SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT
OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to '240.14a-11(c) or '240.14a-12
STANDARD MANAGEMENT CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule O-11
(Set forth the amount on which the filing fee is calculated and state how
it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
TO THE STOCKHOLDERS OF
STANDARD MANAGEMENT CORPORATION
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Standard Management Corporation to be held at 9:30 a.m.,
local time, on Wednesday, June 10, 1998 at the Woodland Country Club, 100
Woodland Lane, Carmel, Indiana 46032.
The matters to be considered at the meeting are described in the
accompanying Notice of Annual Meeting of Stockholders and the Proxy
Statement. We are very pleased that John J. Dillon and Jerry E. Francis
are nominees for election to the Board of Directors for the first time.
Regardless of your plans for attending in person, it is important
that your shares be represented at the meeting. Therefore, please
complete, sign, date and return the enclosed proxy card in the enclosed,
post-paid envelope. This will enable you to vote on the business to be
transacted whether or not you attend the meeting.
We look forward to seeing you at the 1998 Annual Meeting.
Sincerely,
Ronald D. Hunter
Chairman, President and
Chief Executive Officer
May 12, 1998
<PAGE>
STANDARD MANAGEMENT CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998
TO THE STOCKHOLDERS OF
STANDARD MANAGEMENT CORPORATION:
The Annual Meeting of Stockholders (the "Annual Meeting") of Standard
Management Corporation ("SMC" or "the Company") will be held at 9:30 a.m.,
local time, on Wednesday, June 10, 1998, at the Woodland Country Club, 100
Woodland Lane, Carmel, Indiana 46032, to consider and vote on the following
matters:
Proposal 1. To elect three Class III directors to the Board of Directors
of SMC for a term of three years and to elect one Class I
director to the Board of Directors of SMC for a term of one
year.
This item is more fully described in the accompanying Proxy Statement.
In addition, the stockholders will transact such other business as may properly
come before the Annual Meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on May 5, 1998 (the
"Record Date") are entitled to notice of , and to vote at, the Annual Meeting
or any adjournments thereof.
Your attention is directed to the accompanying Proxy Statement, proxy
card and the Shareholders Annual Report. Whether or not you plan to attend the
Annual Meeting in person, you are urged to complete, sign, date and return the
enclosed proxy card in the enclosed, post-paid envelope. If you attend the
Annual Meeting and wish to vote in person, you may withdraw your proxy and vote
your shares personally.
By order of the Board of Directors
Stephen M. Coons
EXECUTIVE VICE PRESIDENT AND SECRETARY
May 12, 1998
Indianapolis, Indiana
<PAGE>
STANDARD MANAGEMENT CORPORATION
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 10, 1998
GENERAL INFORMATION
This Proxy Statement is being furnished to stockholders in connection
with the solicitation of proxies by the Board of Directors (the "Board of
Directors") of Standard Management Corporation ("SMC" or the "Company") for use
at its 1998 Annual Meeting of Stockholders (the "Annual Meeting") to be held at
9:30, a. m. local time, on Wednesday, June 10, 1998 at the Woodland Country
Club, 100 Woodland Lane, Carmel, Indiana 46032.
Each stockholder of record of Common Stock of the Company (the "Common
Stock") on May 5, 1998 (the "Record Date") is entitled to vote at the Annual
Meeting and will have one vote for each share of Common Stock held at the close
of business on the Record Date. A majority of the shares entitled to vote will
constitute a quorum for purposes of the Annual Meeting. On April 30, 1998
there were 7,103,944 shares of Common Stock outstanding and entitled to vote.
A list of the stockholders of record entitled to vote at the Annual
Meeting will be available for inspection by any stockholder for any propose
germane to the meeting, during normal business hours, for a period of ten days
prior to the meeting at the principal executive offices of the Company located
at 9100 Keystone Crossing, Indianapolis, Indiana 46240. The telephone number
at the address is (312) 574-6221.
If you are unable to attend the Annual Meeting you may vote by proxy.
The proxies will vote your shares according to your instructions. If you
return a properly signed and dated proxy card but do not mark a choice on one
or more items, your shares will be voted in accordance with the recommendations
of the Board of Directors as set forth in this Proxy Statement. The proxy card
gives authority to the proxies to vote your shares in their discretion on any
other matter presented at the Annual Meeting. A proxy may indicate that all or
a portion of the shares represented thereby are not being voted by the
stockholder with respect to a particular matter. Any such non-voted shares
will be considered present for the purpose of determining the presence of a
quorum.
You may revoke your proxy at any time prior to voting at the Annual
Meeting by delivering written notice to Stephen M. Coons, the Secretary of the
Company, by submitting a subsequently dated proxy or by attending the Annual
Meeting and voting in person at the Annual Meeting.
The Company will bear the cost of preparing, handling, printing and
mailing this Proxy Statement, the accompanying proxy card and any additional
material which may be furnished to stockholders, and the actual expense
incurred by brokerage houses, fiduciaries and custodians in forwarding such
materials to beneficial owners of Common Stock held in their names. The
solicitation of proxies will be made by the use of the mails and through direct
communication with certain stockholders or their representatives by officers,
directors or employees of the Company who will receive no additional
compensation for such solicitation. This Proxy Statement and the enclosed
proxy card were first sent or given to stockholders on or about May 12, 1998.
