UNITED INCOME, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, JUNE 11, 1996
To the Shareholders of:
UNITED INCOME, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of United
Income, Inc., (the "Company"), will be held Tuesday, June 11, 1996 at 10:00
a.m. at the Best Western, 888 East Dublin-Grandville Road, Columbus, Ohio, for
the following purposes:
1. To elect eight directors of the Company to serve for one year and
until their successors are elected and qualified; and
2. To consider and act upon such other business as may properly be
brought before the meeting.
The Board of Directors has fixed the close of business on April 19, 1996
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY SO THAT YOUR
VOTE CAN BE RECORDED. If you are present at the meeting and desire to do so,
you may revoke your proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
UNITED INCOME, INC.
George E. Francis
George E. Francis
Secretary
Dated: April 22, 1996
Springfield, Illinois
YOUR VOTE IS IMPORTANT!
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON.
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS OF
UNITED INCOME, INC.
GENERAL INFORMATION REGARDING SOLICITATION
The Annual Meeting of the Shareholders of United Income, Inc. (the
"Company") will be held on June 11, 1996 at 10:00 a.m., at the Best Western,
888 East Dublin-Grandville Road, Columbus, Ohio. The mailing address of the
Company is P.O. Box 5147, Springfield, Illinois 62705-5147.
This proxy statement is being sent to each holder of record of the
issued and outstanding shares of Common Stock of the Company, no par value
(the "Common Stock"), as of April 19, 1996, in order to furnish to each
shareholder information relating to the business to be transacted at the
meeting.
This proxy statement, the enclosed proxy and Annual Report are being
mailed to shareholders of the Company on or about April 22, 1996. The Company
will bear the cost of soliciting proxies from its shareholders. The Company
may reimburse brokers and other persons for their reasonable expenses in
forwarding proxy materials to the beneficial owners of the Company's stock.
Solicitations may be made by telephone, telegram or by personal calls, and it
is anticipated that such solicitations will consist primarily of requests to
brokerage houses, custodians, nominees, and fiduciaries to forward the
soliciting material to the beneficial owners of shares held of record by such
persons. If necessary, officers and regular employees of the Company may by
telephone, telegram or personal interview request the return of proxies.
VOTING
The enclosed proxy is solicited by and on behalf of the Board of
Directors. If you are unable to attend the meeting on June 11, 1996, please
complete the enclosed proxy and return it to us in the accompanying envelope
so that your shares will be represented.
When the enclosed proxy is duly executed and returned in advance of the
meeting, and is not revoked, the shares represented thereby will be voted in
accordance with the authority contained therein. Any shareholder giving a
proxy may revoke it at any time before it is voted by delivering to the
Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a later date, or by attending the meeting and voting in person.
If a proxy fails to specify how it is to be voted it will be voted "FOR"
Proposal 1.
Inspectors of election will be appointed to tabulate the number of
shares of Common Stock represented at the meeting in person or by proxy, to
determine whether or not a quorum is present and to count all votes cast at
the meeting. The inspectors of election will treat abstentions and broker
non-votes as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. With respect to the tabulation of votes
cast on a specific proposal presented to the shareholders at the meeting,
abstentions will be considered as present and entitled to vote with respect to
that specific proposal, whereas broker non-votes will not be considered as
present and entitled to vote with respect to that specific proposal.
1
<PAGE>
AFFILIATE COMPANIES
The Company is a member of an insurance holding company system of which
United Trust, Inc., an Illinois corporation ("UTI"), is the ultimate parent.
The following is the current organizational chart for the companies that are
members of the UTI insurance holding company system and affiliates of the
Company, and the acronyms that will be used herein to reference the companies:
United Trust, Inc. ("UTI") is the ultimate controlling company. UTI owns 53%
of United Trust Group ("UTG") and 30% of United Income, Inc. ("UII"). UII
owns 47% of UTG. UTG owns 72% of First Commonwealth Corporation ("FCC"). FCC
owns 100% of Universal Guaranty Life Insurance Company ("UG"). UG owns 100%
of United Security Assurance Company ("USA"). USA owns 84% of Appalachian
Life Insurance Company ("APPL") and APPL owns 100% of Abraham Lincoln
Insurance Company ("ABE").
For purposes of this proxy statement, the term "affiliate life insurance
companies" shall mean UG, USA, APPL and ALIC, and the term "non-insurance
affiliate companies" shall mean the affiliated companies other than UG, USA,
APPL and ALIC.
The companies hereinafter are sometimes collectively referred to as the
"Affiliate Companies".
