<PAGE>
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 Rule 14a 11(c) or Rule 14a 12
The Guarantee Life Companies Inc.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(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 0-11 (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 with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(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>
[LOGO]THE GUARANTEE LIFE
COMPANIES INC.
Guarantee Centre
8801 Indian Hills Drive
Omaha, Neraska 68114
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 14, 1998
To the Shareholders of The Guarantee Life Companies Inc.:
The Annual Meeting of Shareholders of The Guarantee Life Companies Inc.
(the "Company") will be held at Joslyn Art Museum, 2200 Dodge Street, Omaha,
Nebraska, on Thursday, May 14, 1998, at 10:00 a.m., Central Standard Time, for
the following purposes:
1. To elect four directors, each to serve for a three-year term of
office expiring at the 2001 Annual Meeting of Shareholders; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 27, 1998,
are entitled to notice of and to vote at the Annual Meeting of Shareholders.
All shareholders are cordially invited to attend the meeting in person.
However, if you are unable to attend in person and wish to have your shares
voted, please sign and date the enclosed proxy and return it in the accompanying
envelope as promptly as possible or call 1-800-840-1208 to vote by telephone.
YOUR VOTE IS VERY IMPORTANT. Your proxy may be revoked by appropriate notice to
the Secretary of the Company at any time prior to the voting thereof.
BY ORDER OF THE BOARD OF DIRECTORS
R. A. Spellman
Secretary
Omaha, Nebraska
April 9, 1998
<PAGE>
THE GUARANTEE LIFE COMPANIES INC.
Guarantee Centre
8801 Indian Hills Drive
Omaha, Nebraska 68114
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1998
This Proxy Statement is furnished to shareholders of The Guarantee Life
Companies Inc. (the "Company") in connection with the solicitation on behalf of
the Company's Board of Directors of proxies to be voted at the Annual Meeting of
Shareholders of the Company to be held on Thursday, May 14, 1998, at 10:00 a.m.,
Central Standard Time, at Joslyn Art Museum, 2200 Dodge Street, Omaha, Nebraska.
Distribution of this Proxy Statement and the accompanying form of proxy began on
or about April 9, 1998.
Only holders of record of common stock of the Company (the "Common
Stock") at the close of business on March 27, 1998, are entitled to notice of
and to vote at the annual meeting. On that date, the Company had outstanding
8,838,101 shares of Common Stock, each of which is entitled to one vote.
A stockholder who is a participant in Guarantee Life Insurance
Company's Thrift Savings Plan will receive a proxy card which covers both shares
credited to such stockholder's plan account plus shares of record registered in
the same name. Accordingly, proxies executed by such a participant will serve as
a voting instruction to the trustee of the plan. If a participant's plan account
is not carried in the same name as his or her shares of record, such participant
will receive a separate proxy card for both individual and plan holdings. If a
participant in Guarantee Life Insurance Company's Thrift Savings Plan does not
vote the shares credited to the participant's plan account, such shares will be
voted by the plan's trustee in the same proportion as the shares that are voted
by the other participants in the plan.
The enclosed proxy may be revoked by the shareholder at any time prior
to the exercise thereof by filing with the Secretary of the Company a written
revocation or duly executed proxy bearing a later date. The proxy will be deemed
revoked if the shareholder is present at the annual meeting and elects to vote
in person.
A majority of the outstanding shares will constitute a quorum at the
annual meeting. Shares entitled to vote and represented by properly executed,
returned and unrevoked proxies will be considered present at the meeting for
purposes of determining a quorum, including shares with respect to which votes
are withheld, abstentions are cast or there are broker nonvotes. Unless
otherwise directed in the accompanying proxy, the persons named therein will
vote FOR the proposal set forth in the Notice of Annual Meeting of Shareholders.
The cost of soliciting proxies in the enclosed form will be borne by
the Company. In addition to the use of the mails, proxies may be solicited
personally or by telephone or telegraph by directors, officers and regular
employees of the Company, without additional compensation therefor. Banks,
brokerage houses and other institutions, nominees and fiduciaries will be
requested to forward the soliciting material to their principals and to obtain
authorization for the execution of proxies. The Company may reimburse banks,
brokerage houses and other institutions, nominees and fiduciaries for their
expenses in forwarding proxy materials to their principals.
Also, ChaseMellon Shareholder Services, L.L.C. may assist the Company
in soliciting proxies for the annual meeting, and if so, will be paid an
estimated fee of up to $25,000 plus out-of-pocket expenses. The Company has
agreed to indemnify ChaseMellon Shareholder Services, L.L.C. against certain
liabilities in connection with soliciting proxies for the annual meeting.
2
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with one class
elected each year to hold office for a three-year term. Robert D. Bates,
Theodore C. Cooley, Bernard W. Reznicek and Janice D. Stoney, current members of
the Board of Directors, have been nominated for re-election to serve three-year
terms of office expiring at the 2001 Annual Meeting of Shareholders and until
their successors are duly elected and qualified. Directors are elected by a
plurality of votes cast. Consequently, votes withheld and broker nonvotes with
respect to the election of directors will have no impact on the election of
directors. If any nominee is unable to serve, or for good cause declines to
serve at the time of the annual meeting, the persons named in the enclosed proxy
will exercise discretionary authority to vote for substitutes. The Board of
Directors is not aware of any circumstances that would render any nominee
unavailable for election.
The following table sets forth certain information regarding the nominees for
election and the directors continuing in office.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED.
<TABLE>
<CAPTION>
DIRECTOR BUSINESS EXPERIENCE AND
NAME SINCE PRINCIPAL OCCUPATION AGE
<S> <C> <C>
Robert D. Bates 1994 Chairman of the Board, President and Chief Executive Officer 56
of The Guarantee Life Companies Inc. since May 1995.
Chairman of the Board of Guarantee Life Insurance Company
since November 1990 and President and Chief Executive
Officer of Guarantee Life Insurance Company since March 1989.
Theodore C. Cooley 1994 Executive Vice President of the Company since May 1995. 56
Executive Vice President-Individual Division of Guarantee Life
Insurance Company since March 1994, and Senior Vice President-
Individual Division from March 1993 to March 1994. From 1977
until joining Guarantee Life Insurance Company in 1993,
Mr. Cooley served with The Paul Revere Insurance Group.
