UNITED TRUST, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, DECEMBER 8, 1998
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, December 8, 1998 at
10:00 a.m. at the Holiday Inn Select Airport, 2501 South High School Road,
Indianapolis, Indiana 46241 for the following purposes:
1. To elect thirteen 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 October 16,
1998 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
Secretary
Dated: November 11, 1998
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.
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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 December 8, 1998 at 10:00 a.m. at the Holiday
Inn Select Airport, 2501 South High School Road, Indianapolis, Indiana
46241.
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 October 16, 1998, 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 November 11, 1998. 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 December 8, 1998,
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:
ORGANIZATIONAL CHART
AS OF DECEMBER 31, 1997
United Trust, Inc. ("UTI") is the ultimate controlling company. UTI owns
53% of United Trust Group ("UTG") and 41% of United Income, Inc. ("UII").
UII owns 47% of UTG. UTG owns 79% of First Commonwealth Corporation
("FCC") and 100% of Roosevelt Equity Corporation ("REC"). 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 ABE, and the term "non-insurance
affiliate companies" shall mean the affiliated companies other than UG,
USA, APPL and ABE.
The companies hereinafter are sometimes collectively referred to as the
"Affiliate Companies".
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VOTING SECURITIES OUTSTANDING
October 16, 1998 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 1,655,200 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 name and address of the entity
known to be the beneficial owners of more than 5% of the Company's Common
Stock and shows: (i) the total number of shares of Common Stock
beneficially owned by such person as of June 30, 1998 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 562,431(1) 33.8%
Stock no 12 Red Bud Lane
par value Springfield, IL 62707
(1) Larry E. Ryherd owns 230,621 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) 14,800 shares of the
Company's Common Stock, 6,700 shares of which are in the name of Shari
Lynette Serr, 1,200 shares of which are held in the name of Derek Scott
Ryherd and 6,900 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; 160 shares held by Larry E. Ryherd as
custodian for granddaughter; and (vii) 13,800 shares which may be acquired
by Larry E. Ryherd upon the exercise of outstanding stock options.
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 1997, 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 June 30, 1998 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.
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 Randall L. Attkisson 0 *
Stock,$1.00 William F. Cellini 0 *
par value Robert E. Cook 0 *
Jesse T. Correll 0 *
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Larry R. Dowell 0 *
George E. Francis 0 *
Donald G. Geary 225 *
Raymond L. Larson 0 *
Dale E. McKee 0 *
James E. Melville 544 (1) *
Thomas F. Morrow 0 *
Millard V. Oakley 0 *
Larry E. Ryherd 0 *
All directors and executive
officers as a group
(fourteen in number) 769 *
UII's John S. Albin 0 *
Common Randall L. Attkisson 0 *
Stock, no William F. Cellini 0 *
par value Robert E. Cook 4,025 *
Jesse T. Correll 0 *
Larry R. Dowell 0 *
George E. Francis 0 *
Donald G. Geary 0 *
Raymond L. Larson 0 *
Dale E. McKee 0 *
James E. Melville 0 *
Thomas F. Morrow 0 *
Millard V. Oakley 0 *
Larry E. Ryherd 47,250 (2)(9) 3.4%
All directors and executive
officers as a group
(fourteen in number) 51,275 3.7%
Company's John S. Albin 10,503 (3) *
Common Randall L. Attkisson 0 *
Stock, no William F. Cellini 1,000 *
par value Robert E. Cook 10,199 *
Jesse T. Correll 0 *
Larry R. Dowell 10,142 *
George E. Francis 4,600 (4) *
Donald G. Geary 1,200 *
Raymond L. Larson 4,400 (5) *
Dale E. McKee 11,122 *
James E. Melville 52,500 (6) 3.2%
Thomas F. Morrow 40,555 (7) 2.4%
Millard V. Oakley 0 *
Larry E. Ryherd 562,431 (8) 33.8%
All directors and executive
Officers as a group
(fourteen in number) 708,652 42.6%
(1) James E. Melville owns 168 shares individually and 376 shares owned
jointly with his spouse.
(2) Includes 47,250 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.
(3) Includes 392 shares owned directly by Mr. Albin's spouse.
(4) Includes 4,600 shares which may be acquired upon exercise of
outstanding stock options.
(5) Includes 375 shares owned directly by Mr. Larson's spouse.