VOTING SECURITIES OUTSTANDING
April 19, 1996 has been fixed as the record date for the determination
of shareholders entitled to notice of and to vote at the annual meeting or any
adjournments or postponements thereof. On that date, the Company had
outstanding 19,886,572 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.
2
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
The following tabulation sets forth the name and address of the entity
known to be the beneficial owner 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 March 31, 1996 and the nature of such ownership; and (ii)
the percent of the issued and outstanding shares of Common Stock so owned as
of the same date.
Title Number of Shares Percent
of Name and Address and Nature of of
Class of Beneficial Owner Beneficial Ownership Class
Common United Trust, Inc. 5,945,500 29.9%
Stock, 5250 South 6th Street
no par Springfield, IL 62703
value
SECURITY OWNERSHIP OF MANAGEMENT
The following tabulation shows with respect to each of the directors and
nominees of the Company, with respect to the Company's chief executive officer
and each of the Company's executive officers whose salary plus bonus exceeded
$100,000 for fiscal 1995, and with respect to all executive officers and
directors of the Company as a group: (i) the total number of shares of all
classes of stock of the Company or any of its parents or subsidiaries,
beneficially owned as of March 31, 1996 and the nature of such ownership; and
(ii) the percent of the issued and outstanding shares of stock so owned as of
the same date.
Title Directors, Named Executive Number of Shares Percent
of Officers, & All Directors & and Nature of of
Class Executive Officers as a Group Ownership Class
UTI's Vincent T. Aveni 0 *
Common Marvin W. Berschet 0 *
Stock, no John K. Cantrell 0 *
par value Gertrude W. Donahey 0 *
George E. Francis 46,000 (1) *
James E. Melville 525,000 (2) 2.8%
Thomas F. Morrow 1,585,600 (3) 8.5%
Charlie E. Nash 0 *
Larry E. Ryherd 6,172,368 (4) 33.0%
Robert W. Teater 0 *
All directors and 8,328,968 44.6%
executive officers as a
group (ten in number)
3
<PAGE>
Title Directors, Named Executive Number of Shares Percent
of Officers, & All Directors & and Nature of of
Class Executive Officers as a Group Ownership Class
FCC's Vincent T. Aveni 0 *
Common Marvin W. Berschet 0 *
Stock, John K. Cantrell 0 *
$1.00 Gertrude W. Donahey 0 *
par value George E. Francis 0 *
James E. Melville 22,163 *
Thomas F. Morrow 0 *
Charlie E. Nash 0 *
Larry E. Ryherd 0 *
Robert W. Teater 0 *
All directors and 22,163 *
executive officers as a
group (ten in number)
Company's Vincent T. Aveni 109,745 (5) *
Common Marvin W. Berschet 101,800 (6) *
Stock, no John K. Cantrell 0 *
par value Gertrude W. Donahey 100,000 *
George E. Francis 0 *
James E. Melville 0 *
Thomas F. Morrow 590,625 (7) (10) 3.0%
Charlie E. Nash 100,755 *
Larry E. Ryherd 675,000 (8) (10) 3.4%
Robert W. Teater 105,430 (9) *
All directors and
executive officers 1,783,355 9.0%
as a group (ten in number)
(1) Includes 46,000 shares which may be acquired upon the exercise of
outstanding stock options.
(2) James E. Melville owns 140,000 shares jointly with his spouse.
Includes; (i) 30,000 shares of the UTI's Common Stock which are
held beneficially in trust for his daughter, namely Bonnie J.
Melville; (ii) 30,000 shares of the UTI's Common Stock, 7,500
shares of which are in the name of Matthew C. Hartman, his nephew;
7,500 shares of which are in the name of Zachary T. Hartman, his
nephew; 7,500 shares of which are in the name of Elizabeth A.
Hartman, his niece; and 7,500 shares of which are in the name of
Margaret M. Hartman, his niece; and (iii) 325,000 shares which may
be acquired by James E. Melville upon exercise of outstanding
stock options.
(3) Includes 172,000 shares which may be acquired upon the exercise of
outstanding stock options. Includes 10,000 shares as custodian
for grandsons.
(4) Larry E. Ryherd owns 2,710,868 shares of the UTI's Common Stock in
his own name. Includes; (i) 1,500,500 shares of the UTI's Common
Stock in the name of Dorothy LouVae Ryherd, his wife; (ii)
1,500,000 shares of the 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) 293,000 shares of the UTI's
Common Stock, 97,000 shares of which are in the name of Shari
Lynette Serr, 97,000 shares of which are held in the name of Derek
Scott Ryherd, and 99,000 shares of which are in the name of Jarad
John Ryherd; (iv) 5,000 shares of the UTI's Common Stock held in
the name of Larry E. Ryherd as custodian for Charity Lynn Newby,
his niece; (v) 5,000 shares held in the name of Larry E. Ryherd as
custodian for Lesley Carol Newby, his niece; (vi) 20,000 shares
held by Dorothy LouVae Ryherd, his wife as custodian for
granddaughter; and (vii) 138,000 shares which may be acquired by
Larry E. Ryherd upon exercise of outstanding stock options.