Bernard W. Reznicek 1994 National Director, Utility Marketing for Central States 61
Indemnity Co. of Omaha since January 1997. Prior thereto,
starting in July 1994, he was Dean of the Creighton
University College of Business Administration. Between
1987 and 1994 he served with Boston Edison Company,
Boston, Massachusetts and was Chairman and Chief
Executive Officer at the time of his retirement in 1994.
Mr. Reznicek is a director of CalEnergy Company, Stone &
Webster, Inc., CSG Systems International, State Street
Corporation and Thermal Technologies, Inc.
Janice D. Stoney 1994 Executive Vice President (Retired), U S WEST 57
Communications from 1990 until her retirement in 1992.
From 1989 until 1990 she was President of the Consumer
Division of U S WEST Communications. Ms. Stoney is a
director of Premark International and Whirlpool Corporation.
</TABLE>
3
<PAGE>
DIRECTORS WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING OF SHAREHOLDERS:
<TABLE>
<CAPTION>
DIRECTOR BUSINESS EXPERIENCE AND
NAME SINCE PRINCIPAL OCCUPATION AGE
<S> <C> <C> <C>
C.R. "Bob" Bell 1994 President, Greater Omaha Chamber of Commerce since 1989. 67
Thomas T. Hacking 1995 Chief Executive Officer, Hacking & Co., a private investment 53
and merchant banking firm, since 1993. From 1988 until 1993,
Mr. Hacking was Executive Vice President and co-head of
investment banking for Bateman Eichler, Hill Richards Inc.
and its successor, Kemper Securities, Inc.
A.J. Scribante 1994 Chairman of the Board and Chief Executive Officer, VITAL 68
LEARNING Corporation since 1989, and since 1988,
Mr. Scribante has been Chairman of Vital Resources, Inc.
DIRECTORS WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING OF SHAREHOLDERS
John R. Cochran 1994 Chairman of the Board and Chief Executive Officer, FirstMerit 55
Corporation since February 1998, and prior thereto from 1995 to
February 1998, President and Chief Executive Officer of FirstMerit
Corporation. From January 1986 to 1995, Mr. Cochran was
President and Chief Executive Officer of Norwest Bank Nebraska,
N.A. Mr. Cochran is a director of FirstMerit Corporation.
Lee M. Gammill, Jr. 1997 Vice Chairman of the Board (Retired) of New York Life 64
Insurance Company since February 1995. Prior to his position
as Vice Chairman, Mr. Gammill spent approximately 40 years
with New York Life Insurance Company, in a variety of
positions, including Executive Vice President in Charge of
Individual Operations and Senior Vice President. Mr. Gammill
is a director of National Affiliated Corp. and Vanguard Airlines.
James M. McClymond 1994 Consultant to Thermal Technologies, Inc. Since October 1994, 64
he has served as an international business consultant. Prior
thereto, he served as President of Peoples Natural Gas Company
from February 1985 until his retirement in October 1994. Mr.
McClymond is a director of Thermal Technologies, Inc.
William F. Welsh II 1994 President and Chief Executive Officer, Election Systems & 56
Software, Inc., formerly known as American Information
Systems, Inc. since 1994. From 1977 until 1993, Mr. Welsh
served in various management positions at Valmont Industries
Inc., including President and Chief Executive Officer.
</TABLE>
4
<PAGE>
INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee of the Board of Directors,
the Board has reappointed KPMG Peat Marwick LLP ("KPMG") as the independent
public accounting firm to audit the financial statements of the Company and its
subsidiaries for the fiscal year beginning January 1, 1998 and ending December
31, 1998.
Representatives of KPMG will be present at the Annual Meeting. They
will be given the opportunity to make a statement if they desire to do so, and
they will be available to respond to appropriate questions.
Executive Officers
EXECUTIVE OFFICERS, IN ADDITION TO MESSRS. BATES AND COOLEY (SEE PAGE 3)
ARE SET FORTH BELOW.
<TABLE>
<CAPTION>
Business Experience and
Name Principal Occupation AGE
<S> <C> <C>
Michael G. Allen Senior Vice President of the Company since May 1995 and Senior Vice 48
President-Employee Benefits Division of Guarantee Life since January 1996.
Mr. Allen joined Guarantee Life in September 1993 as Senior Vice President-
Planning, Human Resources and Administration and became Senior Vice
President-Group Operations in 1995. Prior thereto, from 1986 until joining
Guarantee Life, he was President of Louis Allen Associates.
William L. Bauhard Senior Vice President and Chief Financial Officer of the Company and 52
Guarantee Life since May 1995. Prior to joining the Company, Mr. Bauhard
spent over 23 years with US WEST Communications in a variety of financial
management positions with the most recent position of Executive Director-Finance.
David L. Bomberger Senior Vice President-Finance and Treasurer of the Company since May 1995, 43
and Senior Vice President-Finance and Treasurer of Guarantee Life since
November 1990.
C.E. "Duffy" Boyle Senior Vice President-Information Systems and Services of Guarantee Life 44
since February 1998, and prior thereto, Vice President-Information Systems
and Services since November 1997. From 1995 until November 1997,
Mr. Boyle held the position of Vice President-Applications Development.
From 1990 until joining Guarantee Life, Mr. Boyle served in a variety of
positions with First Data Corporation, with the most recent position of
Director of Applications Development.
Alan D. Brinkman Vice President and Corporate Actuary of Guarantee Life since May 1997, 37
and prior thereto, Vice President-Financial Actuarial Services since May 1995.
Since joining Guarantee Life in October 1991 until May 1995, Mr. Brinkman
held the position of Financial Actuarial Vice President-Individual Division.
Richard C. Easton Senior Vice President-Group Marketing of Guarantee Life since February 1995. 61
Mr. Easton joined Guarantee Life in February 1993 as Vice President-Group
Sales. Prior to joining Guarantee Life, Mr. Easton spent over 33 years with
Standard of Oregon in a variety of group sales and operations positions with the
most recent position of Vice President of Group Marketing.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C>
J.D. "Wayne" Gardner Senior Vice President-Product and Strategic Development-Individual Division 50
of Guarantee Life since November 1997, and prior thereto, Senior Vice President-
Marketing-Individual Division since September 1994. Mr. Gardner joined
Guarantee Life in May 1993 as Vice President-Marketing and Sales-Individual
Division. From 1977 until joining Guarantee Life, Mr. Gardner served in various
positions with The Paul Revere Insurance Group, most recently as Vice President-
Career Sales.