PROPOSAL 1. ELECTION OF DIRECTORS
Under the Company's Bylaws, the Board of Directors consists of ten
persons and is divided into three classes, each of whose members serves for a
three-year term. At the Annual Meeting, stockholders will elect three Class
III directors and one Class I director. The terms of the current Class III
Directors expire with this Annual Meeting of stockholders. Ronald D. Hunter,
Edward T. Stahl and John J. Dillon are presently directors of the Company. The
nominees for Class III Directors, if elected, will serve three years until the
2001 Annual Meeting of stockholders and until their successors have been
elected and qualified. Jerry E. Francis is currently a director of the
Company. The nominee for Class I Director, if elected, will serve until the
1999 Annual Meeting of Stockholders and until a successor has been elected and
qualified. The current Class I and Class II directors will continue in office
until the 1999 and 2000 Annual Meetings, respectively.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR the four nominees recommended by the Board of Directors
and named below. Stockholders do not have the right to cumulate votes in the
election of directors. Directors are elected by a plurality of the votes cast
at the Annual Meeting. Thus, assuming a quorum is present, the four persons
receiving the greatest number of votes will be elected to serve as members of
the Board of Directors. Accordingly, non-votes with respect to the election of
directors will not affect the outcome of the election of directors. In the
event that any nominee for the Board of Directors is unable or declines to
serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who shall be designated by the Board of Directors to fill
the vacancy, or the number of directors constituting the full Board of
Directors may be reduced. It is not expected that any nominee will be unable
or will decline to serve as a director.
A stockholder of the Company may nominate a person for election to the
Board of Directors. To do so, such stockholder must give written notice
thereof, containing the information required by the Company's Bylaws, to the
Secretary of the Company. Any such notice must be received at the principal
executive office of the Company not later than the close of business on May 22,
1998. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them FOR
the nominees recommended by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE FOLLOWING
NOMINEES AS DIRECTORS OF THE COMPANY.
NOMINEES FOR DIRECTORS
CLASS III - NOMINEES TO SERVE THREE YEARS UNTIL 2001 ANNUAL MEETING:
RONALD D. HUNTER, age 46, has been the Chairman of the Board, Chief Executive
Officer and President of the Company since its formation in June 1989 and the
Chairman of the Board and Chief Executive Officer of Standard Life Insurance
Company of Indiana ("Standard Life") since December 1987. Previously, Mr.
Hunter held several management and sales positions in the life insurance
industry with a number of companies including Conseco, Inc. (1981-1986), Aetna
Life & Casualty Company (1978-1981), United Home Life Insurance Company (1975-
1977) and Prudential Life Insurance Company (1972-1975).
EDWARD T. STAHL, age 51, has been Executive Vice President of the Company since
its formation, has been a Director of the Company since July 1989 (except for
the period from January 12, 1990 to May 21, 1990) and has served as Director of
Corporate Development since June 1993. Mr. Stahl was Secretary of the Company
from June 1989 to March 1994. Mr. Stahl was President and Chief Operations
Officer of Standard Life from May 1988 to June 1993. He has been a Director of
Standard Life since December 1987, and Executive Vice President and Secretary
since June 1993. Mr. Stahl has served in various capacities in the insurance
industry since 1966. He earned his FLMI designation in 1981, and is a member
of several insurance associations.
JOHN J. DILLON, age 39, has been a director of the Company since March 3, 1998.
Mr. Dillon has been with Analytical Surveys, Inc. since January 1997, most
recently serving as Chief Administrative Officer. Prior to that, Mr. Dillon
served in various positions for the State of Indiana, including director of the
Hoosier Lottery from July 1993 to January 1997 and Insurance Commissioner from
July 1989 to July 1991.
NOMINEE TO SERVE A ONE YEAR TERM UNTIL 1999 ANNUAL MEETING:
JERRY E. FRANCIS, 48, has been a director of the Company since March 12, 1998.
He has served as a Senior Vice President of Savers Life Insurance Company
("Savers") since 1991. He was Director of Operations of Savers from 1982 to
1998 and a director of Savers from 1991 to 1998. Mr. Francis received his MBA
from Wake Forest University in 1982.
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
CLASS I - SERVING UNTIL 1999 ANNUAL MEETING
ROBERT A. BORNS, age 62, has been a director of the Company since 1996. He has
served as Chairman of Borns Management Corporation (real estate management),
Indianapolis, Indiana since 1962 and as Chairman of Correctional Management
Company, L.L.C. (privatized correctional facilities), Indianapolis, Indiana
since 1996. Mr. Borns serves on numerous boards, including IPALCO Enterprises,
Inc., Indianapolis Power Light Company, Indianapolis Water Company, IWC
Resources Corporation, and Heritage Partners Management, Inc. He is also a
member of the Board of Trustees of Indianapolis Museum of Art, Indianapolis
Symphony Orchestra, Indiana University Foundation and St. Vincent Hospital
Advisory Board.
RAYMOND J. OHLSON, age 47, has served as Executive Vice President and director
of the Company since December 1993. He has served a President and director of
Standard Marketing Corporation ("Standard Marketing") since August 1991. Since
June 1993, Mr. Ohlson has served as President of Standard Life. Mr. Ohlson
entered the life insurance business in 1971. While still in college, Mr.
Ohlson qualified for the Million Dollar Round Table and is now a life member.