(5) Includes 3,395 shares owned directly by Mr. Aveni's brother and
3,000 shares owned directly by Mr. Aveni's son.
4
<PAGE>
(6) Includes 600 shares owned directly by each of Mr. Berschet's three
children for a total of 1800 shares.
(7) Includes 590,625 shares beneficially in trust for the two children
of Thomas F. Morrow, namely Kristi J. Wilkerson and Amy Suzanne
Heath.
(8) Includes 675,000 shares beneficially in trust for the three
children of Larry E. Ryherd and Dorothy LouVae Ryherd, namely
Shari Lynette Serr, Derek Scott Ryherd and Jarad John Ryherd.
(9) Includes 3,000 shares owned directly by Mr. Teater's spouse.
(10) In addition, Mr. Morrow and Mr. Ryherd are directors and officers
of UTI, which owns 5,945,500 shares (29.9%) of the Company. Mr.
Morrow and Mr. Ryherd disclaim any beneficial interest in the
5,945,500 shares of the Company owned by UTI as the UTI board of
directors controls the voting and investment decisions regarding
such shares.
* Less than 1%.
Except as indicated above, the foregoing persons hold sole voting and
investment power.
Directors and officers of the Company file periodic reports regarding
ownership of Company securities with the Securities and Exchange Commission
pursuant to Section 16(a) of the Securities Exchange Act of 1934 as amended,
and the rules promulgated thereunder.
THE BOARD OF DIRECTORS
In the fiscal year ended December 31, 1995, the Board of Directors of
the Company met four times. All nominees for director attended at least 75%
of all meetings of the Board and any committee of which he is a member except
Mr. John Cantrell.
The Board of Directors has an Audit Committee consisting of Messrs.
Berschet, Nash and Teater. The Audit Committee reviews and acts or reports to
the Board with respect to various auditing and accounting matters, the scope
of the audit procedures and the results thereof, the internal accounting and
control systems of the Company, the nature of services performed for the
Company and the fees to be paid to the independent auditors, the performance
of the Company's independent and internal auditors and the accounting
practices of the Company. The Audit Committee also recommends to the full
Board of Directors the auditors to be appointed by the Board. The Audit
Committee met once in 1995.
The Board of Directors has an Executive Committee consisting of Messrs.
Morrow and Ryherd. The Executive Committee has all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Company, except those powers which, by law, cannot be delegated by the Board
of Directors. The Committee must report to the Board of Directors regarding
all actions taken by the Committee. The Committee did not meet in 1995.
The Board of Directors has a Nominating Committee consisting of Messrs.
Aveni, Cantrell and Mrs. Donahey. The Nominating Committee reviews, evaluates
and recommends directors, officers and nominees for the Board of Directors.
There is no formal mechanism by which shareholders of the Company can
recommend nominees for the Board of Directors, although any recommendations by
shareholders of the Company will be considered. Shareholders desiring to make
nominations to the Board of Directors should submit their nominations in
writing to the Chairman of the Board no later than February 1st of the year in
which the nomination is to be made.The Committee did not meet in 1995.
The Stock Option Committee is composed of Messrs. Berschet, Morrow and
Ryherd. The Committee recommends to the Board of Directors the granting of
options to purchase shares of the Company's Common Stock to those persons
found to be eligible pursuant to the Stock Option criteria. The Committee did
not meet in 1995.
The compensation of the Company's executive officers is determined by
the full Board of Directors (see report on Executive Compensation).
5
<PAGE>
ELECTION OF DIRECTORS
At the annual meeting of shareholders of the Company, nine directors are
to be elected, each director to hold office until the next annual meeting and
until his successor is elected and qualified. Each nominee will be elected
director by a majority of votes cast for such nominee. The persons named in
the proxy intend to vote the proxies as designated for the nominees listed
below. Should any of the nominees listed below become unable or unwilling to
accept nomination or election, it is intended, in the absence of contrary
specifications, that the proxies will be voted for the balance of those named
and for a substituted nominee or nominees; however, the management now knows
of no reason to anticipate such an occurrence. All of the nominees have
consented to be named as nominees and to serve as directors if elected. The
following individuals are nominees for the election of directors:
NAME, AGE POSITION WITH THE COMPANY, BUSINESS EXPERIENCE AND
OTHER DIRECTORSHIPS
Vincent T. Aveni, 69 Director of the Company since 1984; Chairman Emeritus
of Realty One, Inc. and co-developer of the Three
Village Condominium; currently serving the Ohio
Association of Realtors as a trustee; past President
of Ohio Association of Realtors; past Regional Vice
President of the Ohio and Michigan National
Association Marketing Institute, and Farm and Land
Institute.
