<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)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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, Nebraska 68114
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1999
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 13, 1999, at 10:00 a.m., Central Standard Time, for
the following purposes:
1. to elect three directors, each to serve for a three-year term of office
expiring at the 2002 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 26, 1999, 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
/s/ R. A. Spellman
R. A. Spellman
Secretary
Omaha, Nebraska
April 12, 1999
<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 13, 1999
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 13, 1999, at 10:00 a.m.,
Central Standard Time, at Joslyn Art Museum, 2200 Dodge Street, Omaha, Nebraska.
The corporate headquarters of the Company are located at 8801 Indian Hills
Drive, Omaha, Nebraska, 68114. Distribution of this Proxy Statement and the
accompanying form of proxy began on or about April 12, 1999.
Only holders of record of common stock of the Company (the "Common Stock")
at the close of business on March 26, 1999, are entitled to notice of and to
vote at the annual meeting. On that date, the Company had outstanding 9,244,669
shares of Common Stock, each of which is entitled to one vote.
A shareholder 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 shareholder'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 mailings, 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.
1
<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. C.R. "Bob" Bell, Thomas
T. Hacking and A.J. Scribante, current members of the Board of Directors, have
been nominated for re-election to serve three-year terms of office expiring at
the 2002 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> <C>
C.R. "Bob" Bell 1994 President, Greater Omaha Chamber of Commerce since 1989. 68
Thomas T. Hacking 1995 Chief Executive Officer, Hacking & Co., a private investment 54
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 69
LEARNING Corporation since 1989, and since 1988, Mr.
Scribante has been Chairman of Vital Resources, Inc.
Mr. Scribante is the founder and retired Chief Executive
Officer of Majers Corporation, which was sold to Dun &
Bradstreet in 1986.
</TABLE>
Directors whose terms expire at the 2000 Annual Meeting of Shareholders:
<TABLE>
<S> <C> <C> <C>
Lee M. Gammill, Jr. 1997 Vice Chairman of the Board (Retired) of New York Life 65
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 Annuity and Life Re (Holdings), Ltd., National
Affiliated Corp., Vanguard Airlines and AudioHighway.com.
James M. McClymond 1994 Consultant to TTI Technologies, Inc. Since October 1994, Mr. 65
McClymond 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 TTI Technologies, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
William F. Welsh II 1994 President and Chief Executive Officer, Election Systems & 57
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>
Directors whose terms expire at the 2001 Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
Director Business Experience and
Name Since Principal Occupation Age
<S> <C> <C> <C>
Robert D. Bates 1994 Chairman of the Board, President and Chief Executive Officer 57
of the Company 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. 57
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 62
Indemnity Co. of Omaha since January 1997. Mr. Reznicek also
is President of Premier Enterprises. From 1994 through 1996,
Mr. Reznicek 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, Inc., Central States Indemnity Co. of Omaha, Stone &
Webster Incorporated, CSG Systems International, Inc., State
Street Corporation and TTI Technologies, Inc.
Janice D. Stoney 1994 Executive Vice President (Retired), U S WEST 58
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, Whirlpool Corporation and
Bridges Investment Fund.
</TABLE>
3
<PAGE>
Executive Officers
Executive officers of the Company and Guarantee Life Insurance Company
("Guarantee Life"), in addition to Messrs. Bates and Cooley (see page 3), are
set forth below.
Business Experience and
Name Principal Occupation Age
Michael G. Allen Senior Vice President of the Company since 49
May 1995, and Senior Vice President-
Strategic Planning of Guarantee Life since
July 1998. Prior thereto, from January
1996 through July 1998, Mr. Allen was Senior
Vice President-Employee Benefits Division of
Guarantee Life. 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 Guarantee Life 53
Since May 1995 and Treasurer of the
Company and Guarantee Life since September
1998. Prior to joining the Company, Mr.
Bauhard spent over 23 years with U S WEST
Communications in a variety of financial
management positions with the most recent
position of Executive Director-Finance.
C.E. "Duffy" Boyle Senior Vice President of the Company and 45
Senior Vice President-Information Systems
and Services of Guarantee Life since February
1998, and prior thereto, Vice President-
Information Systems and Services of
Guarantee Life 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 38
Guarantee Life since May 1997, and
prior thereto, Vice President-Financial
Actuarial Services since May 1995.
