USLICO CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
USLICO Corporation, a Virginia corporation, will be held at 9:30 a.m.,
April 29, 1994, in the auditorium of the United Services Life Insurance
Company Building, 3rd Floor, 950 North Glebe Road, Arlington, Virginia
22203, for the purpose of considering and acting upon the following
matters:
1. The election of three Directors for a three-year
term on the Board of Directors;
2. The Amendment to the Stock Option Plan to increase
the number of shares authorized to be issued from
500,000 to 1,500,000; and
3. To transact such other business as may properly
come before the meeting or any adjournment thereof.
Further information is contained in the accompanying Proxy Statement.
Only stockholders of record at the close of business on March 21, 1994,
are entitled to notice of, and to vote at, the meeting and any
adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Jeffrey P. Hahn
Senior Vice President, General
Counsel & Secretary
March 29, 1994
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE.<PAGE>
<PAGE>
USLICO CORPORATION
PROXY STATEMENT
INTRODUCTION
This Proxy Statement and the accompanying proxy form are furnished to
stockholders of USLICO Corporation ("USLICO"), a Virginia corporation,
in connection with solicitation by the Board of Directors of USLICO of
proxies for use at the Annual Meeting of Stockholders called to be held
on April 29, 1994, and at any adjournment thereof, for the purpose of
considering and acting upon the matters set forth in the Notice of
Annual Meeting. This Proxy Statement and the accompanying form of
proxy are being mailed to stockholders on or about March 29, 1994.
The Annual Meeting of Stockholders of USLICO will be held on April 29,
1994, at 9:30 a.m. in the auditorium of the United Services Life
Insurance Company Building, 3rd Floor, 950 North Glebe Road, Arlington,
Virginia 22203. The Board of Directors has fixed the close of business
on March 21, 1994, as the record date to determine which holders of
shares of Common Stock ($1 par value per share) are entitled to notice
of and to vote at the meeting. On the record date there were
10,762,049 shares of Common Stock outstanding which are entitled to
vote. Each share is entitled to one vote on each matter submitted to
the meeting. There is no right of cumulative voting of shares.
All valid proxies will be voted according to the instructions on the
Proxy. If no instructions are given, the proxies will be voted for the
election of the slate of Directors and to amend the Stock Option Plan.
Any proxy may be revoked by a subsequently dated proxy or by written
notice of revocation received by USLICO not later than the close of
business on April 28, 1994, or by the holder of record voting in person
at the meeting.
On the date of this Proxy Statement, the Board of Directors knows of no
business to come before the Annual Meeting of Stockholders other than
the matters listed in the Notice. In the event other matters properly
come before the meeting, it is the intent that the holders of the
proxies will vote according to their best judgment absent contrary
instructions.
The presence in person or by proxy of the holders of record of a
majority of the outstanding shares of Common Stock entitled to vote is
required to constitute a quorum to transact business at the meeting.
The affirmative vote of a majority of the outstanding shares of Common
Stock present or represented and entitled to vote is required to elect
a Director and to amend the Stock Option Plan.
The 1993 USLICO Annual Report to Stockholders accompanies this Proxy
Statement.
Unless otherwise indicated, the information provided in this Proxy
Statement is as of March 1, 1994.
<PAGE>
<PAGE>
PRINCIPAL STOCKHOLDERS
The only persons known to USLICO to be the beneficial owners of more
than 5% of the outstanding shares of USLICO are as follows:
Number of Shares of
USLICO Common Stock Percentage
Name and Address Beneficially Owned of Class
Baldwin & Lyons, Inc. 1/ 875,419 8.1%
3100 N. Meridian Street
Indianapolis, Indiana 46208
George Olmsted 2/ 661,910 6.1%
1515 N. Courthouse Road
Suite 505
Arlington, Virginia 22201
Corbyn Investment 606,000 5.6%
Management, Inc. 3/
2330 West Joppa Road
Suite 108
Lutherville, Maryland 21093-7207
All Directors and Elected 249,918 2.3%
Officers as a group
- --------------------------------
1/ Baldwin & Lyons, Inc. ("B&L") is the parent holding company of
Protective Insurance Company ("Protective"). Protective
beneficially owns 875,419 shares of Common Stock. This number
includes Protective's conversion rights to 63,957 shares through
its ownership of $2,005,000 USLICO 8% Convertible Subordinated
Debentures due 2011.
B&L in its Schedule 13D filed with the Securities and Exchange
Commission disclaimed any intention to effect a change in or
influence control of USLICO and further stated the stock was not
acquired in connection with or as a participant in any transaction
having such purpose or effect. In an amended filing, B&L stated
it intends to sell its holdings of USLICO Common Stock at one time
or over time as market conditions permit.
2/ Includes 402,898 shares owned by the Olmsted International Capital
Corporation ("International Capital") and 259,012 shares owned by
a revocable trust (the "Revocable Trust"). The Revocable Trust,
of which Mr. Olmsted is grantor and beneficiary, owns 100% of the
voting stock of International Capital. The figure of 661,910
shares does not include the following shares of USLICO Common
Stock in which Mr. Olmsted disclaims any beneficial interest: (i)
48,617 shares owned by The Carol S. Olmsted Revocable Trust, and
(ii) 26,888 shares owned by an irrevocable trust of which Mr.
Olmsted is one of four trustees.
