UNITED INCOME, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, JULY 24, 1997
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 Thursday, July 24, 1997 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 May 27, 1997
as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are urged to
mark, date and sign the enclosed proxy and return it promptly so that your
vote can be recorded. If you are present at the meeting and desire to do so,
you may revoke your proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
UNITED INCOME, INC.
George E. Francis
George E. Francis
Secretary
Dated: June 25, 1997
Springfield, Illinois
YOUR VOTE IS IMPORTANT!
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON.
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS OF
UNITED INCOME, INC.
GENERAL INFORMATION REGARDING SOLICITATION
The Annual Meeting of the Shareholders of United Income, Inc. (the
"Company") will be held on July 24, 1997 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 May 27, 1997, in order to furnish to each share
holder information relating to the business to be transacted at the meeting.
This proxy statement and the enclosed proxy are being mailed to
shareholders of the Company on or about June 25, 1997. The Annual Report has
been mailed under separate cover. The Company will bear the cost of
soliciting proxies from its shareholders. The Company may reimburse brokers
and other persons for their reasonable expenses in forwarding proxy materials
to the beneficial owners of the Company's stock. Solicitations may be made by
telephone, telegram or by personal calls, and it is anticipated that such
solicitations will consist primarily of requests to brokerage houses,
custodians, nominees, and fiduciaries to forward the soliciting material to
the beneficial owners of shares held of record by such persons. If necessary,
officers and regular employees of the Company may by telephone, telegram or
personal interview request the return of proxies.
VOTING
The enclosed proxy is solicited by and on behalf of the Board of
Directors. If you are unable to attend the meeting on July 24, 1997, please
complete the enclosed proxy and return it to us in the accompanying envelope
so that your shares will be represented.
When the enclosed proxy is duly executed and returned in advance of the
meeting, and is not revoked, the shares represented thereby will be voted in
accordance with the authority contained therein. Any shareholder giving a
proxy may revoke it at any time before it is voted by delivering to the
Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a later date, or by attending the meeting and voting in person.
If a proxy fails to specify how it is to be voted, it will be voted "FOR"
Proposal 1.
Inspectors of election will be appointed to tabulate the number of
shares of Common Stock represented at the meeting in person or by proxy, to
determine whether or not a quorum is present and to count all votes cast at
the meeting. The inspectors of election will treat abstentions and broker
non-votes as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. With respect to the tabulation of
votes cast on a specific proposal presented to the shareholders at the meeting,
abstentions will be considered as present and entitled to vote with respect
to that specific proposal, whereas broker non-votes will not be considered as
present and entitled to vote with respect to that specific proposal.
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<PAGE>
AFFILIATE COMPANIES
The Company is 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 79% of First Commonwealth Corporation ("FCC") and
FCC owns 100% of Universal Guaranty Life Insurance Company ("UG"). UG owns
100% of United Security Assurance Company ("USA"). USA owns 84% of
Appalachian Life Insurance Company ("APPL") and APPL owns 100% of Abraham
Lincoln Insurance Company("ABE").
For purposes of this proxy statement, the term "affiliate life insurance
companies" shall mean UG, USA, APPL and ALIC, and the term "non-insurance
affiliate companies" shall mean the affiliated companies other than UG, USA,
APPL and ALIC.
The companies hereinafter are sometimes collectively referred to as the
"Affiliate Companies".
VOTING SECURITIES OUTSTANDING
May 27, 1997 has been fixed as the record date for the determination of
shareholders entitled to notice of and to vote at the annual meeting or any
adjournments or postponements thereof. On that date, the Company had
outstanding 1,391,921 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.
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<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, 1997 and the nature of such ownership;
and (ii) the percent of the issued and outstanding shares of Common Stock so
owned as of the same date.
Title Number of Shares Percent
of Name and Address and Nature of of
Class of Beneficial Owner Beneficial Ownership Class
Common United Trust, Inc. 416,185 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
exceeds $100,000 for fiscal 1996, and with respect to all executive officers
and directors of the Company as a group: (i) the total number of shares of
all classes of stock of the Company or any of its parents or subsidiaries,
beneficially owned as of March 31, 1997 and the nature of such ownership;
and (ii) the percent of the issued and outstanding shares of stock so owned
as of the same date.
