UNITED TRUST GROUP, INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held on Tuesday, June 11, 2002 To the Shareholders of: UNITED TRUST GROUP, INC. NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of United Trust Group Inc., an Illinois corporation (“UTG”), will be held on Tuesday, June 11, 2002 at 10:00 a.m. at the corporate headquarters at 5250 South Sixth Street Road, Springfield, Illinois 62703 for the following purposes: 1. To elect nine directors of UTG to serve for a term of one (1) year and until their successors are elected and qualified; 2. To approve and adopt the UTG Employee and Director Stock Purchase Plan; and 3. To consider and act upon such other business as may properly be brought before the meeting. The Board of Directors has fixed the close of business on April 19, 2002 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. Only shareholders of record as of the close of business on the record date are entitled to notice of and to vote at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, you are urged to mark, date and sign the enclosed proxy and return it promptly so that your shares can be represented and voted at the Annual Meeting. A proxy may be revoked at any time prior to its exercise at the Annual Meeting by following the instructions in the accompanying proxy statement and will not affect your right to vote in person in the event that you decide to attend the meeting. BY ORDER OF THE BOARD OF DIRECTORS UNITED TRUST GROUP, INC. Theodore C. Miller, Secretary Dated: May 13, 2002 Springfield, Illinois YOUR VOTE IS IMPORTANT! PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS OF UNITED TRUST GROUP, INC. GENERAL INFORMATION REGARDING SOLICITATION The Annual Meeting of the Shareholders of United Trust Group, Inc., an Illinois corporation (“UTG”), will be held on on Tuesday, June 11, 2002 at 10:00 a.m. at the corporate headquarters at 5250 South Sixth Street Road, Springfield, Illinois 62703. The mailing address of UTG's principal executive office is P.O. Box 5147, Springfield, Illinois 62705. This proxy statement is being sent to each holder of record of the issued and outstanding shares of Common Stock of UTG, no par value (the “Common Stock”), as of the close of business on April 19, 2002, in order to furnish to each shareholder information relating to the business to be transacted at the meeting. This proxy statement and the enclosed proxy are being mailed on or about May 13, 2002 to the Shareholders of UTG entitled to notice of and to vote at the meeting. The Annual Report of UTG for the fiscal year ended December 31, 2001 has been mailed to shareholders under separate cover. UTG will bear the cost of soliciting proxies from its shareholders. UTG may reimburse brokers and other persons for their reasonable expenses in forwarding proxy materials to the beneficial owners of Common Stock. Solicitations may be made by telephone, telegram or by personal calls, and it is anticipated that such solicitations will consist primarily of requests to brokerage houses, custodians, nominees, and fiduciaries to forward the soliciting material to the beneficial owners of shares held of record by such persons. If necessary, officers and regular employees of UTG may by telephone, telegram or personal interview request the return of proxies. VOTING The enclosed proxy is solicited by and on behalf of the Board of Directors of UTG. If you are unable to attend the meeting on Tuesday, June 11, 2002, please complete the enclosed proxy and return it to us in the accompanying envelope so that your shares will be represented and voted at the meeting. When the enclosed proxy is duly executed and returned in advance of the meeting, and is not revoked, the shares represented thereby will be voted in accordance with the authority contained therein. Any shareholder giving a proxy may revoke it at any time before it is voted by delivering to the Secretary of UTG a written notice of revocation or a duly executed proxy bearing a later date, or by attending the meeting and voting his or her shares in person. If a proxy fails to specify how it is to be voted, it will be voted “FOR” the election of the director nominees listed in Proposal One and “FOR” the adoption and approval of the UTG Employee and Director Stock Purchase Plan (Proposal Two). Inspectors of election will be appointed to tabulate the number of shares of Common Stock represented at the meeting in person or by proxy, to determine whether or not a quorum is present and to count all votes cast at the meeting. The holders of a majority of the outstanding shares of Common Stock as of the record date must be represented at the meeting in person or by proxy in order for a quorum to be present at the meeting with respect to both proposals. The inspectors of election will treat abstentions and broker non-votes as shares that are present and entitled to vote for purposes of determining the presence of a quorum. Abstentions and broker non-votes will have no effect on the election of directors but will have the effect of a vote against Proposal Two or any other matter submitted to a vote at the meeting. With respect to the election of directors, the affirmative vote of a plurality of the votes duly cast is required for the election of directors (that is, the nominees receiving the greatest number of votes will be elected). There are no cumulative voting rights with respect to the election of directors. The holders of Common Stock as of the record date are entitled to one vote per share of Common Stock with respect to Proposal Two and any other matter that may be submitted to a vote at the meeting. The affirmative vote of the holders of a majority of the shares of Common Stock represented in person or by proxy at the annual meeting is required to approve Proposal Two or any other matter that may be submitted to a vote at the meeting, other than the election of directors. The Correll affiliates hold approximately 60% of the outstanding stock and intend to vote their shares in favor of both proposals 1 and 2. SIGNIFICANT MAJORITY-OWNED SUBSIDIARIES United Trust Group, Inc. was incorporated in 1984, under the laws of the State of Illinois to serve as an insurance holding company. UTG and its subsidiaries have only one significant industry segment - insurance. The Company's dominant business is individual life insurance which includes the servicing of existing insurance business in force, the solicitation of new individual life insurance, and the acquisition of other companies in the insurance business. Significant majority-owned subsidiaries of UTG are as depicted on the following organizational chart: Organizational Chart
For purposes of this proxy statement, the term “subsidiary life insurance companies” shall mean UG, APPL and ABE, and the term “non-insurance subsidiary companies” shall mean the subsidiary companies other than UG, APPL and ABE. The companies hereinafter are sometimes collectively referred to as the “Subsidiary majority owned companies”. This document at times will refer to the Company's largest shareholder, Mr. Jesse T. Correll and certain companies controlled by Mr. Correll. Mr. Correll holds a majority ownership of First Southern Funding LLC, a Kentucky corporation, (“FSF”) and First Southern Bancorp, Inc. (“FSBI”), a bank holding company that operates out of 14 locations in central Kentucky. Mr. Correll is Chairman of the Board of Directors of UTG and is currently UTG's largest shareholder through his ownership control of FSF, FSBI and affiliates. Mr. Correll currently owns or controls directly and indirectly approximately 60% of UTG. (See “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS”) VOTING SECURITIES OUTSTANDING April 19, 2002 has been fixed as the record date for the determination of shareholders entitled to notice of and to vote at the annual meeting or any adjournments or postponements thereof. On that date, UTG had outstanding 3,506,745 shares of Common Stock. No other voting securities of UTG are outstanding. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following tabulation sets forth the name and address of each entity or individual known to be, or that may be considered to be, the beneficial owner of more than 5% of UTG's Common Stock and shows: (i) the total number of shares of Common Stock beneficially owned by such person as of the record date and the nature of such ownership (each entity or individual listed has sole voting and dispositive power over the shares listed opposite such entity or individual's name, except as noted); and (ii) the percent of the issued and outstanding shares of Common Stock so owned as of the same date. Title Amount Percent of Name and Address and Nature of of Class of Beneficial Owner(2) Beneficial Ownership Class (1) Common Jesse T. Correll 335,999 (3) 9.6% Stock, no First Southern Bancorp, Inc. 1,483,791 (3)(4) 42.3% par value First Southern Funding, LLC 0 (3)(4) 0% First Southern Holdings, LLC 1,483,791 (3)(4) 42.3% First Southern Capital Corp., LLC 183,033 (3)(4) 5.2% First Southern Investments, LLC 18,575 0.5% Ward F. Correll 98,523 (5) 2.8% WCorrell, Limited Partnership 72,750 (3) 2.1% Cumberland Lake Shell, Inc. 98,523 (5) 2.8% Dyscim, LLC 150,545 (3) 4.3% Total(6) 2,119,921 60.5% (1) The percentage of outstanding shares is based on 3,506,745 shares of Common Stock outstanding. (2) The address for each of Jesse Correll, First Southern Bancorp, Inc. (“FSBI”), First Southern Funding, LLC (“FSF”), First Southern Holdings, LLC (“FSH”), First Southern Capital Corp., LLC (“FSC”), First Southern Investments, LLC (“FSI”), Dyscim, LLC (“Dyscim”) and WCorrell, Limited Partnership (“WCorrell LP”), is P.O. Box 328, 99 Lancaster Street, Stanford, Kentucky 40484. The address for each of Ward Correll and Cumberland Lake Shell, Inc. (“CLS”) is P.O. Box 430, 150 Railroad Drive, Somerset, Kentucky 42502. (3) The share ownership of Jesse Correll listed includes 112,704 shares of Common Stock owned by him individually, 150,545 shares of Common Stock held by Dyscim (of which Mr. Correll owns all of the outstanding membership interests, and therefor has sole voting and dispositive power