UNITED TRUST, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Tuesday, June 4, 1996
To the Shareholders of:
UNITED TRUST, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of United
Trust, Inc., (the "Company"), will be held Tuesday, June 4, 1996 at 10:00 a.m.
at the offices of the Company, 5250 South 6th Street, Springfield, IL 62703,
for the following purposes:
1. To elect twelve directors of the Company to serve for one year and
until their successors are elected and qualified; and
2. To consider and act upon such other business as may properly be
brought before the meeting.
The Board of Directors has fixed the close of business on April 19, 1996
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY SO THAT YOUR
VOTE CAN BE RECORDED. If you are present at the meeting and desire to do so,
you may revoke your proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
UNITED TRUST, INC.
George E. Francis
George E. Francis
Secretary
Dated: April 22, 1996
Springfield, Illinois
YOUR VOTE IS IMPORTANT!
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON.
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS OF
UNITED TRUST, INC.
GENERAL INFORMATION REGARDING SOLICITATION
The Annual Meeting of the Shareholders of United Trust, Inc. (the
"Company") will be held on June 4, 1996 at 10:00 a.m., at the offices of the
Company, 5250 South Sixth Street, Springfield, Illinois. The mailing address
of the Company is P.O. Box 5147, Springfield, Illinois 62705-5147.
This proxy statement is being sent to each holder of record of the
issued and outstanding shares of Common Stock of the Company, no par value
(the "Common Stock"), as of April 19, 1996, in order to furnish to each
shareholder information relating to the business to be transacted at the
meeting.
This proxy statement, the enclosed proxy and Annual Report are being
mailed to shareholders of the Company on or about April 22, 1996. The Company
will bear the cost of soliciting proxies from its shareholders. The Company
may reimburse brokers and other persons for their reasonable expenses in
forwarding proxy materials to the beneficial owners of the Company's stock.
Solicitations may be made by telephone, telegram or by personal calls, and it
is anticipated that such solicitations will consist primarily of requests to
brokerage houses, custodians, nominees, and fiduciaries to forward the
soliciting material to the beneficial owners of shares held of record by such
persons. If necessary, officers and regular employees of the Company may by
telephone, telegram or personal interview request the return of proxies.
VOTING
The enclosed proxy is solicited by and on behalf of the Board of
Directors. If you are unable to attend the meeting on June 4, 1996, please
complete the enclosed proxy and return it to us in the accompanying envelope
so that your shares will be represented.
When the enclosed proxy is duly executed and returned in advance of the
meeting, and is not revoked, the shares represented thereby will be voted in
accordance with the authority contained therein. Any shareholder giving a
proxy may revoke it at any time before it is voted by delivering to the
Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a later date, or by attending the meeting and voting in person.
If a proxy fails to specify how it is to be voted it will be voted "FOR"
Proposal 1.
Inspectors of election will be appointed to tabulate the number of
shares of Common Stock represented at the meeting in person or by proxy, to
determine whether or not a quorum is present and to count all votes cast at
the meeting. The inspectors of election will treat abstentions and broker
non-votes as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. With respect to the tabulation of votes
cast on a specific proposal presented to the shareholders at the meeting,
abstentions will be considered as present and entitled to vote with respect to
that specific proposal, whereas broker non-votes will not be considered as
present and entitled to vote with respect to that specific proposal.
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AFFILIATE COMPANIES
The Company is the ultimate parent company in an insurance holding
company system. The following is the current organizational chart for the
companies that are members of the Company's insurance holding company system
and affiliates of the Company, and the acronyms that will be used herein to
reference the companies:
United Trust, Inc. ("UTI") is the ultimate controlling company. UTI owns 53%
of United Trust Group ("UTG") and 30% of United Income, Inc. ("UII"). UII
owns 47% of UTG. UTG owns 72% of First Commonwealth Corporation ("FCC"). FCC
owns 100% of Universal Guaranty Life Insurance Company ("UG"). UG owns 100%
of United Security Assurance Company ("USA"). USA owns 84% of Appalachian
Life Insurance Company ("APPL") and APPL owns 100% of Abraham Lincoln
Insurance Company ("ABE").
For purposes of this proxy statement, the term "affiliate life insurance
companies" shall mean UG, USA, APPL and ALIC, and the term "non-insurance
affiliate companies" shall mean the affiliated companies other than UG, USA,
APPL and ALIC.
The companies hereinafter are sometimes collectively referred to as the
"Affiliate Companies".
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VOTING SECURITIES OUTSTANDING
April 19, 1996 has been fixed as the record date for the determination
of shareholders entitled to notice of and to vote at the annual meeting or any
adjournments or postponements thereof. On that date, the Company had
outstanding 18,675,935 shares of Common Stock, no par value. No other voting
securities of the Company are outstanding. The holders of such shares are
entitled to one vote per share. There are no cumulative voting rights. The
affirmative vote of the holders of a majority of the shares of Common Stock
represented in person or by proxy at the annual meeting is required to approve
each matter to be voted on at such meeting.