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 4,600 (1) *
James E. Melville 52,500 (2) 2.6%
Thomas F. Morrow 159,060 (3) 8.0%
Charlie E. Nash 0 *
Larry E. Ryherd 617,236 (4) 31.0%
Robert W. Teater 0 *
All directors and 833,396 41.9%
executive officers as a
group (ten in number)
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<PAGE>
Title Directors, Named Executive Number of Shares Percent
of Officers, & All Directors & and Nature of of
Class Executive Officers as a Group Ownership Class
FCC's Vincent T. Aveni 0 *
Common Marvin W. Berschet 0 *
Stock, $1.00 John K. Cantrell 0 *
par value Gertrude W. Donahey 0 *
George E. Francis 0 *
James E. Melville 431 (5) *
Thomas F. Morrow 0 *
Charlie E. Nash 0 *
Larry E. Ryherd 0 *
Robert W. Teater 0 *
All directors and 431 *
executive officers as a
group (ten in number)
Company's Vincent T. Aveni 7,716 (6) *
Common Marvin W. Berschet 7,161 (7) *
Stock, no John K. Cantrell 0 *
par value Gertrude W. Donahey 7,000 *
George E. Francis 0 *
James E. Melville 0 *
Thomas F. Morrow 31,500(8)(11) 2.3%
Charlie E. Nash 7,052 *
Larry E. Ryherd 47,250(9)(11) 3.4%
Robert W. Teater 7,380(10) *
All directors and
executive officers 115,059 8.3%
as a group (ten in number)
(1) Includes 4,600 shares which may be acquired upon the exercise of
outstanding stock options.
(2) James E. Melville owns 2,500 shares individually, and 14,000 shares
jointly with his spouse. Includes; (i) 3,000 shares of the UTI's Common
Stock which are held beneficially in trust for his daughter, namely Bonnie J.
Melville; (ii) 3,000 shares of the UTI's Common Stock, 750 shares of which
are in the name of Matthew C. Hartman, his nephew; 750 shares of which are in
the name of Zachary T. Hartman, his nephew; 750 shares of which are in the
name of Elizabeth A. Hartman, his niece; and 750 shares of which are in the
name of Margaret M. Hartman, his niece; and (iii) 30,000 shares which may be
acquired by James E. Melville upon exercise of outstanding stock options.
(3) Includes 17,200 shares which may be acquired upon the exercise of
outstanding stock options. Includes 1,000 shares as custodian for grandsons.
(4) Larry E. Ryherd owns 271,086 shares of the UTI's Common Stock in his
own name. Includes; (i) 150,050 shares of the UTI's Common Stock in the name
of Dorothy LouVae Ryherd, his wife; (ii) 150,000 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) 29,300 shares of the UTI's Common Stock,
9,700 shares of which are in the name of Shari Lynette Serr, 9,700 shares of
which are held in the name of Derek Scott Ryherd, and 9,900 shares of which
are in the name of Jarad John Ryherd; (iv) 500 shares of the UTI's Common
Stock held in the name of Larry E. Ryherd as custodian for Charity Lynn Newby,
his niece; (v) 500 shares held in the name of Larry E. Ryherd as custodian for
Lesley Carol Newby, his niece; (vi) 2,000 shares held by Dorothy LouVae
Ryherd, his wife as custodian for granddaughter; and (vii) 13,800 shares which
may be acquired by Larry E.Ryherd upon exercise of outstanding stock options.
(5) James E. Melville owns 55 shares individually and 376 shares jointly
with his spouse.
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<PAGE>
(6) Includes 272 shares owned directly by Mr. Aveni's brother and 210
shares owned directly by Mr. Aveni's son.
(7) Includes 42 shares owned directly by each of Mr. Berschet's two
sons and 77 shares owned directly by Mr. Berschet's daughter, a total of 161
shares.
(8) Includes 31,500 shares beneficially in trust for the two children
of Thomas F. Morrow, namely Kristi J. Wilkerson and Amy Suzanne Heath.
(9) Includes 47,250 shares beneficially in trust for the three children
of Larry E. Ryherd and Dorothy LouVae Ryherd, namely Shari Lynette Serr,
Derek Scott Ryherd and Jarad John Ryherd.
(10) Includes 210 shares owned directly by Mr. Teater's spouse.
(11) In addition, Mr. Morrow and Mr. Ryherd are directors and officers
of UTI, which owns 416,185 shares (29.9%) of the Company. Mr. Morrow and Mr.