over the shares held by it), and 72,750 shares of Common Stock held by WCorrell LP, a limited partnership in which Mr. Correll serves as managing general partner and, as such, has sole voting and dispositive power over the shares held by it. In addition, by virtue of his ownership of voting securities of FSF and FSBI, and in turn, their ownership of 100% of the outstanding membership interests of FSH, Jesse Correll may be deemed to beneficially own the total number of shares of Common Stock owned by FSH, and may be deemed to share with FSH the right to vote and to dispose of such shares. Mr. Correll owns approximately 82% of the outstanding membership interests of FSF; he owns directly approximately 39%, companies he controls own approximately 23%, and he has the power to vote but does not own an additional 3% of the outstanding voting stock of FSBI. FSBI and FSF in turn own 99% and 1%, respectively, of the outstanding membership interests of FSH. Mr. Correll is also a manager of FSC and thereby may also be deemed to beneficially own the total number of shares of Common Stock owned by FSC, and may be deemed to share with it the right to vote and to dispose of such shares. The aggregate number of shares of Common Stock held by these other entities, as shown in the above table, is 1,666,824 shares. (4) The share ownership of FSBI consists of 1,483,791 shares of Common Stock held by FSH of which FSBI is a 99% member and FSF is a 1% member, as further described below. As a result, FSBI may be deemed to share the voting and dispositive power over the shares held by FSH. On September 4, 2001, FSF and FSBI - and their principals - restructured the manner in which they hold shares of UTG by forming a new limited liability company under Kentucky law, FSH. FSBI contributed to FSH shares of Common Stock held by it and cash in exchange for a 99% membership interest in FSH. FSF contributed to FSH shares of Common Stock held by it, subject to notes payable which were assumed by FSH for a 1% membership interest in FSH. As a result, FSBI and FSF own 99% and 1%, respectively, of the outstanding membership interests of FSH who is the aforementioned holder of 1,483,791 shares of Common Stock. (5) Represents the shares of Common Stock held by CLS, all of the outstanding voting shares of which are owned by Ward F. Correll and his wife. As a result, Ward F. Correll may be deemed to share the voting and dispositive power over these shares. (6) According to the most recent Schedule 13D, as amended, filed jointly by each of the entities and persons listed above, Jesse Correll, FSBI, FSF, FSH, FSC, and FSI, have agreed in principle to act together for the purpose of acquiring or holding equity securities of UTG. In addition, the Schedule 13D indicates that because of their relationships with Mr. Correll and these other entities, Ward Correll, CLS, Dyscim and WCorrell LP, may also be deemed to be members of this group. Because the Schedule 13D indicates that for its purposes, each of these entities and persons may be deemed to have acquired beneficial ownership of the equity securities of UTG beneficially owned by the other entities and persons, each has been identified and listed in the above tabulation. SECURITY OWNERSHIP OF MANAGEMENT The following tabulation shows with respect to each of the directors of UTG, with respect to UTG's chief executive officer and each of UTG's executive officers whose salary plus bonus exceeded $100,000 for the fiscal year ended December 31, 2001, and with respect to all executive officers and directors of UTG as a group: (i) the total number of shares of all classes of stock of UTG or any of its parents or subsidiaries, beneficially owned as of the record date and the nature of such ownership; and (ii) the percent of the issued and outstanding shares of stock so owned. Each of these individuals has sole voting and dispositive power over the shares owned by him except as otherwise indicated. Title Directors, Named Executive Amount Percent of Officers, & All Directors & and Nature of of Class(1) Executive Officers as a Group Beneficial Ownership Class (2) UTG's John S. Albin 10,503 (3) * Common Randall L. Attkisson 0 (4) * Stock, no John W. Collins 0 * par value Jesse T. Correll 335,999 (5) 9.6% Ward F. Correll 98,523 (6) 2.8% Thomas F. Darden 0 * Luther C. Miller 0 * Theodore C. Miller 0 * Millard V. Oakley 16,471 * Robert V. O'Keefe 300 (7) * William W. Perry 0 * James P. Rousey 0 * Robert W. Teater 7,380 (8) * Brad M. Wilson 0 * All directors and executive officers as a group (fourteen in number) 469,176 (5) 13.4% FCC's John S. Albin 0 * Common Randall L. Attkisson 0 (4) * Stock, $1.00 John W. Collins 0 * par value Jesse T. Correll 1,217 (5) 2.2% Ward F. Correll 0 * Thomas F. Darden 0 * Luther C. Miller 0 * Theodore C. Miller 15 * Millard V. Oakley 0 * Robert V. O'Keefe 0 * William W. Perry 0 * James P. Rousey 0 * Robert W. Teater 0 * Brad M. Wilson 2 * All directors and executive officers 1,234 (5) 2.3% as a group (fourteen in number) (1) Because of First Southern Holdings, LLC's (“FSH”) ownership of shares of Common Stock of UTG, and First Southern Bancorp, Inc. (“FSBI”) and First Southern Funding, LLC's (“FSF”) ownership of FSH, as further described under the heading “Security Ownership of Certain Beneficial Owners”, FSBI and FSF might be considered to be parents of UTG. (2) The percentage of outstanding shares for UTG is based on 3,506,745 shares of UTG Common Stock outstanding. The percentage of outstanding shares for FCC is based on 54,385 shares of FCC Common Stock outstanding. (3) Includes 392 shares owned directly by Mr. Albin's spouse. (4) Randall L. Attkisson is an associate and business partner of Jesse T. Correll and holds minority ownership positions in certain of the entities identified herein and under the heading “Security Ownership of Certain Beneficial Owners” as owning UTG and FCC Common Stock, including FSF and FSBI, and as further described in (1) above. The ownership of those shares of UTG and FCC Common Stock by those entities is further described herein and under the heading “Security Ownership of Certain Beneficial Owners”. (5) The share ownership of Jesse Correll is described under the heading “Security Ownership of Certain Beneficial Owners”. As further described therein, Mr. Correll may also be deemed to beneficially own additional shares of UTG Common Stock held by certain of the entities listed therein. These additional shares are not included in the tabulation above. FSBI owns 1,217 shares of FCC's common stock. Because of his relationship with FSBI as further described above and under the heading “Security Ownership of Certain Beneficial Owners”, Mr. Correll may be deemed to beneficially own the number of shares of FCC Common Stock owned by FSBI and to share with it the right to vote and dispose of such shares. (6) The share ownership of Ward Correll is described under the heading “Security Ownership of Certain Beneficial Owners”. (7) Includes 300 shares owned directly by Mr. O'Keefe's spouse. (8) Includes 210 shares owned directly by Mr. Teater's spouse. * Less than 1%. THE BOARD OF DIRECTORS In accordance with the laws of Illinois and the Certificate of Incorporation and Bylaws of UTG, as amended, UTG is managed by its executive officers under the direction of the Board of Directors. The Board elects executive officers, evaluates their performance, works with management in establishing business objectives and considers other fundamental corporate matters, such as the issuance of stock or other securities, the purchase or sale of a business and other significant corporate business transactions. In the fiscal year ended December 31, 2001, the Board met 5 times. All directors attended at least 75% of all meetings of the board, except Millard Oakley. The Board of Directors has an Audit Committee consisting of Messrs. Albin, Collins, O'Keefe, and Teater. The Audit Committee performs such duties as outlined in the Company's Audit Committee Charter as approved by the Board of Directors. The Audit Committee reviews and acts or reports to the Board with respect to various auditing and accounting matters, the scope of the audit procedures and the results thereof, internal accounting and control systems of UTG, the nature of services performed for UTG and the fees to be paid to the independent auditors, the performance of UTG's independent and internal auditors and the accounting practices of UTG. The Audit Committee also recommends to the full Board of Directors the auditors to be appointed by the Board. The Audit Committee met twice in 2001. The Audit Committee is comprised of independent directors utilizing NASDAQ standards on independence. The Board of Directors does not have a compensation committee or a nominating committee. The compensation of UTG's executive officers is determined by the full Board of Directors (see report on Executive Compensation). Under UTG's Certificate of Incorporation, the Board of Directors should be comprised of from six to eleven directors. At December 31, 2001, the Board consisted of eleven directors. Shareholders elect Directors to serve for a period of one year at UTG's Annual Shareholders' meeting. Section 16(a) of the Securities Exchange Act of 1934 requires that UTG's directors, executive officers and persons who beneficially owned more than 10% of its Common Stock file certain reports with the Securities and Exchange Commission with regard to their beneficial ownership of the Common Stock. UTG is required to disclose in this proxy statement any failure to file or late filings of such reports. Based solely upon its review of reports furnished to UTG of ownership on Form 3 and changes in ownership on Forms 4 and 5 filed with the Securities and Exchange Commission by UTG's officers, directors and certain beneficial owners, or written representations furnished to the Company by such persons, the Company believes that all filing requirements applicable to its directors, executive officers and 10% beneficial owners were satisfied. AUDIT COMMITTEE REPORT TO SHAREHOLDERS In connection with the December 31, 2001 financial statements, the audit committee: (1) reviewed and discussed the audited financial statements with management; (2) discussed with the auditors the matters required by Statement on Auditing Standards No. 61; and (3) received and discussed with the auditors the matters required by Independence Standards Board Statement No.1 as well as the auditor's independence. Based upon these reviews and discussions, the audit committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report for the fiscal year ended December 31, 2001 on Form 10-K filed with the Securities and Exchange Commission. John S. Albin - Committee Chairman John W. Collins Robert V. O'Keefe Robert W. Teater PROPOSAL ONE ELECTION OF DIRECTORS At the annual meeting of shareholders of UTG, nine directors are to be elected, each director to hold office until the next annual meeting and until his successor is elected and qualified. Each nominee will be elected director by a majority of votes cast for such nominee. The persons named in the proxy intend to vote the proxies as instructed in the proxies. If no instructions are given in a particular proxy, the persons named in the proxy intend to vote the proxy for the nominees listed below. Should any of the nominees listed below become unable or unwilling to accept nomination or election, it is intended, in the absence of contrary specifications, that the proxies will be voted for the balance of those named and for a substituted nominee or nominees; however, the management of UTG currently knows of no reason to anticipate such an occurrence. All of the nominees have consented to be named as nominees and to serve as directors if elected. Information with respect to business experience of the Board of Directors has been furnished by the respective directors or obtained from the records of UTG. The following individuals are nominees for the election of directors: Name, Age Position with the Company, Business Experience and Other Directorships John S. Albin, 73 Director of UTG since 1984 and FCC since 1992; farmer in Douglas and Edgar counties, Illinois, since 1951; Chairman of the Board of Longview State Bank since 1978; President of the Longview Capitol Corporation, a bank holding company, since 1978; Chairman of First National Bank of Ogden, Illinois, since 1987; Chairman of the State Bank of Chrisman since 1988; Director and Secretary of Illini Community Development Corporation since 1990; Commissioner of Illinois Student Assistance Commission since 1996. Randall L. Attkisson 56 Director of UTG and FCC since 1999; President and Chief Operating Officer of UTG and FCC since 2001; Chief Financial Officer, Treasurer, Director of First Southern Bancorp, Inc., a bank holding company, since 1986; Treasurer, Director of First Southern Funding, LLC (formerly First Southern Funding Inc.) since 1992; Director of The River Foundation, Inc. since 1990; President of Randall L. Attkisson & Associates from 1982 to 1986; Commissioner of Kentucky Department of Banking & Securities from 1980 to 1982; Self-employed Banking Consultant in Miami, FL from 1978 to 1980. Jesse T. Correll 45 Chairman and CEO of UTG and FCC since 2000; Director of UTG and FCC since 1999; Chairman, President, Director of First Southern Bancorp, Inc. since 1983; President, Director or Manager of First Southern Funding since 1992; President, Director of The River Foundation since 1990; President, Director and sole member manager of Dyscim LLC (formerly Dyscim Holdings Company, Inc.) since 1990; Director of Thomas Nelson, Inc. since 2001; Director of Computer Services, Inc. since 2001; Director of Global Focus since 2001; Young Life Dominican Republic Committee Member since 2000. Jesse Correll is the son of Ward Correll. Ward F. Correll 73 Director of UTG since 2000 and FCC since 1999; President, Director of Tradeway, Inc. of Somerset, KY since 1973; President, Director of Cumberland Lake Shell, Inc. of Somerset, KY since 1971; President, Director of Tradewind Shopping Center, Inc. of Somerset, KY since 1966; Director of First Southern Bancorp since 1988; Director or Manager of First Southern Funding since 1991; Director of The River Foundation of Stanford, KY since 1990; and Director First Southern Insurance Agency of Stanford, KY since 1987. Ward Correll is the father of Jesse Correll. Thomas F. Darden 47 Director of UTG and FCC since 2001; Managing Partner of Cherokee Investment Partners LLC, a real estate investment firm, and President and CEO of Cherokee Sanford Group, Inc. an affiliated predecessor since 1983; Director of BTI Telecom, Inc. since 1998; Director of Waste Industries, Inc. since 1997; Director of Winston Hotels, Inc. since 1994; Trustee of Shaw University since 1993; Member of the Board of Governors of Research, Triangle Institute since 1998; Former Chairman of the Triangle Transit Authority, serving from 1993 to 1998 and Chairman from 1996 to 1997; Prior to 1996, twice appointed to the North Carolina Board of Transportation. Millard V. Oakley 71 Director of UTG and FCC since 1999; Presently serves on Board of Directors and Executive Committee of Thomas Nelson, a publicly held publishing company based in Nashville, TN; Director of First National Bank of the Cumberlands, Livingston-Cooksville, TN; Lawyer with limited law practice since 1980; State Insurance Commissioner for State of Tennessee from 1975 to 1979; General Counsel, United States House of Representatives, Washington, D.C., Congressional Committee on Small Business from 1971-1973; four elective terms as County Attorney for Overton County, TN; delegate to National Democratic Convention in 1964; four elective terms in the Tennessee General Assembly from 1956 to 1964; Lawyer in Livingston, TN from 1953 to 1971; Elected to the Tennessee Constitutional Convention in 1952. William W. Perry 45 Director of UTG and FCC since 2001; Owner of SES Investments, Ltd., an oil and gas investments company since 1991; President of EGL Resources, Inc., an oil and gas operations company based in Texas and New Mexico since 1992; President of Midland Yucca Realty, a Texas real estate investment company since 1993; Chairman of Perry & Perry, Inc., a Texas oil and gas consulting company since 1977; Member of the Board of Managers of Tall City Equity Fund since 2001; President of Champion Title Group, a Florida based consulting business since 1999; involved with, Young Life, youth organization as a leader, Chairman of the international Committee and National Board since 1977. James P. Rousey 43 Executive Vice President and Chief Administrative Officer since September 2001; Regional CEO and Director of First Southern National Bank from 1988 to 2001. Board Member with the Illinois Fellowship of Christian Athletes since 2001. Robert W. Teater 75 Director of UTG since 1987 and FCC since 1992; member of Columbus School Board 1991-2001; Former Director, Ohio Department of Natural Resources; Founder, Teater-Gebhardt and Associates, Inc., a comprehensive consulting firm in natural resources development; Combat veteran and retired Major General, Ohio Army National Guard. The following current directors term of office will expire at the annual meeting and they are not seeking another term: John W. Collins 75 Director of UTG since 2000; Director of FCC and certain affiliate companies since 1982. Consultant and past President of Collins-Winston Group, an executive search firm, since 1976. Luther C. Miller 71 Director of UTG since 2000 and FCC since 1984; Executive Vice President and Secretary of FCC from 1984 until 1992; officer and director of certain affiliate companies until 1992. Robert V. O'Keefe 80 Director of UTG since 2000 and FCC since 1993; Director and Treasurer of UTG from 1988 to 1992; Director of Cilcorp, Inc. from 1982 to 1994; Director of Cilcorp Ventures, Inc. from 1985 to 1994; Director of Environmental Science and Engineering Co. from 1990 to 1994. The Board of Directors recommends that shareholders vote “FOR” the election of the director nominees listed above. EXECUTIVE OFFICERS OF UTG More detailed information on the following officers of UTG appears under “Election of Directors”: Jesse T. Correll Chairman of the Board and Chief Executive Officer Randall L. Attkisson President and Chief Operating Officer Other officers of UTG are set forth below: Name, Age Position with UTG and, Business Experience James P. Rousey 43 Executive Vice President and Chief Administrative Officer since September 2001; Regional CEO and Director of First Southern National Bank from 1988 to 2001. Board Member with the Illinois Fellowship of Christian Athletes since 2001. Theodore C. Miller 39 Corporate Secretary since December 2000, Senior Vice President and Chief Financial Officer since July 1997; Vice President and Treasurer since October 1992; Vice President and Controller of certain Affiliate Companies from 1984 to 1992. Brad M. Wilson 50 Senior Vice President and Chief Information Officer since 1992; Chief Administrative Officer from December 2000 to September 2001. EXECUTIVE COMPENSATION The following table sets forth certain information regarding compensation paid to or earned by UTG's Chief Executive Officer and each of the Executive Officers of UTG whose salary plus bonus exceeded $100,000 during UTG's last fiscal year: Compensation for services provided by the named executive officers to UTG and its affiliates is paid by FCC (See also Employment Contracts for Messrs. Melville and Ryherd) SUMMARY COMPENSATION TABLE Name and Annual Compensation Other Annual (1) All Other (1) Principal Position Year Salary ($) Bonus ($) Compensation ($) Compensation ($) ($) Jesse T. Correll (2) 2001 56,250 - - - Chairman of the Board 2000 - - - - Chief Executive Officer 1999 - - - - Brad M. Wilson 2001 160,000 3,000 - 3,150 Senior Vice President 2000 157,500 3,227 - 3,150 Chief Information Officer 1999 147,700 3,000 3,665 3,150 Theodore C. Miller 2001 100,000 5,000 - 3,000 Corporate Secretary 2000 91,749 - - 2,752 Senior Vice President 1999 86,783 - 3,179 2,603 Chief Financial Officer (1) Other Annual Compensation consists of interest paid on previously deferred compensation amounts. All Other Compensation consists of UTG's matching contribution to the First