SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ]
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 240.14a-11(c) or
240.14a-12
Financial Industries Corporation
(Name of Registrant as Specified in Its Charter)
Financial Industries Corporation
(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and O-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 O-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:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule O-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:
Financial Industries Corporation
Austin Centre, 701 Brazos
Austin, Texas 78701
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders of
Financial Industries Corporation, which will be held at the
Austin Centre, 701 Brazos, Austin, Texas 78701 on May 21, 1996,
at 11:00 a.m. local time. For those of you who cannot be present
at this meeting, we urge that you participate by indicating your
choices on the enclosed proxy and completing and returning it to
us in the enclosed postage paid envelope at your earliest
convenience. By returning your proxy promptly, you will assist
us in reducing the Company's expenses relating to the meeting.
You can revoke your signed proxy at any time before it is used.
We appreciate your support and cooperation in returning the
enclosed proxy.
Cordially,
Roy F. Mitte
Chairman, President and Chief
Executive Officer
Financial Industries Corporation
Austin Centre, 701 Brazos
Austin, Texas 78701
NOTICE OF ANNUAL MEETING
TO BE HELD MAY 21, 1996
Notice is hereby given that the 1996 Annual Meeting of
Shareholders of Financial Industries Corporation is scheduled to
be held at the Austin Centre, 701 Brazos, Austin, Texas 78701 on
May 21, 1996, 11:00 a.m., local time, for the following purposes:
1. The election of eleven Directors for the ensuing year.
2. Such other business that may properly come before the
meeting or any adjournment thereof.
Only those Shareholders of record at the close of business on
March 29, 1996 (the "Record Date") will be entitled to notice of
and vote at the meeting or any adjournment thereof.
The Proxy Statement accompanies this notice.
April 19, 1996
By Order of the Board of Directors
James M. Grace
Secretary
YOUR VOTE IS IMPORTANT
We hope that you will be able to attend the meeting in person.
IF YOU DO NOT EXPECT TO ATTEND IN PERSON, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND MAIL IT PROMPTLY in the enclosed envelope
for which no postage is necessary if mailed in the United States.
It will assist us in reducing the expenses of the Annual Meeting
if Shareholders who do not attend in person return the signed
proxy promptly. You may revoke your proxy at any time before it
is voted.
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
OF
Financial Industries Corporation
Austin Centre 701 Brazos Austin, Texas 78701
This Proxy is furnished in connection with the solicitation
of proxies by the Board of Directors of Financial Industries
Corporation (FIC or the Company) for use at the Annual Meeting of
Shareholders to be held May 21, 1996, at the Austin Centre, 701
Brazos, Austin, Texas 78701. Solicitation of proxies may be made
by mail and telephone and the expenses will be borne by FIC. The
Company intends to reimburse broker-dealers and others for
forwarding the proxy materials to beneficial owners of the FIC's
Common Stock. The approximate date on which this Proxy Statement
and the enclosed Form of Proxy will be sent or given to
Shareholders is April 19, 1996.
A copy of FIC's Annual Report to Shareholders for the year
ended December 31, 1995, including financial statements, has either
been previously forwarded to Shareholders or is included with
this Proxy Statement.
A copy of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K, including Financial Statements
and Financial Statement Schedules, may be obtained by
Shareholders without charge upon the receipt of a written request
addressed to Robert S. Cox, Financial Industries Corporation,
Austin Centre, 701 Brazos, Austin, Texas 78701.
Only Shareholders of record on the books of FIC at the close
of business on March 29, 1996, will be entitled to vote at the
Annual Meeting. At the close of business on such date, there
were outstanding and entitled to vote 1,085,593 shares of Common
Stock. Each shareholder of FIC Common Stock is entitled to one
vote for each share standing in his or her name on the books of
the Company, as of the Record Date, on all business to come
before the meeting. However, in voting for Directors, each
Shareholder may cumulate votes for the election of Directors for
those candidates whose names have been placed in nomination; that
is, each Shareholder may cast as many votes as there are
Directors to be elected multiplied by the number of shares then
registered in his or her name and to cast all such votes for one
candidate or distribute such votes among the nominees for
Director in accordance with the Shareholder's choice. Each share
will be entitled to eleven(11) votes on a cumulative basis in
voting for Directors. The right to vote cumulatively may be
exercised only in the event that a Shareholder gives written
notice of his decision to vote cumulatively to the Secretary of
FIC on or before the day preceding the Annual Meeting. If any
Shareholder complies with that written notice requirement, all
Shareholders may cumulate their votes. FIC's management does
not intend to request cumulative voting of their shares and is
not aware of an intention by any Shareholder to do so. However,
should any Shareholder elect to vote cumulatively, the person
authorized to vote shares represented by executed proxies, if
authority to vote for the election of Directors is not withheld,
will have full discretion and authority to vote cumulatively and
to allocate votes among any or all of the Board of Directors'
nominees as they may determine or, if authority to vote for a
specific candidate or candidates has been withheld, among those
nominees for whom authority to vote has not been withheld.