Ryherd disclaim any beneficial interest in the 416,185 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, 1996, the Board of Directors of
the Company met four times. All nominees for director attended at least 75%
of all meetings of the Board 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, Cantrell and Donahey. The Audit Committee reviews and acts or
reports to the Board with respect to various auditing and accounting matters,
the scope of the audit procedures and the results thereof, the internal
accounting and control systems of the Company, the nature of services
performed for the Company and the fees to be paid to the independent
auditors, the performance of the Company's independent and internal auditors
and the accounting practices of the Company. The Audit Committee also
recommends to the full Board of Directors the auditors to be appointed by the
Board. The Audit Committee met once in 1996.
The Board of Directors has an Executive Committee consisting of Messrs.
Morrow and Ryherd. The Executive Committee has all the powers and authority
of the Board of Directors in the management of the business and affairs of
the Company, except those powers which, by law, cannot be delegated by the
Board of Directors. The Committee must report to the Board of Directors
regarding all actions taken by the Committee. The Committee did not meet in
1996.
The Board of Directors has a Nominating Committee consisting of Messrs.
Aveni, Nash and Teater. The Nominating Committee reviews, evaluates and
recommends directors, officers and nominees for the Board of Directors.
There is no formal mechanism by which shareholders of the Company can
recommend nominees for the Board of Directors, although any recommendations
by shareholders of the Company will be considered. Shareholders desiring to
make nominations to the Board of Directors should submit their nominations in
writing to the Chairman of the Board no later than February 1st of the year in
which the nomination is to be made.The Committee did not meet in 1996.
The Stock Option Committee is composed of Messrs. 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 1996.
The compensation of the Company's executive officers is determined by
the full Board of Directors (see report on Executive Compensation).
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<PAGE>
ELECTION OF DIRECTORS
At the annual meeting of shareholders of the Company, 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:
POSITION WITH THE COMPANY, BUSINESS EXPERIENCE AND OTHER
NAME, AGE DIRECTORSHIPS
Vincent T. Aveni
70 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
67 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
72 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
88 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
52 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.
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
69 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
57 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. 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
70 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.
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<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
51 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
53 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.
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)
<S> <C> <C> <C>Other Annual
Name and Compensation (2)
Principal Position Salary($) ($)
Larry E. Ryherd 1996 400,000 17,681
Chairman of the 1995 400,000 13,324
Board, Chief 1994 400,000 7,909
Executive Officer
Thomas F. Morrow 1996 300,000 21,405
Vice Chairman, Chief 1995 300,000 16,654
Operating Officer 1994 300,000 9,886
James E. Melville 1996 237,000 27,537
Sr. Executive Vice 1995 237,000 38,206 (3)
President, Chief 1994 237,000 13,181
Financial Officer
George E. Francis 1996 119,000 7,348
Sr. Vice President, 1995 119,000 4,441
Secretary 1994 119,000 2,636
</TABLE>
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<PAGE>
(1) Compensation deferred at the election of named officers is included in
this section.
(2) Other annual compensation consists of interest earned on deferred
compensation amounts pursuant to their employment agreements and the
Company's matching contribution to the First Commonwealth Corporation
Employee Savings Trust 401(k) Plan.
(3) Includes $16,000 for the value of personal perquisites owing Mr.Melville.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
The following table summarizes for fiscal year ending, December 31, 1996,
the number of shares subject to unexercised options and the value of
unexercised options of the Common Stock of UTI held by the named executive
officers. The values shown were determined by multiplying the applicable
number of unexercised share options by the difference between the per share
market price on December 31, 1996 and the applicable per share exercise price.
There were no options granted to the named executive officers during 1996.
<TABLE>
Number of Shares Number of Securities Underlying
Acquired on Value Unexercised Options/SARs
Exercise (#) Realized ($) at FY-End(#)
Name Exercisable Unexercisable
<S> <C> <C> <C> <C>
Larry E. Ryherd 13,800 -
Thomas F. Morrow 17,200 -
James E. Melville 2,500 13,563 30,000 -
George E. Francis 4,600 -
Value of Unexercised In The
Money Options/SARs at
FY-End ($)
Name Exercisable Unexercisable
Larry E. Ryherd 0 -
Thomas F. Morrow 0 -
James E. Melville 0 -
George E. Francis 0 -
</TABLE>
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COMPENSATION OF DIRECTORS
The Company's standard arrangement for the compensation of directors
provide that each director shall receive an annual retainer of $2,400, plus
$300 for each meeting attended and reimbursement for reasonable travel
expenses. The Company's director compensation policy also provides that
directors who are employees or past employees of the Company do not receive
any compensation for their services as directors except for reimbursement for
reasonable travel expenses for attending each meeting. 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. Pursuant to the
agreement, Mr. Ryherd agreed to serve as President and Chief Executive
Officer of the Company and in addition, to serve in other positions of the
affiliated companies if appointed or elected. The agreement provides for an
annual salary of $400,000 as determined by the Board of Directors. The term
of the agreement has been continuous. Mr. Ryherd has deferred portions of
his income under a plan entitling him to a deferred compensation payment on
January 2, 2000 in the amount of $240,000 which includes interest at the rate
of approximately 8.5% per year. Additionally, Mr. Ryherd was granted an
option to purchase up to 13,800 of UTI Common Stock at $17.50 per share.
