UNITED TRUST, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, JULY 22, 1997
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, July 22, 1997 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 eleven 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 May 27, 1997
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. FRANICS
George E. Francis
Secretary
Dated: June 23, 1997
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 July 22, 1997 at 10:00 a.m., at the offices of the
Company, 5250 South 6th 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 May 27, 1997, in order to furnish to each
shareholder information relating to the business to be transacted at the
meeting.
This proxy statement and the enclosed proxy are being mailed to
shareholders of the Company on or about June 23, 1997. The Annual Report has
been mailed under separate cover. 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 July 22, 1997, 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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<PAGE>
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 79% of First Commonwealth Corporation ("FCC")
and 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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<PAGE>
VOTING SECURITIES OUTSTANDING
May 27, 1997 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 1,897,823 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, 1997 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 617,236 (1) 33.0%
Stock, 12 Red Bud Lane
no par Springfield, IL 62707
value
Thomas F. Morrow 159,060 (2) 8.5%
32 W. Fairview
Springfield, Illinois 62707
(1) Larry E. Ryherd owns 271,086 shares of the Company's Common Stock
in his own name. Includes; (i) 150,050 shares of the Company's Common Stock
in the name of Dorothy LouVae Ryherd, his wife; (ii) 150,000 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) 29,300 shares of the
Company's Common Stock, 9,700 shares of which are in the name of Shari Lynette
Serr, 9,700 shares of which are held in the name of Derek Scott Ryherd and
9,900 shares of which are in the name of Jarad John Ryherd; (iv) 500 shares
of the Company's Common Stock held in the name of Larry E. Ryherd as custodian
for Charity Lynn Newby, his niece; (v) 500 shares held in the name of Larry
E. Ryherd as custodian for Lesley Carol Newby, his niece; (vi) 2,000 shares
held by Dorothy LouVae Ryherd, his wife as custodian for granddaughter; and
(vii) 13,800 shares which may be acquired by Larry E. Ryherd upon the exercise
of outstanding stock options.
(2) Includes 17,200 shares which may be acquired upon the exercise of
outstanding stock options. Includes 1,000 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 1996, 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, 1997 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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<PAGE>
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 0
Stock, Robert E. Cook 0 *
$1.00 par Larry R. Dowell 0 *
value George E. Francis 0 *
Donald G. Geary 225
Raymond L. Larson 0 *
Paul D. Lovell 0 *
Dale E. McKee 0 *
James E. Melville 431 (1) *
Thomas F. Morrow 0 *
Larry E. Ryherd 0 *
All directors and 656 *
executive officers as a
group (twelve in number)
UII's John S. Albin 0 *
Common William F. Cellini 0
Stock, Robert E. Cook 4,025 *
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 31,500 (2)(10) 2.3%
Larry E. Ryherd 47,250 (3)(10) 3.4%
All directors and 82,775 5.9%
executive officers as a
group (twelve in number)
Company's John S. Albin 10,504 (4) *
Common William F. Cellini 1,000
Stock, Robert E. Cook 10,199 *
no par Larry R. Dowell 10,142 *
value George E. Francis 4,600 (5) *
Donald G. Geary 1,200
Raymond L. Larson 4,401 (6) *
Paul D. Lovell 10,056 *
Dale E. McKee 11,901 *
James E. Melville 52,500 (7) 2.8%
Thomas F. Morrow 159,060 (8) 8.5%
Larry E. Ryherd 617,236 (9) 33.0%
All directors and 892,799 47.8%
executive officers as a
group (twelve in number)
(1) James E. Melville owns 55 shares individually and 376 shares owned
jointly with his spouse.
(2) Includes 31,500 shares beneficially in trust for the two children
of Thomas F. Morrow, namely Kristi J. Wilkerson and Amy Suzanne
Heath.
(3) Includes 47,250 shares beneficially in trust for the three
childred of Larry E. Ryherd and Dorothy LouVae Ryherd, namely Shari
Lynette Serr, Derek Scott Ryherd and Jarad John Ryherd.
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<PAGE>
(4) Includes 392 shares owned directly by Mr. Albin's spouse.
(5) Includes 4,600 shares which may be acquired upon the exercise of
outstanding stock options.
