeting of shareholders of the Company
shall not be entitled to an Interim Restricted Stock Award. Each award of
Restricted Stock shall provide for a restriction period expiring six months
after the date of grant of the Restricted Stock. Shares of Restricted Stock
shall be evidenced by a stock certificate registered only in the name of the
Eligible Director, which stock certificate shall be held by the Company until
the restriction period on the Restricted Stock shall have lapsed and the
Restricted Stock shall have thereby vested.
(b) Restrictions and Forfeitures.
(i) Shares included in an award of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered,
either voluntarily or involuntarily, until such shares have fully vested.
(ii) Eligible Directors receiving Restricted Stock shall be entitled
to dividend and voting rights for the shares issued even though they are
not vested, provided that such rights shall terminate immediately as to any
forfeited Restricted Stock.
(iii) The Restricted Stock shall be evidenced by a stock certificate
registered only in the name of the Eligible Director, which stock
certificate shall be held by the Company until the Restricted Stock has
fully vested.
(iv) The death of the Eligible Director shall cause the immediate
vesting of the Restricted Stock.
(v) A Restricted Stock Award shall be entirely forfeited by the
Participant in the event that prior to vesting, the Participant breaches
any terms or conditions of the Plan.
(c) Legend on Certificates. Each certificate evidencing an award of
Restricted Stock under the Plan shall be registered in the name of the Eligible
Director and deposited by the Eligible Director, together with a stock power
endorsed in blank, with the Company and shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the United Companies Financial Corporation 1996
Non-Employee Director Stock Plan and a Restricted Stock Agreement entered
into between the registered owner and United Companies Financial
Corporation. Copies of such Plan and Agreement are
B-3
<PAGE> 42
on file in the offices of the Secretary of United Companies Financial
Corporation, 4041 Essen Lane, Baton Rouge, Louisiana 70809."
7. GOVERNMENT REGULATIONS.
This Plan and the Awards 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 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 Awards may be made under the Plan and no
shares of Common Stock shall be issued by the Company, pursuant to or in
connection with any such Award, unless and until all applicable legal
requirements have, in the opinion of counsel to the Company, been complied with.
In connection with any stock issuance or transfer, 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 of Common Stock under the
Plan prior to (i) the admission of such shares to listing on any stock exchange
or the Nasdaq Stock Market, as applicable, on which the Common Stock 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.
8. 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 Awards 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 Restricted Stock and outstanding
and unexercised Options granted under the Plan and shares of Common Stock issued
under the Plan.
9. AMENDMENT.
The Board may amend the Plan from time to time in its sole discretion
unless the amendment would, pursuant to any federal, state or local law or other
rule or regulation to which the Company or the Common Stock is governed, require
shareholder approval, in which event such approval shall be obtained. However,
no amendment shall impair any rights or obligations under any Award made under
the Plan, without the Eligible Director's consent.
10. 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 Award
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.
B-4
<PAGE> 43
11. CHANGE OF CONTROL
All Options shall become fully exercisable, and all Restricted Stock shall
fully vest free of restrictions, upon the occurrence of any Change of Control
(as defined below), whether or not such Options are then exercisable or such
Restricted Stock is then vested under the provisions of the applicable
Agreements relating thereto. For the purpose of the Plan, the term Change in
Control shall mean the happening of any of the following:
(i) When any "person" as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as used in
Section 13(d) and 14(d) thereof, including a "group" as defined in Section
13(d) of the Exchange Act (but excluding any shareholder of record of the
Company as of January 1, 1995, owning 10% or more of the Company's
securities which are entitled to vote in the election of directors of the
Company) directly or indirectly becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities which are entitled to vote with respect to the
election of directors;
(ii) When, during any period of 24 consecutive months, the individuals
who, at the beginning of such period, constitute the Board of Directors of
the Company (the "Incumbent Directors") cease for any reason other than
death or disability to constitute at least a majority thereof; provided,
however, that a director who was not a director at the beginning of such
24-month period shall be deemed to have satisfied such 24-month requirement
(and be an Incumbent Director) if such director was elected by, or on the
recommendation of or with approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors either actually (because they
were directors at the beginning of such 24-month period) or by operation of
this provision;
(iii) The acquisition of the Company or all or substantially all of
the Company's assets by an entity other than the Company (or a 50% or more
owned subsidiary of the Company) through purchase of assets, or by merger,
or otherwise, except in the case of a transaction pursuant to which,
immediately after the transaction, the Company's shareholders immediately
prior to the transaction own immediately after the transaction at least a
majority of the combined voting power of the surviving entity's then
outstanding securities which are entitled to vote with respect to the
election of directors of such entity; or
(iv) The Company files a report or proxy statement with the Commission
pursuant to the Exchange Act disclosing in response to Form 8-K, Form 10-K
or Schedule 14A (or any successor schedule, form or report or item therein)
that a change in control of the Company has or may have occurred or will or
may occur in the future pursuant to any then-existing contract or
transaction.