The option is immediately exercisable and transferable. The option will
expire December 31, 2000.
On April 15, 1993, Thomas F. Morrow entered into an employment agreement
with FCC and UTI. Formerly, Mr. Morrow had served as President and Chief
Operating Officer of UTI and its affiliates. Pursuant to the agreement, Mr.
Morrow agreed to serve as Chief Operating Officer of the Company and in
addition, to serve in other positions of the affiliated companies if appointed
or elected. The agreement provides for an annual salary of $300,000 as
determined by the Board of Directors. The term of the agreement has been
continuous. Mr.Morrow has deferred portions of his income under a plan
entitling him to a deferred compensation payment on January 2, 2000 in the
amount of $300,000 which includes interest at the rate of approximately 8.5%
per year. Additionally, Mr. Morrow was granted an option to purchase up to
17,200 of UTI Common Stock at $17.50 per share. The option is immediately
exercisable and transferable. The option will expire December 31, 2000.
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<PAGE>
The Company and UTI entered into an employment agreement dated April 15,
1993 with James E. Melville pursuant to which Mr. Melville is employed as
Senior Executive Vice President and in addition, to serve in other positions
of the affiliated companies if appointed or elected at an annual salary of
$237,000. The term of the agreement expires December 31, 1997. Mr. Melville
has deferred portions of his income under a plan entitling him to a deferred
compensation payment on January 2, 2000 of $400,000 which includes interest
at the rate of approximately 8.5% per year. Additionally, Mr. Melville was
granted an option to purchase up to 32,500 shares of UTI Common Stock at
$17.50 per share. The option is immediately exercisable and transferable.
The option will expire December 31, 2000.
FCC entered into an employment agreement with George E. Francis on June
16, 1992. Under the terms of the agreement, Mr. Francis is employed as
Senior Vice President of the Company at an annual salary of $119,000. Mr.
Francis also agreed to serve in other positions if appointed or elected to
such positions without additional compensation. The term of the contract has
been continuous. Mr. Francis has deferred portions of his income under a plan
entitling him to a deferred compensation payment on January 2, 2000 of
$80,000 which includes interest at the rate of approximately 8.5% per year.
Additionally, Mr. Francis was granted an option to purchase up to 4,600
shares of UTI Common Stock at $17.50 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.
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<PAGE>
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The compensation of the Company's executive officers is determined by
the full Board of Directors. The Board of Directors strongly believes that
the Company's executive officers directly impact the short-term and long-term
performance of the Company. With this belief and the corresponding objective
of making decisions that are in the best interest of the Company's
shareholders, the Board of Directors places significant emphasis on the design
and administration of the Company's executive compensation plans.
EXECUTIVE COMPENSATION CONSIDERATIONS
The purpose of the Company's executive compensation plans is to ensure
that the compensation levels provided to the Company's executive officers
integrate with the Company's annual and long-term performance objectives, to
align the financial interests of the executive officers with the interests of
the Company's shareholders, to reward for superior financial performance, and
to assist the Company in attracting, retaining and motivating executives with
exceptional leadership abilities. Consistent with this purpose, the Board of
Directors establishes appropriate compensation elements in each of the
executive officers compensation plan to include a base salary, annual bonus,
stock options and deferred compensation alternatives. Compensation levels are
reviewed annually by the Board of Directors relative to other life insurance
companies and companies of similar size in the financial industry ("comparable
companies"). Based upon analysis of total compensation paid by comparable
companies, total compensation paid to the Company's executive officers were
found to be within the same ranges. Accordingly, the Board of Directors feels
that the Company is maintaining a competitive position to retain the talent
necessary to meet the challenges in the life insurance industry.