The proxy solicited by this Proxy Statement is revokable at
any time prior to the exercise thereof at the meeting by written
notice submitted to James M. Grace, Secretary, Financial
Industries Corporation, Austin Centre, 701 Brazos, Austin, Texas
78701 or by delivery of a subsequent proxy. All shares
represented by executed and unrevoked proxies will be voted in
accordance with instructions contained therein. Proxies
submitted without specification will be voted to elect the
nominees for Directors named herein.
ELECTION OF DIRECTORS
The following eleven nominees are proposed for election as
Directors to serve until the next Annual Meeting of Shareholders
or until their successors are elected and qualified. All
nominees are now Directors of the Company. Proxies solicited by
the Board of Directors will be voted in favor of the election of
these nominees unless authorization to do so is withheld in the
proxy. If any nominee for election as Director is unable or
unwilling to serve, which the Board of Directors does not
anticipate, the persons acting under the proxy will vote for such
other person as management may recommend. An affirmative vote by
a majority of those shares constituting at least a quorum at the
Annual Meeting of Shareholders is required for the election of
Directors. The Board of Directors recommends a vote "FOR" each
of the nominees.
The names and ages of the nominees, their principal
occupations or employment during the past five years and other
data regarding them are set forth on the following pages. The
data supplied below is based on information provided by the
nominees, except to the extent that such data is known to the
Company.
Principal Occupation and Other Director
Name Age Information Since
John D. 53 Vice President, Investments of 1991
Barnett Prudential Securities since 1983.
Joseph F. 57 Vice President and Director of FIC 1992
Crowe, FSA since February 1992. Vice President
and Director of InterContinental
Life Corporation (ILCO) since May
1991. Executive Vice President and
Director of Investors Life Insurance
Company of North America and
InterContinental Life Insurance
Company since June 1991. Executive
Vice President and Director of
Family Life Insurance Company since
June 1991 and Investors Life
Insurance Company of Indiana since
February 1995. From 1986 to March
1991, Executive Vice President of
Personal Financial Security Division
of Aetna Life & Casualty Company.
Jeffrey H. 43 Senior Vice President and Director 1995
Demgen of Investors Life Insurance Company
of North America from October 1992
to June 1995 and Family Life
Insurance Company since October
1992. Senior Vice President of
Intercontinental Life Insurance
Company from October 1992 to June
1995. Senior Vice President of
United Insurance Company of America,
Chicago, Illinois from 1984 to July
1992.
James M. 52 Vice President, Secretary, Treasurer 1976
Grace, CPA and Director of FIC since 1976.
Director since 1984 and Vice
President and Treasurer since 1985
of ILCO. Executive Vice President,
Treasurer and Director of
InterContinental Life Insurance
Company and Investors Life Insurance
Company of North America since 1989,
Family Life Insurance Company since
June 1991 and Investors Life
Insurance Company of Indiana since
February 1995.
Roger H. Hamm 51 Executive Vice President and 1995
Director of Investors Life Insurance
Company of Indiana, Investors Life
Insurance Company of North America
and Family Life Insurance Company
since August 1995. Vice President
and Director of FIC and ILCO since
September 1995. Executive Vice
President of InterContinental Life
Insurance Company since August 1995.
Vice President of Aetna Life &
Casualty Company from 1972 to 1995.
Roy F. Mitte 64 Chairman of the Board, President and 1976
Chief Executive Officer of FIC since
1976. Chairman of the Board,
President and Chief Executive
Officer of ILCO and InterContinental
Life Insurance Company since 1985.
Chairman of the Board, President and
Chief Executive Officer of Investors
Life Insurance Company of North
America since 1988, Family Life
Insurance Company since June 1991
and Investors Life Insurance Company
of Indiana since February 1995.
Chairman, ILG Securities Corporation
since 1988.