(6) James E. Melville owns 2,500 shares individually and 14,000 shares
jointly with his spouse. Includes: (i) 3,000 shares of UTI's Common
Stock which are held beneficially in trust for his daughter, namely
Bonnie J. Melville; (ii) 3,000 shares of UTI's Common Stock, 750
shares of which are in the name of Matthew C. Hartman, his nephew; 750
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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
exercise of outstanding stock options.
(7) Includes 17,200 shares which may be acquired upon exercise of
outstanding stock options.
(8) Larry E. Ryherd owns 230,621 shares of UTI's Common Stock in his own
name. Includes: (i) 150,050 shares of UTI's Common Stock in the name
of Dorothy LouVae Ryherd, his wife; (ii) 150,000 shares of UTI'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) 14,800 shares of UTI's
Common Stock, 6,700 shares of which are in the name of Shari Lynette
Serr, 1,200 shares of which are held in the name of Derek Scott Ryherd,
6,900 shares of which are in the name of Jarad John Ryherd; (iv) 500
shares of UTI'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, 160 shares held by Larry E. Ryherd as custodian for
granddaughter; and (vii) 13,800 shares which may be acquired by Larry E.
Ryherd upon exercise of outstanding stock options.
(9) In addition, Mr. Ryherd is a director and officer of UII. The Company
owns 565,766 shares of UII. Mr. Ryherd disclaims any beneficial interest
of the 565,766 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 accordance with the laws of Illinois and the Certificate of
Incorporation and Bylaws of the Company, as amended, the Company is managed
by its executive officers under the direction of the Board of Directors.
The Board elects executive officers, evaluates their performance, works
with management in establishing business objectives and considers other
fundamental corporate matters, such as the issuance of stock or other
securities, the purchase or sale of a business and other significant
corporate business transactions. In the fiscal year ended December 31,
1997, the Board met five times. All directors attended at least 75% of all
meetings of the board except for Mr. 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 1997.
The Board of Directors has a Nominating Committee consisting of Messrs.
Cook 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 1997.
The compensation of the Company's executive officers is determined by
the full Board of Directors (see report on Executive Compensation).
Under the Company's Certificate of Incorporation, the Board of Directors
may be comprised of between five and twenty-one directors. The Board
currently has ten directors. Shareholders elect Directors to serve for a
period of one year at the Company's Annual Shareholders' meeting.
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The following information with respect to business experience of the
Board of Directors has been furnished by the respective directors or
obtained from the records of the Company.
ELECTION OF DIRECTORS
At the annual meeting of shareholders of the Company, thirteen 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 70
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.
Randall L. Attkisson 53
Chief Financial Officer, Treasurer, Director or
First Southern Bancorp, Inc. since 1986; Director of The
Galilean Home, Liberty, KY since 1996; Treasurer, Director
of First Southern Funding, Inc. since 1992; Director of The
River Foundation, Inc. since 1990; Treasurer, Director of
Somerset Holdings, Inc. since 1987; President of Randall L.
Attkisson & Associates from 1982 to 1986; Commissioner of
Kentucky Department of Banking & Securities from 1980 to
1982; Self-employed Banking Consultant in Miami, FL from
1978 to 1980.
William F. Cellini 63
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 72
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.
Jesse T. Correll 42
Chairman, President, Director of First Southern
Bancorp, Inc. since 1983; President, Director of First
Southern Funding, Inc. since 1992; President, Director of
Somerset Holdings, Inc. and Lancaster Life Reinsurance
Company and First Southern Insurance Agency since 1987;
President, Director of The River Foundation since 1990;
President, Director of Dyscim Holdings Company, Inc. since
1990; Director or Adamas Diamond Corporation since 1980;
Secretary, Director Lovemore Holding Company since 1987;
President, Director of North Plaza of Somerset since 1990;
Director of St. Joseph Hospital, Lexington, KY since 1997;
Managing Partner of World Wide Minerals from 1978 to 1983.
Larry R. Dowell 63
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 74
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 63
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
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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.
Dale E. McKee 79
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 52
President and Chief Operating Officer since July
1997; Chief Financial Officer of the Company since 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 certain Affiliate Companies from 1984 until
September 1991; Senior Executive Vice President of certain
affiliate companies from 1984 until 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 1992.
Thomas F. Morrow 53
Director of the Company since 1984; 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.