He earned his CLU designation in 1980. Mr. Ohlson owned and operated Ohlson &
Associates, an independent insurance marketing organization, from 1984 to April
1, 1994, when the assets of Ohlson & Associates were acquired by Standard
Marketing.
RAMESH H. BHAT, age 48, has been a director of the Company since July 1989,
except for the period from January 1990 to August 1990. Dr. Bhat has been
practicing obstetrics and gynecology in Fort Wayne, Indiana, since 1978 and is
a member of the medical staff of Parkview Memorial Hospital and partner of
Northeast OB-GYN, P.C., in Fort Wayne, Indiana.
CLASS II - SERVING UNTIL 2000 ANNUAL MEETING
STEPHEN M. COONS, age 57, has been a director of the Company since August,
1989. Mr. Coons has been General Counsel and Executive Vice President of the
Company since March 1993 and has been Secretary of the Company since March
1994. He was of counsel to the law firm of Coons, Maddox & Koeller from March
1993 to December 31, 1995. Prior to March 1993, Mr. Coons was a partner with
the law firm of Coons & Saint. He has been practicing law for 27 years. Mr.
Coons served as Indiana Securities Commissioner from 1978 to 1983.
MARTIAL R. KNIESER, age 55, has been a director of the Company since May 1990.
He was Medical Director of Community Hospital Indianapolis from 1978 to 1989
and has been Medical Director of Stat Laboratory Services from 1989 to present.
Dr. Knieser also has been Medical Director of Standard Life since December
1987.
PAUL ("PETE") B. PHEFFER, age 47, has been Executive Vice President, Chief
Financial Officer and Treasurer of the Company since May 1, 1997 and director
of the Company since June 27, 1997. Prior to joining the Company, Mr. Pheffer
was Senior Vice President - Chief Financial Officer and Treasurer of Jackson
National Life Insurance Company from 1994 to 1996 and prior to that was Senior
Vice President - Chief Financial Officer at Kemper Life Insurance Companies
from 1992 to 1994. Mr. Pheffer, a CPA, received his MBA from the University of
Chicago in 1988.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met six times in 1997, each time pursuant to a
regularly scheduled meeting. No director attended fewer than 75% of the
meetings of the Board of Directors or committees thereof on which he served.
It is the primary responsibility of the Board of Directors to oversee the
management of the business of the Company. To assist in carrying out its
responsibilities, the Board of Directors has established four standing
committees: the Executive Committee, the Audit Committee, the Compensation
Committee and the Incentive Stock Option Plan Committee. The latter is a
committee of the whole. The Executive Committee serves as the Nominating
Committee.
EXECUTIVE AUDIT COMPENSATION
R. Hunter* M. Knieser* M. Knieser*
R. Ohlson R. Borns R. Borns
P. Pheffer J. Lanshe R. Bhat
E. Stahl
___________________
* Chairman
The principal function of the Executive Committee is acting for the Board
of Directors in the management of business when action is required between
Board of Directors meetings. The committee meets as necessary, and all actions
by the committee are reported at the next Board of Directors meeting. The
Executive Committee met once during 1997.
The Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent auditors and recommends the
appointment of independent auditors to the Board of Directors. In addition,
the committee also monitors the effectiveness of the audit effort and financial
reporting and the adequacy of financial and operating controls. The Audit
Committee met one time during 1997.
The Compensation Committee approves compensation objectives and policy
for all employees and is responsible for developing and making recommendations
to the Board of Directors with respect to the Company's executive compensation
policies. In addition, the Compensation Committee determines periodically and
recommends to the Board of Directors the base cash compensation for the Chief
Executive Officer and other executive officers of the Company. The committee
reports to stockholders on executive compensation items as required by the
Securities and Exchange Commission. The Compensation Committee met three
times during 1997.
The Incentive Stock Option Committee has responsibility for granting
stock options to eligible members of management under, and otherwise
administers the Amended and Restated 1992 Stock Option Plan (the "Stock Option
Plan"). The Incentive Stock Option Plan Committee met three times during 1997.
<PAGE>
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives an annual cash
retainer of $10,000. Non-employee directors of the Company receive $1,000 per
Board of Directors or Board of Directors Committee meeting attended in person.
All non-employee directors are reimbursed for expenses incurred in connection
with their services as directors. Pursuant to the Stock Option Plan, each non-
employee director is entitled to receive, on the date of each Annual Meeting,
an immediately exercisable option to purchase 500 shares of Common Stock at a
purchase price equal to the fair market value of Common Stock on the date of
the grant. The Board of Directors may vary, from year to year, the number of
shares subject to options granted to each non-employee director, provided that
such number may not be less than 500. Each such option will be exercisable for
ten years and may terminate earlier upon termination of directorship.
Effective October 29, 1997, the Board of Directors granted options to its non-
employee directors as follows: Mr. Borns - 20,000, Mr. Lanshe - 30,000, Dr.
Bhat - 40,000 and Dr. Knieser - 40,000. The Stock Option Plan also provides
that each non-employee director is entitled to receive an option to purchase
500 shares of Common Stock upon commencement of service as a director.
Officers of the Company do not receive an annual retainer, meeting fees, shares
of Common Stock or other compensation for service as directors of the Company
or for service on Committees of the Board of Directors.