Marvin W. Berschet, 66 Director of the Company since 1984; self-employed
since 1956; charter member of National Cattlemen's
Association; Board member of Meat Export Federation
for seven years and Chairman of Beef Council for three
years; served on the National Livestock and Meat Board
for 16 years; past President of Ohio Cattlemen's
Association.
John K. Cantrell, 71 Director of the Company since 1992; Chairman of the
Board of Directors of certain affiliate companies
since 1984; Chief Executive Officer of certain
affiliate companies from 1984 until 1992; Officer and
Director of certain affiliate companies for more than
the past five years.
Gertrude W. Donahey, 87 Director of the Company since 1984; Treasurer of the
Company since 1987; in 1970, the first woman elected
to a constitutional office in the State of Ohio;
elected Treasurer of Ohio and served in that capacity
until she retired in 1983.
Thomas F. Morrow, 51 Vice Chairman and Chief Operating Officer of the
Company since 1992, and a Director since 1987;
President and COO of UTI since 1991, Treasurer since
1993 and a Director since 1984; President, Chief
Operating Officer, Treasurer and Director of UTG since
1992; Vice Chairman, Chief Operating Officer and
Director of certain affiliate companies since 1992 and
Treasurer since 1993; Executive Vice President,
Secretary and Director of UFI since 1990; Executive
Vice President, Secretary and Director of FFMC since
1991. Mr. Morrow has served as Vice Chairman and
Director of certain affiliate life insurance companies
since 1992 as well as having held similar positions
with other affiliate life insurance companies from
1987 to 1992.
Charlie E. Nash, 68 Director of the Company since 1984; Executive Director
and State President of the Ohio Farmers Union; serves
on the Board of Directors for National Farmers Union
Uniform Pension Committee and as a member of its
Investment Committee for pension funds; Chairman of
the Putnam County Board of Elections; serves on the
Board of Directors of Farmers Union Ventures, Inc.,
Green Thumb, Inc. and Farmers Education Foundation; he
is a farm owner.
Larry E. Ryherd, 56 Chairman of the Board of Directors of the Company
since 1987, CEO since 1992, President since 1993 and a
Director since 1987; UTI Chairman of the Board of
Directors and a Director since 1984, CEO since 1991;
Chairman, CEO and Director of UTG since 1992;
President, CEO and Director of certain affiliate
companies since 1992; Chairman of the Board and
Director of UFI since 1990; Director of FFMC since
1991. Mr. Ryherd has served as Chairman of the Board,
CEO, President and COO of certain affiliate life
insurance companies since 1992 and 1993. He has also
been a Director of the National Alliance of Life
Companies since 1992 and is the 1994 Membership
Committee Chairman; he is a member of the American
Council of Life Companies and Advisory Board Member of
its Forum 500 since 1992.
Robert W. Teater, 69 Director of the Company since 1984; Director of UTG
and certain affiliate companies since 1992; member of
Columbus School Board since 1991, President of
Columbus School Board since 1992; President of Robert
W. Teater and Associates, a comprehensive consulting
firm in natural resources development and organization
management since 1983.
6
<PAGE>
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 of Directors, Chief
Executive Officer and President
Thomas F. Morrow Vice Chairman and Chief Operating Officer
Other officers of the company are set forth below:
NAME, AGE POSITION WITH THE COMPANY, BUSINESS EXPERIENCE AND
OTHER DIRECTORSHIPS
James E. Melville, 50 Chief Financial Officer since March 1993; Senior
Executive Vice President of the Company since
September 1992; President and Chief Operating Officer
of certain affiliate life insurance companies and
Senior Executive Vice President of non-insurance
affiliate companies since September 1992; 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 September 1989;
Consultant to UTI and UTG from March 1992 through
September 1992.
George E. Francis, 52 Secretary of the Company since March 1993; Senior Vice
President and Chief Administrative Officer of certain
affiliate companies since 1989; Secretary of certain
affiliate companies since March 1993; Director of
certain affiliate companies since October 1992;
Treasurer and Chief Financial Officer of certain
affiliate companies from 1984 until September 1992.