Mary G. Rahal Senior Vice President of the Company since May 1997, and Senior Vice 51
President-Human Resources and Corporate Services of Guarantee Life since
August 1996. From 1984 until joining Guarantee Life, Ms. Rahal served in
various positions with The Paul Revere Insurance Group, most recently as
Sales Vice President, South Central Region.
Gary H. Rittenhouse Senior Vice President of the Company since May 1995 and Senior Vice 51
President-Strategic Initiatives and Group Special Markets of Guarantee
Life since January 1996. Mr. Rittenhouse has served in various positions
since joining Guarantee Life in 1970, including Senior Vice President-Group
Division, Senior Vice President-Group Marketing and Vice
President-Group Marketing.
Richard A. Spellman Senior Vice President, General Counsel and Secretary of the Company since 55
May 1995 and Senior Vice President, General Counsel and Secretary of
Guarantee Life since July 1990.
</TABLE>
Ownership of Common Stock
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of February 28, 1998, by (i) each
director and each executive officer named in the Summary Compensation Table and
(ii) all directors and executive officers as a group. Except as noted below,
each holder listed below has sole investment and voting power with respect to
the shares beneficially owned by the holder.
<TABLE>
<CAPTION>
Deferred Phantom Stock
Common Compensation Appreciation 401(k) Total
Name Stock Plan(1) Plan(2) Plan(3) Options(4) Other Shares
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Bates 51,181(5) 10,148 22,329 10,370 32,086 38,269(10) 164,383(12)
C.R. "Bob" Bell 2,226 0 0 0 3,000 0 5,226
John R. Cochran 1,069 640 0 0 3,000 0 4,709
Theodore C. Cooley 10,539(6) 3,763 1,855 3,470 4,973 152* 24,752
Lee M. Gammill, Jr. 0 751 0 0 3,000 0 3,751
Thomas T. Hacking 2,400(7) 0 0 0 3,000 0 5,400
James M. McClymond 13,000 0 0 0 3,000 0 16,000
Bernard W. Reznicek 1,100 0 0 0 3,000 0 4,100
A.J. Scribante 33,140(8) 0 0 0 3,000 0 36,140
Janice D. Stoney 2,100 990 0 0 3,000 0 6,090
William F. Welsh II 20,010 0 0 0 3,000 0 23,010
Gary H. Rittenhouse 1,906(9) 1,427 4,408 2,405 4,973 226* 15,345
Michael G. Allen 14,697 949 1,046 2,345 2,473 955(11) 22,465
David L. Bomberger 2,803 1,495 3,023 1,688 4,973 17* 13,999
All Directors and Executive Officers as a group (21 persons) 410,367
</TABLE>
6
<PAGE>
As of February 28, 1998, Common Stock benefiucially owned by directors
and executive office as a group represents approximately 4.6% of the outstanding
shares. Except as noted, each holder listed owns less than 1% of the outstanding
shares.
(1) The figures in this column represent phantom stock units held in the
Guarantee Life Insurance Company Deferred Compensation Plan. Holders of
these phantom stock units have no voting or investment power.
(2) The figures in this column represent phantom stock units held in a
phantom stock appreciation program adopted prior to the existence of a
public market for the Company's Common Stock. Holders of these phantom
stock units have no voting or investment power.
(3) The figures in this column represent shares held, as of February 28,
1998, in Guarantee Life's 401(k) Plan. Holders of these shares have
voting and investment power.
(4) Includes shares that could be obtained upon exercise of stock options
which have vested or will vest within 60 days.
(5) Includes 44 shares held by the Robert D. Bates Irrevocable Trust.
(6) Includes 130 shares held by an irrevocable trust of which Mr. Cooley's
spouse is the co-trustee.
(7) Mr. Hacking is a limited partner in, and Hacking & Co. acts as a
consultant to, a group of partnerships managed by Kayne Anderson
Investment Management, Inc. These partnerships own, in the aggregate,
167,500 shares. Mr. Hacking disclaims beneficial ownership of these
shares.
(8) Includes 345 and 375 shares owned by VITAL LEARNING Corporation and
Vital Resources, Inc., respectively. Mr. Scribante is the Chairman of
the Board and Chief Executive Officer of VITAL LEARNING Corporation and
Chairman of the Board of Vital Resources, Inc.
(9) Includes 60 shares held by Mr. Rittenhouse's family members.
(10) Includes 15,000 shares of restricted stock and 20,000 performance shares
issued pursuant to the 1994 Long Term Incentive Plan as to which Mr.
Bates has voting power but no investment power. Also includes 1,730
shares of restricted stock pursuant to an Incentive Compensation Plan
Bonus Program and 1,539 shares of restricted stock issued pursuant to a
Stock Option Early Exercise Incentive Program as to which Mr. Bates has
voting but no investment power.
(11) Includes 455 shares of restricted stock issued pursuant to an Incentive
Compensation Plan Bonus Program and 500 shares of restricted stock
issued pursuant to a Stock Option Early Exercise Incentive Program as to
which Mr. Allen has voting but no investment power.
(12) Mr. Bates is the beneficial owner of approximately 1.86% of the
outstanding shares.
* Represents shares of restricted stock issued pursuant to an Incentive
Compensation Plan Bonus Program as to which the participant has voting
but no investment power.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors and persons who beneficially own more
than ten percent of the Company's Common Stock ("reporting persons"), to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Based on Company records and other information, the Company believes
that during 1997, all reporting persons were in compliance with all applicable
filing requirements except that one report covering two transactions was
inadvertently filed late on behalf of James M. McClymond.
7
<PAGE>
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held eight meetings in 1997. All directors
attended at least 75% of the meetings of the Board and its committees on which
they served.
The Board of Directors has standing Audit and Compensation Committees.
In 1997, the Audit Committee was composed of Directors Bekins (until his
retirement in November 1997), Bell, Gammill and Reznicek, with Mr. Reznicek
serving as Chair. The functions performed by the Audit Committee include
exercising the powers and authority of the directors of the Company to oversee
and monitor the internal accounting and operating systems of the Company and its
subsidiaries and related matters. The Audit Committee held four meetings in
1997. In 1997, the Compensation Committee was composed of Directors McClymond,
Scribante, Stoney and Welsh, with Mr. Scribante serving as Chair. The duties of
the Compensation Committee include exercising the powers and authority of the
directors of the Company with regard to compensation philosophy and guidelines
for the executive and management groups of the Company and its subsidiaries and
related matters. The Compensation Committee held seven meetings in 1997.