Millard V. Oakley 68
Presently serves on Board of Directors and
Executive Committee of Thomas Nelson, a publicly held
publishing company based in Nashville, TN; Director of First
National Bank of the Cumberlands, Livingston-Cooksville, TN;
Lawyer with limited law practice since 1980; State Insurance
Commissioner for State of Tennessee from 1975 to 1979;
Served as General Counsel, United States House of
Representatives, Washington, D.C., Congressional Committee
on Small Business from 1971-1973; Served four elective terms
as County Attorney for Overton County, Tennessee; Elected
delegate to National Democratic Convention in 1964; Served
four elective terms in the Tennessee General Assembly from
1956 to 1964; Lawyer in Livingston, TN from 1953 to 1971;
Elected to the Tennessee Constitutional Convention in 1952.
Larry E. Ryherd 58
President, CEO and Director of the company since 1992;
UTI Chairman of the Board of Directors and a Director 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, .CEO, President and COO of certain affiliate life
insurance companies since 1992 and 1993; Director of the
National Alliance of Life Companies since 1992; 1994 NALC
Membership Committee Chairman; Member of the American
Council of Life Companies and Advisory Board Member of its
Forum 500 since 1992.
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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
James E. Melville President and Chief Operating Officer
Other officers of the company are set forth below:
NAME, AGE POSITION WITH THE COMPANY, BUSINESS EXPERIENCE AND OTHER
DIRECTORSHIPS
George E. Francis 53
Executive Vice President since July 1997;
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.
Theodore C. Miller 35
Senior Vice President and Chief Financial Officer
since July 1997; Vice President and Treasurer since October
1992; Vice President and Controller of certain Affiliate
Companies from 1984 to 1992.
OTHERS NOT COMPLETING THEIR TERM:
Paul D. Lovell Director of the Company resigned effective September 23,
1997. Mr. Lovell is retired.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid to or earned by the Company's Chief Executive Officer and
each of the Executive Officers of the Company whose salary plus bonus
exceeded $100,000 during each of the Company's last three fiscal years:
Compensation for services provided by the named executive officers to the
Company and its affiliates is paid by FCC as set forth in their employment
agreements. (See Employment Contracts).
SUMMARY COMPENSATION TABLE
Annual Compensation (1)
Other Annual
Name and Compensation (2)
Principal Position Salary($) $
Larry E. Ryherd 1997 400,000 18,863
Chairman of the
Board 1996 400,000 17,681
Chief Executive
Officer 1995 400,000 13,324
James E. Melville 1997 237,000 29,538
President, Chief 1996 237,000 27,537
Operating Officer 1995 237,000 38,206(3)
George E. Francis 1997 122,000 8,187
Executive Vice 1996 119,000 7,348
President,Secretary 1995 119,000 4,441
(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 $16,000 for the value of personal perquisites owing
Mr.Melville.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
The following table summarizes for fiscal year ending, December 31,
1997, the number of shares subject to unexercised options and the value of
unexercised options of the Common Stock of UTI held by the named executive
officers. The values shown were determined by multiplying the applicable
number of unexercised share options by the difference between the per share
market price on December 31, 1997 and the applicable per share exercise
price. There were no options granted to the named executive officers for
the past three fiscal years.
Number Number of Value of
of Securities Unexercised in
Shares Underlying the Money
Acquired Value Unexercised Options/ Options/SARs
on Exercise(#) Realized SARs at FY-End(#) at FY-End($)
Name Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
Larry E. Ryherd - - 13,800 - - -
James E. Melville - - 30,000 - - -
George E. Francis - - 4,600 - - -
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 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 July 31, 1997, Larry E. Ryherd entered into an employment agreement
with 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 Chairman of the Board 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 is for a period of five
years. 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 Common Stock of the Company 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 dated July 31, 1997 with James
E. Melville pursuant to which Mr. Melville is employed as President and
Chief Operating Officer and in addition, to serve in other positions of the
affiliated companies if appointed or elected at an annual salary of
$238,200. The term of the agreement expires July 31, 2002. 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 30,000 shares of the
Common Stock of the Company 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 July
31, 1997. Under the terms of the agreement, Mr. Francis is employed as
Executive Vice President of the Company at an annual salary of $126,200.
Mr. Francis also agreed to serve in other positions if appointed or elected
to such positions without additional compensation. The term of the
agreement expires July 31, 2000. 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 Common Stock of the Company at
$17.50 per share. The option is immediately exercisable and transferable.
This option will expire on December 31, 2000.