On November 6, 1995 Mr. Fred Dailey resigned from the Board of Directors.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid to or earned by the Company's Chief Executive Officer and
each of the three other most highly compensated Executive Officers of the
Company during each of the Company's last three fiscal years. Compensation
for services provided by the named executive officers to the Company and its
affiliates is paid by FCC as set forth in their employment agreements. (See
Employment Contracts)
<TABLE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION (1) Long Term
Compensation
Securities
Other Annual Underlying
NAME AND Compensation (3) Stock Options
PRINCIPAL POSITION SALARY ($) BONUS ($) ($) AWARDED (#)(2)
<S> <C> <C> <C> <C> <C>
Larry E. Ryherd 1995 400,000 - 13,324 -
President, Chief 1994 400,000 - 7,909 -
Executive Officer 1993 240,000 169,365 2,393 138,000
Thomas F. Morrow 1995 300,000 - 16,654 -
Vice Chairman, Chief 1994 300,000 - 9,886 -
Operating Officer 1993 200,000 107,576 2,992 172,000
James E. Melville 1995 237,000 - 38,206 (4) -
Sr. Executive Vice 1994 237,000 - 13,181 -
President, Chief 1993 237,000 - 14,506 (4) 325,000
Financial Officer
George E. Francis 1995 119,000 - 4,441 -
Sr. Vice President, 1994 119,000 - 2,636 -
Secretary 1993 119,000 - 798 46,000
</TABLE>
7
<PAGE>
(1) Compensation deferred at the election of named officers is included in
this section.
(2) Reflects stock options to purchase UTI Common Stock pursuant to their
employment agreements.
(3) All other compensation consists of interest earned on deferred
compensation amounts pursuant to their employment agreements.
(4) Includes $10,517 and $16,000 in 1993 and 1995 respectively for the value
of personal perquisites owing Mr. Melville.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
The following table summarizes for fiscal year ending, December 31,
1995, the number of shares subject to unexercised options and the value of
unexercised options of the Common Stock of UTI held by the named executive
officers. The values shown were determined by multiplying the applicable
number of unexercised share options by the difference between the per share
market price on December 31, 1995 and the applicable per share exercise price.
There were no options granted to the named executive officers during 1995. No
named executive officers exercise any options.
<TABLE>
Number of Securities Underlying Value of Unexercised In the
Unexercised Options/SARs Money Options/SARs at
at FY-End(#) FY-End ($)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Larry E. Ryherd 138,000 - 0 -
Thomas F. Morrow 172,000 - 0 -
James E. Melville 300,000 25,000 (1) 0 8,875 (1)
George E. Francis 46,000 - 0 -
</TABLE>
(1) Mr. Melville's employment agreement with FCC and UTI provides that he
will be granted an option to purchase 25,000 shares of UTI's Common Stock at
$.02 a share if he is employed pursuant to the terms of the employment
agreement through December 31, 1997.
COMPENSATION OF DIRECTORS
The Company's standard arrangement for the compensation of directors
provide that each director shall receive an annual retainer of $2,400, plus
$300 for each meeting attended and reimbursement for reasonable travel
expenses. The Company's director compensation policy also provides that
directors who are employees or past employees of the Company do not receive
any compensation for their services as directors except for reimbursement for
reasonable travel expenses for attending each meeting. Mr. Cantrell receives
compensation pursuant to an agreement which is described in the following
section.
EMPLOYMENT CONTRACTS
On April 15, 1993, Larry E. Ryherd entered into an employment agreement
with FCC and UTI. Formerly, Mr. Ryherd had served as Chairman of the Board
and Chief Executive Officer of UTI and its affiliates. Under the terms of the
agreement, Mr. Ryherd agreed to serve as Chief Executive Officer of the
Company for a period of 36 months at an annual salary of $240,000. In
addition, Mr. Ryherd agreed to serve as Chairman of the Board and Chief
Executive Officer of UG if elected, and to serve in other positions if
appointed or elected to serve in such positions without additional
compensation. The agreement provides that Mr. Ryherd receives bonus
compensation on the basis of a formula as determined by the Boards of
Directors of UTI and certain of its affiliates. The amount of bonus
compensation as determined is related to the marketing of the business of its
affiliates and is based on percentages of new premiums written and unearned
commissions of terminated agents. Effective January 1, 1995, the Board of
Directors approved a change to this agreement setting Mr. Ryherd's annual
salary at $400,000 without bonus awards through the end of the contract term.
Mr. Ryherd has deferred portions of his income under a plan entitling him to a
deferred compensation payment on January 2, 2000 in the amount of $240,000
which includes interest at the rate of approximately 8.5% per year.