3/ Corbyn Investment Management, Inc., an investment advisory firm,
filed a Schedule 13G with the Securities and Exchange Commission
containing a disclaimer of any intention to effect a change in or
influence control of USLICO Corporation and stating the stock was
not acquired as a participant in any transaction having such
purpose or effect.
<PAGE>
<PAGE>
ELECTION OF DIRECTORS
The business affairs of USLICO are managed under the direction of its
Board of Directors. The management of USLICO knows of no reason why
the proposed nominees for Director would be unable or would refuse to
serve if elected.
An affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present or represented and entitled to vote at
the meeting is required to elect each nominee. Unless otherwise
directed, all shares represented by valid proxies will be voted in
favor of the nominees.
Eighty-three percent (83%) of the total 10,757,356 eligible votes were
represented at the 1993 Annual Stockholders Meeting. Each Director
elected at that meeting received not less than 98% of the votes cast.
Information about the incumbent Directors and the three nominees for
election is set forth below:
Position Held Amount of
Name, Age with USLICO; Shares Percent
and Term Director Principal Beneficially of
of Office Since Occupation Owned * Ownership
John A. Beck** N/A Nominee for Director. 500 ***
Age: 68 Of Counsel,
(NOMINEE) Reed Smith Shaw &
McClay for more than
the last 5 years.
Director, The Johnston-
Lemon Group, Inc., and
Washington Mutual
Investors Fund.
Robert E. 1986 Director. President, 1,900 ***
Buchanan Buchanan Companies for
Age: 51 more than the last 5
(INCUMBENT years.
TO 1996)
Daniel J. 1986 Director. Chairman 32,406 ***
Callahan, III and Chief Executive
Age: 61 Officer of USLICO
(INCUMBENT since 1992. Vice
TO 1995) Chairman (1991-1992)
and Chairman (1985-
1991), American
Security Bank, N.A.
Director, Washington
Gas Light Company,
Fox Meyer Corp., and
International
Registries, Inc.<PAGE>
<PAGE>
Position Held Amount of
Name, Age with USLICO; Shares Percent
and Term Director Principal Beneficially of
of Office Since Occupation Owned * Ownership
Robert F. 1984 Director. Major General, 1,651 ***
Cocklin AUS, Retired. Retired
Age: 75 Executive Vice President,
(RETIRING - Association of the U.S.
1994) Army. Senior Fellow, Land
Warfare Institute. Trustee
George C. Marshall Foundation.
Director, United Services
Life Insurance Company
(1982-1989). Director,
Military Professional
Resources Inc. (1989-1992).
Glenn H. 1993 Director. Executive Vice 40,406 ***
Gettier, Jr. President and Chief
Age: 51 Financial Officer of USLICO
(NOMINEE) since October 1992.
Executive Vice President
and Chief Financial Officer
of The Equitable Life
Assurance Society of the
United States (1984-1990).
William V. 1988 Director. General, USAF, 1,351 ***
McBride Retired. Director, United
Age: 71 Services Life Insurance
(INCUMBENT Company (1980-1991).
TO 1996) President, Greater San
Antonio Chamber of Commerce
(1982-1987). Director,
Southwest Research Institute.
Jack N. N/A Nominee for Director. General 0 ***
Merritt USA, Retired. President and
Age: 63 COO of Association of the U.S.
(NOMINEE) Army (Joined Staff of Associa-
tion of the U.S. Army 1987).
Trustee, George C. Marshall
Foundation. Director, The
Atlantic Council and Military
Professional Resources Inc.
Board of Advisors of The
Citadel and Georgia Institute
of Technology.
<PAGE>
<PAGE>
Position Held Amount of
Name, Age with USLICO; Shares Percent
and Term Director Principal Beneficially of
of Office Since Occupation Owned * Ownership
Thomas H. 1984 Director. Admiral, U.S. Navy, 2,607 ***
Moorer Retired. Retired Chairman of
Age: 82 the Joint Chiefs of Staff.
(RETIRING - Retired Senior Advisor, The
1994) Center for Strategic and
International Studies.
Director, Blount, Inc. and
CACI, Inc.
Fioravante G. 1988 Director. Partner, Rogers & 2,700 ***
Perrotta **** Wells, New York, for more
Age: 62 than the last 5 years.
(INCUMBENT TO Director, Bankers Security
1995) Life Insurance Society (1976-
1991). Director, Sun Life
Insurance & Annuity Co. of
New York, Viking Fire
Insurance Co., and Northstar
Life Insurance Co.
David H. Roe 1991 Director. President and 47,997 ***
Age: 53 Chief Operating Officer of
(INCUMBENT TO USLICO. Affiliated with
1996) USLICO since October 1991.
Executive Vice President
and Chief Financial Officer
of USAA (1990-1991);
affiliated with USAA from
1986-1991. Brigadier
General, USAF, Retired.
David S. Smith 1984 Director. Attorney. 1,700 ***
Age: 76 Director, International
(RETIRING - Bank (1983-1989). Director,
1994) Council of American
Ambassadors. Ambassador to
Sweden (1976-1977).
Associated with USLICO and
affiliated companies for
more than the last 5 years.
Director, International
Registries, Inc.
<PAGE>
<PAGE>
Position Held Amount of
Name, Age with USLICO; Shares Percent
and Term Director Principal Beneficially of
of Office Since Occupation Owned * Ownership
Eli Weinberg 1984 Director. Private Invest- 5,200 ***
Age: 57 ments. Chief Operating
(INCUMBENT TO Officer of Barington Capital
1995) Group, L.P., New York (1992-
1993). Chief Financial
Officer, Mabon, Nugent & Co.