PRINCIPAL HOLDERS OF SECURITIES
The following tabulation sets forth the names and addresses for those
persons known to be the beneficial owners of more than 5% of the Company's
Common Stock and shows for each: (i) the total number of shares of Common
Stock beneficially owned by such persons as of March 31, 1996 and the nature
of such ownership; and (ii) the percent of the issued and outstanding shares
of Common Stock so owned as of the same date.
Title Number of Shares Percent
of Name and Address and Nature of of
Class of Beneficial Owner Beneficial Ownership Class
Common Larry E. Ryherd 6,172,368 (1) 33.0%
Stock, 12 Red Bud Lane
no par Springfield, IL 62707
value
Thomas F. Morrow 1,585,600 (2) 8.5%
32 W. Fairview
Springfield, Illinois 62707
(1) Larry E. Ryherd owns 2,710,868 shares of the Company's Common
Stock in his own name. Includes; (i) 1,500,500 shares of the
Company's Common Stock in the name of Dorothy LouVae Ryherd, his
wife; (ii) 1,500,000 shares of the Company's Common Stock which
are held beneficially in trust for the three children of Larry E.
Ryherd and Dorothy LouVae Ryherd, namely Shari Lynette Serr, Derek
Scott Ryherd and Jarad John Ryherd; (iii) 293,000 shares of the
Company's Common Stock, 97,000 shares of which are in the name of
Shari Lynette Serr, 97,000 shares of which are held in the name of
Derek Scott Ryherd and 99,000 shares of which are in the name of
Jarad John Ryherd; (iv) 5,000 shares of the Company's Common Stock
held in the name of Larry E. Ryherd as custodian for Charity Lynn
Newby, his niece; (v) 5,000 shares held in the name of Larry E.
Ryherd as custodian for Lesley Carol Newby, his niece; (vi) 20,000
shares held by Dorothy LouVae Ryherd, his wife as custodian for
granddaughter; and (vii) 138,000 shares which may be acquired by
Larry E. Ryherd upon the exercise of outstanding stock options.
(2) Includes 172,000 shares which may be acquired upon the exercise of
outstanding stock options. Includes 10,000 shares as custodian
for grandsons.
SECURITY OWNERSHIP OF MANAGEMENT
The following tabulation shows with respect to each of the directors and
nominees of the Company, with respect to the Company's chief executive officer
and each of the Company's executive officers whose salary plus bonus exceeded
$100,000 for fiscal 1995, and with respect to all executive officers and
directors of the Company as a group: (i) the total number of shares of all
classes of stock of the Company or any of its parents or subsidiaries,
beneficially owned as of March 31, 1996 and the nature of such ownership; and
(ii) the percent of the issued and outstanding shares of stock so owned as of
the same date.
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Title Directors, Named Executive Number of Shares Percent
of Officers, & All Directors & and Nature of of
Class Executive Officers as a Group Ownership Class
FCC's John S. Albin 0 *
Common William F. Cellini 104
Stock, Robert E. Cook 0 *
$1.00 par Larry R. Dowell 0 *
value George E. Francis 0 *
Donald G. Geary 90,140
Raymond L. Larson 0 *
Paul D. Lovell 0 *
Dale E. McKee 0 *
James E. Melville 22,163 *
Thomas F. Morrow 0 *
Larry E. Ryherd 0 *
Robert J. Webb 0 *
All directors and 112,407 *
executive officers as a
group (thirteen in number)
UII's John S. Albin 0 *
Common William F. Cellini 0
Stock, Robert E. Cook 57,500 *
no par Larry R. Dowell 0 *
value George E. Francis 0 *
Donald G. Geary 0
Raymond L. Larson 0 *
Paul D. Lovell 0 *
Dale E. McKee 0 *
James E. Melville 0 *
Thomas F. Morrow 590,625 (1) (9) 3.0%
Larry E. Ryherd 675,000 (2) (9) 3.4%
Robert J. Webb 0 *
All directors and 1,323,125 6.7%
executive officers as a
group (thirteen in number)
Company's John S. Albin 105,041 (3) *
Common William F. Cellini 10,000
Stock, Robert E. Cook 101,999 *
no par Larry R. Dowell 101,423 *
value George E. Francis 46,000 (4) *
Donald G. Geary 12,000
Raymond L. Larson 44,011 (5) *
Paul D. Lovell 100,569 *
Dale E. McKee 119,018 *
James E. Melville 525,000 (6) 2.8%
Thomas F. Morrow 1,585,600 (7) 8.5%
Larry E. Ryherd 6,172,368 (8) 33.0%
Robert J. Webb 75,793 *
All directors and 8,998,822 48.2%
executive officers as a
group (thirteen in number)
(1) Includes 590,625 shares beneficially in trust for the two children
of Thomas F. Morrow, namely Kristi J. Wilkerson and Amy Suzanne
Heath.