After joining Guarantee Life in October
1991 until May 1995, Mr. Brinkman
held the position of Financial Actuarial Vice
President-Individual Division. Mr. Brinkman
also is the Appointed Actuary of Guarantee
Life.
Richard C. Easton Senior Vice President-Employee Benefits 62
Division Marketing of Guarantee Life
since February 1995. 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.
John W. Neppl Vice President and Controller of the 33
Company and Guarantee Life since July
1998. Prior to joining Guarantee Life
in April 1998, Mr. Neppl served as Vice
President of Administration for Financial
Brokerage, Inc., and prior thereto, was
an audit manager for Deloitte & Touche.
Mary G. Rahal Senior Vice President of the Company since 52
May 1997, and Senior Vice 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.
4
<PAGE>
Gary H. Rittenhouse Senior Vice President of the Company since 52
May 1995 and Senior Vice 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 56
and Secretary of the Company since
May 1995 and Senior Vice President, General
Counsel and Secretary of Guarantee Life
since July 1990.
Ownership of Common Stock
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of February 28, 1999, by (1) each director and each
executive officer named in the Summary Compensation Table and (2) all directors
and executive officers as a group. There are no beneficial owners of more than
5% of the common stock of the Company. 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 60,805(5) 10,656 22,618 16,803 69,939 38,654(10) 219,476(12)
C.R. "Bob" Bell 2,226 0 0 0 3,381 0 5,607
Theodore C. Cooley 12,239(6) 4,555 1,879 4,308 9,945 152* 33,078
Lee M. Gammill, Jr. 0 1,904 0 0 3,000 0 4,904
Thomas T. Hacking 7,400(7) 0 0 0 3,381 0 10,781
James M. McClymond 13,000 0 0 0 3,381 0 16,381
Bernard W. Reznicek 1,100 0 0 0 3,381 0 4,481
A.J. Scribante 35,140(8) 0 0 0 3,381 0 38,521
Janice D. Stoney 2,100 1,646 0 0 3,381 0 7,127
William F. Welsh II 20,010 0 0 0 3,381 0 23,391
Michael G. Allen 17,170 2,011 1,060 3,117 4,972 1,450(11) 29,780
William L. Bauhard 1,760 4,569 0 501 9,945 130* 16,905
Gary H. Rittenhouse 1,906(9) 1,651 4,466 2,858 9,945 226* 21,052
--------
All Directors and Executive Officers as a group (19 persons) 492,638
</TABLE>
As of February 28, 1999, Common Stock beneficially owned by directors and
executive officers as a group represents approximately 5.3% 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, 1999,
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.
5
<PAGE>
(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,
237,700 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 1,924 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 995 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 2.37% 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 or 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
("SEC"). Officers, directors and more than ten percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) reports they file. Based on a review of copies of such reports received
by the Company and written representations from each such person who did not
file an annual report with the SEC that no other reports were required, the
Company believes that during 1998, all reporting persons were in compliance with
all applicable filing requirements except that reports for Robert D. Bates,
James M. McClymond, Mary G. Rahal and William F. Welsh II were filed one day
late due to severe weather conditions which delayed timely delivery. In
addition, an initial Form 3 was filed late on behalf of John W. Neppl. Finally,
the 1998 Form 5 (for 1997 transactions) was filed late on behalf of Alan D.
Brinkman.
Meetings of Board of Directors and Committees
The Board of Directors held eleven meetings in 1998. 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
1998, the Audit Committee was composed of Directors 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 1998. In 1998, 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 five
meetings in 1998.
6
<PAGE>
Compensation of Directors
During 1998, 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 or who serve as a committee chair
for Guarantee Life 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 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. No options were granted or exercised during 1998 under the Directors
Stock Incentive Plan.
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,
1998, each non-employee director was granted 1,250 nonqualified stock options at
a price of $28.50 per share. These options become exercisable in 25% annual
installments with the first annual installment exercisable on January 1, 2000.
Also pursuant to the Company's 1994 Long Term Incentive Plan, on December 31,
1998, each non-employee director was granted nonqualified stock options for
shares having an aggregate fair market value of $5,000 on that date. These
options become exercisable in 25% annual installments with the first annual
installment exercisable on December 31, 2000.