(1990-1991). Senior Vice
President, Drexel Burnham
Lambert, Inc. (1985-1989).
Director, Bankers Security
Life Insurance Society (1978-
1991).
The number of beneficially owned shares for executive officers not
named above are: W. Alan Aument -- 46,219; David W. Karsten -- 34,215;
and Jeffrey P. Hahn -- 31,566. Each owns less than 1% of the
outstanding shares of USLICO. *
_______________________________
* Includes beneficial ownership of the following shares which may be
exercised at various Exercise Dates through awarded stock options:
30,000 shares -- Mr. Callahan; 47,000 shares -- Mr. Roe; 40,000
shares -- Mr. Gettier; 33,000 shares -- Mr. Aument; 32,500 shares
-- Mr. Karsten; and 31,500 shares -- Mr. Hahn.
** Mr. Beck is Of Counsel at Reed Smith Shaw & McClay to which USLICO
and its subsidiaries paid legal fees in 1993.
*** Less than 1%.
**** Mr. Perrotta is a Partner in Rogers & Wells to which USLICO and
its subsidiaries paid legal fees in 1993.
<PAGE>
<PAGE>
The following individuals are the three (3) nominees for election as
Directors for a three-year term:
THREE-YEAR TERM EXPIRING AT THE ANNUAL MEETING IN 1997
John A. Beck
Glenn H. Gettier, Jr.
Jack N. Merritt
Directors are paid a fee of $750 for each meeting of the Board of
Directors or Committee of the Board attended. In addition, Directors
receive an annual retainer of $15,000. Committee Chairmen also receive
an annual retainer of $2,000. No fees or retainers are paid to
Directors who are salaried employees of USLICO or its subsidiaries.
On December 10, 1993, in lieu of an increase in cash compensation, the
Board of Directors of USLICO Corporation awarded a stock grant of 700
shares to each Director who was not an employee of USLICO Corporation
or any of its affiliates. This award was made to compensate the
Directors for their increased efforts and to maintain Director
compensation at competitive levels.
In 1993, the Board of Directors adopted a Retirement Plan for
Directors. The Plan provided that a USLICO Director who retires from
the Board and who has more than five years of service on the Board of
USLICO and its subsidiary companies shall receive a benefit equal to
one half of the annual retainer times the following percentage: 5-6
years of service -- 50%, 6-7 years of service -- 60%, 7-8 years of
service -- 70%, 8-9 years of service -- 80%, 9-10 years of service --
90%, more than 10 years of service -- 100%. The benefit is payable for
a maximum of ten years. General Cocklin, Admiral Moorer and Mr. Smith,
the three retiring Directors, each have more than 10 years of service
and shall each be entitled to a benefit of $7,500 per year.
During 1993, there were seven regularly-scheduled meetings and three
special meetings of the Board of Directors. With the exception of
General Cocklin who attended 73% of the meetings, all of the other
Directors attended more than 75% of their scheduled Board and Committee
meetings in 1993.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has three standing Committees. The Committees
and the Director-members of the Committees are as follows:
EXECUTIVE COMMITTEE COMPENSATION COMMITTEE AUDIT COMMITTEE
Daniel J. Callahan, Fioravante G. Perrotta, William V. McBride,
III, Chairman Chairman Chairman
Robert E. Buchanan Robert F. Cocklin Robert E. Buchanan
William V. McBride Thomas H. Moorer Fioravante G. Perrotta
David H. Roe Eli Weinberg
David S. Smith
Eli Weinberg
The Executive Committee is authorized to act on behalf of the Board of
Directors during the periods between regular or special meetings of the
Board of Directors. The Executive Committee met on one occasion in
1993.
<PAGE>
<PAGE>
The Compensation Committee reviews the qualifications of potential
candidates to serve on the Board of Directors and recommends to the
Board candidates deemed suitable to be designated as nominees for
election as Directors by the stockholders of USLICO. The Committee
also reviews the performance of the elected officers of USLICO and its
subsidiary companies, recommends to the Board the amount of annual
compensation for each individual as well as other forms of
compensation. The Compensation Committee met on five occasions in
1993.
The Audit Committee receives and reviews reports regularly from the
independent public accountants, the internal auditing staff and the
Controller. The Audit Committee met on four occasions in 1993.
AMENDMENT TO THE STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES
In April 1991, when the stockholders approved the Stock Option Plan
("Plan"), 500,000 shares of USLICO common stock were reserved for
issuance under the Plan. Options for 423,500 shares have been awarded
under the Plan and only 76,500 shares remain available for future
awards. The Board of Directors believes that stock options directly
link executive rewards to the stock market's assessment of the
Company's success, thus promoting a closer link between the interests
of management and the shareholders. Also, the Board of Directors
intends to grant options to key employees who are not senior officers
to reward performance and to more directly link their compensation to
Company performance. See Compensation Committee Report to Shareholders
(p. 13). On February 25, 1994, the Board of Directors, subject to
approval by stockholders, increased the number of shares available for
grants by 1,000,000 shares.