Additionally, Mr. Ryherd was granted an option to purchase up to 138,000 of
UTI Common Stock at $1.75 per share. The option is immediately exercisable
and transferable. The option will expire December 31, 2000.
8
<PAGE>
On April 15, 1993, Thomas F. Morrow entered into an employment agreement
with FCC and UTI. Formerly, Mr. Morrow had served as President and Chief
Operating Officer of UTI and its affiliates. Under the terms of the
agreement, Mr. Morrow agreed to serve as Vice Chairman and Chief Operating
Officer of the Company for a period of 36 months at an annual salary of
$200,000. In addition, Mr. Morrow agreed to serve as Vice Chairman of the
Board of Directors of UG if elected, and to serve in other positions if
appointed or elected to serve in such positions without additional
compensation. The agreement provides that Mr. Morrow receives bonus
compensation on the basis of a formula as determined by the Boards of
Directors of UTI and certain of its affiliates. The amount of bonus
compensation as determined is related to the marketing of the business of its
affiliates and is based on percentages of new premiums written and unearned
commissions of terminated agents. Effective January 1, 1995, the Board of
Directors approved a change to this agreement setting Mr. Morrow's annual
salary at $300,000 without bonus awards through the end of the contract term.
Mr. Morrow has deferred portions of his income under a plan entitling him to a
deferred compensation payment on January 2, 2000 in the amount of $300,000
which includes interest at the rate of approximately 8.5% per year.
Additionally, Mr. Morrow was granted an option to purchase up to 172,000 of
UTI Common Stock at $1.75 per share. The option is immediately exercisable
and transferable. The option will expire December 31, 2000.
FCC and UTI entered into an agreement dated April 15, 1993 with James E.
Melville pursuant to which Mr. Melville is employed as Senior Executive Vice
President of the Company. In addition, Mr. Melville agreed to serve as
President and Chief Operating Officer of UG if elected, and to serve in other
positions if appointed or elected without additional compensation. The term
of the agreement consists of two time periods. The first period, January 1,
1993 through June 30, 1995 at an annual salary of $237,000. The second
period, July 1, 1995 through December 31, 1997, Mr. Melville's employment will
be on a specified time basis. Mr. Melville has deferred portions of his
income under a plan entitling him to a deferred compensation payment on
January 2, 2000 of $400,000 which includes interest at the rate of
approximately 8.5% per year. Additionally, Mr. Melville was granted an option
to purchase up to 300,000 shares of UTI Common Stock at $1.75 per share. The
option is immediately exercisable and transferable. The option will expire
December 31, 2000. Additionally, if Mr. Melville is employed for the entire
term of the contract, he will be allowed to purchase 25,000 shares of UTI
Common Stock at $.02. This option will expire December 31, 1998.
FCC entered into an employment agreement with George E. Francis on June
16, 1992. Under the terms of the agreement, Mr. Francis is employed as Senior
Vice President of the Company for a period of 36 months at an annual salary of
$119,000. Mr. Francis also agreed to serve in other positions if appointed or
elected to such positions without additional compensation. Mr. Francis has
deferred portions of his income under a plan entitling him to a deferred
compensation payment on January 2, 2000 of $80,000 which includes interest at
the rate of approximately 8.5% per year. Additionally, Mr. Francis was
granted an option to purchase up to 46,000 shares of UTI Common Stock at $1.75
per share. The option is immediately exercisable and transferable. This
option will expire on December 31, 2000.
On June 16, 1992, FCC entered into an employment agreement with John K.
Cantrell, Chairman of the Board of Directors of FCC and a Director of the
Company. Mr. Cantrell has agreed to continue as Chairman of the Board of
Directors of FCC and a Director of the Company until April 30, 2002. In
consideration for this commitment, FCC has agreed to pay Mr. Cantrell $12,500
each month for the first sixty months of the term and $8,333.33 each month for
the last sixty months of the term. After Mr. Cantrell's retirement and until
the death of the first to die of Mr. Cantrell or his wife, the Company will
pay Mr. Cantrell the sum of $6,250 per month.
From and after the death of the first to die of Mr. and Mrs. Cantrell,
FCC will pay $4,166.67 per month to the survivor until death of the survivor.
Mrs. Cantrell will receive the death benefit described above from and after
Mr. Cantrell's death regardless of whether he died while employed or after
retirement. If Mr. Cantrell becomes disabled prior to retirement, FCC will
continue to make payments described above while he is disabled until April 30,
2002. This agreement has been entered into for the purpose of securing Mr.
Cantrell's extremely valuable services over the ten years and to relieve Mr.