On July 31, 1997, the Company entered into a severance agreement with
Thomas F. Morrow, Director of the Company since 1984. Mr. Morrow had
certain expectations and understandings as to the length of time he would
be employed by the Company and desired to retire effective July 31, 1997.
Mr. Morrow has agreed to continue as director of the Company and his duties
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as an executive officer ceased. The Company paid Mr. Morrow six months'
severance in a lump sum of $150,000. In lieu of renewal commissions that
Mr. Morrow was entitled to under prior agreements, Mr. Morrow will be paid
a monthly sum of $4,000 for a period of 24 months commencing July 31, 1997.
Thereafter, Morrow will be paid a monthly sum of $3,000 for the next 24
month period ending July 31, 2001. Prior to his retirement, Mr. Morrow
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
UTI Common Stock at $17.50 per share. The option is immediately
exercisable and transferable. The option will expire December 31, 2000.
Mr. Morrow also redeemed the Common Stock of the Company and UII held by
himself and his family. See "Related Party Transactions".
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 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 material
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
Larry E. Ryherd has been Chairman of the Board and Chief Executive
Officer since 1984. The Board of Directors used the same compensation plan
elements described above for all executive officers to determine Mr.
Ryherd's 1997 compensation.
In setting both the cash-based and equity-based elements of Mr. Ryherd's
compensation, the Board of Directors made an overall assessment of Mr.
Ryherd's leadership in achieving the Company's long-term strategic and
business goals.
Mr. Ryherd's base salary reflects a consideration of both competitive
forces and the Company's performance. The Board of Directors does not
assign specific weights to these categories.
The Company surveys total cash compensation for chief executive officers
at the same group of companies described under "Base Salary" above. Based
upon its survey, the Company then determines a median around which it
builds a competitive range of compensation for the CEO. As a result of
this review, the Board of Directors concluded that Mr. Ryherd's base salary
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was in the low end of the competitive market, and his total direct
compensation (including stock incentives) was competitive for CEOs running
companies comparable in size and complexity to the Company.
The Board of Directors considered the Company's financial results as
compared to other companies within the industry, financial performance for
fiscal 1997 as compared to fiscal 1996, the Company's progress as it
relates to the Company's growth through acquisitions and simplification of
the organization, the fact that since the Company does not have a Chief
Marketing Officer, Mr. Ryherd assumes additional responsibilities of the
Chief Marketing Officer, and Mr. Ryherd's salary history, performance
ranking and total compensation history.
Through fiscal 1997, Mr. Ryherd's annual salary was $400,000, the amount
the Board of Directors set in January 1996. In July 1997, the Board of
Directors reviewed Mr. Ryherd's salary. Following a review of the above
factors, the Board of Directors decided to recognize Mr. Ryherd's
performance by placing a greater emphasis on long-term incentive awards,
and therefore retained Mr. Ryherd's base salary at $400,000.
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 Raymond L. Larson
William F. Cellini Dale E. McKee
Robert E. Cook James E. Melville
Larry R. Dowell Thomas F. Morrow
Donald G. Geary Larry E. Ryherd
James E. Melville
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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,
1997, with the cumulative total return on the NASDAQ Composite Index
Performance and the NASDAQ Insurance Stock Index (1):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1997
UTI 100 63 25 19 32 40
100 115 112 159 195 239
NASDAQ
insurance 100 107 100 143 163 239
</TABLE>
(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 on the NASDAQ Small Cap exchange under the sign "UTIN".
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 due in part as a result of the Company's
low profile, 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 $233 million in
1991 to approximately $333 million in 1997. The growth rate has been
the result of acquisitions of other companies 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 1997 and
were officers or employees of the Company or its subsidiaries during 1997:
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 1997, the following executive officers of the Company were also
members of the Board of Directors of UII, two of whose executive officers
served on the Board of Directors of the Company: Messrs. Melville and
Ryherd.
During 1997, Larry E. Ryherd and James E. Melville, executive officers
of the Company, were also members of the Board of Directors of FCC, two of
whose executive officers served on the Board of Directors of the Company:
Messrs. Melville and Ryherd.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
UTI has a service agreement with its affiliate, UII (equity investee), to
perform services and provide personnel and facilities. The services
included in the agreement are claim processing, underwriting, processing
and servicing of policies, accounting services, agency services, data
processing and all other expenses necessary to carry on the business of a
life insurance company.