(6) Includes 375 shares owned directly by Mr. Larson's spouse.
(7) James E. Melville owns 2,500 shares individually and 14,000 shares
jointly with his spouse. Includes; (i) 3,000 shares of the
Company's Common Stock which are held beneficially in trust for his
daughter, namely Bonnie J. Melville; (ii) 3,000 shares of the
Company's Common Stock, 750 shares of which are in the name of
Matthew C. Hartman, his nephew; 750 shares of which are in
the name of Zachary T. Hartman, his nephew; 750 shares of which are
in the name of Elizabeth A. Hartman, his niece; and 750 shares of
which are in the name of Margaret M. Hartman, his niece; and
(iii) 30,000 shares which may be acquired by James E. Melville
upon the exercise of outstanding stock options.
(8) See footnote 2 under "Principal Holders of Securities" on page 3.
(9) See footnote 1 under "Principal Holders of Securities" on page 3.
(10) In addition, Mr. Morrow and Mr. Ryherd are directors and officers
of UII. The Company owns 416,185 shares (29.6%) of UII. Mr.
Morrow and Mr. Ryherd disclaim any beneficial interest of the
416,185 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, 1996, the Board of Directors of
the Company met four times. All nominees for director attended at least 75%
of all meetings of the Board except for William Cellini.
The Board of Directors has an Audit Committee consisting of Messrs.
Albin, Geary, McKee and Larson. 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 1996.
The Board of Directors has an Executive Committee consisting of Messrs.
Melville, 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 1996.
The Board of Directors has a Nominating Committee consisting of Messrs.
Cook, Lovell and Morrow. 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 1996.
The Stock Option Committee is composed of Messrs. Cellini, Dowell 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 1996.
The compensation of the Company's executive officers is determined by
the full Board of Directors (see report on Executive Compensation).
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<PAGE>
ELECTION OF DIRECTORS
At the annual meeting of shareholders of the Company, eleven 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
69 Director of the Company since 1984; 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
62 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
71 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
62 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
73 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
62 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
65 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
78 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
51 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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<PAGE>
Thomas F. Morrow
52 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. 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
57 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. 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.
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
53 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.
It is with deepest sympathy that we report of the passing of Director,
Robert J. Webb. Mr. Webb was instrumental in the early formation of the
Company having served as a member of the Board of Directors over the past
twelve years.
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).
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<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation (1)
Other Annual
Name and Compensation (2)
Principal Position Salary ($) ($)
<S> <C> <C>
Larry E. Ryherd 1996 400,000 17,681
Chairman of the Board 1995 400,000 13,324
Chief Executive Officer 1994 400,000 7,909
Thomas F. Morrow 1996 300,000 21,405
President, Chief 1995 300,000 16,654
Operating Officer 1994 300,000 9,886
James E. Melville 1996 237,000 27,537
Sr. Executive Vice 1995 237,000 38,206 (3)
President, Chief 1994 237,000 13,181
Financial Officer
George E. Francis 1996 119,000 7,348
Sr. Vice President, 1995 119,000 4,441
Secretary 1994 119,000 2,636
</TABLE>
(1) Compensation deferred at the election of named officers is included in
this section.
(2) Other annual compensation consists of interest earned on deferred
compensation amounts pursuant to their employment agreements and the
Company's matching contribution to the First Commonwealth Corporation
Employee Savings Trust 401(k) Plan.
(3) Includes $16,000 for the value of personal perquisites owing Mr.
Melville.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
The following table summarizes for fiscal year ending, December 31,
1996, the number of shares subject to unexercised options and the value of
unexercised options of the Company's common stock held by the named executive
officers. The values shown were determined by multiplying the applicable
number of unexercised share options by the difference between the per share
market price on December 31, 1996 and the applicable per share exercise price.
There were no options granted to the named executive officers during 1996.