Commonwealth Corporation Employee Savings Trust 401(k) Plan. (2) On March 27, 2000, Mr. Jesse T. Correll assumed the position as Chairman of the Board and Chief Executive Officer of UTG and each of its affiliates. Mr. Correll did not receive a salary, bonus or other compensation for his duties with UTG and each of its affiliates in the year 2000. In March 2001, the Board of Directors approved an annual salary for Mr. Correll of $75,000, with payments to begin on April 1, 2001. Option/SAR Grants/Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values At December 31, 2001 there were no shares of Common Stock subject to unexercised options held by the named executive officers. There were no options or stock appreciation rights granted to the named executive officers for the past three fiscal years. Compensation of Directors UTG's standard arrangement for the compensation of directors provides that each director shall receive an annual retainer of $2,400, plus $300 for each meeting attended and reimbursement for reasonable travel expenses. UTG's director compensation policy also provides that directors who are employees of UTG or directors or officers of FSF and its affiliates do not receive any compensation for their services as directors except for reimbursement for reasonable travel expenses for attending each meeting. Employment Contracts FCC entered into an employment agreement dated July 31, 1997 with Larry E. Ryherd. Formerly, Mr. Ryherd had served as Chairman of the Board and Chief Executive Officer of UTG and its affiliates, until his resignation on March 27, 2000. Pursuant to the agreement, Mr. Ryherd agreed to serve as Chairman of the Board and Chief Executive Officer of UTG and in addition, to serve in other positions of the affiliated companies if appointed or elected. The agreement provides for an annual salary of $400,000 as determined by the Board of Directors. The term of the agreement is for a period of five years. Mr. Ryherd has deferred portions of his income under a plan entitling him to a deferred compensation payment, which was paid to him on January 2, 2000, in the amount of $240,000, which included interest at the rate of approximately 8.5% annually. Additionally, Mr. Ryherd was granted an option to purchase up to 13,800 of the Common Stock of UTG at $17.50 per share. The option was immediately exercisable and transferable. At December 31, 2000, all previously granted options expired. In accordance with the employment agreement, Mr. Ryherd continues to receive his annual Salary of $400,000 until the agreement expiration date of July 31, 2002. The entire $933,333 payable to Mr. Ryherd, from the date of his resignation until the end of his employment agreement was accrued, and thus expensed, by FCC in the first quarter of 2000. FCC entered into an employment agreement dated July 31, 1997 with James E. Melville pursuant to which Mr. Melville is employed as President and Chief Operating Officer and in addition, to serve in other positions of the affiliated companies if appointed or elected at an annual salary of $238,200. The term of the agreement expires July 31, 2002. Mr. Melville has deferred portions of his income under a plan entitling him to a deferred compensation payment which was paid to him on January 2, 2000 of $400,000 which includes interest at the rate of approximately 8.5% annually. Additionally, Mr. Melville was granted an option to purchase up to 30,000 shares of the Common Stock of UTG at $17.50 per share. The option was immediately exercisable and transferable. At December 31, 2000, all previously granted options expired. In accordance with the employment agreement, Mr. Melville continues to receive his annual Salary of $238,200 until the agreement expiration date of July 31, 2002. An accrual of $562,000 was established through a charge to general expenses at year-end 2000 for the remaining payments required pursuant to the terms of Mr. Melville's employment contract and other settlement costs. There are no other employment agreements in effect with any executive officers or employees of the Company. REPORT ON EXECUTIVE COMPENSATION Introduction The compensation of UTG's executive officers is determined by the full Board of Directors. The Board of Directors strongly believes that UTG's executive officers directly impact the short-term and long-term performance of UTG. With this belief and the corresponding objective of making decisions that are in the best interest of UTG's shareholders, the Board of Directors places significant emphasis on the design and administration of UTG's executive compensation plans. Executive Compensation Plan Elements Base Salary. The Board of Directors establishes base salaries at a level intended to be within the competitive market range of comparable companies. In addition to the competitive market range, many factors are considered in determining base salaries, including the responsibilities assumed by the executive, the scope of the executive's position, experience, length of service, individual performance and internal equity considerations. In addition to a base salary, increased compensation of current and future executive officers of the Company will be determined using a “performance based” philosophy. UTG's financial results are analyzed and future increases to compensation will be proportionately based on the profitability of the Company. Stock Options and Compensation. Stock options are granted at the discretion of the Board of Directors. There were no options granted to the named executive officers during the last three fiscal years. Proposal 2, relating to the adoption and approval of the UTG Employee and Director Stock Purchase Plan, if approved at the annual meeting, will become an important part of the executive compensation plan as a way to motivate UTG's officers and employees and align their interests with those of the shareholders of the UTG. Deferred Compensation. There are currently no deferred compensation arrangements with any executive officers or employees of the Company. Chief Executive Officer On March 27, 2000, Mr. Jesse T. Correll assumed the position of Chairman of the Board and Chief Executive Officer of UTG and each of its affiliates. Under Mr. Correll's leadership, he declined to receive a salary, bonus or other forms of compensation for his duties with UTG and each of its affiliates in the year 2000. In March 2001, the Board of Directors approved an annual salary for Mr. Correll of $75,000, with payments to begin on April 1, 2001. As a reflection of Mr. Correll's leadership, the compensation of current and future executive officers of the Company will be determined by the Board of Directors using a “performance based” philosophy. The Board of Directors will consider UTG's financial results and future compensation decisions will be proportionately based on the profitability of the Company. Conclusion The Board of Directors believes this executive compensation plan provides a competitive and motivational compensation package to the executive officer team necessary to produce the results UTG strives to achieve. BOARD OF DIRECTORS John S. Albin Luther C. Miller Randall L. Attkisson Millard V. Oakley John W. Collins Robert V. O'Keefe Jesse T. Correll William W. Perry Ward F. Correll Robert W. Teater Thomas F. Darden PROPOSAL TWO ADOPTING AND APPROVING THE UTG EMPLOYEE AND DIRECTOR STOCK PURCHASE PLAN On March 26, 2002, the Board of Directors adopted the United Trust Group, Inc. Employee and Director Stock Purchase Plan. A summary of the plan is set forth below. The summary is qualified in its entirety by reference to the complete text of the plan without attachments, which is attached to this proxy statement as Appendix A. The plan's purpose is to provide employees and directors of UTG and its subsidiaries an opportunity to invests in shares of our common stock. The plan will be administered by the Board of Directors of UTG. The Board has authority to interpret and construe the provisions of the plan and to adopt rules and regulations to carry out the plan. Decisions by the Board in the administration of the plan are final and binding absent manifest error. The Board may arrange for individuals or organizations to assist in the administration of the plan. The Board is seeking the shareholders' approval of the plan because each of the individuals serving as directors of UTG will be eligible to be selected by the full Board of Directors to participate in and purchase shares in offerings under the plan. Unless the shareholders of UTG approve the plan, directors of UTG will not be eligible to participate in the plan or any offerings under the plan unless they are otherwise entitled to participate as eligible employees of UTG or its subsidiaries, as described in the summary below. A total of 400,000 shares of common stock may be purchased under the plan, subject to appropriate adjustment for stock dividends, stock splits or similar recapitalizations resulting in a change in shares of UTG. The plan is not intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. Eligibility Requirements for Plan Participants Only individual employees of UTG or its subsidiaries who either (1) serve as directors of UTG or its subsidiaries, or (2) have been employed full-time by UTG or its subsidiaries for at least one year at the time of an offering, are eligible to be selected by the Board of Directors to participate under the plan. Any person serving as a director of UTG or its subsidiaries at the time of an offering under the plan is eligible to participate in that offering under the plan. The employment relationship will be treated as continuing intact while an employee is on sick leave or other bona fide leave of absence for a period not to exceed 90 days. The employment relationship will be deemed terminated on the 91st day of such leave. The Board may refuse to issue shares to any person if it determines in good faith that the eligibility requirements were not met either during the annual offering period or at the time of the closing of the offering. Independent contractors and other individuals who are not employees or directors are