SUMMARY OF THE STOCK OPTION PLAN
The Plan is administered by the Board of Directors. The Board
determines which employees of USLICO Corporation and its subsidiaries
will be granted Options, the number of Options to be granted to each
employee based on the nature and value of said employee's services and
their accomplishments and potential contributions to the success of
USLICO, and the Option Price. Although it is not possible to state the
number of employees who will receive Options since the selection of
participants rests within the discretion of the Board, the Option
Grants Table on page 10 indicates the options granted in the last
fiscal year. No Option for the additional shares may be granted under
the Plan after April 30, 1996.
The Plan may be amended or terminated by the Board of Directors.
However, no amendment may be made without the approval of the
Stockholders which would (1) increase the aggregate number of shares of
Common Stock that may be granted under the Plan (except for equitable
adjustments authorized by the Plan in the event a recapitalization or
other change occurs in the corporate structure of USLICO or the Common
Stock) or (2) change the category of persons entitled to participate in
the Plan. No amendment or termination of the Plan may, without the
consent of the employee, impair the rights of the employee with respect
to an Option previously granted.
Options entitle the holder to purchase shares of Common Stock at a
price fixed by the Board at the time the Option is granted. The price
may be not less than seventy-five (75) percent of the fair market value
per share for such stock on the date of the granting of the Option.
When the Option is exercised the holder must pay USLICO the Option
Price in cash. To date, all option awards have been at the closing
price for USLICO's stock on the date of the grant.
When each Option is granted the Board shall determine when the Option
may be first exercised. Under the Plan the Board can generally delay
the exercise for a period not to exceed three years from the issue
date. Any Options not exercised within eight years of the issue date
will lapse.
Under current law, the grant of an Option should not result in
realization of income by the employee. The excess of the fair market
value of the shares on the Exercise Date over the Option Price is
taxable as ordinary income to the employee. USLICO is entitled to a
deduction for Federal income tax purposes at the same time and in the
same amount as ordinary income is realized by the employee on the
Exercise Date. In the event of a sale of the shares, any appreciation
after the date of exercise is taxable income as capital gains to the
employee.
Effective January 1, 1994, the Internal Revenue Code generally denies a
deduction to any publicly-held corporation for compensation paid to
senior executives in a taxable year, to the extent such compensation
exceeds $1.0 million, subject to an exception for "performance-based
compensation" and subject to certain transition provisions. Because
the ultimate value of stock options is open-ended, USLICO intends to
take the necessary steps to conform its compensation to comply with the
deductibility provisions of the Code.
VOTE REQUIRED
Approval of the amendment requires the affirmative vote of a majority
of the shares of common stock present, or represented, and entitled to
vote at the meeting.
RECOMMENDATION
The Compensation Committee and the Board of Directors has unanimously
approved the proposed amendment to the Plan and recommends that
shareholders vote FOR the amendment. The persons named in the enclosed
form of Proxy have advised that it is their intention to vote each
Proxy FOR such proposal, unless a contrary decision is indicated on the
Proxy.
EXECUTIVE OFFICERS OF USLICO
In addition to Messrs. Callahan, Gettier and Roe as Director-officers,
the executive officers of USLICO are Mr. W. Alan Aument (age 51),
Senior Vice President and Treasurer since 1984; Mr. Jeffrey P. Hahn
(age 49), Senior Vice President, General Counsel and Secretary since
1988; and Mr. David W. Karsten (age 46), Senior Vice President and
Controller since 1985. Messrs. Aument, Hahn and Karsten have been
employed as officers of subsidiary and affiliated companies of USLICO
for more than five years.
The business address for the above executive officers is 4601 Fairfax
Drive, Arlington, Virginia.
<PAGE>
<PAGE>
EXECUTIVE COMPENSATION
USLICO does not provide compensation directly. All USLICO executives
are salaried officers of wholly-owned subsidiary companies.
The following table summarizes the compensation paid in fiscal 1993 to
the Chief Executive Officer and the four other most highly-compensated
executive officers of USLICO and the compensation paid to each such
individual for the two previous fiscal years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Compen- Award(s) Options/ Payouts Compensation
Principal Position Year Salary($) Bonus($) sation($) ($) SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel J. Callahan, 1993 300,000 -- -- -- 30,000 -- 56,511(2,6)
III, Chairman and 1992 75,000 -- -- -- -- -- 45,900(3)
Chief Executive 1991 -- -- -- -- -- -- 24,950(3)
Officer(1)
David H. Roe, 1993 285,000 -- -- -- 30,000 -- 4,015(6)
President and Chief 1992 261,872 -- -- -- 12,000 -- 7,750(3)
Operating Officer(4) 1991 53,044 -- -- -- 5,000 -- 600(3)
Glenn H. Gettier, Jr., 1993 249,996 -- -- -- 30,000 -- 937(6)
Executive Vice 1992 62,499 -- 55,348 -- 10,000 -- --
President and Chief 1991 -- -- -- -- -- -- --
Financial Officer(5)
W. Alan Aument, 1993 155,700 -- -- -- 15,000 -- 3,418(6)
Senior Vice President 1992 154,200 -- -- -- 10,500 -- 400(3)
and Treasurer 1991 147,467 23,500 -- -- 7,500 -- 3,568(3)
David W. Karsten, 1993 149,500 -- -- -- 15,000 -- 3,356(6)
Senior Vice President 1992 148,000 -- -- -- 11,000 -- 600(3)
and Controller 1991 139,500 42,500 -- -- 6,500 -- 2,700(3)
<FN>
(1) Mr. Callahan is employed under an agreement with the Company
effective October 1, 1992. This agreement extended his employment
through October 1, 1993, with provision for an automatic one year
renewal through October 1, 1994.