COMPENSATION OF DIRECTORS
During 1997, each non-employee director of the Company received an
$18,000 annual retainer, $1,000 for each board meeting attended and $750 for
each committee meeting attended. In addition, each committee chair received an
annual retainer of $3,000. Non-employee directors of the Company who also serve
on the Board of Directors of Guarantee Life Insurance Company or who serve as a
committee chair for Guarantee Life Insurance Company received only one annual
retainer fee for their board memberships and committee chairmanships and only
one meeting fee for each joint meeting of both boards attended. Similarly,
non-employee directors of the Company who also serve on committees of Guarantee
Life Insurance Company received only one meeting fee for each joint committee
meeting. In addition, directors are reimbursed for travel expenses incurred in
attending meetings.
In May 1996, the Board of Directors adopted the Directors Stock
Incentive Plan in order to attract, retain and motivate the best qualified
directors and to enhance mutuality of interest between the directors and
shareholders of the Company. The Directors Stock Incentive Plan provides a
one-time grant of options to each non-employee director in office on May 9,
1996, and each individual who first becomes a director after May 9, 1996, to
purchase 3,000 shares of the Company's Common Stock. These options became
exercisable November 9, 1996, at an exercise price of $17.125 per share. After
becoming a board member, the Company granted 3,000 options to Mr. Gammill on May
9, 1997. These options became exercisable November 9, 1997, at an exercise price
of $20.00 per share. Director Bekins (who retired in November 1997) exercised
his 3,000 options on January 29, 1998.
The Directors Stock Incentive Plan is administered by the Board of
Directors. The maximum number of shares that may be issued under this plan is
90,000. If there is a stock split, stock dividend, recapitalization or other
relevant change affecting the Common Stock, appropriate adjustments will be made
in the number of shares available under this plan in the future and in the
exercise prices under outstanding grants made before the event.
Pursuant to the Company's 1994 Long Term Incentive Plan, on January 1,
1997, each non-employee director was granted 1,250 nonqualified stock options at
a price of $18.50 per share. These options become exercisable in 25% annual
installments with the first annual installment exercisable on January 1, 1999.
Also pursuant to the Company's 1994 Long Term Incentive Plan, on December 31,
1997, each non-employee director was granted nonqualified stock options for
shares having an aggregate fair market value of $5,000 on that date. These
options become exercisable in 25% annual installments with the first annual
installment exercisable on December 31, 1999.
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by Guarantee Life
for the fiscal year ended December 31, 1997, to the chief executive officer and
the four most highly compensated executive officers, other than the chief
executive officer, of Guarantee Life and the Company.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
---------------------------------------------------------------------------
Restricted Securities
Other Annual Stock Underlying All Other
Name and Salary Bonus Compensation Award(s) Options/SARs Compensation
Principal Position Year ($) ($) ($)* ($)** (#) ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Bates 1997 461,406 118,059(1) 5,297 55,370 100,000 58,752(12)
Chairman, President and 1996 453,333 196,075(2) 6,248 24,509 0 64,868(13)
Chief Executive Officer 1995 415,700 200,000 6,874 0 159,110 61,143(14)
Theodore C. Cooley 1997 212,490 90,047(3) 2,239 0 15,000 6,330(15)
Executive Vice President 1996 199,600 46,481(4) 2,299 3,254 0 5,609(16)
1995 191,267 66,861 831 0 19,889 5,712(17)
Gary H. Rittenhouse 1997 172,040 89,440(5) 1,080 0 15,000 5,842(18)
Senior Vice President 1996 162,750 64,416(6) 692 4,831 0 5,243(19)
1995 156,250 20,000 1,576 0 19,889 5,252(20)
Michael G. Allen 1997 196,440 35,442(7) 974 17,734 15,000 5,281(21)
Senior Vice President 1996 180,700 47,933(8) 676 5,992 0 4,028(22)
1995 154,367 40,000 14,192(11) 0 19,889 5,625(23)
David L. Bomberger 1997 168,873 49,887(9) 1,304 0 15,000 5,017(24)
Senior Vice President 1996 153,083 36,610(10) 1,649 363 0 4,838(25)
1995 139,700 35,000 1,035 0 19,889 4,216(26)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 2,805 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $70,826 when
payable.
(2) Includes 5,503 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $117,645 when
payable.
(3) Includes 356 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $8,989 when
payable.
(4) Includes 978 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $20,916 when
payable.
(5) Includes 354 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $8,939 when
payable.
(6) Includes 1,205 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $25,766 when
payable.
(7) Includes 842 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $21,261 when
payable.
(8) Includes 1,345 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $28,759 when
payable.
(9) Includes 197 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $4,974 when
payable.
9
<PAGE>
(10) Includes 342 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $7,310 when
payable.
(11) Includes income tax allowance on non-deductible moving/relocation
expense reimbursements.
(12) Consists of $4,800 employer matching contribution to the
Guarantee Life Thrift Savings Plan, $1,800 of
premiums paid for group term life insurance, and a $52,152 deposit to an
annuity to supplement Mr. Bates' retirement plan benefit.
(13) Consists of $4,621 employer matching contribution to the Guarantee Life
Thrift Savings Plan, $1,800 of premiums paid for group term life
insurance, and a $58,447 deposit to an annuity to supplement Mr. Bates'
retirement plan benefit.
(14) Consists of $4,578 employer matching contribution to the Guarantee Life
Thrift Savings Plan, $1,152 of premiums paid for group term life
insurance, and a $55,413 deposit to an annuity to supplement Mr. Bates'
retirement plan benefit.
(15) Consists of $4,530 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $1,800 of premiums paid for group term life
insurance.
(16) Consists of $3,809 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $1,800 of premiums paid for group term life
insurance.
(17) Consists of $4,560 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $1,152 of premiums paid for group term life
insurance.
(18) Consists of $4,690 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $1,152 of premiums paid for group term life
insurance.
(19) Consists of $4,547 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $696 of premiums paid for group term life
insurance.
(20) Consists of $4,556 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $696 of premiums paid for group term life
insurance.
(21) Consists of $4,585 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $696 of premiums paid for group term life
insurance.
(22) Consists of $3,332 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $696 of premiums paid for group term life
insurance.
(23) Consists of $4,929 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $696 of premiums paid for group term life
insurance.