(2) Includes 675,000 shares beneficially in trust for the three
children of Larry E. Ryherd and Dorothy LouVae Ryherd, namely
Shari Lynette Serr, Derek Scott Ryherd and Jarad John Ryherd.
4
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(3) Includes 3,893 shares owned directly by Mr. Albin's spouse.
(4) Includes 46,000 shares which may be acquired upon the exercise of
outstanding stock options.
(5) Includes 3,753 shares owned directly by Mr. Larson's spouse.
(6) James E. Melville owns 140,000 shares jointly with his spouse.
Includes; (i) 30,000 shares of the Company's Common Stock which
are held beneficially in trust for his daughter, namely Bonnie J.
Melville; (ii) 30,000 shares of the Company's Common Stock, 7,500
shares of which are in the name of Matthew C. Hartman, his nephew;
7,500 shares of which are in the name of Zachary T. Hartman, his
nephew; 7,500 shares of which are in the name of Elizabeth A.
Hartman, his niece; and 7,500 shares of which are in the name of
Margaret M. Hartman, his niece; and (iii) 325,000 shares which may
be acquired by James E. Melville upon the exercise of outstanding
stock options.
(7) See footnote 3 under "Principal Holders of Securities" on page 3.
(8) See footnote 2 under "Principal Holders of Securities" on page 3.
(9) In addition, Mr. Morrow and Mr. Ryherd are directors and officers
of UII. The Company owns 5,888,000 shares (29.6%) of UII. Mr.
Morrow and Mr. Ryherd disclaim any beneficial interest of the
5,888,000 shares of UII owned by the Company as the Company's
board of directors controls the voting and investment decisions
regarding such shares.
* Less than 1%.
Except as indicated above, the foregoing persons hold sole voting and
investment power.
Directors and officers of the Company file periodic reports regarding
ownership of Company securities with the Securities and Exchange commission
pursuant to Section 16(a) of the Securities Exchange Act of 1934 as amended,
and the rules promulgated thereunder.
THE BOARD OF DIRECTORS
In the fiscal year ended December 31, 1995, the Board of Directors of
the Company met five times. All nominees for director attended at least 75%
of all meetings of the Board and any committee of which he is a member.
The Board of Directors has an Audit Committee consisting of Messrs.
Albin, Cook and Webb. The Audit Committee reviews and acts or reports to the
Board with respect to various auditing and accounting matters, the scope of
the audit procedures and the results thereof, the internal accounting and
control systems of the Company, the nature of services performed for the
Company and the fees to be paid to the independent auditors, the performance
of the Company's independent and internal auditors and the accounting
practices of the Company. The Audit Committee also recommends to the full
Board of Directors the auditors to be appointed by the Board. The Audit
Committee met once in 1995.
The Board of Directors has an Executive Committee consisting of Messrs.
Cook, Morrow and Ryherd. The Executive Committee has all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Company, except those powers which, by law, cannot be delegated
by the Board of Directors. The Committee must report to the Board of
Directors regarding all actions taken by the Committee. The Committee did not
meet in 1995.
The Board of Directors has a Nominating Committee consisting of Messrs.
Dowell, Larson, Lovell and McKee. The Nominating Committee reviews, evaluates
and recommends directors, officers and nominees for the Board of Directors.
There is no formal mechanism by which shareholders of the Company can
recommend nominees for the Board of Directors, although any recommendations by
shareholders of the Company will be considered. Shareholders desiring to make
nominations to the Board of Directors should submit their nominations in
writing to the Chairman of the Board no later than February 1st of the year in
which the nomination is to be made. The Committee did not meet in 1995.
The Stock Option Committee is composed of Messrs. Albin, Morrow and
Ryherd. The Committee recommends to the Board of Directors the granting of
options to purchase shares of the Company's Common Stock to those persons
found to be eligible pursuant to the Stock Option criteria. The Committee did
not meet in 1995.
The compensation of the Company's executive officers is determined by
the full Board of Directors (see report on Executive Compensation).