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Report of the Compensation Committee of the Board of Directors
The Compensation Committee of the Board of Directors approves
compensation objectives and policy for all employees and is responsible for
developing and making recommendations to the Board of Directors with respect to
the Company's executive compensation policies. In addition, the Compensation
Committee determines periodically and recommends to the Board of Directors the
base cash compensation for the Chief Executive Officer and other executive
officers of the Company.
EXECUTIVE COMPENSATION PHILOSOPHY.
The objectives of the Company's executive compensation program are to:
* Support the achievement of desired Company performance.
* Provide compensation that will attract and retain superior talent and
reward performance, which is critical to both the short-term and long-
term success of the Company.
* Align the executive officers' interests with the success the Company
by placing a portion of pay at risk with payout dependent upon
corporate performance.
The executive compensation program provides an overall level of
compensation opportunity believed to be competitive within the life insurance
industry, as well as with a broader group of companies of comparable size and
complexity. Actual compensation levels may be greater or less than average
competitive levels in surveyed companies based upon annual and long-term
performance of the Company as well as individual performance. The Compensation
Committee uses its discretion to set executive compensation at levels warranted
in its judgment by external, internal or individual circumstances.
EXECUTIVE OFFICER COMPENSATION PROGRAM.
The Company's executive officer compensation program is comprised of
three major components, all of which are intended to attract, retain and
motivate highly effective executives.
1. BASE SALARY. Base salary levels for the Company's executive officers
are competitively set relative to companies in the insurance industry and other
comparable companies. In determining salaries, the Committee also takes into
account individual experience and performance and specific issues particular to
the Company. These salaries are embodied in employment agreements negotiated
with the Company's executive officers. See "- Executive Compensation -
Employment Agreements."
2. CASH INCENTIVE COMPENSATION. Cash incentive compensation is designed
to motivate executives to attain short-term and long-term corporate goals.
Annual cash bonuses depend upon attainment of specified business goals. The
Compensation Committee's policy is to have a significant portion of an
executive's total potential cash compensation tied to the Company's overall
expected performance.
3. LONG-TERM INCENTIVE COMPENSATION. Long-term incentive compensation
is provided to executives and other employees through the Stock Option Plan.
The objectives of the Stock Option Plan are to align executive and stockholder
long-term interests by creating a strong and direct link between executive pay
and stockholder return, and to enable executives to develop and maintain a
significant, long-term ownership position in Common Stock.
The Stock Option Plan authorizes a grant of stock options, within the
total number of shares authorized, to eligible officers and other key
employees. The amount of Common Stock subject to any award made under the
Stock Option Plan is a function of salary and position in the Company. As with
the determination of base salaries and cash incentive compensation, the
Incentive Stock Option Plan Committee exercises subjective judgment and
discretion in view of its general policies. The Company's long-term
performance ultimately determines compensation from stock options, since gains
from stock option exercise are entirely dependent on the long-term growth of
the Company's stock price. Awards are made at a level calculated to be
competitive within the life insurance industry as well as a broader group of
companies of comparable size and complexity.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
disallows a public company's compensation deduction with respect to certain
highly-compensated executives in excess of $1,000,000 unless certain conditions
are satisfied. The Company presently believes that this provision is unlikely
to become applicable in the near future to the Company because the levels of
base salary and annual cash incentive compensation of the Company's executive
officers are substantially less than $1,000,000 per annum. Therefore, the
Company has not taken any action to adjust its compensation plans or policies
in response to such Section 162(m).
OTHER EXECUTIVE COMPENSATION.
The Company provides programs to the executive officers that are
generally available to all employees of the Company including 401(k) plan and
medical benefits.
CHIEF EXECUTIVE OFFICER COMPENSATION.
Mr. Hunter was appointed to the position of Chairman of the Board, Chief
Executive Officer and President during 1989. The compensation of Mr. Hunter is
established by the terms of his employment contract, dated January 1, 1989, as
amended. Under his employment contact, a portion of his cash compensation is
tied directly to the Company's financial performance, because his annual cash
bonus is a fixed percentage (3 percent) of the Company's annual gross operating
income. During 1997, Mr. Hunter's annual base salary rate was increased from
$316,418 to $325,911. Mr. Hunter's incentive bonus in 1997 was $184,724 in
accordance with his employment agreement. Mr. Hunter was granted stock options
with respect to 105,000 shares of Common Stock.
Martial R. Knieser, Chairman
Ramesh H. Bhat
Robert A. Borns
Members of the Compensation Committee
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and certain other components of
the compensation paid to Mr. Hunter, Chairman, Chief Executive Officer and
President of the Company, and the four other highest-paid executive officers of
the Company during fiscal year 1997 (the "Named Executive Officers") for the
Company's last three fiscal years:
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
FISCAL SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER UNDERLYING OPTIONS COMPENSATION (2)
<S> <C> <C> <C> <C> <C>
Ronald D. Hunter..............1997 $325,911 $184,724 $9,997(1) 105,000 $40,042
Chairman of the Board 1996 316,418 171,996 -- 272,895 28,645
CEO and President 1995 307,800 56,118 -- 130,200 12,867
Raymond J. Ohlson.............1997 223,140 92,362 -- 65,000 18,130
Executive Vice President and 1996 211,984 85,998 -- 145,005 12,796
Chief Marketing Officer 1995 206,210 28,059 -- 72,450 7,795
Stephen M. Coons..............1997 167,355 92,362 -- 60,000 --
Executive Vice President, 1996 162,481 85,998 -- 145,005 --
General Counsel and Secretary 1995 158,055 28,059 -- 52,500 --
Paul B. Pheffer...............1997 133,333 -- -- 150,000 4,500
Executive Vice President,
Chief Financial Officer and
Treasurer(3)
Edward T. Stahl...............1997 125,582 92,362 -- 60,000 6,000
Executive Vice President and 1996 121,924 85,998 -- 77,070 6,000
Director of Corporate 1995 118,603 33,059 -- 52,500 3,000
Development
</TABLE>
_____________________
(1) Amount for 1997 includes imputed interest on a $775,000 interest-free
loan made to Mr. Hunter in 1997.