12. EFFECTIVE DATE; SHAREHOLDER APPROVAL.
The Effective Date of the Plan shall be November 11, 1996, subject to
receipt within one year of that date of the approval of the holders of the
majority of the total voting power of the voting securities of the Company
present or represented by proxy at the meeting of the shareholders at which the
Plan is considered. All Awards granted prior to such shareholder approval shall
be subject to receipt of such approval and no rights with regard to such Awards
may be exercised prior to receipt of such approval. If such shareholder approval
is not received, all such Awards shall automatically terminate and be forfeited.
13. APPLICABLE 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 of the Plan shall continue to be fully effective.
B-5
<PAGE> 44
UNITED COMPANIES FINANCIAL CORPORATION
THE SOLICITATION OF THIS PROXY IS MADE ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. TERRELL BROWN and DALE E. REDMAN, and
each of them with full power of substitution, the attorney and proxy of the
undersigned to attend the Annual Meeting of Shareholders of UNITED COMPANIES
FINANCIAL CORPORATION to be held at the United Companies Financial Corporation
Executive Office Building, 4041 Essen Lane, Baton Rouge, Louisiana, at 9:00
a.m. on May 14, 1997, or any postponement or adjournment thereof, and to vote
the stock of the undersigned with all powers the undersigned would possess if
present upon the following matters and upon any other business that may
properly come before the meeting or any postponement or adjournment thereof.
The proxy when properly executed will be voted as specified herein. If no
specification is made, it is the intention of the proxies to vote FOR proposals
1, 2, 3 and 4.
INSTRUCTIONS: This proxy, signed and dated, must be returned for your
shares to be represented at the Annual Meeting. To vote, please mark the
appropriate box for each proposal in blue or black ink, date and sign this
proxy exactly as your name appear(s) hereon. If stock is held jointly,
signature should include both names. Executors, administrators, trustees,
guardians and others signing in a representative capacity should give their
full title. The shares represented by this proxy will be voted as specified by
the shareholder(s). If no choice is specified, the proxy will be voted FOR
proposals 1, 2, 3 and 4. PLEASE return promptly in the enclosed postage paid
envelope.
SEE REVERSE SIDE
FOLD AND DETACH HERE
<PAGE> 45
Please mark [X]
your votes
as indicated
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4
1. Election of four directors to serve until WITHHOLD
the 2000 Annual Meeting of Shareholders. FOR AUTHORITY
[ ] [ ]
INSTRUCTIONS: IF YOU WISH TO WITHHOLD
AUTHORITY SELECTIVELY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH
THAT NOMINEE'S NAME BELOW.
The Nominees are:
Harris J. Chustz, Jr., Roy G. Kadair, M.D.,
Dale E. Redman, William H. Wright, Jr.
2. Approval of the United Companies Financial Corporation 1996 Long-Term
Incentive Compensation Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the United Companies Financial Corporation 1996 Non-Employee
Director Stock Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In Their Discretion, the Proxies are Authorized to Vote upon Such Other
Business as May Properly Come Before the Meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SIGNATURE SIGNATURE DATED , 1997
----------------------- -------------------- ------
NOTE: Please sign this proxy as name(s) appears hereon and return it promptly
in the envelope provided, whether or not you plan to attend the meeting.
FOLD AND DETACH HERE
<PAGE> 46
UNITED COMPANIES FINANCIAL CORPORATION
THE SOLICITATION OF THIS PROXY IS MADE ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the trustee of United Companies Financial
Corporation Employee Stock Ownership Plan and Trust (the "ESOP"), with full
power of substitution, the attorney and proxy of the undersigned to attend the
Annual Meeting of Shareholders of UNITED COMPANIES FINANCIAL CORPORATION to be
held at the United Companies Financial Corporation Executive Office Building,
4041 Essen Lane, Baton Rouge, Louisiana, at 9:00 a.m. on May 14, 1997, or any
postponement or adjournment thereof, and to vote the stock allocated to the
account of the undersigned in the ESOP with all powers the undersigned would
possess if present upon the following matters and upon any other business that
may properly come before the meeting or any postponement or adjournment
thereof.