5
<PAGE>
ELECTION OF DIRECTORS
At the annual meeting of shareholders of the Company, nine directors are
to be elected, each director to hold office until the next annual meeting and
until his successor is elected and qualified. Each nominee will be elected
director by a majority of votes cast for such nominee. The persons named in
the proxy intend to vote the proxies as designated for the nominees listed
below. Should any of the nominees listed below become unable or unwilling to
accept nomination or election, it is intended, in the absence of contrary
specifications, that the proxies will be voted for the balance of those named
and for a substituted nominee or nominees; however, the management now knows
of no reason to anticipate such an occurrence. All of the nominees have
consented to be named as nominees and to serve as directors if elected. The
following individuals are nominees for the election of directors:
NAME, AGE POSITION WITH THE COMPANY, BUSINESS EXPERIENCE AND
OTHER DIRECTORSHIPS
John S. Albin, 68 Director of the Company since 1984; Director of United
Trust Group, Inc., Investors Trust, Inc., Universal
Guaranty Investment Co. and Commonwealth Industries
Corp. since 1992; farmer in Douglas and Edgar
counties, Illinois, since 1951; Chairman of the Board
of Longview State Bank since 1978; President of the
Longview Capitol Corporation, a bank holding company,
since 1978; Chairman of First National Bank of Ogden,
Illinois, since 1987; Chairman of the State Bank of
Chrisman since 1988; Director and Secretary of Illini
Community Development Corporation since 1990; Chairman
of Parkland College Board of Trustees since 1990;
board member of the Fisher National Bank, Fisher,
Illinois, since 1993.
William F. Cellini, 61 Director of FCC and certain affiliate companies since
1984; Chairman of the Board of New Frontier
Development Group, Chicago, Illinois for more than the
past five years; Executive Director of Illinois
Asphalt Pavement Association.
Robert E. Cook, 70 Director of the Company since 1984; President of
United Fidelity, Inc. since 1990; Chairman of the
Board of Directors of First Fidelity Mortgage Company
since 1991; President of Cook-Witter, Inc., a
governmental consulting and lobbying firm with offices
in Springfield, Illinois, from 1985 until 1990.
Larry R. Dowell, 61 Director of the Company since 1984; cattleman and
farmer in Stronghurst, Henderson County, Illinois
since 1956; member of the Illinois Beef Association;
past Board and Executive Committee member of Illinois
Beef Council; Chairman of Henderson County Board of
Supervisors since 1992.
Donald G. Geary, 72 Director of FCC and certain affiliate companies since
1984; industrial warehousing developer and founder of
Regal 8 Inns for more than the past five years.
Raymond L. Larson, 61 Director of the Company since 1984; cattleman and
farmer since 1953; Director of the Bank of Sugar
Grove, Illinois since 1977; Board member of National
Livestock and Meat Board since 1983 and currently
Treasurer; Board member and past President of Illinois
Beef Council; member of National Cattlemen's
Association and Illinois Cattlemen's Association.
Paul D. Lovell, 64 Director of the Company since 1984; President of
Lovell Constructors, Inc., a residential developer and
builder located in Bradley, Illinois since 1970; owner
of Lovell Enterprises since 1961; member of Illinois
Homebuilders Association Executive Board since 1987;
assessor for Bourbonnais Township since 1966.
Dale E. McKee, 77 Director of the Company since 1984; pork producer and
farmer in Rio, Illinois, since 1947; President of
McKee and Flack, Inc., an Iowa corporation engaged in
farming since 1975; director of St. Mary's Hospital of
Galesburg since 1984.
James E. Melville, 50 Chief Financial Officer of the Company since March
1993; Senior Executive Vice President of the Company
since September 1992; President of certain Affiliate
Companies from May 1989 until September 1991; Chief
Operating Officer of FCC from 1989 until September
1991; Chief Operating Officer of FCC from 1989 until
September 1991; Chief Operating Officer of certain
Affiliate Companies from 1984 until September 1991;
Senior Executive Vice President of certain Affiliate
Companies from 1984 until September 1989; Consultant
to UTI and UTG from March 1992 through September 1992;
President and Chief Operating Officer of certain
affiliate life insurance companies and Senior
Executive Vice President of non-insurance Affiliate
Companies since September 1992.
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Thomas F. Morrow, 51 President and COO of the Company since 1991, Treasurer
since 1993 and a Director since 1984; Vice Chairman
and Chief Operating Officer of UII since 1992,
Director since 1987; President, Chief Operating
Officer, Treasurer and Director of UTG since 1992;
Vice Chairman, Chief Operating Officer and Director of
certain affiliate companies since 1992 and Treasurer
since 1993; Executive Vice President, Secretary and
Director of UFI since 1990; Executive Vice President,
Secretary and Director of FFMC since 1991. Mr. Morrow
has served as Vice Chairman and Director of certain
affiliate life insurance companies since 1992 as well
as having held similar positions with other affiliate
life insurance companies from 1987 to 1992.