(2) Advance salary payment of $54,167 for January and February, 1994.
No salary payment was made for these two months in 1994.
(3) Director fees.
(4) Mr. Roe is employed under an agreement with the Company effective
October 1, 1992. This agreement extended his employment through
October 1, 1993, with provision for an automatic one year renewal
through October 1, 1994.
(5) Mr. Gettier was hired on October 6, 1992, under an agreement with
the Company that extended his employment through October 1, 1993,
with provision for an automatic one-year renewal through
October 1, 1994. As an incentive for him to take the position and
to help defray the costs of selling his home, he was awarded a
$50,000 signing bonus. A stock option of 10,000 shares was also
awarded as part of the incentive to accept the position. In
addition, the Company made payments on his behalf related to his
relocation in the amount of $5,348 in 1992.
(6) Company contributions to 401(k) Plan. In 1993 pre-tax Company
contributions were $2,344 for Mr. Callahan, $4,015 for Mr. Roe,
$937 for Mr. Gettier, $3,418 for Mr. Aument, and $3,356 for Mr.
Karsten.
</TABLE>
<PAGE>
<PAGE>
SEPARATION AGREEMENTS
USLICO and a subsidiary have Executive Severance Benefit Agreements
with Messrs. Roe, Gettier, Aument, Karsten and ten other executive
officers not named in the Summary Compensation Table. The purpose of
the agreements is to provide severance payments to the covered
executives whose employment is terminated (for reasons other than
death, disability, or for cause), or who resign because of material
reductions in duties, compensation, or relocation requirements, within
twenty-four months following the date of a change-in-control of USLICO.
The payment would be the base compensation paid to the executive during
the 12-month period preceding the termination date, exclusive of all
bonuses. Change-in-control is generally defined in the agreements as:
(i) the acquisition, by a person or group other than USLICO, of 20% or
more of the voting power of USLICO's outstanding voting securities;
(ii) the acquisition by a person or group of 50% of such securities;
(iii) a change in the majority of USLICO's Board of Directors; (iv) a
reorganization or merger where the owners of USLICO prior to the event
own less than 50% of USLICO after the event; (v) a dissolution; or (vi)
a sale of 50% or more of the assets.
MANAGEMENT INCENTIVE COMPENSATION PLAN
Established effective January 1, 1993, the Management Incentive
Compensation Plan links compensation opportunities for key executives,
including Messrs. Callahan, Roe, Gettier, Aument, Karsten and sixteen
executive officers not named in the Summary Compensation Table, to
demonstrated performance against established objectives, the
accomplishment of which will further enhance the Company's dual
missions of: (i) providing a competitive return to shareholders on a
sustained basis; and (ii) providing reliable, competitive and
financially secure insurance coverages to policyholders at the lowest
practical cost.
Participation in the Plan is determined annually by the Compensation
Committee and the Board of Directors. Performance goals are
established each year in light of existing economic conditions and the
Company's then established strategic and operating plans and priorities
so that the Plan retains its purpose of motivating and rewarding key
executives for producing those realistic, focused results which reflect
the best interests of its policyholders and its shareholders.
Goals are established in any three of four categories: (i) Company-
wide goals which reflect measured results for the Company as stated in
numeric terms; (ii) primary business unit goals which reflect the
measured results for a primary business unit as stated primarily in
numeric terms; (iii) secondary business unit goals which reflect the
measured results of a secondary business unit within a primary unit as
stated, to the extent possible, in numeric terms; and (iv) individual
goals which reflect the measured results of personal actions by a
single participant. A significant portion of the total opportunity for
any participant will be based on performance against Company-wide
goals. For the initial Plan year, fiscal 1993, at least 50% of a
participant's total incentive opportunity was based on Company-wide
goals. A final goal describing one or more minimum results which must
be achieved for or during any fiscal year before any incentive awards
can be either calculated or paid for any participant is also
established. The maximum award under the Plan ranges from 20 to 40
percent of base compensation depending on position.
There were no payments in 1993 under the Plan.
<PAGE>
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the details regarding stock options
granted to the individuals listed in the Summary Compensation Table and
other employees during fiscal year 1993.
<TABLE>
<CAPTION>
Potential Realized Value at
Percent of Assumed Annual Rate of
Total Options Exercise Stock Price Appreciation for
Granted to Price Option Term
Options Employees in Per Share Expiration
Name and Position Granted(1) Fiscal Year ($/SH)(2) Date 5% (3) 10% (3)
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Callahan, 30,000 11.4% $16.375 03/26/2001 $234,550 $561,788
III, Chairman and
Chief Executive
Officer
David H. Roe, 30,000 11.4% $16.375 03/26/2001 234,550 561,788
President and Chief
Operating Officer
Glenn H. Gettier, Jr., 30,000 11.4% $16.375 03/26/2001 234,550 561,788
Executive Vice
President and Chief
Financial Officer
W. Alan Aument, 15,000 5.7% $16.375 03/26/2001 117,275 280,894
Senior Vice President
and Treasurer
David W. Karsten, 15,000 5.7% $16.375 03/26/2001 117,275 280,894
Senior Vice President
and Controller
EXECUTIVE GROUP 135,000 51.4% $16.375 03/26/2001 1,055,474 2,528,046
(TOTAL) (4)
NON-EXECUTIVE DIRECTOR -- -- -- -- -- --
GROUP
NON-EXECUTIVE OFFICER 127,500 48.6% $16.375 03/26/2001 996,837 2,387,599
EMPLOYEE GROUP
<FN>
(1) All options granted during fiscal 1993 vest one-third on the date
of the grant (March 26, 1993) and one-third on each of the two
following anniversaries of the grant.