UII has a service agreement with USA which states that USA is to pay UII
monthly fees equal to 22% of the amount of collected first year premiums,
20% in second year and 6% of the renewal premiums in years three and after.
UII's subcontract agreement with the Company states that UII is to pay the
Company monthly fees equal to 60% of collected service fees from USA as
stated above.
On January 1, 1993, FCC entered into an agreement with UG pursuant to which
FCC provides management services necessary for UG to carry on its business.
In addition to the UG agreement, FCC and its affiliates have either
directly or indirectly entered into management and/or cost-sharing
arrangements for FCC's management services. FCC received net management
fees of $9,893,321, $9,927,000 and $10,464,000 under these arrangements in
1997, 1996 and 1995, respectively. UG paid $8,660,481, $9,626,559 and
$10,164,000 to FCC in 1997, 1996 and 1995, respectively.
USA paid $989,295, $1,567,891 and $2,015,325 under their agreement with UII
for 1997, 1996 and 1995, respectively. UII paid $593,577, $940,734 and
$1,209,195 under their agreement with the Company for 1997, 1996 and 1995,
respectively.
Their respective domiciliary insurance departments have approved the
agreements of the insurance companies and it is Management's opinion that
where applicable, costs have been allocated fairly and such allocations are
based upon generally accepted accounting principles. The costs paid by the
Company for these services include costs related to the production of new
business, which are deferred as policy acquisition costs and charged off to
the income statement through "Amortization of deferred policy acquisition
costs". Also included are costs associated with the maintenance of
existing policies that are charged as current period costs and included in
"general expenses".
On July 31, 1997, UTI issued convertible notes for cash received totaling
$2,560,000 to seven individuals, all officers or employees of UTI. The
notes bear interest at a rate of 1% over prime, with interest payments due
quarterly and principal due upon maturity of July 31, 2004. The conversion
price of the notes are graded from $12.50 per share for the first three
years, increasing to $15.00 per share for the next two years and increasing
to $20.00 per share for the last two years. Conditional upon the seven
individuals placing the funds with UTI were the acquisition of a portion of
the holdings of UTI owned by Larry E. Ryherd and his family and the
acquisition of common stock of UTI and UII held by Thomas F. Morrow and his
family and the simultaneous retirement of Mr. Morrow. Neither Mr. Morrow
nor Mr. Ryherd was a party to the convertible notes.
Approximately $1,048,000 of the cash received from the issuance of the
convertible notes was used to acquire stock holdings of UTI and UII of Mr.
Morrow and to acquire a portion of UTI's stock held by Larry E. Ryherd and
his family. The remaining cash received will be used by UTI to provide
additional operating liquidity and for future acquisitions of life
insurance companies. On July 31, 1997, UTI acquired a total of 126,921 of
its own shares of common stock and 47,250 shares of UII common stock from
Thomas F. Morrow and his family. Mr. Morrow simultaneously retired as an
executive officer of UTI. Mr. Morrow will remain as a member of the Board
of Directors of UTI. In exchange for his stock, Mr. Morrow and his family
received approximately $348,000 in cash, promissory notes valued at
$140,000 due in eighteen months, and promissory notes valued at $1,030,000
due January 31, 2005. These notes bear interest at a rate of 1% over
prime, with interest due quarterly and principal due upon maturity. The
notes do not contain any conversion privileges. Additionally, on July 31,
1997, UTI acquired a total of 97,499 shares of its common stock from Larry
E. Ryherd and his family. Mr. Ryherd and his family received approximately
$700,000 in cash and a promissory note valued at $251,000 due January 31,
2005. The acquisition of approximately 16% of Mr. Ryherd's stock holdings
of UTI was completed as a prerequisite to the convertible notes placed by
other management personnel to reduce the total holdings of Mr. Ryherd and
his family to make the stock more attractive to the investment community.
Following the transaction, Mr. Ryherd and his family own approximately 31%
of the outstanding common stock of UTI.
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YEAR 2000 ISSUE UTI AND UII
The "Year 2000 Issue" is the inability of computers and computing
technology to recognize correctly the Year 2000 date change. The problem
results from a long-standing practice by programmers to save memory space
by denoting Years using just two digits instead of four digits. Thus,
systems that are not Year 2000 compliant may be unable to read dates
correctly after the Year 1999 and can return incorrect or unpredictable
results. This could have a significant effect on UTI and UII's
business/financial systems as well as products and services, if not
corrected.