not eligible to participate in the plan. As of April 19, 2002, there were approximately 55 employees and 9 directors of UTG and its subsidiaries who would be eligible to participate in the plan. How the Plan Operates Under the plan, the Board has discretion to select eligible employees and directors of UTG and its subsidiaries to purchase shares of UTG's common stock in an annual offering. The Board may decide if and when annual offerings of shares under the plan will be made and may determine the number of shares to be offered in an annual offering and the number of shares, if any, to be offered to a selected eligible participant. No fractional shares will be issued, and any fractional shares will be rounded down to the next whole number. Each annual offering, if made, will remain open for a 30-day period, during which the selected participants may elect to purchase shares. An election will not be valid unless the selected participant meets the eligibility requirements and, prior to the end of the offering period, (1) delivers to UTG a signed, completed subscription agreement in the form attached as Exhibit A to the plan, together with full payment for the purchase price of the shares, and (2) signs and delivers to UTG a stock restriction agreement (see “Transfer Restrictions” below). The closing of an annual offering will occur within five business days following the end of the annual offering period. At that time, certificates representing the shares purchased by a participant in the annual offering will be issued. If there has been an oversubscription of the annual offering, any excess funds received will be returned, without interest, by check to the participants. The purchase price at which shares will be offered under the plan will be fixed by the Board at the time it authorizes each annual offering. The price at which shares will be offered is not based on market price, which as of April 29, 2002 was $7.25. However, in any case, the plan provides that the price at which shares will be offered will not be less than 100% of the fair market value of the shares of common stock of UTG at the time the offering is authorized by the Board. The purchase price for shares to be offered in the first annual offering has been arbitrarily set at $12.00 per share. Participants' rights to purchase shares under the plan are personal and may not be assigned, transferred, pledged or otherwise disposed of by the participant. The right to purchase shares under the plan may be exercised only during a participant's lifetime. The Board may amend or terminate the plan at any time. Transfer Restrictions Shares issued under the plan will be subject to applicable restrictions under federal and state securities laws. It is a condition of offers of shares under the plan that the offer and sale of the shares are either exempt from registration under the Securities Act of 1933 and applicable state securities laws, or are duly registered in compliance with such laws. Shares acquired under the plan will also be subject to restrictions contained in the stock restriction agreement that each participant must enter into before being permitted to purchase shares under the plan. The following is a brief summary of the stock restriction agreement. The stock restriction agreement will restrict the ability of plan participants to sell, transfer, or otherwise dispose of the shares they acquire under the plan. Participants may transfer their shares by gift for their benefit or to their spouses or children, but the transferred shares remain subject to the stock restriction agreement. Participants may also pledge, mortgage or otherwise encumber their shares, and the pledgee will be bound by the stock restriction agreement. However, if the pledge is made for the purpose of securing a loan on behalf of UTG or any entity that is controlled by UTG or Jesse Correll, either individually or collectively, the pledgee will receive the shares free of the restrictions imposed by the stock restriction agreement. Participants also may sell, donate or transfer their shares with the prior approval of the Board, but the Board may condition its approval on such terms and conditions as it deems appropriate. Participants may offer UTG an opportunity to purchase their shares at any time, so long as they will sell not less than the lesser of (1) all of the shares they then own, or (2) shares whose fair value is at least $1,000. If UTG does not purchase all or any part of the share offered for sale, the remaining plan participants who are parties to the stock restriction agreement will have a ten day option to purchase a pro rata portion of the shares based upon their percentage ownership of the total number of shares of common stock owned by all of the participant shareholders who exercised their option to purchase under the stock restriction agreement. If neither UTG nor the remaining participant shareholders purchase all or any part of the shares, the selling participant shareholder will be free (subject to applicable state and federal securities laws) to sell all, but not less than all, of the unpurchased shares for a period of 90 days from the expiration of the remaining participant shareholders' option. If the shares are not sold within the 90 day period, the stock restriction agreement once again will apply to the shares. If a participant dies or his or her employment with or service as a director of UTG or any of its subsidiaries is terminated for any reason (including retirement and disability), UTG will purchase all of the shares then held by the participant, his or her personal representative, spouse or children, as the case may be (including any shares transferred to a participant's spouse under a divorce decree) within 90 days of such death or termination of employment. If a participant has transferred shares to his or her non-employee spouse, upon a divorce, UTG will purchase all of the shares then held by the non-employee spouse (or that were transferred by him or her to the children of the non-employee spouse) within 90 days of the date of entry of the divorce decree. The purchase price will be paid in cash within 60 days from the date of purchase, subject to the receipt of any required regulatory approvals. If any regulatory approvals are required in connection with the purchase of the shares, the shares and the purchase price will be escrowed pending receipt of such approvals, and interest on the purchase price will accrue to the seller's benefit regardless of whether the sale ultimately takes place. Even if regulatory approval is required, the sale of shares must close, if at all, within 150 days from the date the shares were first offered for sale or the date of death, termination of employment or divorce, whichever is applicable. If Jesse Correll and his affiliates sell, in one or a series of related transactions, more than 50% of the then outstanding shares of common stock of UTG to any third party not affiliated with Mr. Correll, all of the participant shareholders who are parties to the stock restriction agreement will be given the opportunity to sell their shares either to the third party or to UTG on the same terms and conditions as Mr. Correll and his affiliates. Federal Income Tax consequences Because the plan provides that the purchase price for shares purchased under the plan will be not less than 100% of the fair market value of the shares, the Company believes that purchasers of shares under the plan should not recognize any compensation or ordinary income when they purchase shares. However, if the purchase price is determined to be less than the actual fair market value of the common stock, participants may recognize compensation or ordinary income in an amount equal to the excess, if any, of the fair market value of the shares of the common stock received over the purchase price. If the purchased shares are later sold, purchasers will recognize short-term or long-term capital gain or loss, depending upon their holding period for the shares. Their gain will be equal to the difference between the net sale proceeds and their tax basis in the shares. Generally, their tax basis will be equal to the purchase price plus the compensation income, if any, recognized at the time the participant purchased the shares. Generally, the purchase and/or subsequent sale of shares acquired under the plan has state income tax consequences similar to the federal income tax consequences described above. However, these tax effects will depend on the jurisdictions involved, such as where a participant is employed and where he or she resides. Vote Required The affirmative vote of a majority of the votes of the shares represented at the Annual Meeting and entitled to vote is required to approve the proposal to adopt the United Trust Group, Inc. Employee and Director Stock Purchase Plan. If the plan is not adopted, directors of UTG will not be entitled to participate in or purchase shares under the plan unless they are otherwise entitled to participate as eligible employees of UTG and its subsidiaries. The Board of Directors recommends that shareholders vote “FOR” the adoption of the Plan. PERFORMANCE GRAPH The following graph compares the cumulative total shareholder return on UTG's Common Stock during the five fiscal years ended December 31, 2001 with the cumulative total return on the NASDAQ Composite Index Performance and the NASDAQ Insurance Stock Index (1). The graph assumes that $100 was invested on December 31, 1996 in each of the Company's common stock, the NASDAQ Composite Index, and the NASDAQ Insurance Stock Index, and that any dividends were reinvested.