(24) Consists of $4,609 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $408 of premiums paid for group term life
insurance.
(25) Consists of $4,430 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $408 of premiums paid for group term life
insurance.
(26) Consists of $3,808 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $408 of premiums paid for group term life
insurance.
* In 1997 includes amounts reimbursed for the payment of taxes and amounts
reimbursed from a nonqualified medical plan for Messrs. Bates, Cooley,
Allen, Bomberger and Rittenhouse.
** Awards were made after December 31, 1997 and after December 31, 1996,
respectively, and therefore no value is reported for those dates.
10
<PAGE>
Option Grants Table
The following table sets forth information concerning stock options
granted to the chief executive officer and the four most highly compensated
executive officers, other than the chief executive officer, of Guarantee Life
and the Company during 1997.
<TABLE>
<CAPTION>
Individual Grants
-----------------
Potential Realizable
Number of % of Total Value at Assumed
Securities Options/SARs Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation for
Options/SARs Employees Base Price Expiration Option Term
Name Granted (#) in Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Bates 50,000 20.83% $ 19.25 10/18/01 $1,199,000 $1,479,500
15,000 6.25% $ 21.00 2/20/07 $ 513,150 $ 817,050
Theodore C. Cooley 15,000 6.25% $ 21.00 2/20/07 $ 513,150 $ 817,050
Gary H. Rittenhouse 15,000 6.25% $ 21.00 2/20/07 $ 513,150 $ 817,050
Michael G. Allen 15,000 6.25% $ 21.00 2/20/07 $ 513,150 $ 817,050
David L. Bomberger 15,000 6.25% $ 21.00 2/20/07 $ 513,150 $ 817,050
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values
The following table sets forth information concerning stock options
exercised through February 1998 by the chief executive officer and the four most
highly compensated executive officers, other than the chief executive officer,
of Guarantee Life and the Company.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year End (#) at Fiscal Year End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert D. Bates 7,693 101,932 32,086 $ 497,333
184,331 $2,424,630
Theodore C. Cooley 0 0 4,973 $ 77,081
29,916 $ 343,698
Gary H. Rittenhouse 0 0 4,973 $ 77,081
29,916 $ 343,698
Michael G. Allen 2,500 32,500 2,473 $ 38,331
29,916 $ 343,698
David L. Bomberger 0 0 4,973 $ 77,081
29,916 $ 343,698
- ---------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Incentive Plan
The 1994 Long Term Incentive Plan was adopted in December 1994, and
amended April 6, 1995, December 8, 1995, November 14, 1996, and May 8, 1997. The
Plan was adopted in order to retain and attract qualified key employees,
directors and agents of the Company and its subsidiaries and to align the
interests of such persons with those of the Company and its shareholders by
providing for the grant of options to purchase the Company's Common Stock which
may be either incentive stock options or nonqualified stock options, as well as
for restricted stock and performance shares. No award may be granted under the
Incentive Plan after December 26, 2000.
The Company's Board of Directors has designated the Compensation
Committee of the Board of Directors as the Plan Committee. The Plan Committee
has authority to administer the Incentive Plan, including the authority to
determine who will receive awards and for what number of shares and to establish
the terms and conditions of the awards.
The maximum number of shares of Common Stock that may be issued under
the Incentive Plan is 1,345,828, which is 13% of the total number of shares of
Common Stock issued and outstanding immediately following the initial public
offering of the Company's Common Stock. If there is a stock split, stock
dividend, recapitalization or other relevant change affecting the Common Stock,
appropriate adjustments will be made in the number and class of shares that may
be awarded under the Incentive Plan in the future and in the number and class of
shares and price under all outstanding grants made before the event.
In 1997, the Plan Committee made awards of 240,000 stock options to key
employees and directors at prices varying from $18.50 per share to $28.50 per
share.
Retirement Plan
Each of the named executive officers participates in the Retirement
Plan for Home Office Employees of Guarantee Life Insurance Company and in the
Guarantee Life Insurance Company Supplemental Retirement Plan.
The following table sets forth the benefits payable, assuming
retirement at age 65, to participants in the Retirement Plan and the
Supplemental Retirement Plan at the levels of compensation and for the periods
of service contained therein.
Assumed
Annual Annual Pension Plan Benefits
Earnings Years of Service at Normal Retirement
15 20 25 30 35
---------------------------------------------------
$120,000 33,802 45,070 51,837 58,604 65,372
150,000 42,802 57,070 65,712 74,354 82,997
175,000 50,302 67,070 77,275 87,479 97,684
200,000 57,802 77,070 88,837 100,604 112,372
225,000 65,302 87,070 100,400 113,729 127,059
250,000 72,802 97,070 111,962 126,854 141,747
300,000 87,802 117,070 135,087 153,104 171,122
350,000 102,802 137,070 158,212 179,354 200,497
400,000 117,802 157,070 181,337 205,604 229,872
450,000 132,802 177,070 204,462 231,854 259,247
500,000 147,802 197,070 227,587 258,104 288,622
12
<PAGE>
The benefits shown in the preceding table are payable in the form of a
straight life annuity. Benefits are not subject to offset for Social Security
benefits. Compensation taken into account under the pension plans is the average
monthly compensation paid to a participant during the consecutive 60-month
period that produces the highest average compensation. For this purpose,
compensation includes the total of base salary and bonus. The annual
compensation shown in the Summary Compensation Table will be taken into account
in computing the average monthly compensation used to determine the amount of
each executive officer's retirement benefits, but generally will constitute only
20% of the compensation used for this purpose. Accordingly, the compensation
used to determine the amount of such benefits differs by more than 10% from the
compensation shown in the Summary Compensation Table for all the named executive
officers. As of December 31, 1997, the aggregate amount of compensation and
credited years of service taken into account for retirement benefits were as
follows: Mr. Bates, $3,356,490 and eight years; Mr. Cooley, $1,229,282 and four
years; Mr. Allen, $823,484 and four years; Mr. Rittenhouse, $988,827 and 27
years; and Mr. Bomberger, $894,414 and 20 years.
Employment Agreement
Guarantee Life has entered into an employment agreement with Mr. Bates,
effective as of April 1, 1995, pursuant to which he will serve as the Chairman
of the Board of Directors, President and Chief Executive Officer of Guarantee
Life and of the Company. The employment agreement was amended and restated on
January 1, 1997, among other things, to add the Company as a party thereto. The
initial term of the employment agreement will end on March 31, 1998. Thereafter,
on the anniversary date of the April 1, 1995 effective date, the term of the
agreement shall automatically be extended for additional one year terms until
the Company or Mr. Bates gives the other party written notice that it does not
wish to extend the term of the agreement.