(2) Amounts reported for fiscal year 1997 were as follows: (i) matching
contributions by the Company to the 401(k) plan (Mr. Hunter $6,000, Mr.
Ohlson $6,000 and Mr. Stahl $6,000); (ii) key man life insurance
premiums paid by the Company (Mr. Hunter $4,090, Mr. Ohlson $3,175);
(iii) disability income insurance premiums paid by the Company (Mr.
Hunter $6,955, Mr. Ohlson $5,455); and (iv) travel allowance paid by the
Company (Mr. Hunter $13,000, Mr. Ohlson $3,500, Mr. Pheffer $4,500).
(3) No 1995 or 1996 compensation information is reported for Mr. Pheffer
because he commenced employment on May 1, 1997. Mr. Pheffer also does
not have an employment agreement.
The following table provides information on stock options granted under
the Stock Option Plan in 1997 to the Named Executive Officers. All options
granted in 1997 were non-qualified stock options, and the Company has not
issued any Stock Appreciation Rights (ASARs@).
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
PERCENT OF TOTAL PER
NUMBER OF SECURITIES OPTIONS GRANTED TO SHARE
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
GRANTED(1) FISCAL YEAR PRICE DATE PRESENT VALUE (2)
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Hunter 105,000 18.92% $ 6.50 10/29/97 $401,100
Raymond J. Ohlson 65,000 11.71 6.50 10/29/07 248,300
Stephen M. Coons 60,000 10.81 6.50 10/29/07 229,200
Paul B. Pheffer 75,000 13.51 4.875 5/1/97 214,500
75,000 13.51 6.50 10/29/07 286,500
Edward T. Stahl 60,000 10.81 6.50 10/29/07 229,200
</TABLE>
________________
(1) The options with an exercise price of $4.875 per share were exercisable
with respect to the first third of the aggregate number of shares subject
thereto on their grant date (May 1, 1997): will become exercisable with
respect to the second third of the aggregate number of shares subject
thereto on May 1, 1998 and become exercisable with respect to all the
remaining shares subject thereto on May 1, 1999. The options with an
exercise price of $6.50 per share were exercisable with respect to the
first third of the aggregate number of shares subject thereto on their
grant date (October 29, 1997); will become exercisable with respect to
the second third of the aggregate number of shares subject thereto on
October 29, 1998 and will become exercisable with respect to all the
remaining shares subject thereto on October 29, 1999.
(2) In accordance with Securities and Exchange Commission rules, there
values were established using the Black-Scholes stock option valuation
model that was adapted for use in valuing executive stock options.
Assumptions used to calculate the Grant Date Present Value were: Stock
price volatility .3630 and interest rate 5.67%. The valuation model was
not adjusted for non-transferability, risk of forfeiture or the vesting
restrictions of the options. The Company does not believe that the
Black-Scholes model, whether modified or not modified, or any other
valuation model, is a reliable method of computing the present value of
the Company's employee stock options. The value ultimately realized, if
any, will depend on the amount that the market price of the stock exceeds
the exercise price on the date of exercise.
<PAGE>
No stock options were exercised by Named Executive Officers during fiscal
year 1997. The following table sets forth information with respect to Named
Executive Officers concerning unexercised options held as of the end of fiscal
year 1997. The Company has not issued any SARs.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY
OPTIONS AT FY-END (#) OPTIONS AT FY-END($)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Ronald D. Hunter.......... 415,345 92,750 278,218 56,125
Raymond J. Ohlson......... 225,122 57,333 161,056 34,579
Stephen M. Coons.......... 146,385 51,375 122,577 28,395
Paul B. Pheffer........... 50,000 100,000 43,750 87,500
Edward T. Stahl........... 138,195 51,375 122,577 28,395
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. Hunter, Ohlson, Coons
and Stahl, which agreements provide that, if their employment is terminated due
to certain acts, for a period of one year thereafter, each shall not (i) sell
or attempt to sell, within Indiana, any type of products marketed by the
Company, (ii) sell or attempt to sell any types of products marketed by the
Company to any customer of the Company and (iii) within Indiana, own, be
employed by, or be connected in any manner with any business similar to the
type of business of the Company. Messrs. Hunter, Ohlson, Coons and Stahl also
agree that during the employment term and for a period of six months
thereafter, each will assign to SMC or its nominees all of his right, title and
interest in and to all technical information that each makes, develops or
conceives.
Mr. Hunter's employment agreement terminates on January 1, 1999. His
salary under his employment agreement for 1997 was $325, 911 per year and is
increased each year by the percent change of the Consumer Price Index ("CPI").