Larry E. Ryherd, 56 Chairman of the Board of Directors and a Director of
the Company since 1984, CEO since 1991; Chairman of
the Board of UII since 1987, CEO since 1992 and
President since 1993; Chairman, CEO and Director of
UTG since 1992; President, CEO and Director of certain
affiliate companies since 1992; Chairman of the Board
and Director of UFI since 1990; Director of FFMC since
1991. Mr. Ryherd has served as Chairman of the Board,
CEO, President and COO of certain affiliate life
insurance companies since 1992 and 1993. He has also
been a Director of the National Alliance of Life
Companies since 1992 and is the 1994 Membership
Committee Chairman; he is a member of the American
Council of Life Companies and Advisory Board Member of
its Forum 500 since 1992.
Robert J. Webb, 79 Director of the Company since 1984; cattleman, pork
producer and farmer in Pope County, Illinois since
1972; president and director of Pope-Hardin Farm
Bureau since 1980; Board member of Illinois Farm
Development Authority.
EXECUTIVE OFFICERS OF THE COMPANY
More detailed information on the following officers of the Company appears
under "Election of Directors":
Larry E. Ryherd Chairman of the Board and Chief Executive
Officer
Thomas F. Morrow President and Chief Operating Officer and
Treasurer
James E. Melville Senior Executive Vice President, Chief Financial
Officer
Other officer of the company is set forth below:
NAME, AGE POSITION WITH THE COMPANY, BUSINESS EXPERIENCE AND
OTHER DIRECTORSHIPS
George E. Francis, 52 Secretary of the Company since February 1993; Director
of certain Affiliate Companies since October 1992;
Senior Vice President and Chief Administrative Officer
of certain Affiliate Companies since 1989; Secretary
of certain Affiliate Companies since March 1993;
Treasurer and Chief Financial Officer of certain
Affiliate Companies from 1984 until September 1992.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid to or earned by the Company's Chief Executive Officer and
each of the three other most highly compensated Executive Officers of the
Company during each of the Company's last three fiscal years: Compensation
for services provided by the named executive officers to the Company and its
affiliates is paid by FCC as set forth in their employment agreements. (See
Employment Contracts).
7
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<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation (1) Long Term
Compensation
Securities
Other Annual Underlying
NAME AND Compensation (3) Stock Options
PRINCIPAL POSITION SALARY ($) BONUS ($) ($) AWARDED (#)(2)
<S> <C> <C> <C> <C> <C>
Larry E. Ryherd 1995 400,000 - 13,324 -
Chairman of the Board 1994 400,000 - 7,909 -
Chief Executive Officer 1993 240,000 169,365 2,393 138,000
Thomas F. Morrow 1995 300,000 - 16,654 -
President, Chief 1994 300,000 - 9,886 -
Operating Officer 1993 200,000 107,576 2,992 172,000
James E. Melville 1995 237,000 - 38,206 (4) -
Sr. Executive Vice 1994 237,000 - 13,181 -
President, Chief 1993 237,000 - 14,506 (4) 325,000
Financial Officer
George E. Francis 1995 119,000 - 4,441 -
Sr. Vice President, 1994 119,000 - 2,636 -
Secretary 1993 119,000 - 798 46,000
</TABLE>
(1) Compensation deferred at the election of named officers is included in
this section.
(2) Reflects stock option to purchase the Company's Common Stock pursuant to
their employment agreements.
(3) All other compensation consists of interest earned on deferred
compensation amounts pursuant to their employment agreements.
(4) Includes $10,517 and $16,000 in 1993 and 1995 respectively for the value
of personal perquisites owing Mr. Melville.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
The following table summarizes for fiscal year ending, December 31, 1995,
the number of shares subject to unexcercised options and the value of
unexercised options of the Company's common stock held by the named executive
officers. The values shown were determined by multiplying the applicable
number of unexercised share options by the difference between the per share
market price on December 31, 1995 and the applicable per share exercise price.
There were no options granted to the named executive officers during 1995.
No named executive officers exercise any options.
<TABLE>
Number of Securities Underlying Value of Unexercised In the
Unexercised Options/SARs Money Options/SARs at
at FY-End(#) FY-End ($)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Larry E. Ryherd 138,000 - 0 -
Thomas F. Morrow 172,000 - 0 -
James E. Melville 300,000 25,000 (1) 0 8,875 (1)
George E. Francis 46,000 - 0 -
</TABLE>
(1) Mr. Melville's employment agreement with the Company provides that he
will be granted an option to purchase 25,000 shares of UTI's Common Stock at
$.02 a share if he is employed pursuant to the terms of the employment
agreement through December 31, 1997.
8
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COMPENSATION OF DIRECTORS
The Company's standard arrangement for the compensation of directors
provide that each director shall receive an annual retainer of $2,400, plus
$300 for each meeting attended and reimbursement for reasonable travel
expenses. The Company's director compensation policy also provides that
directors who are employees or past employees of the Company do not receive
any compensation for their services as directors except for reimbursement for
reasonable travel expenses for attending each meeting. On May 1, 1995, Mr.