7
<PAGE>
Summary Compensation Table
The following table summarizes the compensation paid by Guarantee Life for
the fiscal year ended December 31, 1998 to the chief executive officer and the
four most highly compensated executive officers, other than the chief executive
officer, of the Company and Guarantee Life .
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation Awards
- ----------------------------------------------------------------------------------------------------------------------------------
Restricted Securities
Other Annual Stock Underlying All Other
Name and Salary Bonus Compensation Award(s) Options/SARs Compensation
Principal Position Year ($) ($) ($) * ($) (#) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert D. Bates 1998 518,583 0 5,000 7,076 0 57,767 (11)
Chairman, President and 1997 461,406 118,059 (1) 5,297 55,370 100,000 58,752 (12)
Chief Executive Officer 1996 453,333 196,075 (2) 6,248 24,509 0 64,868 (13)
Theodore C. Cooley 1998 236,995 0 675 0 8,000 11,611 (14)
Executive Vice President 1997 212,490 90,047 (3) 2,239 0 15,000 6,330 (15)
1996 199,600 46,481 (4) 2,299 3,254 0 5,609 (16)
Michael G. Allen 1998 221,803 0 3,000 13,489 8,000 8,413 (17)
Senior Vice President 1997 196,440 35,442 (5) 974 17,734 15,000 5,281 (18)
1996 180,700 47,933 (6) 676 5,992 0 4,028 (19)
William L. Bauhard 1998 212,200 0 0 0 8,000 8,553 (20)
Senior Vice President, 1997 186,756 34,516 (7) 0 0 15,000 5,691 (21)
Chief Financial Officer and 1996 173,760 22,250 (8) 3 2,781 0 4,235 (22)
Treasurer
Gary H. Rittenhouse 1998 197,455 0 102 0 8,000 9,759 (23)
Senior Vice President 1997 172,040 89,440 (9) 1,080 0 15,000 5,842 (24)
1996 162,750 64,416 (10) 692 4,831 0 5,243 (25)
- ------------------------------------------------------------------------------------------------------------------------------------
</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 842 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $21,261 when
payable.
(6) 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.
(7) Includes 136 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $3,434 when
payable.
(8) Includes 624 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $13,338 when
payable.
(9) Includes 354 shares of Common Stock received in lieu of cash
compensation, which shares had a fair market value of $8,939 when
payable.
(10) 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.
8
<PAGE>
(11) Consists of $2,336 employer matching contributions to the Guarantee Life
Thrift Savings Plan, $ 6,959 employer contribution to the Guarantee Life
Deferred Compensation Plan, $1,800 of premiums paid for group term life
insurance and a $46,672 deposit to an annuity to supplement Mr. Bates'
retirement plan benefit.
(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 $4,800 employer matching contribution to the Guarantee Life
Thrift Savings Plan, $5,011 employer contribution to the Guarantee Life
Deferred Compensation Plan and $1,800 of premiums paid for group term
life insurance.
(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 $4,800 employer matching contribution to the Guarantee Life
Thrift Savings Plan, $2,917 employer contribution to the Deferred
Compensation Plan and $696 of premiums paid for group term life
insurance.
(18) Consists of $4,585 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $696 of premiums paid for group term life
insurance.
(19) Consists of $3,332 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $696 of premiums paid for group term life
insurance.
(20) Consists of $4,800 employer matching contribution to the Guarantee Life
Thrift Savings Plan, $2,601 employer contribution to the Deferred
Compensation Plan and $1,152 of premiums paid for group term life
insurance.
(21) Consists of $4,539 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $1,152 of premiums paid for group term life
insurance.
(22) Consists of $3,083 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $1,152 of premiums paid for group term life
insurance.
(23) Consists of $4,800 employer matching contribution to the Guarantee Life
Thrift Savings Plan, $3,807 employer contribution to the Deferred
Compensation Plan and $1,152 of premiums paid for group term life
insurance.
(24) 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.
(25) Consists of $4,547 employer matching contribution to the Guarantee Life
Thrift Savings Plan and $696 of premiums paid for group term life
insurance.
* In 1998, includes amounts reimbursed for the payment of taxes and amounts
reimbursed from a nonqualified medical plan for Messrs. Bates, Cooley,
Allen and Rittenhouse.