In addition, Mr. Hunter receives a bonus equal to 3% of the annual gross
operating income of the Company, but not less than 10% of his annual salary.
Following a termination of his employment with the Company in the event of a
change-in-control, Mr. Hunter will also be entitled to receive a lump sum
payment equal to the amount determined by multiplying the number of shares of
Common Stock subject to unexercised stock options previously granted by the
Company and held by Mr. Hunter on the date of termination, whether or not such
options are then exercisable, and the highest per share fair market value of
the Common Stock on any day during the six-month period ending on the date of
termination. Upon payment of such amount, such unexercised stock options will
be deemed to be surrendered and canceled. In the event of a change-in-control
of the Company whereby Mr. Hunter's employment is terminated, Mr. Hunter is
entitled to a lump sum payment equal to his average annual compensation times
299%.
Mr. Ohlson's employment agreement terminates on June 16, 1998. His
salary under his employment agreement for 1997 was $223,140 per year, and is
increased each year by the percent change of the CPI. In addition, Mr. Ohlson
receives a bonus equal to 1 2% of the annual gross operating income of the
Company but not less than 10% of his annual salary. Following a termination of
his employment with the Company in the event of a change-in control, Mr. Ohlson
will also be entitled to receive a lump sum payment equal to the amount
determined by multiplying the number of shares of Common Stock subject to
unexercised stock options previously granted by the Company and held by Mr.
Ohlson on the date of termination, whether or not such options are then
exercisable, and the highest per share fair market value of the Common Stock
subject to unexercised stock options previously granted by the Company and held
by Mr. Ohlson on the date of termination, whether or not such options are then
exercisable, and the highest per share fair market value of the Common Stock on
any day during the six month period ending on the date of termination. Upon
payment of such amount, such unexercised stock options will be deemed to be
surrendered and canceled. In the event of a change-in-control of the Company
whereby Mr. Ohlson's employment is terminated, Mr. Ohlson is entitled to a lump
sum payment equal to his average annual compensation times 299%.
Mr. Coons' employment agreement terminates on March 1, 1999. His salary
under his employment agreement for 1997 was $167,355 per year, and is increased
each year by the percent change of the CPI. In addition, Mr. Coons receives a
bonus equal to 1 2% of the annual gross operating income of the Company but not
less than 10% of his annual salary. Following a termination of his employment
with the Company in the event of a change-in-control, Mr. Coons will also be
entitled to receive a lump sum payment equal to the amount determined by
multiplying the number of shares of Common Stock subject to unexercised stock
options previously granted by the Company and held by Mr. Coons on the date of
termination, whether or not such options are then exercisable, and the highest
per share fair market value of the Common Stock on any day during the six month
period ending on the date of termination. Upon payment of such amount, such
unexercised stock options will be deemed to be surrendered and canceled. In
the event of a change-in-control of the Company whereby Mr. Coons' employment
is terminated, Mr. Coons is entitled to a lump sum payment equal to his average
annual compensation times 299%.
Mr. Stahl's employment agreement terminates on January 1, 1999. his
salary under this employment agreement for 1997 was $125,582 and is increased
each year by the percent change of the CPI. In addition, Mr. Stahl receives a
bonus equal to 1 2% of the annual gross operating income of the Company, but
not less than 10% of his annual salary. Following a termination of his
employment with the Company in the event of a change-in-control, Mr. Stahl will
also be entitled to receive a lump sum payment equal to the amount determined
by multiplying the number of shares of Common Stock subject to unexercised
stock options previously granted by the Company and held by Mr. Stahl on the
date of termination, whether or not such options are then exercisable, and the
highest per share fair market value of the Common Stock on any day during the
six month period ending on the date of termination. Upon payment of such
amount, such unexercised stock options will be deemed to be surrendered and
canceled. In the event of a change-in-control of the Company whereby Mr.
Stahl's employment is terminated, Mr. Stahl is entitled to a lump sum payment
equal to his average annual compensation times 299%.
<PAGE>
The following table sets forth certain information concerning the
repricing of stock options held by any executive officer during the five
completed fiscal years since the Company became a reporting company under the
Exchange Act. The Company has not issued any SARs.
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Exercise Option Term
Underlying Price Price at Remaining
Options/ of Stock at Time of at
SARs Time of Repricing New Date of
Repriced or Repricing or or Exercise Repricing or
NAME AND PRINCIPAL POSITION DATE Amended Amendment Amendment Price Amendment
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Hunter 5/1/96 105,000 $4.375 $9.41 $7.238 86 months
Chairman of the 99,645 4.375 7.62 7.238 91 months
Board CEO and
President
Raymond J. Ohlson 5/1/96 26,250 4.375 12.38 7.238 82 months
Executive Vice 39,375 4.375 9.41 7.238 86 months
President and
Chief Marketing 37,380 4.375 7.62 7.238 91 months
Officer
Stephen M. Coons 5/1/96 26,250 4.375 9.41 7.238 86 months
Executive Vice 24,885 4.375 7.62 7.238 91 months
President,
General Counsel
and Secretary
John J. Quinn 5/1/96 78,750 4.375 8.46 7.238 86 months
Executive Vice
President and
Chief Financial
Officer(1)
Edward T. Stahl 5/1/96 22,050 4.375 9.41 7.238 86 months
Executive Vice 20,895 4.375 7.62 7.238 91 months
President and
Director of
Corporate Development
</TABLE>
(1) On October 14, 1997, the Board of Directors terminated Mr. Quinn's
employment effective as of March 15, 1997.