Cellini and Mr. Geary were each granted options to purchase 10,000 shares of
the Company's Common Stock at $.02 per share. The options were granted
pursuant to an agreement under which the Company provided incentives for their
continued service with the company and its affiliates. Under the terms of the
grants, the options were immediately exercisable and Messrs. Celini and Geary
exercised those options on May 1, 1995.
EMPLOYMENT CONTRACTS
On April 15, 1993, Larry E. Ryherd entered into an employment agreement
with the Company and FCC. Formerly, Mr. Ryherd had served as Chairman of the
Board and Chief Executive Officer of the Company and its affiliates. Under
the terms of the agreement, Mr. Ryherd agreed to serve as President and Chief
Executive Officer of the Company for a period of 36 months at an annual salary
of $240,000. In addition, Mr. Ryherd agreed to serve as Chairman of the Board
and Chief Executive Officer of UG if elected, and to serve in other positions
if appointed or elected to serve in such positions without additional
compensation. The agreement provides that Mr. Ryherd receives bonus
compensation on the basis of a formula as determined by the Boards of
Directors of the Company and certain of its affiliates. The amount of bonus
compensation as determined is related to the marketing of the business of its
affiliates and is based on percentages of new premiums written and unearned
commissions of terminated agents. Effective January 1, 1995, the Board of
Directors approved a change to this agreement setting Mr. Ryherd's annual
salary at $400,000 without bonus awards through the end of the contract term.
Mr. Ryherd has deferred portions of his income under a plan entitling him to a
deferred compensation payment on January 2, 2000 in the amount of $240,000
which includes interest at the rate of approximately 8.5% per year.
Additionally, Mr. Ryherd was granted an option to purchase up to 138,000 of
the Company's Common Stock at $1.75 per share. The option is immediately
exercisable and transferable. The option will expire December 31, 2000.
On April 15, 1993, Thomas F. Morrow entered into an employment agreement
with the Company and FCC. Formerly, Mr. Morrow had served as President and
Chief Operating Officer of the Company and its affiliates. Under the terms of
the agreement, Mr. Morrow agreed to serve as President and Chief Operating
Officer of the Company for a period of 36 months at an annual salary of
$200,000. In addition, Mr. Morrow agreed to serve as Vice Chairman of the
Board of Directors of UG if elected, and to serve in other positions if
appointed or elected to serve in such positions without additional
compensation. The agreement provides that Mr. Morrow receives bonus
compensation on the basis of a formula as determined by the Boards of
Directors of the Company and certain of its affiliates. The amount of bonus
compensation as determined is related to the marketing of the business of its
affiliates and is based on percentages of new premiums written and unearned
commissions of terminated agents. Effective January 1, 1995, the Board of
Directors approved a change to this agreement setting Mr. Morrow's annual
salary at $300,000 without bonus awards through the end of the contract term.
Mr. Morrow has deferred portions of his income under a plan entitling him to a
deferred compensation payment on January 2, 2000 in the amount of $300,000
which includes interest at the rate of approximately 8.5% per year.
Additionally, Mr. Morrow was granted an option to purchase up to 172,000 of
the Company's Common Stock at $1.75 per share. The option is immediately
exercisable and transferable. The option will expire December 31, 2000.
The Company and FCC entered into an agreement dated April 15, 1993 with
James E. Melville pursuant to which Mr. Melville is employed as Senior
Executive Vice President of the Company. In addition, Mr. Melville agreed to
serve as President and Chief Operating Officer of UG if elected, and to serve
in other positions if appointed or elected without additional compensation.
The term of the agreement consists of two time periods. The first period,
January 1, 1993 through June 30, 1995 at an annual salary of $237,000. The
second period, July 1, 1995 through December 31, 1997, Mr. Melville's
employment will be on a specified time basis. Mr. Melville has deferred
portions of his income under a plan entitling him to a deferred compensation
payment on January 2, 2000 of $400,000 which includes interest at the rate of
approximately 8.5% per year. Additionally, Mr. Melville was granted an option
to purchase up to 300,000 shares of the Company's Common Stock at $1.75 per
share. The option is immediately exercisable and transferable. The option
will expire December 31, 2000. Additionally, if Mr. Melville is employed for
the entire term of the contract, he will be allowed to purchase 25,000 shares
of the Company's Common Stock at $.02. This option will expire December 31,
1998.
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FCC entered into an employment agreement with George E. Francis on June
16, 1992. Under the terms of the agreement, Mr. Francis is employed as Senior
Vice President of the Company for a period of 36 months at an annual salary of
$119,000. Mr. Francis also agreed to serve in other positions if appointed or
elected to such positions without additional compensation. Mr. Francis has
deferred portions of his income under a plan entitling him to a deferred
compensation payment on January 2, 2000 of $80,000 which includes interest at
the rate of approximately 8.5% per year. Additionally, Mr. Francis was
granted an option to purchase up to 46,000 shares of the Company's Common
Stock at $1.75 per share. The option is immediately exercisable and
transferable. This option will expire on December 31, 2000.