(1) UTG selected the NASDAQ Composite Index Performance as an appropriate comparison since during the time period reflected, UTG's Common Stock was traded on the NASDAQ Small Cap exchange under the sign “UTGI”. Furthermore, UTG selected the NASDAQ Insurance Stock Index as the second comparison because there is no similar single “peer company” in the NASDAQ system with which to compare stock performance and the closest additional line-of-business index which could be found was the NASDAQ Insurance Stock Index. Trading activity in UTG's Common Stock is limited, which may be due in part as a result of UTG's low profile, and its reported operating losses. The Return Chart is not intended to forecast or be indicative of possible future performance of UTG's stock. The foregoing graph shall not be deemed to be incorporated by reference into any filing of UTG under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that UTG specifically incorporates such information by reference. Compensation Committee Interlocks and Insider Participation and Related Party Transactions UTG does not have a compensation committee and decisions regarding executive officer compensation are made by the full Board of Directors of UTG. The following persons served as directors of UTG during 2001 and were officers or employees of UTG or its affiliates during 2001: Jesse T. Correll and Randall L. Attkisson. Accordingly, these individuals have participated in decisions related to compensation of executive officers of UTG and its subsidiaries. During 2001, Jesse T. Correll and Randall L. Attkisson, executive officers of UTG, FCC and their insurance subsidiaries, were also members of the Board of Directors of FCC and the insurance subsidiaries. Other Related Party Transactions At a December 17, 2001 joint meeting of the board of directors of UTG, FCC and their insurance subsidiaries, the boards of directors of the insurance subsidiaries discussed and decided to further explore and pursue a possible sale of the insurance charters of each of APPL and ABE. In the alternative to a sale of the APPL charter, the boards also discussed and decided to further explore a possible merger of APPL into UG. Regardless of whether a merger is ultimately pursued or the charters of each subsidiary are sold, UG would likely assume and reinsure the existing insurance policies of those subsidiaries in any such transaction. On June 5, 2001, UTG and FCC jointly announced their respective Boards of Directors approved a definitive agreement whereby UTG would acquire the remaining common shares (approximately 18%) of FCC which UTG does not currently own. Under the terms of the agreement, FCC will be merged with and into UTG, with UTG continuing as the surviving entity in the merger. Pursuant to the merger agreement, UTG will pay $250 in cash for each share of FCC common stock not held by United Trust Group. The transaction is subject to various conditions precedent set forth in the merger agreement, including the approval of the transaction by the shareholders of FCC. FCC plans to submit the transaction to the vote of the FCC shareholders to be held at a special meeting to be called for that purpose. Shareholders of FCC are urged to read the Proxy Statement when it becomes available. During the fourth quarter of 2001, UG purchased real estate from an outside third party through the formation of an LLC in which UG is a two-thirds owner. The other one-third partner is Millard V. Oakley, who is a Director of both UTG and FCC. Hampshire Plaza, LLC consists of a twenty story, 254,000 square foot office tower, an attached 72,000 square foot retail plaza, and an attached parking garage with approximately 350 parking spaces located in Manchester, New Hampshire for $6,333,336. At December 31, 2001, the property was carried at $6,491,734. On November 15, 2001, UTG was extended a $3,300,000 line of credit from the First National Bank of the Cumberlands located in Livingston, Tennessee. The First National Bank of the Cumberlands is owned by Millard V. Oakley, who is a Director of both UTG and FCC. The line of credit will expire one year from the date of issue, and all funds advanced under this line of credit are to be used for the repurchase of stock. The interest rate provided for in the agreement is variable and indexed to be the lowest of the U.S. prime rates as published in the money section of the Wall Street Journal, with any interest rate adjustments to be made monthly. To date, the Company has no borrowings or obligations attributable to this line of credit. On October 26, 2001, APPL effected a reverse stock split, as a result of which (i) it became a wholly-owned subsidiary of UG, and an indirect wholly-owned subsidiary of FCC and UTG, and (ii) its minority shareholders received an aggregate of $1,055,294.50 in respect of their shares. Prior to the reverse stock split, UG owned 88% of the outstanding shares of APPL. On September 4, 2001, FSF and FSBI (and their principals) restructured the manner in which they hold shares of UTG by forming a new limited liability company under Kentucky law, First Southern Holdings, LLC (“FSH”). FSBI contributed to FSH shares of UTG common stock held by it and cash in exchange for a 99% membership interest in FSH. FSF contributed to FSH shares of UTG common stock held by it, subject to notes payable which were assumed by FSH in exchange for a 1% membership interest in FSH. On April 12, 2001, UTG completed the purchase of 22,500 shares of UTG common stock and 544 shares of FCC common stock from James E. Melville and family pursuant to a stock purchase agreement in exchange for five year promissory notes of UTG in the aggregate principal amount of $288,800. On April 12, 2001, UTG also completed the purchase from another family member of Mr. Melville of an additional 100 shares of UTG for a total cash payment of $800. The purchase for cash by UTG of an additional 39 shares of FCC common stock owned by Mr. Melville at a purchase price of $200.00 per share was consummated on June 27, 2001. Mr. Melville was a former director of UTG, FCC and the three insurance subsidiaries of UTG; he resigned from those boards on February 13, 2001. On April 12, 2001, UTG also completed the purchase of 559,440 shares of UTG common stock from Larry E. Ryherd and family pursuant to a stock purchase agreement for cash payments totaling $948,026 and a five year promissory note of UTG in the principal amount of $3,527,494. The purchase by UTG of the remaining 3,775 shares of UTG common stock to be purchased for cash at $8.00 per share pursuant to the stock purchase agreement along with an additional 570 shares from certain parties to the stock purchase agreement was completed on June 20, 2001. The promissory notes of UTG received by certain of the sellers pursuant to the Melville purchase agreement and the Ryherd purchase agreement bear interest at a rate of 7% per annum (paid quarterly) with payments of principal to be made in five equal annual installments, the first such payment of principal to be due on the first anniversary of the closing. The Melville and Ryherd stock purchase agreements were originally between the sellers of the shares and First Southern Bancorp. First Southern Bancorp's rights and obligations under those purchase agreements were assigned to, and assumed by, UTG prior to the completion of the stock purchases contemplated thereby. The sellers of those shares consented to those assignments and assumptions pursuant to separate consent and novation agreements. On April 12, 2001, UTG also purchased in a separate transaction 10,891 shares of UTG common stock from Robert E. Cook at a price of $8.00 per share. At the closing, Mr. Cook received $17,426 in cash and a five year promissory note of UTG (substantially similar to the promissory notes issued pursuant to the Melville and Ryherd Purchase Agreements described above) in the principal amount of $69,702. Mr. Cook was a director of UTG and FCC who resigned his position on January 8, 2001. Mr. Cook proposed the stock purchase to Jesse T. Correll who agreed to purchase Mr. Cook's stock on substantially the same terms as the purchases of the stock held by Messrs. Melville and Ryherd as described above. Mr. Correll is Chairman of the Board of Directors of UTG and currently UTG's largest shareholder through his ownership control of FSF, FSBI and affiliates. Mr. Correll is the majority shareholder of FSF and FSBI, a bank holding company that operates out of 14 locations in central Kentucky. At December 31, 2001, Mr. Correll owns or controls directly and indirectly approximately 60% of UTG. Under the current structure, FCC pays a majority of the general operating expenses of the affiliated group. FCC then receives management, service fees and reimbursements from the various affiliates. UTG paid FCC $550,000, $750,000 and $600,000 in 2001, 2000 and 1999, respectively for reimbursement of costs attributed to UTG. On January 1, 1993, FCC entered an agreement with UG pursuant to which FCC provides management services necessary for UG to carry on its business. UG paid $6,156,903, $6,061,515 and $6,251,340 to FCC in 2001, 2000 and 1999, respectively. ABE pays fees to FCC pursuant to a cost sharing and management fee agreement. FCC provides management services for ABE to carry on its business. The agreement requires ABE to pay a percentage of the actual expenses incurred by FCC based on certain activity indicators of ABE business to the business of all the insurance company subsidiaries plus a management fee based on a percentage of the actual expenses allocated to ABE. ABE paid fees of $332,673, $371,211 and $392,005 in 2001, 2000 and 1999, respectively under this agreement. APPL has a management fee agreement with FCC whereby FCC provides certain administrative duties, primarily data processing and investment advice. APPL paid fees of $444,000, $444,000 and $300,000 in 2001, 2000 and 1999, respectively under this agreement. Respective domiciliary insurance departments have approved the agreements of the insurance companies and it is Management's opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America. Since the Company's affiliation with FSF, UG has acquired mortgage loans through participation agreements with First Southern National Bank, with which certain directors and executive officers are affiliated as described under the section entitled “Election of Directors”. FSNB services the loans covered by these participation agreements. UG pays a .25% servicing fee on these loans and a one-time fee at loan origination of .50% of the original loan amount to cover costs incurred by FSNB relating to the processing