This proxy when properly executed will be voted as specified herein. If no
specification is made, it is the intention of the proxies to vote FOR proposals
1, 2, 3 and 4.
INSTRUCTIONS: This proxy, signed and dated, must be returned for your
shares to be represented at the Annual Meeting. To vote, please mark the
appropriate box for each proposal in blue or black ink, date and sign this
proxy exactly as your name appear(s) hereon. If stock is held jointly,
signature should include both names. Executors, administrators, trustees,
guardians and others signing in a representative capacity should give their
full title. The shares represented by this proxy will be voted as specified by
the undersigned. If no choice is specified, the proxy will be voted FOR
proposals 1, 2, 3 and 4. PLEASE return promptly in the enclosed postage paid
envelope.
SEE REVERSE SIDE
FOLD AND DETACH HERE
<PAGE> 47
Please mark [X]
your votes
as indicated
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4
1. Election of four directors to serve until WITHHOLD
the 2000 Annual Meeting of Shareholders. FOR AUTHORITY
[ ] [ ]
INSTRUCTIONS: IF YOU WISH TO WITHHOLD
AUTHORITY SELECTIVELY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH
THAT NOMINEE'S NAME BELOW.
The Nominees are:
Harris J. Chustz, Jr., Roy G. Kadair, M.D.,
Dale E. Redman, William H. Wright, Jr.
2. Approval of the United Companies Financial Corporation 1996 Long-Term
Incentive Compensation Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the United Companies Financial Corporation 1996 Non-Employee
Director Stock Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In Their Discretion, the Proxies are Authorized to Vote upon Such Other
Business as May Properly Come Before the Meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SIGNATURE SIGNATURE DATED , 1997
----------------------- -------------------- ------
NOTE: Please sign this proxy as name(s) appears hereon and return it promptly
in the envelope provided, whether or not you plan to attend the meeting.
FOLD AND DETACH HERE
<PAGE> 48
UNITED COMPANIES FINANCIAL CORPORATION
THE SOLICITATION OF THIS PROXY IS MADE ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the trustee of United Companies Financial
Corporation Employees' Savings Plan (the "401(k) Plan"), with full power of
substitution, the attorney and proxy of the undersigned to attend the
Annual Meeting of Shareholders of UNITED COMPANIES FINANCIAL CORPORATION to be
held at the United Companies Financial Corporation Executive Office Building,
4041 Essen Lane, Baton Rouge, Louisiana, at 9:00 a.m. on May 14, 1997, or any
postponement or adjournment thereof, and to vote the stock allocated to the
account of the undersigned in the 401(k) Plan with all powers the undersigned
would possess if present upon the following matters and upon any other business
that may properly come before the meeting or any postponement or adjournment
thereof.
This proxy when properly executed will be voted as specified herein. If no
specification is made, it is the intention of the proxies to vote FOR proposals
1, 2, 3 and 4.
INSTRUCTIONS: This proxy, signed and dated, must be returned for your
shares to be represented at the Annual Meeting. To vote, please mark the
appropriate box for each proposal in blue or black ink, date and sign this
proxy exactly as your name appear(s) hereon. If stock is held jointly,
signature should include both names. Executors, administrators, trustees,
guardians and others signing in a representative capacity should give their
full title. The shares represented by this proxy will be voted as specified by
the undersigned. If no choice is specified, the proxy will be voted FOR
proposals 1, 2, 3 and 4. PLEASE return promptly in the enclosed postage paid
envelope.
SEE REVERSE SIDE
FOLD AND DETACH HERE
<PAGE> 49
Please mark [X]
your votes
as indicated
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4
1. Election of four directors to serve until WITHHOLD
the 2000 Annual Meeting of Shareholders. FOR AUTHORITY
[ ] [ ]
INSTRUCTIONS: IF YOU WISH TO WITHHOLD
AUTHORITY SELECTIVELY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH
THAT NOMINEE'S NAME BELOW.
The Nominees are:
Harris J. Chustz, Jr., Roy G. Kadair, M.D.,
Dale E. Redman, William H. Wright, Jr.
2. Approval of the United Companies Financial Corporation 1996 Long-Term
Incentive Compensation Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the United Companies Financial Corporation 1996 Non-Employee
Director Stock Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In Their Discretion, the Proxies are Authorized to Vote upon Such Other
Business as May Properly Come Before the Meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SIGNATURE SIGNATURE DATED , 1997
----------------------- -------------------- ------
NOTE: Please sign this proxy as name(s) appears hereon and return it promptly
in the envelope provided, whether or not you plan to attend the meeting.
FOLD AND DETACH HERE