9
<PAGE>
Option Grants Table
The following table sets forth information concerning stock options granted
to the chief executive officer and the four most highly compensated executive
officers, other than the chief executive officer, of Guarantee Life and the
Company during 1998.
Individual Grants
<TABLE>
<CAPTION>
Potential Realizable
Number of % of Total Value at Assumed
Securities Options/SARs Annual Rates of Stock
Underlying Granted to Exercise or Price Appreciation for
Options/SARs Employees Base Price Expiration Option Term
Name Granted (#) in Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Bates 0 0% 0 N/A N/A N/A
Theodore C. Cooley 8,000 3.48% $25.25 2/19/08 $329,040 $523,920
Michael G. Allen 8,000 3.48% $25.25 2/19/08 $329,040 $523,920
William L. Bauhard 8,000 3.48% $25.25 2/19/08 $329,040 $523,920
Gary H. Rittenhouse 8,000 3.48% $25.25 2/19/08 $329,040 $523,920
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Values
The following table sets forth information concerning stock options
exercised through February 1999 by the chief executive officer and the four most
highly compensated executive officers, other than the chief executive officer,
of Guarantee Life and the Company.
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year End (#) at Fiscal Year End ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert D. Bates 1,924 $10,351 69,939 $384,665
144,554 $437,547
Theodore C. Cooley 0 0 9,945 $54,698
32,944 $54,692
Michael G. Allen 2,473 $35,240 4,972 $27,346
32,944 $54,692
William L. Bauhard 0 0 9,945 $54,698
32,944 $54,692
Gary H. Rittenhouse 0 0 9,945 $54,698
32,944 $54,692
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<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
Incentive 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 1998, the Plan Committee made awards of 243,210 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 ("Retirement
Plan") and in the Guarantee Life Insurance Company Supplemental Retirement Plan
("Supplemental Plan").
The following table sets forth the benefits payable, assuming retirement at
age 65, to participants in the Retirement Plan and the Supplemental 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 23,424 34,773 49,974 66,264 88,084
150,000 31,614 46,931 67,448 89,433 118,883
175,000 38,439 57,063 82,009 108,741 144,548
200,000 45,264 67,194 96,570 128,049 170,214
225,000 52,089 77,326 111,131 147,356 195,879
250,000 58,914 87,458 125,692 166,664 221,545
300,000 72,564 107,722 154,815 205,279 272,876
350,000 86,214 127,986 183,937 243,895 324,207
400,000 99,865 148,249 213,060 282,510 375,538
450,000 113,515 168,513 242,182 321,126 426,869
500,000 127,165 188,777 271,305 359,741 478,200
11
<PAGE>
The benefits shown in the preceding table are based upon amendments made to
the Retirement Plan. Effective January 1, 1998, the Retirement Plan was amended
in order to implement a cash balance plan. Participants in the plan prior to
the amendment date are grandfathered under the prior plan formula for a period
of ten years, if that formula provides a greater benefit. The cash balance plan
generates a lump sum account balance which can be converted to monthly income
payments. The figures in the preceding table assume that an employee elects a
life only benefit and are based upon the conversion factors in effect in 1998.
The calculation of the projected benefits assumes no future pay increases and
assumes the interest crediting rate and the conversion rate remain the same as
the rates in effect for 1998. The benefits provided by the Retirement Plan are
subject to benefit and compensation limitations applicable to qualified pension
plans. For 1998, the maximum annual benefit payable at age 65 is $130,000, and
the maximum credited compensation is $160,000. The Company also provides
benefits through the Supplemental Plan, which restores to participants all
benefits reduced due to the limitations imposed upon the Retirement Plan.
Therefore, the total retirement benefits from both the Retirement Plan and the
Supplemental Plan are equal to the figures in the table set forth above. As of
December 31, 1998, accrued annual retirement benefits, which include both the
Retirement Plan and Supplemental Plan, were as follows: Mr. Bates, $224,469;
Mr. Cooley, $49,641; Mr. Allen, $36,768; Mr. Bauhard, $25,861; and Mr.
Rittenhouse, $195,164.
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 the Company
and Guarantee Life. 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 ended 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 prequisite 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 Plan had he been
employed for an additional two years and be fully vested in his accrued benefits
thereunder.
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.
12
<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 14 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 1998, 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 in 1998. 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 1998.
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, 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.