Under the employment agreement, Mr. Bates receives an annual base
salary of $400,000 per annum (subject to increase at the discretion of the Board
of Directors or reduction as part of an overall reduction in salaries payable to
senior management personnel) and participates in employee and executive benefit
and perquisite programs at levels appropriate for his position. Mr. Bates is
also eligible to receive an annual cash bonus and long term incentive awards.
In the event Mr. Bates' employment is involuntarily or constructively
terminated without cause or he ceases to be Chairman of the Board, Chief
Executive Officer or President, the agreement provides for the payment to Mr.
Bates of two times his annual cash compensation. In the event Mr. Bates'
employment is terminated in contemplation of a change of control or within two
years following a change of control, the agreement provides for payment to Mr.
Bates of three times his annual cash compensation. Upon involuntary termination,
Mr. Bates would also receive a prorated bonus for the year of termination, all
accrued compensation, the cash value of all previously awarded long term
incentive grants, the present value of the additional retirement benefits which
he would have accrued under the Supplemental Retirement Plan had he been
employed for an additional two years and be fully vested in his accrued benefits
under Guarantee Life's Supplemental Retirement Plan.
Upon Mr. Bates' termination due to death or disability, he will receive
an amount equal to his bonus payment amount, his accrued compensation, the cash
value of all previously awarded long term incentive grants, and other incentives
or awards including, without limitation, any outstanding award of restricted
stock or performance shares.
As a make-whole pension provision, Guarantee Life provides Mr. Bates
compensation which is payable upon his death, retirement or termination of
employment pursuant to a written agreement under which he is credited with a
fixed percentage (a minimum of 9% and a maximum of 12%) of his base salary and
annual incentive compensation.
13
<PAGE>
Executive Severance Plan
The Company has established the Executive Severance Plan under which
certain executive officers and other designated key employees of the Company and
its subsidiaries are eligible to receive certain severance benefits upon the
occurrence of a change of control and other events. The Company's Board of
Directors has designated 13 executive positions for participation in the
Executive Severance Plan.
Under the Executive Severance Plan, if a participant is involuntarily
terminated other than for cause or voluntarily terminates employment for good
reason, prior to the second anniversary of a change of control, except as
provided below, such participant will receive the following severance benefits:
(1) a lump-sum amount equal to either one, two or three times the participant's
base salary, (2) outstanding incentive awards or deferred compensation accounts
shall become fully vested and earned, determined, in the case of any award based
on attaining levels of performance, on performance as of the end of the fiscal
year preceding the date of termination or the end of the month in which the
termination occurs, whichever is more favorable to the participant and (3)
outplacement services for one year.
The Executive Severance Plan is renewable at three-year intervals
unless terminated by the Board of Directors, provided that, if a change of
control occurs during its term, it will continue in effect until all obligations
thereunder are satisfied. In no event, however, will severance benefits payable
under the Executive Severance Plan exceed the amount allowable to the Company as
a deduction for federal income tax purposes under applicable law.
Compensation Committee Interlocks and Insider Participation
In 1997, the Company's Compensation Committee was composed of A.J.
Scribante, Chair, James M. McClymond, Janice D. Stoney and William F. Welsh II.
Robert D. Bates, Chairman of the Board, President and Chief Executive Officer of
the Company and Guarantee Life, served on the Board of Directors of VITAL
LEARNING Corporation and was a member of its Compensation Committee in 1997. A.
J. Scribante, Chief Executive Officer of VITAL LEARNING Corporation, was a
member of the Company's and Guarantee Life's Boards of Directors and was a
member of the Company's and Guarantee Life's Compensation Committee in 1997.
Report of the Compensation Committee on Executive Compensation
The Company's Compensation Committee is composed of independent,
non-employee members of the Board of Directors. The duties of the Committee
include exercising the powers and authority of the directors of the Company with
regard to compensation arrangements for Company executives and related matters.
The Company became a publicly-held entity in December 1995, upon the conversion
of its subsidiary, Guarantee Life Insurance Company, from a mutual life
insurance company to a stock life insurance company.
Prior to the conversion of Guarantee Life in December 1995, the
Committee retained an independent compensation consulting firm to assist in
developing specific executive compensation plans and policies. Working with the
consulting firm, the Committee adopted and revised plans of compensation
intended to both continue the compensation philosophy and provide incentives
that encourage and reward the creation of additional shareholder value.
14
<PAGE>
Compensation Philosophy
As a public company since December 1995, the Company's compensation
philosophy is to maintain a competitive compensation program that ties total
compensation opportunities for executives to the creation of shareholder value.
This philosophy is implemented through the combination of the following
elements:
(1) base salaries that are at or somewhat above the 50th percentile of
salaries at a broad group of life insurance companies of similar
and somewhat larger size, in order to enable the Company to attract
and retain qualified executives in a competitive marketplace;
(2) an annual incentive plan that provides opportunities for executives
to receive cash incentives based on improvement in growth and
profitability; and
(3) equity-based awards that align the interests of executives with
those of shareholders by tying economic rewards directly to
increases in shareholder value and encouraging stock ownership by
key executives.
Section 162(m) of the Internal Revenue Code prohibits the Company from
deducting any compensation in excess of $1 million paid to certain of its
executive officers, except to the extent that such compensation is paid pursuant
to a shareholder approved plan upon the attainment of specified performance
objectives. The Company has not paid any compensation to any executive officers
that was not deductible by reason of the prohibition in Section 162(m). By
reason of having only recently become a public company, the Company qualifies
for certain transition rules that will simplify compliance with Section 162(m)
in the immediate future. The Committee believes that tax deductibility is an
important factor, but not the sole factor, to be considered in setting executive
compensation policy. Accordingly, the Committee generally intends to take such
reasonable steps as are required to avoid the loss of a tax deduction due to
Section 162(m), but reserves the right, in appropriate circumstances, to pay
amounts which are not deductible.