<PAGE>
PERFORMANCE GRAPH
The following performance graph reflects a five-year comparison of cumulative
total shareholder return for Common Stock, the Center for Research in Security
Prices at the University of Chicago ("CRSP") prepared Total Return Index for
The Nasdaq Stock Market (U.S.) and CRSP index with respect to the performance
of the insurance companies comprising the Nasdaq Insurance Stocks. The graph
is constructed on the assumption that $100 was invested on December 31, 1993 in
each of Common Stock, the CRSP Total Return Index, and the Nasdaq Insurance
Stock Index.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG SMC, CRSP INDEX AND NASDAQ INDEX
[CAPTION]
Measurement period
(Fiscal year covered) SMC CRSP Nasdaq Insurance
Index Index
Measurement PT -
12/31/93 $100 $100 $100
FYE 12/31/94 $42 $98 $94
FYE 12/31/95 $62 $138 $134
FYE 12/31/96 $71 $170 $152
FYE 12/31/97 $95 $209 $224
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company Charter and Bylaws provide for indemnification of its officers
and directors to the maximum extent permitted under the Indiana Business
Corporation Law (AIBCL@). In addition, the Company has entered into separate
indemnification agreements with some of its directors which may require the
Company, among other things, to indemnify them against certain liabilities that
may arise by reason of their status or service as directors to the maximum
extent permitted under the IBCL.
On October 28, 1997, the Company made an interest free loan to Mr. Hunter,
Chairman of the Board of the Company, in the amount of $775,500, representing a
new loan in the sum of $437,500 and consolidation of an existing loan with a
principal balance of $338,000. The loan is repayable within 10 days of Mr.
Hunter's voluntary termination or resignation as Chairman and CEO of the
Company. In the event of a termination of Mr. Hunter's employment with the
Company following a change in control, the loan is deemed to be forgiven.
<PAGE>
COMMON STOCK OWNERSHIP OF DIRECTORS, DIRECTOR NOMINEES, EXECUTIVE OFFICERS AND
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock; (i) by each stockholder known by the
Company to own beneficially more than five percent (5%) of the outstanding
Common Stock; (ii) by each of the Company's directors; (iii) by each of the
Company's Named Executive Officers and (iv) by all directors and Named
Executive Officers of the Company as a group. This information is as of March
31, 1998 based upon Schedules 13-G filed with the Securities and Exchange
Commission.
NUMBER OF
SHARES
<TABLE>
<CAPTION>
NAME OWNED (1) PERCENT (2)
<S> <C> <C>
Ronald D. Hunter.......................895,029 (3) 11.19%
9100 Keystone Crossing
Indianapolis, Indiana 46240
Ramesh H. Bhat ........................372,353 (4) 4.98
Martial R. Knieser ....................326,955 (5) 4.40
Raymond J. Ohlson .....................262,913 3.57
Edward T. Stahl .......................184,659 2.53
Stephen M. Coons ......................179,344 (6) 2.46
Robert A. Borns ........................60,500 __*
Paul B. Pheffer ........................75,000 __*
Jerry E. Francis .......................43,745 __*
James C. Lanshe ........................32,513 __*
John J. Dillon ..........................2,000 __*
All directors and Named Executive Officers as a group
(eleven persons) ....................2,435,011 25.53
Conseco Group............................1,740,038 (7) 22.37
11815 N. Pennsylvania Street
Carmel, Indiana 46032
_____________________________
* Less than one percent
<PAGE>
(1) Except as otherwise noted below, each person named in the table possesses
sole voting and sole investment power with respect to all shares of Common
Stock listed in the table as owned by such person. Shares beneficially
owned include shares that may be acquired pursuant to the exercise of
outstanding options or warrants that are exercisable within 60 days of
March 31, 1998 as follows: Mr. Hunter - 438,095, Dr. Bhat - 60,179, Dr.
Knieser - 42,600, Mr. Ohlson - 239,122, Mr. Stahl - 149,570, Mr. Coons -
157,760, Mr. Borns - 20,500, Mr. Pheffer - 75,000, Mr. Lanshe - 32,075,
directors and Named Executive Officers as a group -1,214,901.
(2) Percentage of total outstanding shares is calculated separately for each
person on the basis of the actual number of outstanding shares as of
March 31, 1998 and assumes, for purposes of the calculation, that shares
issuable upon exercise of options or warrants exercisable and securities
convertible within 60 days held by such person (but no other
stockholders) had been issued as of such date. Percentages less than 1%
are not indicated.
(3) Includes 336 shares beneficially owned by Mr. Hunter's minor child, as to
which Mr. Hunter disclaims beneficial ownership. Includes 250,000 shares
held by Mr. Hunter who is named as a voting trustee under a Voting Trust
created pursuant to the terms of the Stock Purchase Agreement dated as of
July 18, 1996 by and between the Company and Delta Life And Annuity
Company. Under the terms of the voting trust, the trustees hold and vote
the Common Stock held in the trust and share voting power with respect to
such shares. Mr. Hunter disclaims beneficial ownership of these shares.