Compensation Philosophy
Having concluded its third year as a public company, the Company's
compensation philosophy continues to be one of maintaining a competitive
compensation program that ties total compensation opportunities for executives
to the creation of shareholder value. This philosophy is implemented through a
combination of the following elements:
13
<PAGE>
(1) base salaries that are at or somewhat above the 50th percentile of
salaries at a broad group of life insurance companies of similar or 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 achievement of specific return on beginning
equity (ROBE) targets under Guarantee Life's Total Rewards program (explained
below); 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 ("Code") prohibits the Company
from deducting any compensation in excess of $1 million paid to its executive
officers. Certain compensation specified in the Code is excluded from this
limit, including compensation that is both paid pursuant to a shareholder
approved plan upon the attainment of specified performance objectives and
awarded by a committee consisting of outside directors. In 1998, the Company
did not pay any compensation to any executive officers that was not deductible
by reason of the prohibition in Code Section 162(m). 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 Code 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. It is the Company's objective to pay its
executives base salaries 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 by the Committee
as the median (50th percentile) to somewhat above median level among similar-
sized and somewhat larger companies in the life insurance industry. The
Committee had 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.
In 1998, Mr. Bates' salary was increased by $75,921. This included a
$65,000 merit increase and a one time adjustment resulting from a policy
decision to eliminate certain employer sponsored benefit programs. In 1997, Mr.
Bates received 50,000 stock options (as discussed below), but he did not receive
a salary increase. The Committee's decision to increase Mr. Bates' 1998 salary
was based upon the Company's strong performance in 1997 and because a review of
peer companies with which Guarantee Life competes for chief executive talent
revealed that Mr. Bates' salary was lower than the recommended competitive
range. It continues to be a primary goal of the Committee to align Mr. Bates'
compensation with shareholder value, while ensuring that compensation is
maintained at a competitive level.
Annual Incentives
In 1998, Guarantee Life introduced a new employee benefits program for all
employees, including executive officers. Under this new program, called Total
Rewards, all employees, including executives, are eligible to receive, as a part
of Total Rewards, an annual award based on the financial, operational and
service results of the Company. The amount of money available for distribution
in the form of annual incentive awards is entirely based upon the Company's
return on beginning equity (ROBE) performance. In late 1997 and early 1998,
ROBE targets were established for the Company and for each of Guarantee Life's
divisions. More specifically, three levels of ROBE performance were established
for the Company and divisions: threshold, par and maximum. Notably, the ROBE
levels established for executive officers were higher than ROBE levels
established for non-executive staff. Because the Company's threshold ROBE level
was not attained in 1998, none of the executive officers are eligible
14
<PAGE>
for an annual incentive award. Accordingly, no bonuses will be paid in 1999 for
calendar year 1998 to Mr. Bates, the executive vice president or the senior vice
presidents.
In 1998, the Company granted matching shares as part of a stock ownership
program to the chief executive officer and certain senior vice presidents who
elected to receive in excess of ten percent of their 1998 bonuses in the form of
Company stock. 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.
Also in 1998, the Company granted matching shares to the chief executive
officer and certain senior vice presidents pursuant to the Company's Stock
Option Early Exercise Incentive Program. Under this program, eligible
participants are granted one share of restricted stock for every five option
shares exercised within three years of the program's adoption in November 1996.
These matching shares will vest on the third anniversary of the date of grant
provided the participant does not sell any Company stock during the three year
period.
Long-Term Incentives
The purposes of the Company's long-term incentive program 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. As of December 26,
1998, one half of these options had vested. The remaining half will vest in 50%
increments on December 26, 1999 and December 26, 2000. Pursuant to the terms of
the long-term incentive plan, no stock options were awarded in 1996 to
executives who received options 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.
In 1998, the Company granted to each of the executive vice president and
the senior vice presidents, options to purchase between 5,000 and 8,000 shares
of the Company's common stock at an option price of $25.25 per share. These
options will vest in the year in which the Company's return on equity equals or
exceeds 12.5%. Automatic vesting will occur in 2005. All options are granted
at fair market value on the date of the grant.
The Committee did not grant any awards to Mr. Bates in 1998. This was due,
in part, to the fact that the Committee instead had recommended a salary
increase for Mr. Bates. It also was due to the existence of the shareholder
value focused long-term incentive program for the chief executive officer which
was designed by the Committee in 1997. 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, in 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.