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The compensation of the Company's executive officers is determined by
the full Board of Directors. The Board of Directors strongly believes that
the Company's executive officers directly impact the short-term and long-term
performance of the Company. With this belief and the corresponding objective
of making decisions that are in the best interest of the Company's
shareholders, the Board of Directors places significant emphasis on the design
and administration of the Company's executive compensation plans.
EXECUTIVE COMPENSATION CONSIDERATIONS
The purpose of the Company's executive compensation plans is to ensure
that the compensation levels provided to the Company's executive officers
integrate with the Company's annual and long-term performance objectives, to
align the financial interests of the executive officers with the interests of
the Company's shareholders, to reward for superior financial performance, and
to assist the Company in attracting, retaining and motivating executives with
exceptional leadership abilities. Consistent with this purpose, the Board of
Directors establishes appropriate compensation elements in each of the
executive officers compensation plan to include a base salary, annual bonus,
stock options and deferred compensation alternatives. Compensation levels are
reviewed annually by the Board of Directors relative to other life insurance
companies and companies of similar size in the financial industry ("comparable
companies"). Based upon analysis of total compensation paid by comparable
companies, total compensation paid to the Company's executive officers were
found to be within the same ranges. Accordingly, the Board of Directors feels
that the Company is maintaining a competitive position to retain the talent
necessary to meet the challenges in the life insurance industry.
EXECUTIVE COMPENSATION PLAN ELEMENTS
BASE SALARY. The Board of Directors establishes base salaries each year
at a level intended to be within the competitive market range of comparable
companies. In addition to the competitive market range, many factors are
considered in determining base salaries, including the responsibilities
assumed by the executive, the scope of the executive's position, experience,
length of service, individual performance and internal equity considerations.
During fiscal years 1994 and 1995 there were no changes in the base salaries
of the named executive officers.
ANNUAL BONUS. The Company does not have a bonus plan that directly ties
executive compensation to the Company's earnings performance on a near term
basis; however, the bonus compensation element is considered if the executive
officer is responsible for a specific business unit of the Company (see
Employment Contracts).
STOCK OPTIONS. One of the Company's priorities is for the executive
officers to be significant shareholders so that the interest of the executives
are closely aligned with the interests of the Company's other shareholders.
The Board of Directors believes that this strategy motivates executives to
remain focused on the overall long-term performance of the Company. Stock
options are granted at the discretion of the Board of Directors and are
intended to be granted at levels within the competitive market range of
comparable companies. During 1993, each of the named executive officers were
granted options under their employment agreements for the Company's Common
Stock as described in the Employment Contracts section. There were no options
granted to the named executive officers during fiscal years 1994 and 1995.
DEFERRED COMPENSATION. A very significant component of overall
Executive Compensation Plans is found in the flexibility afforded to
participating officers in the receipt of their compensation. The
availability, on a voluntary basis, of the deferred compensation arrangements
as described in the Employment Contracts section may prove to be critical to
certain officers, depending upon their particular financial circumstance.
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CHIEF EXECUTIVE OFFICER AND PRESIDENT
During 1995, the Company's most highly compensated executive officers
were Larry E. Ryherd, Chief Executive Officer, and Thomas F. Morrow, President
and Chief Operating Officer. In deciding Mr. Ryherd's and Mr. Morrow's
compensation, the Board of Directors did not affix specific weights or values
to the various factors considered in the executive compensation plan elements.
The Board of Directors considered the significant progress made in 1993, 1994
and 1995 as it relates to the Company's growth through acquisitions and
marketing new business. The Board of Directors also considered key decisions
and actions taken to ensure the Company's long term profitability such as the
continued restructuring of the Company in response to changes in the industry
in order to remain competitive, and the consolidation of operations to achieve
cost savings. Mr. Ryherd's cash compensation for 1995 was $400,000 of which
$30,000 was deferred. Mr. Morrow's cash compensation for 1995 was $300,000 of
which $37,500 was deferred. No stock options were granted to Mr. Ryherd or
Mr. Morrow during 1995 and neither exercised any stock options during the
year.
CONCLUSION
The Board of Directors believes the mix of structured employment
agreements with certain key executives, conservative market based salaries,
competitive cash incentives for short-term performance and the potential for
equity-based rewards for long term performance represents an appropriate
balance. This balanced Executive Compensation Plan provides a competitive and
motivational compensation package to the executive officer team necessary to
continue to produce the results the Company strives to achieve. The Board of
Directors also believes the Executive Compensation Plan addresses both the
interests of the stockholders and the executive team.