and establishment of the loan. UG paid $79,730, $34,721 and $11,578 in servicing fees and $22,626, $91,392 and $0 in origination fees to FSNB during 2001, 2000 and 1999, respectively. The Company reimbursed expenses incurred by Mr. Correll and Mr. Attkisson relating to travel and other costs incurred on behalf of or relating to the Company. The Company paid $145,407, $96,599 and $39,336 in 2001, 2000 and 1999,respectively to First Southern Bancorp, Inc. in reimbursement of such costs. In addition, beginning in 2001, the Company began reimbursing FSBI a portion of salaries for Mr. Correll and Mr. Attkisson. The reimbursement was approved by the UTG board of directors and totaled $128,411 in 2001 which included salaries and other benefits. See also the discussion under “Proposal 2 - Adopting and Approving the UTG Employee and Director Stock Purchase Plan”. RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS Kerber, Eck and Braeckel LLP (“KEB”) served as UTG's independent certified public accounting firm for the fiscal year ended December 31, 2001 and for fiscal year ended December 31, 2000. In serving its primary function as outside auditor for UTG, KEB performed the following audit services: examination of annual consolidated financial statements; assistance and consultation on reports filed with the Securities and Exchange Commission and; assistance and consultation on separate financial reports filed with the State insurance regulatory authorities pursuant to certain statutory requirements. Audit Fees. Audit Fees billed for these audit services in the fiscal year ended December 31, 2001 totaled $165,000, and audit fees billed for quarterly reviews of the Company's financial statements totaled $16,979. Financial Information Systems Design and Implementation Fees. KEB did not render any services related to financial information systems design and implementation for the fiscal year ended December 31, 2001. All Other Fees. No other services besides the audit services described above were performed by, and therefore no other fees were billed by, KEB for services in the fiscal year ended December 31, 2001. UTG does not expect that a representative of KEB will be present at the Annual Meeting of Shareholders of UTG. No accountants have been selected for fiscal year 2002 because UTG generally chooses accountants shortly before the commencement of the annual audit work. SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING In order for a proposal by a shareholder to be included in UTG's proxy statement and form of proxy for the 2003 Annual Meeting of Shareholders, the proposal must be received by UTG at its principal office on or before January 31, 2003. Shareholder proposals submitted after March 31, 2003, will be considered untimely, and the proxy solicited by UTG for next year's annual meeting may confer discretionary authority to vote on any such matters without a description of them in the proxy statement for that meeting. OTHER MATTERS TO COME BEFORE THE MEETING The management does not intend to bring any other business before the meeting of UTG's shareholders and has no reason to believe that any will be presented to the meeting. If, however, any other business should properly be presented to the meeting, the proxies named in the enclosed form of proxy will vote the proxies in accordance with their best judgement. MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS In late 2000, the Securities and Exchange Commission adopted new rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process allows for extra convenience for stockholders and potential costs savings for companies. This year, one or more brokers with accountholders who are UTG shareholders may send a single proxy statement addressed to two or more shareholders sharing the same address. In those cases, a single proxy statement and Annual Report will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholder. Once you have received notice from your broker that they will be sending communications to your address in this way, they will continue this practice until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to receive proxy materials and communications in this way and would prefer to receive a separate proxy statement, please notify your broker, direct your written request to United Trust Group, Inc., Theodore C. Miller, Secretary, 5250 South Sixth Street Road, P.O. Box 5147, Springfield, Illinois, 62705-5147, or contact Mr. Miller at 217-241-6300. UTG will deliver promptly, upon written or oral request in the manner provided above, a separate copy of the proxy statement and Annual Report for the fiscal year ended December 31, 2001 to a shareholder at a shared address to which a single copy was delivered. If your broker is not currently delivering a single proxy statement addressed to two or more shareholders sharing the same address (i.e., you received multiple copies of this proxy statement), and you would like to request delivery of a single copy, you should contact your broker. AVAILABILITY OF ANNUAL REPORT ON FORM 10-K UTG has filed its Annual Report for the year ended December 31, 2001 on Form 10-K with the Securities and Exchange Commission. A copy of the report, including any financial statements and financial statement schedules, may be obtained without charge by any shareholder. Requests for copies of the report should be sent to Theodore C. Miller, Secretary, United Trust Group, Inc., 5250 South 6th Street Road, P.O. Box 5147, Springfield, Illinois, 62705-5147. BY ORDER OF THE BOARD OF DIRECTORS UNITED TRUST GROUP, INC. Theodore C. Miller, Secretary Dated: May 13, 2002 Appendix A EXHIBIT A United Trust Group, Inc. Employee and Director Stock Purchase Plan COMMON STOCK (no par value) Background United Trust Group, Inc. is an Illinois corporation and an insurance holding company. We desire to offer employees and directors of United Trust Group, Inc. and its subsidiaries the opportunity to invest in shares of our common stock. This document describes the plan we have established under which employees and directors may purchase shares of United Trust Group, Inc. common stock. Investing in shares under the plan is not without risks. The price at which shares are being offered under this plan is not based on market price, and employees and directors investing in shares under the plan will be required to execute a stock restriction agreement. The stock restriction agreement imposes significant restrictions on the transferability of shares, and fixes the price at which a participant in the plan may be required to sell shares back to United Trust Group, Inc. based on the change in the book value of the shares, not market value. A note about United Trust Group, Inc. United Trust Group, Inc. is a publicly-held company that files reports with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. Until recently, our common stock was traded on the Nasdaq Small Cap Stock Market. Effective December 31, 2001, we voluntarily de-listed our shares from Nasdaq, and our shares are now traded sporadically in the over-the-counter market. Jesse Correll, and his affiliates and associates own a majority of our outstanding shares of common stock. How many shares may be issued under the plan The board of directors has authorized the issuance of a total of 400,000 shares of common stock pursuant to this plan. The number of shares authorized to be issued under the plan will be subject to adjustment proportionately if there is a stock dividend, stock split or similar recapitalization event resulting in a change in shares of United Trust Group, Inc. How the plan operates Annual offering of shares. Eligible employees and directors of United Trust Group, Inc. and its subsidiaries may be offered the opportunity to purchase a limited amount of shares of United Trust Group under the plan annually. Each annual offering, if made, will remain open for a period of 30 days, during which directors and eligible employees selected by our board of directors may elect to purchase shares of United Trust Group, Inc. under the plan. An election to purchase shares will not be valid unless the employee/director meets the eligibility requirements to participate in the plan and, prior to the end of the offering period, (1) the employee/director delivers to United Trust Group, Inc. a signed, completed subscription agreement, in the form attached as Exhibit A, together with payment in full of the purchase price of the shares, and (2) the employee/director signs and delivers to United Trust Group, Inc. a stock restriction agreement, in the form attached as Exhibit B. Limit on number of shares that may be purchased annually. The board of directors of United Trust Group, Inc. shall have discretion to determine the number of shares to be offered in any annual offering subject to the limitations in this plan and to determine the number of shares, if any, to be offered to each director or eligible employee in an annual offering under the plan. No fractional shares will be issued, and any fractions will be rounded down to the next whole number. Closing of annual offering. The closing of an annual offering will occur within [5] business days following the end of the annual offering period. At that time, certificates representing the shares purchased by a participating employee in an annual offering will be issued, in the name of the participating employee, and, if there has been an oversubscription, any excess funds received will be returned, by check, to participating employees (without interest). Timing of annual offerings. The board of directors of United Trust Group, Inc. will determine if and when annual offerings of shares under the plan will be made. Price of shares in an annual offering. The price at which shares will be offered in the first annual offering has been arbitrarily set at $12.00 per share. At each annual offering thereafter, the board of directors of United Trust Group, Inc. will fix the price at which shares will be offered under the plan at the time it authorizes the annual offering. In any case, the price at which shares will be offered under the plan will not be