Finally, in 1997, 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
15
<PAGE>
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. The Company's performance in 1998 did not trigger vesting
of any of the options granted to Mr. Bates under the shareholder value focused
long-term incentive program.
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. Final awards granted under
this program vested on December 31, 1998. Changes made to the original terms of
the program include the allowance of payment of the awards to be in stock; and
transfer of fully vested phantom shares from the phantom stock appreciation
program to the stock account of Guarantee Life's Deferred Compensation Plan. In
addition, the Committee authorized accelerated vesting, payment of benefits in a
lump sum and all-cash payouts to certain participants identified by the
Committee. None of the participants identified by the Committee include any of
the named executive officers. Under the phantom stock appreciation program, Mr.
Bates has an interest in the economic equivalent of approximately 22,618 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 foregoing Report of the Compensation Committee on Executive
Compensation is provided by the Compensation Committee: A. J. Scribante, Chair,
James M. McClymond, Janice D. Stoney and William F. Welsh II.
16
<PAGE>
Performance Graph
The following graph sets out the cumulative total shareholder return on the
Company's Common Stock since December 20, 1995, assuming the investment of $100
on December 20, 1995, and reinvestment of all dividends since that date to
December 31, 1998, compared with the S&P 500 and the SNL Life & Health Insurance
Index for the same period.
[LINE GRAPH]
<TABLE>
<CAPTION>
Period Ending
-----------------------------------------------------------------------------
Index 12/20/95 12/31/95 6/30/96 12/31/96 6/30/97 12/31/97 6/30/98 12/31/98
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Guarantee Life Companies Inc. (The) 100.00 103.28 115.91 122.40 167.18 190.65 147.11 125.35
S & P 500 100.00 101.71 111.97 124.97 150.72 166.67 196.19 214.30
SNL Life & Health Insurance Index 100.00 102.01 110.88 133.00 162.06 185.23 216.77 218.21
</TABLE>
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, 1999, and ending December
31, 1999.
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.
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 13, 1999, 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 19, 1999. A notice of
nominations by a shareholder shall set forth as to each proposed nominee who is
not an incumbent director (1) the name, age, business address and, if known,
residence address of each nominee proposed in such notice, (2) the principal
occupation or employment of each such nominee, (3) the number of shares of
Common Stock of the Company which are beneficially owned by each such nominee
and the nominating shareholder and (4) any other information concerning
17
<PAGE>
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 26, 1999, are entitled to bring business before the Annual
Meeting or make nominations for directors.
Any proposal that a shareholder intends to present at the 2000 Annual
Meeting must be received by the Company no later than December 13, 1999, for
inclusion in the 2000 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.
The proxy for the 2000 Annual Meeting of Shareholders will confer on the
proxyholders discretionary authority to vote on any matter proposed by any
shareholder for consideration at the meeting if the Company does not receive
written notice of the matter from the proponent on or before April 6, 2000. The
notice must be submitted in writing and mailed by certified mail to the
Secretary of The Guarantee Life Companies Inc., Guarantee Centre, 8801 Indian
Hills Drive, Omaha, Nebraska 68114.
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 shareholders.
The Company's Annual Report, including financial statements, is being
mailed, together with this Proxy Statement, to all shareholders entitled to vote
at the Annual Meeting. However, such Annual Report is not to be considered part
of this proxy solicitation material. In addition, any shareholder who wishes to
receive a copy of the Form 10-K filed by the Company with the Securities and
Exchange Commission may obtain a copy without charge by writing to the Company.
Requests should be directed to Investor Relations, The Guarantee Life Companies
Inc., Guarantee Centre, 8801 Indian Hills Drive, Omaha, Nebraska 68114. The
Form 10-K can also be found on the Company's World Wide Website: www.guar.com.
18
<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) C.R. "Bob" Bell
02) Thomas T. Hacking
03) A.J. Scribante
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
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
<PAGE>
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 13, 1999, or
any adjournment thereof.
PLEASE MARK, SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND RETURN
IT IN THE ENCLOSED ENVELOPE.
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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 13, 1999. Your vote is vital - your shares cannot
be voted unless you sign and return your proxy card OR vote by telephone.
PLEASE VOTE