(2) All options were granted at the closing price as reported in the
Wall Street Journal on the date of grant.
(3) Gains are reported net of the option exercise price, but before
taxes associated with exercise. The gain is calculated assuming
five percent and ten percent increase, compounded annually, in the
per share price of the stock. These amounts represent certain
assumed rates of appreciation only over the eight-year option
term. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock, overall
stock market conditions, as well as the option holder's continued
employment through the exercise period. The amounts reflected in
the table may not necessarily be achieved.
(4) Includes one other Executive Officer in addition to the above-
named individuals.
</TABLE>
During 1993, Form 4s reporting stock options awarded to Messrs.
Callahan, Roe, Gettier, Hahn, Aument and Karsten were filed late by the
Company on their behalf. All filings are now current.
No options were exercised under the Plan in 1993.
<PAGE>
<PAGE>
USLICO RETIREMENT PLAN
USLICO maintains a noncontributory, defined benefit pension plan and an
excess benefit plan for its employees. The following table provides
an example of benefits at the normal retirement age of 65, payable as a
life annuity.
YEARS OF CREDITED SERVICE AT RETIREMENT
FINAL AVERAGE SALARY 15 20 25 30 35
$ 25,000 5,796 7,728 9,661 11,593 11,593
50,000 13,296 17,728 22,161 26,593 26,593
75,000 20,796 27,728 34,661 41,593 41,593
100,000 28,296 37,728 47,161 56,593 56,593
125,000 35,796 47,728 59,661 71,593 71,593
150,000 43,296 57,728 72,161 86,593 86,593
175,000 50,796 67,728 84,661 101,593 101,593
200,000 58,296 77,728 97,161 116,593 116,593
225,000 65,796 87,728 109,661 131,593 131,593
250,000 73,296 97,728 122,161 146,593 146,593
300,000 88,296 117,728 147,161 176,593 176,593
400,000 118,296 157,728 197,161 236,593 236,593
450,000 133,296 177,728 222,161 266,593 266,593
500,000 148,296 197,728 247,161 296,593 296,593
The excess plan provides a benefit for employees whose retirement
benefit from the qualified retirement plan would be reduced because of
application of certain sections of the Internal Revenue Code, which
limit the annual compensation used to determine the final average
salary to $150,000, and the maximum benefit the plan may pay to
$118,800, for 1994.
Credited years of service for benefit accrual under the Pension Plan,
as of December 31, 1993, for the following executive officers are:
Daniel J. Callahan, III 1 year
David H. Roe 2 years
Glenn H. Gettier 1 year
W. Alan Aument 21 years
David W. Karsten 8 years
<PAGE>
<PAGE>
A participant's annual pension payable to him as of his normal
retirement date will be equal to 1.5% of that portion of his "final
average salary" (as defined in the USLICO Retirement Plan) which is
equal to the "Covered Compensation" (as defined in the USLICO
Retirement Plan) in effect for the year in which the participant
retires, plus 2.0% of that portion of the participant's final average
salary in excess of the Covered Compensation, multiplied by the number
of years of credited service not to exceed 30 years. A pension benefit
is payable upon (i) normal retirement, (ii) early retirement at or
after age 55 with at least five years of vesting service, (iii) death,
under certain circumstances, and (iv) disability if the participant has
completed at least five years of vesting service. A pension benefit is
also payable to any participant who terminates employment after
completing at least five years of vesting service. Payments beginning
prior to age 65 may be reduced to reflect early commencement. This
pension benefit may be payable at the election of the participant at
any time at or after age 55. Generally, the payment of benefits will
be in the form of a straight life annuity for participants who are not
married and a joint and survivor annuity for those who are married.
USLICO SAVINGS PLAN (IRC Section 401(k) Plan)
On January 1, 1988, the USLICO Savings Plan (USAVE) under Internal
Revenue Code Section 401(k) was established for employees of USLICO's
subsidiary companies. Under the terms of the Plan, eligible employees
may contribute up to 15% of pay to the allowable maximum permitted for
such plans under the Internal Revenue Code. The IRC maximum
contribution for 1994 is $9,240.
The Company contributions to the Plan are determined annually by the
Board of Directors. For 1993, the Board of Directors agreed to a
Company matching grant of 50 cents on each dollar of the first 3% of
pay an employee contributes to the Plan plus 25 cents on each dollar of
the next 3% of pay being contributed, provided USLICO's GAAP income for
the year exceeded $15 million, excluding realized investment gains or
losses. The Company met this profit goal in 1993 and a Company
contribution totaling $271,410 was made. For 1994, the Board approved
quarterly matching contributions using the same formula described above
to determine each employee's share.
The Plan permits the employee to select the funding medium for
investing his or her salary deferral contributions. At present, there
are six funding media consisting of: USLICO Common Stock, a Deposit
Administration Contract issued by USLICO subsidiary Bankers Security
Life Insurance Society, a Balanced Fund offered by Crestar Bank, the
Plan's trustee, the Fidelity Magellan Fund, the Fidelity U.S. Equity
Index Fund and the Fidelity Ginnie Mae Portfolio.