Cantrell of pressures to provide his wife and himself in the event of his
disability or death.
9
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The compensation of the Company's executive officers is determined by
the full Board of Directors. The Board of Directors strongly believes that
the Company's executive officers directly impact the short-term and long-term
performance of the Company. With this belief and the corresponding objective
of making decisions that are in the best interest of the Company's
shareholders, the Board of Directors places significant emphasis on the design
and administration of the Company's executive compensation plans.
EXECUTIVE COMPENSATION CONSIDERATIONS
The purpose of the Company's executive compensation plans is to ensure
that the compensation levels provided to the Company's executive officers
integrate with the Company's annual and long-term performance objectives, to
align the financial interests of the executive officers with the interests of
the Company's shareholders, to reward for superior financial performance, and
to assist the Company in attracting, retaining and motivating executives with
exceptional leadership abilities. Consistent with this purpose, the Board of
Directors establishes appropriate compensation elements in each of the
executive officers compensation plan to include a base salary, annual bonus,
stock options and deferred compensation alternatives. Compensation levels are
reviewed annually by the Board of Directors relative to other life insurance
companies and companies of similar size in the financial industry ("comparable
companies"). Based upon analysis of total compensation paid by comparable
companies, total compensation paid to the Company's executive officers were
found to be within the same ranges. Accordingly, the Board of Directors feels
that the Company is maintaining a competitive position to retain the talent
necessary to meet the challenges in the life insurance industry.
EXECUTIVE COMPENSATION PLAN ELEMENTS
BASE SALARY. The Board of Directors establishes base salaries each year
at a level intended to be within the competitive market range of comparable
companies. In addition to the competitive market range, many factors are
considered in determining base salaries, including the responsibilities
assumed by the executive, the scope of the executive's position, experience,
length of service, individual performance and internal equity considerations.
During fiscal years 1994 and 1995 there were no changes in the base salaries
of the named executive officers.
ANNUAL BONUS. The Company does not have a bonus plan that directly ties
executive compensation to the Company's earnings performance on a near term
basis; however, the bonus compensation element is considered if the executive
officer is responsible for a specific business unit of the Company (see
Employment Contracts).
STOCK OPTIONS. One of the Company's priorities is for the executive
officers to be significant shareholders so that the interest of the executives
are closely aligned with the interests of the Company's other shareholders.
The Board of Directors believes that this strategy motivates executives to
remain focused on the overall long-term performance of the Company. Stock
options are granted at the discretion of the Board of Directors and are
intended to be granted at levels within the competitive market range of
comparable companies. During 1993, each of the named executive officers were
granted options under their employment agreements for UTI Common Stock as
described in the Employment Contract section. There were no options granted
to the named executive officers during fiscal years 1994 and 1995.
DEFERRED COMPENSATION. A very significant component of overall
Executive Compensation Plans is found in the flexibility afforded to
participating officers in the receipt of their compensation. The
availability, on a voluntary basis, of the deferred compensation arrangements
as described in the Employment Contract section, may prove to be critical to
certain officers, depending upon their particular financial circumstance.
10
<PAGE>
CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN
During 1995, the Company's most highly compensated executive officers
were Larry E. Ryherd, Chief Executive Officer and President, and Thomas F.
Morrow, Vice Chairman and Chief Operating Officer. In deciding Mr. Ryherd's
and Mr. Morrow's compensation, the Board of Directors did not affix specific
weights or values to the various factors considered in the executive
compensation plan elements. The Board of Directors considered the significant
progress made in 1993, 1994 and 1995 as it relates to the Company's growth
through acquisitions and marketing new business. The Board of Directors also
considered key decisions and actions taken to ensure the Company's long term
profitability such as the continued restructuring of the Company in response
to changes in the industry in order to remain competitive, and the
consolidation of operations to achieve cost savings. Mr. Ryherd's cash
compensation for 1995 was $400,000 of which $30,000 was deferred. Mr.
Morrow's cash compensation for 1995 was $300,000 of which $37,500 was
deferred. No stock options were granted to Mr. Ryherd or Mr. Morrow during
1995 and neither exercised any stock options during the year.
CONCLUSION
The Board of Directors believes the mix of structured employment
agreements with certain key executives, conservative market based salaries,
competitive cash incentives for short-term performance and the potential for
equity-based rewards for long term performance represents an appropriate
balance. This balanced Executive Compensation Plan provides a competitive and
motivational compensation package to the executive officer team necessary to
continue to produce the results the Company strives to achieve. The Board of
Directors also believes the Executive Compensation Plan addresses both the
interests of the stockholders and the executive team.