Base Salaries
The base salaries of the chief executive officer, executive vice
president and senior vice presidents have been, and will continue to be,
reviewed periodically by the Committee. The Company seeks to pay its executives
at competitive levels, based on the scope of responsibilities applicable to each
position and the Committee's subjective assessment of the individual's
performance and expected contribution to the Company's success. Competitive base
salary levels are defined as the median (50th percentile) to somewhat above
median level among similar-sized and somewhat larger companies in the life
insurance industry. The Committee has adopted a specific peer group of
companies, selected on the basis of size, performance and line of business
comparability, for comparison purposes in establishing base salaries. The
Committee expects to moderate salary growth in the future, basing more of the
total compensation package on corporate performance.
Mr. Bates' base salary was not increased in 1997 as part of a strategy
to have a greater emphasis on performance-based compensation elements, and to
more closely align Mr. Bates' compensation with the creation of shareholder
value.* In lieu of a base salary increase, the Company awarded Mr. Bates 50,000
options, which is more thoroughly discussed below under the section entitled
"Long Term Incentives." Based on market data, the Committee is satisfied that
Mr. Bates' salary is competitive with companies with which Guarantee Life
competes for chief executive talent.
*The difference in Mr. Bates' salary for the years 1996 and 1997, as reflected
in the Summary Compensation Table on page 9, is due to a salary increase Mr.
Bates received in March 1996, which was in effect only ten months of 1996 but
was in effect all twelve months of 1997.
15
<PAGE>
Annual Incentives
In 1997, the annual incentive plan was based primarily on return on
equity targets, with goals set for Guarantee Life and its principal divisions.
Annual incentive rewards were tied to three specific financial objectives
identified by management and approved by the Committee: (1) supporting continued
growth, (2) profitability and (3) increased shareholder value. The plan provided
for market medial levels of compensation for performance that met budgeted plan
projections set at the beginning of the year and approved by the Committee. The
plan provided approximately 75th percentile rewards for superior performance
against the annual budgeted financial measures. A portion of awards under this
plan are paid in Company stock.
The performance targets were approved by the Committee at the beginning
of 1997 and the Committee certifies that the awards under the plan correspond to
actual results versus the targets established. Mr. Bates' annual incentive
targets for 1997 were 25% of base salary (threshold target), 60% of base salary
(par target), and 100% of base salary (maximum target), which were tied to
Guarantee Life's performance against corporate return on equity targets. Mr.
Bates' targets for 1996 were 25%, 50% and 75%, respectively. Mr. Bates' actual
bonus for 1997 was $118,059.
In addition to awards under the annual incentive plan, the Committee
may, under appropriate circumstances, grant discretionary bonuses to executives
to acknowledge exceptional performance in the attainment of specific goals.
In 1997, the Company granted matching shares as part of a stock
ownership program to the chief executive officer, executive vice president and
the senior vice presidents. These matching shares shall vest on the third
anniversary of the date of grant if certain stock ownership goals are met,
unless the executive's employment with the Company and each of its subsidiaries
terminates prior thereto due to death, disability or retirement at or after age
60, in which case the matching shares shall become fully vested.
Long Term Incentives
The purposes of the Company's 1994 Long Term Incentive Plan, as
amended, are to reward top management for increasing shareholder value, to
develop stock ownership among key executives, and to help retain key executives.
The Committee has approved a long term incentive plan that provides for grants
of stock options to the chief executive officer, executive vice president,
senior vice presidents and other key employees. Both incentive stock options and
nonqualified stock options (with a maximum term of 10 years) were granted in
1995. One quarter (25%) of these options became exercisable on December 26,
1997. The remaining three quarters will become vested in 25% increments on
December 26, in each of the years 1998, 1999, and 2000. Pursuant to the terms of
the long term incentive plan, no stock options were awarded in 1996 to
executives who received option grants in 1995. In 1997, the Company granted to
each of the chief executive officer, executive vice president and the senior
vice presidents, options to purchase 15,000 shares of the Company's common stock
at an option price of $21.00 per share. One third of these options will vest in
the year in which the Company's return on equity equals or exceeds 13%. The
remaining two thirds will vest in the year in which the Company's return on
equity equals or exceeds 15%. Automatic vesting will occur in 2004. All options
are granted at fair market value on the date of the grant.
As previously mentioned, in 1997, as an alternative to increasing Mr.
Bates' base salary, the Company designed a shareholder value focused long term
incentive program for the chief executive officer. The program had several
components. The first component was a one time grant of 15,000 restricted shares
which shall vest on January 1, 2001. The second component was a one time grant
of 20,000 performance shares, at a price of $18.50 per share, which shall vest
on the January 1 following the second consecutive calendar year between January
1, 1997 and December 31, 2003 on which the Company's total return to
shareholders exceeds the median level of competing companies. Automatic vesting
of these shares will occur on January 1, 2004.
16
<PAGE>
Finally, the Company granted Mr. Bates options to purchase 50,000
shares of the Company's common stock at an option price of $19.25 per share.
These options shall vest after the Company achieves a 12.5% or higher return on
equity. Upon the Company's achievement of a 12.5% return on equity, the Company
will grant Mr. Bates an additional 100,000 options to purchase shares at fair
market value. These options will vest when the Company achieves a 15% return on
equity. Upon reaching a 15% return on equity, the Company will grant Mr. Bates
another 100,000 options to purchase shares at fair market value. Vesting of
these final 100,000 options will be determined by the Board at the time they are
granted, based upon the needs of the business. The program pursuant to which the
additional 200,000 options are to be granted will terminate in five years. With
respect to the initial 50,000 options, if Mr. Bates remains continuously
employed by the Company or one of its subsidiaries through and including October
18, 2001, then these options will become fully vested.
Prior to the adoption of the 1994 Long Term Incentive Plan and the
existence of a public market for the Company's Common Stock, Guarantee Life
maintained a phantom stock appreciation program that provided participating
executives with an economic incentive to increase statutory surplus. This
program, which was implemented in 1991, generally required the completion of
five years of service following any award to receive any amounts otherwise
earned under the applicable formula. With the anticipated public market for the
Company's Common Stock, no further awards were made under this program after
1994.
The value of the appreciation inherent in each award made under this
program, as determined by the Committee taking into account appropriate
adjustments to negate the effect of the demutualization process, was converted,
effective as of the time of the Company's initial public offering, into an
economic interest in a number of shares of the Company's Common Stock, based on
the offering price in the initial public offering. The other terms and
conditions of awards made under this program, including the original vesting
schedule, remain unchanged, except that payment of such awards may be made in
stock. Upon adoption by the Company's Board, the Guarantee Life Insurance
Company Phantom Stock Plan was amended to allow participants thereof, upon
vesting of their phantom shares, to transfer all or a portion of their vested
phantom shares to the stock account of the Guarantee Life Insurance Company
Deferred Compensation Plan. Under the phantom stock appreciation program, Mr.