Dale E. Mitte 61 Senior Vice President since January 1994
1993 and Vice President, Chief
Underwriter and Director since 1988
of Investors Life Insurance Company
of North America and
InterContinental Life Insurance
Company. Senior Vice President
since January 1993, Director from
June 1991 to April 1992 and Vice
President and Chief Underwriter
since June 1991 of Family Life
Insurance Company. Director, Senior
Vice President and Chief Underwriter
of Investors Life Insurance Company
of Indiana since June 1995.
Leonard A. 53 President, Leonard Nadler 1994
Nadler Associates, Inc., a commercial real
estate brokerage company located in
Los Angeles, California, for more
than the last five years.
Frank Parker 66 President, Gateway Tugs, Inc. and 1994
Par-Tex Marine, Inc., both of which
are located in Brownsville, Texas
and are engaged in operating and
chartering harbor and intracoastal
tug boats, for more than the last
five years.
Eugene E. 53 Vice President and Director of FIC 1992
Payne, Ph.D. since February 1992. Vice President
of ILCO since 1988 and Secretary and
Director of ILCO since 1989.
Executive Vice President and
Director since 1988 and Secretary
since 1989 of Investors Life
Insurance Company of North America.
Executive Vice President since 1988
and Secretary and Director since
1989 of InterContinental Life
Insurance Company. Executive Vice
President, Secretary and Director of
Family Life Insurance Company since
June 1991 and Investors Life
Insurance Company of Indiana since
February 1995.
Robert F. 52 General Counsel and Vice President 1992
Spears, Esq. of FIC and Director of Family Life
Insurance Company since June 1991.
Partner of the law firm of Locke
Purnell Rain Harrell in Dallas,
Texas for more than five years prior
to June 1991.
Mr. Nadler and his wife were general partners of a single-
asset partnership that owned The Palmilla Apartments, a 26-unit
apartment complex in Hollywood, California. In March 1992, a
receiver for that property was appointed by stipulation of the
parties in connection with the conveyance of that property to the
mortgagee. The receiver was discharged by stipulation of the
parties in September 1992.
All of the nominees named above were elected Directors at
the 1995 Annual Shareholders' Meeting, except Mr. Hamm, who was
appointed a Director by the Board of Directors on September 22,
1995.
EXECUTIVE OFFICERS
The following table sets forth the names and ages of the
persons who served as the Company's executive officers during
1994 together with all positions and offices held by them with
the Company. Officers are elected to serve at the will of the
Board of Directors or until their successors have been elected
and qualified.
Name Age Positions and Offices
Roy F. Mitte 64 Chairman of the Board, President
and Chief Executive Officer
James M. Grace 52 Vice President, Secretary and
Treasury
Eugene E. Payne 53 Vice President
Joseph F. Crowe 57 Vice President
Roger Hamm 51 Vice President
In May 1991, Roy F. Mitte suffered a stroke, resulting in
partial paralysis affecting his speech and mobility. Mr. Mitte
continues to make the requisite decisions in his capacity as
Chief Executive Officer, although his ability to communicate and
his mobility are impaired.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's
equity securities, to file reports of beneficial ownership on
Form 3 and changes in beneficial ownership on Forms 4 and 5 with
the Securities and Exchange Commission. Officers, directors and
greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished
to the Company, or written representatives that no Forms 5 were
required, the Company believes that during the period from
January 1, 1995 through December 31, 1995, all Section 16(a)
filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to each
person who is known by the Company to be the beneficial owner of
five percent (5%) or more of the outstanding shares of Common
Stock of the Company as of March 19, 1996.
Amount & Nature of Percent of
Name and Address Beneficial Ownership Class
Roy F. Mitte, Chairman
of the Board, President
and Chief Executive
Officer
Austin Centre
701 Brazos
Austin, Texas 78701..... 373,304 (1) 34.39%(1)
InterContinental Life
Corporation
Austin Centre
701 Brazos
Austin, Texas 78701..... 145,423 (2) 12.19%(3)
Investors Life Insurance
Company of North America
Austin Centre
701 Brazos
Austin, Texas 78701..... 145,423 (2) 12.19%(3)
(1) These shares are beneficially owned by Mr. Mitte and held
jointly with his wife, Joann C. Mitte.
(2) Of such shares, 29,100 shares are owned by Investors Life
Insurance Company of North America ("Investors-NA"), 8,850 shares
are owned by Intercontinental Life Insurance Company ("ILIC"),
and 107,473 shares are issuable upon exercise of an option held
by Investors-NA. Investors-NA is a direct subsidiary of ILCO.
ILIC is a direct subsidiary of Investors-NA.