BOARD OF DIRECTORS
Vincent T. Aveni Thomas F. Morrow
Marvin W. Berschet Charlie E. Nash
John K. Cantrell Larry E. Ryherd
Gertrude W. Donahey Robert W. Teater
The foregoing Report on Executive Compensation shall not be deemed to be
incorporated by reference into any filing of the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates such information by reference.
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Company's Common Stock during the five fiscal years ended December 31,
1995, with the cumulative total return on the NASDAQ Composite Index
Performance and the NASDAQ Insurance Stock Index (1):
The five year total return chart reflects Company stock performance compared
to the NASDAQ stock market and the NASDAQ insurance stock market. The base
year is 1990 with subsequent years reflecting a percentage change from the
base year. The Company's stock price percentage changes were 100, 100, 100,
92 and 92 for 1991, 1992, 1993, 1994 and 1995, respectively. NASDAQ
composite stock price percentage changes were 160, 186, 212, 208 and 300
for 1991, 1992, 1993, 1994 and 1995, respectively. The NASDAQ insurance
composite stock price percentage changes were 141, 191, 204, 193 and 274 for
1991, 1992, 1993, 1994 and 1995, respectively.
Assumes $100 Invested on December 31, 1991.
11
<PAGE>
(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. Furthermore, the Company selected the NASDAQ Insurance
Stock Index as the second comparison because there is no similar single
"peer company" in the NASDAQ system with which to compare stock
performance and the closest additional line-of-business index which
could be found was the NASDAQ Insurance Stock Index. Trading activity
in the Company's Common Stock is limited, which may be a result in part
of the Company's low profile from not being listed on any exchange, and
its reported operating losses. The Company has experienced a tremendous
growth rate over the period shown in the Return Chart with assets
growing from approximately $9 million in 1990 to approximately $13.3
million in 1995. The growth rate has been the result of other company
acquisitions and new insurance writings. The Company has incurred costs
of conversions and administrative consolidations associated with the
acquisitions which has contributed to the operating losses. The Return
Chart is not intended to forecast or be indicative of possible future
performance of the Company's stock.
The foregoing graph shall not be deemed to be incorporated by reference
into any filing of the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates such information by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following persons served as directors of the Company during 1995 and
were officers or employees of the Company or its subsidiaries during 1995:
John K. Cantrell, Thomas F. Morrow and Larry E. Ryherd. Accordingly, these
individuals have participated in decisions related to compensation of
executive officers of the Company and its subsidiaries.
During 1995, the following executive officers of the Company were also
members of the Board of Directors of FCC, two of whose executive officers
served on the Board of Directors of the Company: Messrs. Morrow and Ryherd.
During 1995, the following executive officers of the Company were also
members of the Board of Directors of UTI, two of whose executive officers
served on the Board of Directors of the Company: Messrs. Morrow and Ryherd.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Kerber, Eck and Braeckel served as the Company's independent certified
public accounting firm for the fiscal year ended December 31, 1995 and fiscal
year ended December 31, 1994. In serving its primary function as outside
auditor for the Company, Kerber, Eck and Braeckel performed the following
audit services: examination of annual consolidated financial statements;
assistance and consultation on reports filed with the Securities and Exchange
Commission and; assistance and consultation on separate financial reports
filed with the State insurance regulatory authorities pursuant to certain
statutory requirements. The Company does not expect that a representative of
Kerber, Eck and Braeckel will be present at the Annual Meeting of Shareholders
of the Company. No accountants have been selected for fiscal year 1996
because the Company generally chooses accountants shortly before the
commencement of the annual audit work.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
1997 ANNUAL MEETING
In order for a proposal by a shareholder to be included in the Company's
proxy statement and form of proxy for the 1997 Annual Meeting of Shareholders,
the proposal must be received by the Company at its principal office on or
before December 15, 1996.
12
<PAGE>
OTHER MATTERS TO COME BEFORE THE MEETING
The management does not intend to bring any other business before the
meeting of the Company's shareholders and has no reason to believe that any
will be presented to the meeting. If, however, any other business should
properly be presented to the meeting, the proxies named in the enclosed form
of proxy will vote the proxies in accordance with their best judgement.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company has filed its 1995 Annual Report on Form 10-K with the
Securities and Exchange Commission. A copy of the report may be obtained
without charge by any shareholder. Requests for copies of the report should
be sent to George E. Francis, United Income, Inc., 5250 South 6th Street, P.O.
Box 5147, Springfield, Illinois, 62705-5147.
BY ORDER OF THE BOARD OF DIRECTORS
UNITED INCOME, INC.
George E. Francis
George E. Francis, Secretary
Dated: April 22, 1996
13