UTI and UII established a project to address year 2000 processing concerns
in September of 1996. In 1997 UTI and UII completed the review of UTI and
UII's internally and externally developed software, and made corrections to
all year 2000 non-compliant processing. UTI and UII also secured
verification of current and future year 2000 compliance from all major
external software vendors. In December of 1997, a separate computer
operating environment was established with the system dates advanced to
December of 1999. A parallel model office was established with all dates
in the data advanced to December of 1999. Parallel model office processing
is being performed using dates from December of 1999 to January of 2001, to
insure all year 2000 processing errors have been corrected. Testing should
be completed by the end of the first quarter of 1998. After testing is
completed, periodic regression testing will be performed to monitor
continuing compliance. By addressing year 2000 compliance in a timely
manner, compliance will be achieved using existing staff and without
significant impact on UTI and UII operationally or financially.
RECENT DEVELOPMENT
Equity Investment in UTI
On April 30, 1998, UTI and First Southern Funding, a Kentucky corporation
("FSF"), signed a Definitive Agreement ("the FSF Agreement") whereby FSF
will make an equity investment in UTI. Under the terms of the FSF
Agreement, FSF will buy 473,523 authorized but unissued shares of UTI
common stock for $15.00 a share and will also buy 389,715 shares of UTI
common stock that UTI purchased during the last year in private
transactions at the average price UTI paid for such stock, plus interest,
or approximately $10.00 per share. FSF will also purchase 66,667 shares of
UTI common stock and $2,560,000 of face amount convertible bonds which are
due and payable on any change in control of UTI, in private transactions,
primarily from officers of UTI. In addition, FSF will be granted a three
year option to purchase up to 1,450,000 shares of UTI common stock for
$15.00 per share.
Management of UTI intends to use the equity that is being contributed to
expand their operations through the acquisition of other life companies.
The transaction is subject to the receipt of regulatory and other
approvals; and the satisfaction of certain conditions. The transaction is
not expected to be completed before July 31, 1998, and there can be no
assurance that the transaction will be completed.
FSF is an affiliate of First Southern Bancorp, Inc., a bank holding company
that owns five banks that operate out of 14 locations in central Kentucky.
PENDING CHANGE IN CONTROL OF UNITED TRUST, INC.
On February 19, 1998, the Company signed a letter of intent with Jesse
T. Correll, whereby Mr. Correll will personally or in combination with
other individuals make an equity investment in UTI over a period of three
years. Under the terms of the letter of intent Mr. Correll will buy
2,000,000 authorized but unissued shares of common stock for $15.00 per
share and will also buy 389,715 shares of common stock, representing common
stock purchased during the last eight months in private transactions at the
average price paid for such stock, plus interest, or approximately $10.00
per share. Mr. Correll also will purchase 66,667 shares of common stock
and $2,560,000 of face amount of convertible bonds (which are due and
payable on any change in control of the Company) in private transactions.
The Company intends to use the equity that is being contributed to
expand their operations through the acquisition of other life insurance
companies. The transaction is subject to negotiation of a definitive
purchase agreement; completion of due diligence by Mr. Correll; the receipt
of regulatory and other approvals; and the satisfaction of certain
conditions. The transaction is not expected to be completed before June
30, 1998, and there can be no assurance that the transaction will be
completed.
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PROPOSED MERGER
On March 25, 1997, the Board of Directors of the Company and UII voted
to recommend to the shareholders a merger of the two companies. Under the
Plan of Merger, the Company would be the surviving entity issuing one share
of its stock for each share held by UII shareholders.
The Company owns 53% of United Trust Group, Inc., an insurance holding
company, and UII owns 47% of United Trust Group, Inc. Neither the Company
nor UII have any other significant holdings or business dealings. The
Board of Directors of each company thus concluded a merger of the two
companies would be in the best interests of the shareholders. The merger
will result in certain cost savings, primarily related to costs associated
with maintaining a corporation in good standing in the states in which it
transacts business.
A vote of the shareholders of the Company and UII regarding the proposed
merger is anticipated to occur sometime during the first quarter of 1999.
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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, 1997 and for
fiscal year ended December 31, 1996. 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 1998 because the Company
generally chooses accountants shortly before the commencement of the annual
audit work.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
1999 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 1999 Annual Meeting of
Shareholders, the proposal must be received by the Company at its principal
office on or before December 15, 1998.
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 1997 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, Secretary
Dated: November 11, 1998
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