<TABLE>
Number of Shares Number of Securities
Acquired on Value of Underlying Unexercised
Exercise (#) Realized ($) Options/SARS at FY-End (#)
Name Exercisable Unexercisable
<S> <C> <C> <C> <C>
Larry E. Ryherd - - 13,800 -
Thomas F. Morrow - - 17,200 -
James E. Melville 2,500 13,563 30,000 -
George E. Francis - - 4,600 -
Value of Unexercised
In the Money
Options/SARs at FY-End ($)
Exercisable Unexercisable
Larry E. Ryherd 0 -
Thomas F. Morrow 0 -
James E. Melville 0 -
George E. Francis 0 -
</TABLE>
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<PAGE>
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.
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. Pursuant to the agreement, Mr. Ryherd agreed to serve as
President and Chief Executive Officer of the Company and in addition, to serve
in other positions of the affiliated companies if appointed or elected. The
agreement provides for an annual salary of $400,000 as determined by the Board
of Directors. The term of the agreement has been continuous. 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 13,800 of the Company's
common stock at $17.50 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. Pursuant to the
agreement, Mr. Morrow agreed to serve as Chief Operating Officer of the
Company and in addition, to serve in other positions of the affiliated
companies if appointed or elected. The agreement provides for an annual
salary of $300,000 as determined by the Board of Directors. The term of the
agreement has been continuous. 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% annually. Additionally, Mr. Morrow was granted an option
to purchase up to 17,200 of the Company's common stock at $17.50 per share.
The option is immediately exercisable and transferable. The option will
expire December 31, 2000.
The Company and FCC entered into an employment agreement dated April 15,
1993 with James E. Melville pursuant to which Mr. Melville is employed as
Senior Executive Vice President and in addition, to serve in other positions
of the affiliated companies if appointed or elected at an annual salary of
$237,000. The term of the agreement expires December 31, 1997. 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% annually. Additionally, Mr. Melville was
granted an option to purchase up to 32,500 shares of the Company's common
stock at $17.50 per share. The option is immediately exercisable and
transferable. The option will expire December 31, 2000.
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 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. The term of the agreement has been
continuous. 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 4,600 shares
of the Company's Common Stock at $17.50 per share. The option is immediately
exercisable and transferable. This option will expire on December 31, 2000.
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<PAGE>
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 the last three fiscal years, there were no changes in the base salaries
of the named executive officers.
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 the last three fiscal years.
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.
CHIEF EXECUTIVE OFFICER AND PRESIDENT
During 1996, 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 1994, 1995
and 1996 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
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cost savings. Mr. Ryherd's cash compensation for 1996 was $400,000. Mr.
Morrow's cash compensation for 1996 was $300,000. No stock options were
granted to Mr. Ryherd or Mr. Morrow during 1996 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 shareholders and the executive team.
BOARD OF DIRECTORS
John S. Albin Paul D. Lovell
William F. Cellini Dale E. McKee
Robert E. Cook James E. Melville
Larry R. Dowell Thomas F. Morrow
Donald G. Geary Larry E. Ryherd
Raymond L. Larson
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,
1996, with the cumulative total return on the NASDAQ Composite Index
Performance and the NASDAQ Insurance Stock Index (1):
FIVE YEAR TOTAL RETURN CHART
NASDAQ NASDAQ UTI
Insurance
1991 100.00 100.00 100.00
1992 116.58 135.76 200.00
1993 133.69 145.03 125.00
1994 130.48 136.42 50.00
1995 185.03 194.04 37.50
1996 227.27 221.19 62.50
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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 growth over the period shown in the Return Chart with
assets increasing from approximately $41 million in 1991 to approximately
$355 million in 1996. 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 1996 and
were officers or employees of the Company or its subsidiaries during 1996:
Thomas F. Morrow, James E. Melville and Larry E. Ryherd. Accordingly, these
individuals have participated in decisions related to compensation of
executive officers of the Company and its subsidiaries.
During 1996, the following executive officers of the Company were also
members of the Board of Directors of FCC, three of whose executive officers
served as directors of the Company: Messrs. Morrow, Melville and Ryherd.
During 1996, 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, 1996 and for
fiscal year ended December 31, 1995. 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 1997 because the Company generally chooses accountants shortly
before the commencement of the annual audit work.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
1998 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 1998 Annual Meeting of Shareholders,
the proposal must be received by the Company at its principal office on or
before December 15, 1997.
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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 1996 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: June 23, 1997
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