Approximately 66% of eligible employees participate in the Plan.
<PAGE>
<PAGE>
COMPENSATION COMMITTEE REPORT TO SHAREHOLDERS 1/
The Compensation Committee (the "Committee") of the Board of Directors
administers the Company's executive compensation program for officers,
evaluates the performance of USLICO executive officers, and considers
management succession and related matters. The Committee reviews with
the Board all aspects of compensation for the Chief Executive Officer,
Daniel J. Callahan, III, and reviews in general the compensation of all
other executives. The Board retains final approval authority of all
Committee recommendations concerning executive compensation.
EXECUTIVE COMPENSATION POLICY --- The philosophy upon which the
Company's executive compensation programs are built includes:
- Creation of a mutuality of interest between the
executive officers and shareholders through
compensation structures that share the rewards and
risks of strategic decision-making.
- Reinforcement of the strategic performance
objectives of the Company.
- Reflection and promotion of the Company's values
toward teamwork through the enhancement of the
level of corporate focus and collaborative efforts
within the senior management group to the Company's
success.
- Attraction and retention of qualified talent, which
is critical to both the short-term and long-term
success of the Company.
PAY MIX AND MEASUREMENT --- USLICO's executive compensation is based on
three components, each of which is intended to serve the overall
compensation philosophy:
BASE SALARY. The Committee's approach to base compensation is to offer
competitive salaries in comparison with market practices. However,
with the move last year to the use of more variable compensation tied
directly to Company performance, our practice now is to maintain base
salary levels below industry average. Accordingly, the annual base
salary range mid-point for each position is targeted approximately 15%
below competitive levels of U.S. insurance companies as reported by The
Hay Management Consultants Annual Executive Compensation Survey. This
survey is examined annually and adjustments are made, if appropriate,
to the salary range for each position.
Salaries and pay ranges for executives are reviewed by the Committee on
an annual basis and salaries may be increased at that time based on:
(i) the Committee's assessment, with input from the CEO, of the
individual's performance and contributions to the Company's primary
goals and objectives, (ii) the position of an individual's salary in
the pay range, and (iii) increases in competitive pay levels. The
Committee views work performance as the most important factor in
determining increases to base salary.
___________________________
1/ The report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that USLICO specifically incorporates
this information by reference, and shall not otherwise be deemed
filed under such Acts.<PAGE>
<PAGE>
In late 1992, the Company embarked on a new strategic course to
increase profitability and shareholder value. This included a new
executive management team and a stringent review of current
operations. In context with this new strategy, a number of non-cash,
restructuring charges and other one-time write-offs were made giving
the Company a net loss for the year. At the same time, the quarterly
shareholder dividend was reduced in order to add to the capital
resources needed to support future profitable growth. Additionally,
the Company's Executive Council and this Committee decided to hold base
compensation for the Company's senior officers at 1992 levels
throughout 1993. Accordingly, no changes to base cash compensation
were made in 1993 for the executive officers.
With improved financial results for 1993, and to recognize the
accomplishments the senior management team made toward the Company's
goals, the Committee, with concurrence of the Board of Directors,
approved increases in base pay averaging 7.4% for the executive group
effective January 1, 1994. Mr. Callahan's base salary increased on
that date from $300,000 to $325,000. This increase puts his base
salary at 77% of the average base salaries of chief executive officers
of the companies included in the 1993 Hay Group Executive Compensation
Report for the Insurance Industry.
ANNUAL INCENTIVES. USLICO Corporation, effective January 1, 1993,
established the Management Incentive Compensation Plan for executive
and senior officers of USLICO Corporation and its life insurance
subsidiaries. The incentives provided by the Plan are intended to
reflect the Company's belief that management's compensation should be
tied directly to the success of the organization through profitable
operations and enhancement of shareholder value. Incentive
opportunities under the Plan are focused and allocated consistent with
the performance requirements established by the Committee and the Board
of Directors in conjunction with top management.
Performance goals are established each year by the Committee based on
the Company's established strategic and operating plans and priorities.
The 1993 goals were established in two categories: (i) a Company-wide
goal which reflected measured results of USLICO and its life companies
as stated in terms of net operating income, excluding realized
investment gains or losses, on GAAP and statutory accounting bases; and
(ii) individual goals which reflected the measured results of personal
actions by a single participant. For the initial Plan year, 50% or
more of a participant's total incentive opportunity was based on
corporate-wide goals.
For 1993, the Committee also established a minimum goal of $15 million
net income, excluding realized investment gains or losses and any gains
or losses from USLICO's ship registry and corporate formation business,
which had to be achieved before any incentive awards could be paid to
any participant. Net income in 1993 did not meet this minimum goal and
no incentives were paid.
LONG-TERM INCENTIVES. Long-term incentives are provided through annual
grants of stock options to the named executives and others. The Stock
Option Plan was approved by stockholders in 1991 to assist in the
retention and motivation of executives to improve the Company's long-
term performance and to align executive officers' interest with
shareholders' interest.
The Committee, subject to Board approval, determines the number of
options to be granted each year. Individual awards are based on the
nature and value of the executives' services and their accomplishments
to the Company's performance. During 1991, 1992 and 1993, a total of
78,500, 110,000 and 262,500 options, respectively, were granted to
officers of USLICO and its subsidiaries. A total of 27,500 options
were surrendered to the Plan due to employee departures. The number of
options granted in 1993 increased due to the inclusion of eleven
additional key members of the management team in the Plan. The 1993
grants were made in recognition of the hard work and long hours spent
by the senior management team in the examination of all the Company's
business methods and operations.