BOARD OF DIRECTORS
John S. Albin Dale E. McKee
Robert E. Cook Thomas F. Morrow
Larry R. Dowell Larry E. Ryherd
Raymond L. Larson Robert J. Webb
Paul D. Lovell
The foregoing Report on Executive Compensation shall not be deemed to be
incorporated by reference into any filing of the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates such information by reference.
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Company's Common Stock during the five fiscal years ended December 31,
1995, with the cumulative total return on the NASDAQ Composite Index
Performance and the NASDAQ Insurance Stock Index (1):
The five year total return chart reflects Company stock performance compared
to the NASDAQ stock market and the NASDAQ insurance stock market. The base
year is 1990 with subsequent years reflecting a percentage change from the
base year. The Company's stock price percentage changes were 57, 114, 71,
29 and 21 for 1991, 1992, 1993, 1994 and 1995 respectively. NASDAQ composite
stock price percentage changes were 160, 186, 212, 208 and 300 for 1991, 1992,
1993, 1994 and 1995, respectively. The NASDAQ insurance composite stock
price percentage changes were 141, 191, 204, 193 and 274 for 1991, 1992, 1993,
1994 and 1995, respectively.
Assumes $100 invested on December 31, 1991
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(1) The Company selected the NASDAQ Composite Index Performance as an
appropriate comparison because the Company's Common Stock is not listed on any
exchange but the Company's Common Stock is traded in the over-the-counter
market and is quoted on the NASDAQ system. Furthermore, the Company selected
the NASDAQ Insurance Stock Index as the second comparison because there is no
similar single "peer company" in the NASDAQ system with which to compare stock
performance and the closest additional line-of-business index which could be
found was the NASDAQ Insurance Stock Index. Trading activity in the Company's
Common Stock is limited, which may be a result of the Company's low profile
from not being listed on any exchange, and its reported operating losses. The
Company has experienced a tremendous growth rate over the period shown in the
Return Chart with assets growing from approximately $33.5 million in 1990 to
approximately $356 million in 1995. The growth rate has been the result in
part of other company acquisitions and new insurance writings. The Company
has incurred costs of conversions and administrative consolidations associated
with the acquisitions which has contributed to the operating losses. The
Return Chart is not intended to forecast or be indicative of possible future
performance of the Company's stock.
The foregoing graph shall not be deemed to be incorporated by reference into
any filing of the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates such information by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as directors of the Company during 1995 and
were officers or employees of the Company or its subsidiaries during 1995:
Thomas F. Morrow and Larry E. Ryherd. Accordingly, these individuals have
participated in decisions related to compensation of executive officers of the
Company and its subsidiaries.
During 1995, the following executive officers of the Company were also
members of the Board of Directors of FCC, two of whose executive officers
served as directors of the Company: Messrs. Morrow and Ryherd. During 1995,
the following executive officers of the Company were also members of the Board
of Directors of UII, two of whose executive officers served as directors of
the Company: Messrs. Morrow and Ryherd.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Kerber, Eck and Braeckel served as the Company's independent certified
public accounting firm for the fiscal year ended December 31, 1995 and for
fiscal year ended December 31, 1994. In serving its primary function as
outside auditor for the Company, Kerber, Eck and Braeckel performed the
following audit services: examination of annual consolidated financial
statements; assistance and consultation on reports filed with the Securities
and Exchange Commission and; assistance and consultation on separate financial
reports filed with the State insurance regulatory authorities pursuant to
certain statutory requirements. The Company does not expect that a
representative of Kerber, Eck and Braeckel will be present at the Annual
Meeting of Shareholders of the Company. No accountants have been selected for
fiscal year 1996 because the Company generally chooses accountants shortly
before the commencement of the annual audit work.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
1997 ANNUAL MEETING
In order for a proposal by a shareholder to be included in the Company's
proxy statement and form of proxy for the 1997 Annual Meeting of Shareholders,
the proposal must be received by the Company at its principal office on or
before December 15, 1996.
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OTHER MATTERS TO COME BEFORE THE MEETING
The management does not intend to bring any other business before the
meeting of the Company's shareholders and has no reason to believe that any
will be presented to the meeting. If, however, any other business should
properly be presented to the meeting, the proxies named in the enclosed form
of proxy will vote the proxies in accordance with their best judgement.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company has filed its 1995 Annual Report on Form 10-K with the
Securities and Exchange Commission. A copy of the report may be obtained
without charge by any shareholder. Requests for copies of the report should
be sent to George E. Francis, United Trust, Inc., 5250 South 6th Street, P.O.
Box 5147, Springfield, Illinois, 62705-5147.
BY ORDER OF THE BOARD OF DIRECTORS
UNITED TRUST, INC.
George E. Francis
George E. Francis, Secretary
Dated: April 22, 1996