(3) Assumes that outstanding stock options or warrants held by
other persons have not been exercised.
The following table contains information as of March 19,
1996 as to the Common Stock of the Company beneficially owned by
each Director, nominee and executive officer and by all executive
officers, nominees and directors of the Company as a group.
Messrs. Barnett, Crowe, Demgen, Hamm, Parker, Payne and Spears
did not beneficially own any shares of FIC as of March 19, 1996.
The information contained in the table has been obtained by the
Company from each Director, nominee and executive officer except
for information known to the Company. Except as indicated in the
notes to the table, each beneficial owner has sole voting power
and sole investment power as to the shares listed opposite his
name.
Amount & Nature of
Name Beneficial Ownership Percent of Class
Roy F. Mitte 373,304 (1) (2) 34.39%
James M. Grace 1,120 (2) *
Dale E. Mitte 400 *
Leonard A. Nadler 333 *
All Executive
Officers, Nominees
and Directors as
a Group (10
persons) 375,157 (1) (2) 34.56%
(1) These shares are beneficially owned by Mr. Mitte and are
held jointly with his wife Joann C. Mitte.
(2) No executive officer or director holds any options to
acquire FIC common stock. Messrs. Roy Mitte, Grace, Hamm, Payne,
and Crowe are officers and/or directors of ILCO and beneficially
owned approximately 67% of the outstanding shares of ILCO common
stock as of March 19, 1996. Since FIC beneficially owns 62% of
ILCO Common Stock, Mr. Roy Mitte's personal holdings are combined
with FIC's holdings in determining the percentage of ILCO Common
Stock beneficially owned by Mr. Mitte. ILCO beneficially owned
145,423 shares of FIC common stock (12.19% of the outstanding
shares) as of March 19, 1996.
* Less than 1%.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table sets forth information concerning the
compensation of the Company's Chief Executive Officer and each of
the four other persons who were serving as executive officers of
the Company at the end of 1995 and received cash compensation
exceeding $100,000 during 1995.
Annual Compensation
Name and Prinicpal All Other
Position Year Salary(1) Bonus(1) Other(2) Compensation
Roy F. Mitte,
Chairman of the
Board, President
and Chief Executive 1995 $503,500 -0- -0- $1,120,513(4)
Officer 1994 503,500 $1,076,159(3) -0- 1,376,663(5)
1993 503,500 -0- -0- 3,237,120(6)
James M. Grace, Vice
President,
Secretary and 1995 195,000 10,000 -0- -0-
Treasurer 1994 195,000 2,500 -0- -0-
1993 195,000 5,000 -0- -0-
Eugene E. Payne,
Vice President 1995 195,000 10,000 -0- -0-
1994 195,000 5,000 -0- -0-
1993 195,000 -0- -0- -0-
Joseph F. Crowe,
Vice President 1995 195,000 10,000 -0- -0-
1994 195,000 5,500 -0- -0-
1993 195,000 3,000 -0- -0-
Roger H. Hamm (7) 1995 63,308 -0- 175,371(8) -0-
(1) The salaries and bonuses set forth in the table were paid by
ILCO, except that $216,857 of Mr. Mitte'e salary in 1995,
$251,700 of Mr. Mitte's salary and $538,080 of his bonus in 1994
and $251,750 of Mr. Mitte's salary in 1993 were paid directly to
him by Family Life. The executive officers of FIC have also been
executive officers of Family Life, the insurance subsidiary of
FIC, and ILCO and its insurance subsidiaries. Family Life
reimbursed ILCO (or, in the case of Mr. Mitte, paid Mr. Mitte
directly) the following amounts as Family Life's share of the
executive officers' cash compensation for 1993, 1994 and 1995:
$251,750, $789,830 and $216,857, respectively, for Mr. Mitte;
$55,750, $70,590 and $88,293, respectively, for Mr. Grace;
$91,650, $126,750 and $79,875, repectively, for Dr. Payne;
$55,350, $68,250 and $88,293, respectively, for Mr. Crowe; and
$109,205 (1995 only) for Mr. Hamm.
(2) Does not include the value of perquisites and other personal
benefits because the aggregate amount of any such compensation
does not exceed the lesser of $50,000 or 10 percent of the total
amount of annual salary and bonus for any named individual.