Bates has an interest in the economic equivalent of approximately 22,329 shares
of the Company's Common Stock.
Other Chief Executive Officer Compensation
In 1995, to assure itself of his continued services following its
demutualization and in recognition of Mr. Bates' past contributions to Guarantee
Life and his expected contribution to its future performance, Guarantee Life
entered into an employment agreement with Mr. Bates. The agreement has a
three-year term and it is renewed annually. Among other things, the agreement
provides for the payment to Mr. Bates of two times his annual cash compensation
if his employment is involuntarily or constructively terminated without cause,
and three times such annual compensation if his termination is a result of a
change of control. The agreement was amended and restated, effective January 1,
1997, to add the Company as a party and to clarify that, upon death, disability,
or involuntary or constructive termination, vesting will be automatically
accelerated for his long term incentives and other benefits, including any
outstanding award of restricted stock or performance shares.
The Compensation Committee: A. J. Scribante, Chair, James M. McClymond,
Janice D. Stoney and William F. Welsh II.
17
<PAGE>
Performance Graph
The following graph sets out the cumulative total shareholder return on
the Company's Common Stock since its initial public offering on December 19,
1995, assuming the investment of $100 on December 19, 1995, and reinvestment of
all dividends since that date to December 31, 1997, compared with the S&P 500
and the SNL Life & Health Insurance Index for the same period.
TOTAL RETURN PERFORMANCE
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Period Ending
-------------------------------------------------------------------------------------------
Index 12/19/95 12/31/95 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Guarantee Life Companies Inc. 100.00 121.15 118.27 135.97 153.78 143.58 148.85 196.12 225.97 223.65
S & P 500 ....................... 100.00 100.72 106.13 110.88 114.31 123.75 127.07 149.25 160.43 165.05
SNL Life & Health Insurance Index 100.00 102.24 107.93 111.13 117.25 133.29 137.63 162.42 176.47 185.64
</TABLE>
Future Proposals
Any proposal by any shareholder to transact any corporate business or
to nominate a director at the Annual Meeting of Shareholders on May 14, 1998,
shall be made by notice in writing and mailed by certified mail to the Secretary
of the Company and must be received no later than April 16, 1998. A notice of
nominations by a shareholder shall set forth as to each proposed nominee who is
not an incumbent director (i) the name, age, business address and, if known,
residence address of each nominee proposed in such notice, (ii) the principal
occupation or employment of each such nominee, (iii) the number of shares of
Common Stock of the Company which are beneficially owned by each such nominee
and the nominating shareholder and (iv) any other information concerning the
nominee that must be disclosed regarding nominees in proxy solicitations
pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended,
and the rules under such section. Only shareholders of record at the close of
business on March 27, 1998, are entitled to bring business before the annual
meeting or make nominations for directors.
Any proposal that a shareholder intends to present at the 1999 annual
meeting must be received by the Company no later than December 10, 1998, for
inclusion in the 1999 notice of annual meeting, proxy statement and form of
proxy. The inclusion of any such proposal in the proxy material shall be subject
to the requirements of the proxy rules adopted under the Securities Exchange Act
of 1934, as amended.
18
<PAGE>
Other Business
Management does not know of any other business that will be presented
for consideration at the annual meeting; however, if any other business should
properly come before the annual meeting, the shares represented by the proxies
and voting instructions solicited hereby may be discretionarily voted on such
business in accordance with the judgment of the proxy holders.
19
<PAGE>
[LOGO] THE GUARANTEE LIFE
COMPANIES INC.
Building Relationships For Life(R)
Guarantee Centre
8801 Indian Hills Drive
Omaha, Nebraska 68114-4066
402-361-7300
http://www.guar.com
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
Please mark your votes as indicated in this example
X
PROPOSAL 1 - ELECTION OF DIRECTORS -
NOMINEES:
01) Robert D. Bates
02) Theodore C. Cooley
03) Bernard W. Reznicek
04) Janice D. Stoney
WITHHOLD: (Write that nominee's name in the space provided below.)
FOR WITHHOLD FOR ALL
IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW
SIGNATURE(S)______________________________________________________
SIGNATURE(S) ________________________________ DATE _____________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
HELP US SAVE MONEY - VOTE BY TELEPHONE
QUICK - EASY - IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE: CALL TOLL-FREE USING A TOUCH-TONE TELEPHONE 1-800-840-1208
ANYTIME.
THERE IS NO CHARGE TO YOU FOR THIS CALL.
You will be asked to enter the 11-digit CONTROL NUMBER located in the lower
right corner of this form.
PROPOSAL 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9. To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
WHEN ASKED, YOU MUST CONFIRM YOUR VOTE BY PRESSING 1.
IF YOU VOTE BY TELEPHONE, THERE IS NO NEED TO MAIL BACK YOUR PROXY CARD.
THANK YOU FOR VOTING.
CALL - TOLL-FREE - ON A TOUCH-TONE TELEPHONE 1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
THE GUARANTEE LIFE COMPANIES INC.
Guarantee Centre
8801 Indian Hills Drive
Omaha, Nebraska 68114
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
THE GUARANTEE LIFE COMPANIES INC.
PROXY CARD
The person signing on the reverse side of this Proxy Card hereby
appoints R. D. Bates, W. L. Bauhard and R. A. Spellman proxies, with power to
act without the other and with power of substitution, and hereby authorizes them
to represent and vote, as designated on the reverse side, all shares of Common
Stock of The Guarantee Life Companies Inc. standing in the name of said person
with all powers said person would possess if present at the Annual Meeting of
Shareholders of The Guarantee Life Companies Inc. to be held May 14, 1998, or
any adjournment thereof.
PLEASE MARK, SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND
RETURN IT IN THE ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF TWO WAYS:
1. Call TOLL-FREE 1-800-840-1208 using a touch-tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
OR
2. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
A majority of shareholders must vote in order for the Annual Meeting
to be held as scheduled on May 14, 1998. Your vote is vital - your shares cannot
be voted unless you sign and return your proxy card OR vote by telephone.
PLEASE VOTE