less than 100% of the fair market value of shares of United Trust Group, Inc. at the time the offering is authorized by the United Trust Group, Inc. board of directors. Eligibility requirements for participants The board of directors of United Trust Group, Inc. shall have discretion to select the directors and eligible employees who will be extended the opportunity to purchase shares in any annual offering under the plan. Only individual employees of United Trust Group, Inc. or its subsidiaries who either (1) serve as directors of United Trust Group, Inc. or its subsidiaries or (2) have been employed full-time by United Trust Group, Inc. or its subsidiaries for at least 1 year at the time of an offering of shares under the plan are eligible to participate and purchase shares in that offering under the plan. Any person serving as a director of United Trust Group, Inc. or any of its subsidiaries at the time of an offering of shares under the plan is eligible to participate and purchase shares in that offering under the plan. The board of directors of United Trust Group, Inc. may refuse to issue any shares to a person if it determines, in good faith, that the foregoing eligibility requirement was not met either during the annual offering period and at the time of the closing of the offering. Independent contractors and other individuals who are not employees or directors are not eligible to participate in the plan. The employment relationship will be treated as continuing intact while an employee is on sick leave or other bona fide leave of absence for a period not to exceed 90 days. Where the period of leave exceeds 90 days, the employment relationship will be deemed terminated on the 91st day of such leave. The opportunity to participate in the plan is personal to eligible employees and directors selected by the board of directors. No right with regard to participation in the plan or right to purchase and receive shares of United Trust Group, Inc. under the plan may be assigned, transferred, pledged or otherwise disposed of in any way by a participating employee or director. Any such attempted assignment, transfer, pledge, or other disposition will be without effect. An eligible employee's or director's right to purchase shares under the plan may be exercised only during the employee's or director's lifetime. A participating employee or director will have no interest in, or rights to, any shares under the plan until the certificate represented shares purchased by that participating employee has been issued. Who administers the plan The plan is administered by the board of directors of United Trust Group, Inc. The board of directors of United Trust Group, Inc. has full power and authority to construe, interpret and administer the plan and may adopt rules and regulations for carrying out the plan. The board of directors may make arrangements for individuals or organizations to assist in the administration of the plan. Decisions made by the board of directors of United Trust Group, Inc. in the administration of the plan are final and binding absent manifest error. Conditions of the plan It is a condition of any offer of shares under this plan that the offer and sale of the shares are either exempt from the registration requirements imposed under the Securities Act of 1933 and applicable state securities laws or are duly registered in compliance with such registration requirements, and will be administered accordingly. United Trust Group, Inc. will not be obligated to offer or issue any shares under this plan if it determines, in good faith, that the offering or issuance of such sale violates any law. Until the shareholders of United Trust Group, Inc. approve the participation of directors in the plan, directors of United Trust Group, Inc. will not be entitled to participate in the plan, or in any offering under the plan, unless they are otherwise entitled to participate in the plan as eligible employees of United Trust Group, Inc. and its subsidiaries. Transfer restrictions Shares issued under the Plan shall be subject to the restrictions on transferability contained in the stock restriction agreement and applicable restrictions under federal and state securities laws. Amendment and termination of the plan The plan may be amended or terminated by the board of directors of United Trust Group, Inc. at any time. Construction of plan This plan shall be governed by the laws of Illinois. No provision of this plan shall be construed as giving any person any right he would not otherwise have to become or remain an employee of United Trust Group, Inc. or any of its subsidiaries or any other right not expressly created by such provision. No provision of this plan shall be construed as requiring Jesse Correll or any of his associates or affiliates to acquire or retain ownership of shares of United Trust Group, Inc., or restrict in any way the issuance of shares of United Trust Group, Inc. or the transfer of ownership or control of shares of any of United Trust Group, Inc. or any of its subsidiaries. This plan is not intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. Date approved by the board of directors of United Trust Group, Inc. : March 26, 2002 Date approved by the shareholders of United Trust Group, Inc.:__________________ UNITED TRUST GROUP, INC. _____________________________ Theodore C. Miller, Secretary Appendix B May 13, 2002 [Letterhead of United Trust Group, Inc] Dear Shareholders: The 2002 Annual Meeting of Shareholders of United Trust Group, Inc. will be held at the corporate headquarters, 5250 South Sixth Street, Springfield, Illinois 62703, on June 11, 2002, at 10:00a.m. At the meeting, shareholders will act to elect nine directors, to consider and vote upon approving the United Trust Group, Inc. Employee and Director Stock Purchase Plan, and to vote upon such other business as may properly come before the meeting. Your vote is important. Whether or not you plan to attend the meeting, please review the enclosed proxy statement, complete the proxy form below and return it promptly in the envelope provided. It is important to keep your stock portfolio current. Registrations should be kept up-to-date. Remember to notify the Company of a change in address. Our stock transfer department is available to assist you with these and other shareholder questions. Sincerely, Theodore C. Miller Corporate Secretary APPENDIX TO PROXY STATEMENT PROXY CARD Fold and Tear Here Fold and Tear Here - -------------------------------------------------------------------------------- PROXY FORM PROXY Form UNITED TRUST GROUP, INC. Annual Meeting of Shareholders - To be Held June 11, 2002 THE BOARD OF DIRECTORS SOLICITES THIS PROXY The undersigned hereby appoints Jesse T. Correll and Randall L. Attkisson, or either of them, the attorneys and proxies with full power of substitution and revocation to represent and to vote, as designated below, all the shares of common stock of the Company held of record by the undersigned on April 19, 2002, at the annual meeting of shareholders to be held at the corporate headquarters, 5250 South Sixth Street, Springfield, Illinois 62703, on June 11, 2002 at 10:00 a.m., or any adjournment thereof. This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS PRESENTED. Please sign exactly as your name appears on the form and date and mail the proxy promptly. When signing as an attorney, executor, administrator, trustee or guardian, please give your full title a such. If shares are held jointly, both owners must sign. If a corporation, please sign in full corporate name by President and other authorized officer. If a partnership, please sign in partnership name by authorized person. Continued and to be voted and signed on the reverse Our Stock Transfer Department is available to assist you with changes or questions concerning your account. Lost Certificate - Notification of a lost stock certificate must be made in writing. Address Changes - Notification of shareholder address changes must be made in writing. If your address has changed or should change in the future, please give us your new address below. Your name ____________________________________________________________________ (Old Address) - Street _______________________________________________________ City _____________________________ State ___________________ Zip ____________ (New Address)- Street ________________________________________________________ City _____________________________ State ___________________ Zip ____________ Date new address in effect ________________ Signature ________________________ Registration Changes - A change in certification registration is needed because of: __ Marriage __ Divorce __ Death of a tenant __ Establishment of a trust __ Remove custodian __ Other - Explain ______________________ For instructions about your specific situation, contact our Stock Transfer Department by phone at (217)241-6410 or by writing to United Trust Group, Inc., Attn: Stock Transfer Department, P.O. Box 5147, Springfield, IL 62705-5147 Signature _________________________________ Date _______________________ 1. To elect all Director Nominees to serve on the Board of Directors. The nominees are: John S. Albin, Randall L. Attkisson, Jesse T. Correll, Ward F. Correll, Thomas F. Darden II, Millard V. Oakley, William W. Perry, James P. Rousey, and Robert W. Teater Withhold For All For Authority Except* ___ ___ ___ *Exceptions: To vote for all directors nominees, mark the “For” box. To withhold voting for all nominees, mark the “Withhold Authority” box. To withhold voting for a particular nominee, mark the “For All Except” box and enter name(s) of the exception(s) in the space provided. Your shares will be voted for the remaining nominees. ___________________________________________________________________________ 2. Proposal to approve and adopt the United Trust Group, Inc. Employee and Director Stock Purchase Plan. ___ FOR ___ AGAINST ___ ABSTAIN 3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof. UTG Signature _____________________________ Date ______________________ Signature _____________________________ Date ______________________