(3) ILCO's Compensation Committee made a recommendation to
ILCO's Board of Directors, which the Board adopted, that a bonus
be paid to Mr. Mitte to enable him to pay off the $650,000 loan
that ILCO had made to Mr. Mitte in 1989 and to reimburse him for
the amount of federal income tax payable on the bonus. Since
ILCO and FIC have usually each paid one-half of Mr. Mitte's cash
compensation, FIC's Board of Directors, acting on the
recommendation of its Compensation Committee, subsequently
authorized FIC to pay $500,000 of that bonus to Mr. Mitte.
Therefore, FIC paid $500,000, and ILCO paid $576,159, of the
bonus.
(4) In 1989, ILCO's Board of Directors granted Mr. Mitte options
to purchase 600,000 shares of ILCO's Common Stock. In October
1992, Mr. Mitte surrendered to ILCO for cancellation options to
purchase 120,000 shares. ILCO and Mr. Mitte entered into a
contract in 1993 providing for the cancellation of 240,000
options for an aggregate amount of $3,237,120 in 1993 and the
cancellation in subsequent years of the remaining options for an
aggregate amount of $3,610,240. In addition, the Company agreed
to pay Mr. Mitte the amount necessary to ensure that Mr. Mitte
will receive the same amount, after federal income tax, that he
would have received if the options had been cancelled in 1992.
During 1995, Mr. Mitte was paid $836,582 for cancellation in 1995
of options to purchase 50,000 shares of ILCO's Common Stock,
$156,323 for the federal income tax reimbursement relating to
the cancelation in 1994 of options to purchase 68,500 shares and
$127,608 as the final payment relating to the cancellation in
1993 of options to purchase 240,000 shares. These option
cancellation payments were made pursuant to the contact referred
to above. FIC's Compensation Committee made a recommendation to
FIC's Board of Directors, which it adopted, that, in lieu of
paying Mr. Mitte a bonus as it has in the past, FIC pay $407,000
of these option cancellation payments to Mr. Mitte, with the
balance of $713,513 being paid by ILCO.
(5) During 1994, ILCO paid Mr. Mitte $997,520 for the
cancellation in 1994 of options to purchase 68,500 shares of
ILCO's Common Stock and $379,143 for the federal income tax
reimbursement relating to the cancellation in 1993 of options to
purchase 240,000 shares. Both of these payments were made
pursuant to the contract referred to in footnote (4).
(6) ILCO paid this amount in 1993 to Mr. Mitte for the
cancellation of options to purchase 240,000 shares of ILCO's
Common Stock pursuant to the contract referred to in footnote
(4).
(7) Mr. Hamm became an executive officer of FIC and ILCO in
August 1995.
(8) This amount was paid as relocation assistance by the Company
to Mr. Hamm in connection with his relocation from Connecticut to
Austin, Texas.
Directors' Compensation
Directors who are not officers or employees of the Company
are paid a $5,000 annual fee, and are compensated $1,000 for each
regular or special meeting of the Board of Directors which they
attend in person.
Members of Compensation Committee
The Compensation Committee makes recommendations to the
Board of Directors with respect to the Chief Executive Officer's
compensation. The members of the Compensation Committee are John
D. Barnett, Leonard A. Nadler and Frank Parker.
Compensation Committee Interlocks and Insider Participation
Roy F. Mitte determines the compensation of all executive
officers of the Company, other than the Chief Executive Officer.
Mr. Mitte is the Chairman of the Board, President and Chief
Executive Officer of the Company and ILCO. He also determines
the compensation of all executive officers of ILCO, other than
the Chief Executive Officer.
Reports on Executive Compensation
The following reports and the performance graph following
those reports shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or
under the Securities Exchange Act of 1934, except to the extent
that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such
Acts.
Chief Executive Officer's Report
The following report is made by the Chief Executive Officer
with respect to compensation policies applicable to the Company's
executive officers, other than the Chief Executive Officer.
The goal of the Company's executive compensation policies is
to ensure that an appropriate relationship exists between
executive pay and the creation of shareholder value, while at the
same time motivating and retaining senior managers. Executive
compensation is based on several factors, including corporate
performance. While sales, earnings, return on equity and other
performance measures are considered in making annual executive
compensation decisions, no formulas, pre-established target
levels or minimum performance thresholds are used. Each
executive officer's individual initiatives and achievements and
the performance of the operations directed by the executive are
integral factors utilized in determining that officer's
compensation.