(4) Includes 43,260 shares beneficially owned by Dr. Bhat's spouse and minor
children, as to which shares Dr. Bhat disclaims beneficial ownership.
(5) Includes 8,043 shares beneficially owned by Dr. Knieser's spouse and
children, as to which shares Dr. Knieser disclaims beneficial ownership.
(6) Includes 2,100 shares beneficially owned by Mr. Coons' child, as to which
shares Mr. Coons disclaims beneficial ownership.
(7) Includes 760,670 shares (9.67%) issuable upon conversion of $4,371,573
Convertible Note with Great American Reserve Insurance Company, which is
convertible at any time and 631,360 (8.03%) shares issuable upon
conversion of $3,628,427 Convertible Note with Capital American Life
Insurance Company, which is convertible at any time; and 348,000 shares
(4.67%) issuable upon conversion of $2,000,000 Convertible Note with
Transport Life Insurance Company, which is convertible at any time.
Information with respect to Great American Reserve Insurance Company and
Capitol American Life Insurance Company ("Conseco Group") is based solely
on a review of statements on Schedule 13G filed by such entities with the
Securities and Exchange Commission. All of these entities are
beneficially owned by Conseco, Inc. All of the shares, when
issued, will be subject to a Voting Trust Agreement by and among the
Conseco Group, the Company and two voting trustees appointed by the
Company and the Conseco Group. It is anticipated that Mr. Hunter will be
the Company Trustee.
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP has been selected by the Board of Directors to be the
independent auditors to audit the consolidated financial statements of the
Company for fiscal year 1998. This firm has been employed by the Company in
that capacity continuously since the Company's formation in 1989.
Representatives of Ernst & Young LLP will be present at the Annual Meeting,
will be given an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions relating to the audit of the
Company's 1997 consolidated financial statements.
STOCKHOLDER PROPOSALS
A stockholder of the Company may bring business before the Annual Meeting.
To do so, such stockholder must give written notice thereof, containing the
information required by the Company's Bylaws, to the Secretary of the Company.
Any such notice must be received at the principal executive office of the
Company not later than the close of business on May 22, 1998.
The Company's 1999 Annual Meeting is expected to be held on or about
April 27, 1999. In order to be considered for inclusion in the Company's Proxy
Statement for its 1999 Annual Meeting, a stockholder's proposal must be
received by the Company within a reasonable time before solicitation of proxies
for such meeting is made. Such proposals may be included in next year's Proxy
Statement if they comply with certain rules and regulations promulgated by the
Securities and Exchange Commission.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent (10%) of the Common Stock ("Reporting Persons"), to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Reporting Persons are required by the Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) reports
they file. Based solely on its review of the copies of such forms received by
it and written representations from certain Reporting Persons, the Company
believes that during fiscal 1997 its Reporting Persons complied with all filing
requirements applicable to them, except that Dr. Bhat filed one late report
with respect to a total of two transactions and Mr. Lanshe filed one late
report with respect to a total of two transactions.
ANNUAL REPORT
The Company's Annual Report for 1998 is being mailed to the stockholders
with this Proxy Statement, but is not part of the proxy solicitation material.
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other matters, other than those stated
above, to be presented at the Annual Meeting, but if any other matters should
properly come before the meeting, it is intended that the persons named in the
accompanying proxy card will vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
Stephen M. Coons
Executive Vice President and
Secretary
<PAGE>
PROXY
STANDARD MANAGEMENT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 10, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Standard Management Corporation ( the
ACompany@ or "SMC") does hereby acknowledge receipt of Notice of said Annual
Meeting and the accompanying Proxy Statement and does hereby constitute and
appoint Ronald D. Hunter and Stephen M. Coons, or either of them, with full
power of substitution, to vote all shares of Common Stock of SMC that the
undersigned is entitled to vote, as fully as the undersigned could do if
personally present, at the Annual Meeting of Stockholders of SMC, to be held on
Wednesday, June 10, 1998 at 9:30 a.m. (Eastern Standard Time) at The Woodland
Country Club, 100 Woodland Lane, Carmel, Indiana 46032, and at any adjournment
thereof, as follows:
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE NOMINEES FOR DIRECTOR (AS DEFINED BELOW) IN PROPOSAL 1. IF OTHER
BUSINESS IS PRESENTED AT SAID MEETING, THIS PROXY WILL BE VOTED ON THOSE
MATTERS IN ACCORDANCE WITH THE BEST JUDGMENT OF THE NAMED PROXIES.
PLEASE MARK BOX | OR [X]
1. The election of three (3) Class II Directors and one (1) Class I
Director:
[ ] FOR the nominees listed [ ] WITHHOLD AUTHORITY for the nominees listed
Ronald D. Hunter Edward T. Stahl John J. Dillon Jerry E. Francis
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE THAT NOMINEE'S NAME FROM THE NAMES LISTED ABOVE.
You are urged to mark, sign, date and return your proxy without delay in
the return envelope provided for that purpose, which requires no postage if
mailed in the United States.
Dated: , 1998
Signature
Signature if held jointly
When signing the proxy, please take care to have the signature conform to the
stockholder's name as it appears on this side of the proxy. If shares are
registered in the names of two or more persons, each person should sign.
Executors, administrators, trustees and guardians should so indicate when
signing. Corporations and partnerships should sign in their full corporate or
partnership names by a duly authorized person.
</TABLE>