EXECUTIVE COMPENSATION PLAN ELEMENTS
Base Salary. The Board of Directors establishes base salaries each year
at a level intended to be within the competitive market range of comparable
companies. In addition to the competitive market range, many factors are
considered in determining base salaries, including the responsibilities
assumed by the executive, the scope of the executive's position, experience,
length of service, individual performance and internal equity considerations.
During the last three fiscal years, there were no changes in the base salaries
of the named executive officers.
Stock Options. One of the Company's priorities is for the executive
officers to be significant shareholders so that the interest of the executives
are closely aligned with the interests of the Company's other shareholders.
The Board of Directors believes that this strategy motivates executives to
remain focused on the overall long-term performance of the Company. Stock
options are granted at the discretion of the Board of Directors and are
intended to be granted at levels within the competitive market range of
comparable companies. During 1993, each of the named executive officers were
granted options under their employment agreements for UTI Common Stock as
described in the Employment Contract section. There were no options granted
to the named executive officers during the last three fiscal years.
Deferred Compensation. A very significant component of overall Executive
Compensation Plans is found in the flexibility afforded to participating
officers in the receipt of their compensation. The availability, on a
voluntary basis, of the deferred compensation arrangements as described in the
Employment Contract section, may prove to be critical to certain officers,
depending upon their particular financial circumstance.
CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN
During 1996, 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 1994, 1995 and 1996 as it relates to the
Company's
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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 1996 was $400,000. Mr. Morrow's cash compensation for 1996
was $300,000. No stock options were granted to Mr. Ryherd or Mr. Morrow
during 1996 and neither exercised any stock options during the year.
CONCLUSION
The Board of Directors believes the mix of structured employment
agreements with certain key executives, conservative market based salaries,
competitive cash incentives for short-term performance and the potential for
equity-based rewards for long term performance represents an appropriate
balance. This balanced Executive Compensation Plan provides a competitive and
motivational compensation package to the executive officer team necessary to
continue to produce the results the Company strives to achieve. The Board of
Directors also believes the Executive Compensation Plan addresses both the
interests of the shareholders and the executive team.
BOARD OF DIRECTORS
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,
1996, with the cumulative total return on the NASDAQ Composite Index
Performance and the NASDAQ Insurance Stock Index (1):
FIVE YEAR TOTAL RETURN CHART
NASDAQ
NASDAQ Insurance UII
1991 100.00 100.00 100.00
1992 116.58 135.76 100.00
1993 133.69 145.03 100.00
1994 130.48 136.42 92.00
1995 185.03 194.04 92.00
1996 227.27 221.19 40.00
Assumes $100 Invested on December 31, 1991
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(1) The Company selected the NASDAQ Composite Index Performance as an
appropriate comparison because the Company's Common Stock is not listed on
any exchange. 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 $19 million in 1991 to
approximately $355 million in 1996 through it's 47% equity ownership of UTG.
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 1996 and
were officers or employees of the Company or its subsidiaries during 1996:
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 1996, 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 1996, 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, 1996 and fiscal
year ended December 31, 1995. In serving its primary function as outside
auditor for the Company, Kerber, Eck and Braeckel performed the following
audit services: examination of annual consolidated financial statements;
assistance and consultation on reports filed with the Securities and Exchange
Commission and; assistance and consultation on separate financial reports
filed with the State insurance regulatory authorities pursuant to certain
statutory requirements. The Company does not expect that a representative of
Kerber, Eck and Braeckel will be present at the Annual Meeting of
Shareholders of the Company. No accountants have been selected for fiscal
year 1997 because the Company generally chooses accountants shortly before
the commencement of the annual audit work.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR
1998 ANNUAL MEETING
In order for a proposal by a shareholder to be included in the Company's
proxy statement and form of proxy for the 1998 Annual Meeting of Shareholders,
the proposal must be received by the Company at its principal office on or
before December 15, 1997.
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OTHER MATTERS TO COME BEFORE THE MEETING
The management does not intend to bring any other business before the
meeting of the Company's shareholders and has no reason to believe that any
will be presented to the meeting. If, however, any other business should
properly be presented to the meeting, the proxies named in the enclosed form
of proxy will vote the proxies in accordance with their best judgement.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company has filed its 1996 Annual Report on Form 10-K with the
Securities and Exchange Commission. A copy of the report may be obtained
without charge by any shareholder. Requests for copies of the report should
be sent to George E. Francis, United 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: June 25, 1997
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