Initially, 500,000 shares of USLICO common stock were reserved for
issuance under the Plan. As of March 1, 1994, only 76,500 shares
remain available for future grants under this Plan. The Committee
believes that stock options directly link executive rewards to the
stock market's assessment of the Company's success, thus promoting
shareholder identification. Also, the Board of Directors intends to
grant options to key employees who are not senior officers to reward
performance and to more directly link their compensation to Company
performance. On February 25, 1994, the Board of Directors, at the
Committee's recommendation and subject to approval by stockholders,
increased the number of shares available for grants by 1,000,000
shares.
February 24, 1994
Compensation Committee
Fioravante G. Perrotta, Chairman
Robert F. Cocklin
Thomas H. Moorer
Eli Weinberg
<PAGE>
<PAGE>
STOCK PRICE PERFORMANCE GRAPH 1/
The graph below compares cumulative total return of USLICO, the S&P 500
Index and the S&P Life Insurance Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG USLICO CORPORATION, THE S&P 500 INDEX
AND THE S&P LIFE INSURANCE INDEX
CUMULATIVE TOTAL RETURN
1989 1990 1991 1992 1993
USLICO CORP. 100 112 79 97 100 94
S&P 500 100 132 128 166 179 197
S&P LIFE INSURANCE 100 158 129 186 250 253
* $100 INVESTED ON 12/31/88 IN STOCK OR INDEX -- INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
- ----------------------------------
1/ The Stock Price Performance Graph below shall not be deemed
incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent USLICO specifically incorporates this
information by reference, and shall not otherwise be deemed filed
under such Acts.
<PAGE>
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement the only matters which the
management intends to present at the meeting are those set forth in the
Notice of Meeting and in this Proxy Statement. The management knows of
no other matters which may come before the meeting. However, if any
other matters properly come before the meeting, it is intended that
proxies in the accompanying form will be voted in respect thereto in
accordance with the judgment of the person or persons voting as proxies.
All shares represented by valid proxies will be voted. Proxies will be
voted in accordance with the specifications therein, or in the absence of
specifications, in accordance with the provisions of the proxy.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Stockholder proposals for inclusion in the Proxy Statement for the 1995
Annual Meeting must be received at USLICO's executive office no later
than December 15, 1994. USLICO reserves the right not to include any
proposal which does not meet all the requirements for such inclusion
established by the Securities and Exchange Commission in effect at that
time.
COST OF SOLICITATION
The cost of this solicitation will be borne by USLICO. In addition to
solicitation by mail, proxies may be solicited by telephone, telegram or
personal interview. USLICO will solicit proxies for shares registered in
the names of brokerage houses and other custodians, nominees and
fiduciaries. Such nominees will be requested to send proxies and proxy
material to their principals and USLICO will reimburse such persons for
their expenses in so doing.
INDEPENDENT PUBLIC ACCOUNTANTS
The public accounting firm of KPMG Peat Marwick conducted an annual audit
in 1993 of USLICO and its subsidiaries. The selection of independent
auditors for the current year will be made by the Board of Directors at
its April 1994 meeting. A representative of KPMG Peat Marwick will be
present at the Stockholders' Meeting and will be available to answer
questions and make a statement if desired.
BY ORDER OF THE BOARD OF DIRECTORS
Jeffrey P. Hahn
Senior Vice President, General
Counsel & Secretary
March 29, 1994<PAGE>
<PAGE>
USLICO CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- APRIL 29, 1994
The undersigned hereby appoints Daniel J. Callahan, III and David H.
Roe, and each of them, with full power of substitution, proxy to vote all
shares of common stock which the undersigned is entitled to vote at the
Meeting, and any adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTIONS GIVEN IN THE SPACE PROVIDED. IF NOT OTHERWISE DIRECTED, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE NOMINEES AS
DIRECTORS AND FOR THE AMENDMENT TO THE STOCK OPTION PLAN.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WHICH
RECOMMENDS THE ELECTION OF THOSE NOMINATED AS DIRECTORS AND THE APPROVAL
OF THE AMENDMENT TO THE STOCK OPTION PLAN.
(Continued and to be SIGNED on other side)
=======================================================================
[BOX WITH Please mark your votes
"X" HERE] as in this example.
(TWO PROPOSALS FOR VOTE AT ANNUAL MEETING - SEE TEXT BELOW)
FOR WITHHELD
1. Election of Nominees: John A. Beck
Directors. [BOX] [BOX] Glenn H. Gettier, Jr.
Jack N. Merritt
FOR AGAINST ABSTAIN
2. Approval of Amendment
to Stock Option Plan [BOX] [BOX] [BOX]
Three-year term expiring at annual stockholders meeting in 1997.
For, except vote withheld from the following nominee(s)
________________________________
SIGNATURE(S)____________________________________________DATE___________
NOTE: Please sign exactly as your name(s) appears hereon. If jointly
held, both parties should sign. When signing as executor, administrator,
trustee or guardian, please give full title as such. If a corporation,
please sign in full corporate name by authorized officer and give full
title. If a partnership, please sign in partnership name by authorized
person(s).