Since the executive officers of the Company are also
executive officers of ILCO, they receive cash compensation from
the Company and ILCO. In addition, since a significant portion
of the Company's net income is derived from its equity in ILCO's
net income, the executive officers of both companies are provided
long-term equity-based compensation in the form of ILCO stock
options and interests in ILCO's Employee Stock Ownership Plan
("ESOP"). They also participate in medical and pension plans
that are generally available to employees of the Company and
ILCO. The objectives of the stock option plans and the ESOP are
to create a strong link between executive compensation and
shareholders return and enable senior managers to develop and
retain a significant and long-term equity investment.
Under ILCO's Incentive Stock Option Plan, options to
purchase shares of ILCO's Common Stock at 100% of fair market
value on the date of grant have been granted to executive
officers and other key employees. At December 31, 1995, options
to acquire 81,500 shares were outstanding, of which options to
purchase 80,000 shares are held by executive officers of the
Company and ILCO. Under ILCO's Non-Qualified Stock Option Plan,
options to buy ILCO's Common Stock at 100% of the fair market
value on the date of grant but in no event less that $3.33 per
share can be granted to officers, directors, agents and others.
At December 31, 1995, options to purchase 312,000 shares were
outstanding, of which options to buy 162,000 shares were held by
executive officers of the Company and ILCO. ILCO's Board of
Directors administers both plans. Options were granted in 1988,
1991 and 1995. No options were granted in 1992, 1993 or 1994,
and no further options can be granted under the Incentive Stock
Option Plan.
ILCO's ESOP is a noncontributory employee benefit plan
available to all employees who have completed one year of
service. Allocations of ILCO's contributions are made to
participants in accordance with their compensation. Vesting of
participants in their accounts occurs in annual installments over
a period of approximately ten years. The assets of the ESOP
consist of 379,738 shares of ILCO's Common Stock, of which 40,767
shares are allocated to the accounts of executive officers of the
Company and ILCO and 273,165 shares are allocated to the other
participants.
The Company and ILCO provide medical and pension benefits to
their executive officers that are generally available to
employees. In addition, executive officers of the Company and
ILCO may participate in ILCO's Savings and Investment Plan (401K
Plan). Although ILCO does not make contributions to the plan,
eligible employees may make contributions to the plan on a tax-
deferred basis.
The foregoing report has been furnished by Roy F. Mitte.
Compensation Committee's Report
The Compensation Committee of the Board of Directors makes a
recommendation to the Board of Directors each year with respect
to the Chief Executive Officer's compensation for that year. The
Committee's recommendation regarding the Chief Executive
Officer's 1995 compensation was made to and adopted by the Board
on June 10, 1995. In addition, on September 22, 1995, the
Committee made a recommendation to the Board of Directors, which
it adopted, that the Company pay additional compensation of
$407,000 in 1995 to the Chief Executive Officer.
The compensation policies and practices of the Compensation
Committee are subjective and are not based upon specific
criteria. The Committee did consider the Company's overall
financial performance and its continuing progress in expense
management, maintenance of a high quality investment portfolio
and marketing of insurance products designed to generate an
acceptable level of profitability. The Committee recognized the
Chief Executive Officer's leadership role in the Company's
performance and his ability to select, recruit and motivate
qualified people to implement the Company's policies that have
contributed to that performance. Although the Committee believed
that an increase in the Chief Executive Officer's annual base
compensation in 1995 would have been justified, it accepted his
request that his annual base compensation for 1995 remain the
same as it was in 1994.
Since the Chief Executive Officer's 1995 compensation is not
based on any particular measures of the Company's performance,
such as sales, earnings or return on equity, there is no specific
discussion in this report of the relationship of the Company's
performance to the Chief Executive Officer's compensation for
1995.
Nevertheless, the Committee does believe that it is
noteworthy that the Company reduced its bank debt to $6.765
million during 1995, the net income of ILCO, in which the Company
has a 47% interest, increased to $10.7 million in 1995 from $9.9
million in 1994, and the Company's net income for 1995 was
$10,017,000 ($9.04 per share) compared to net income in 1994 of
$9,954,000 ($9.00 per share).
The foregoing report is submitted by John D. Barnett,
Leonard A. Nadler and Frank Parker, the members of the
Compensation Committee.
Performance Graph
The graph and table below compare the cumulative total
shareholder return on the Company's Common Stock for the last
five calendar years with the cumulative total return on The
Nasdaq Stock Market (US) and an index of stocks of life insurance
companies traded on Nasdaq over the same period (assuming the
investment on December 31, 1990 of $100 in the Company's Common
Stock, The Nasdaq Stock Market (US) and an index of stocks of
life insurance companies traded on Nasdaq and the reinvestment of
all dividends).
[The graph that appears in the paper version of this proxy
statement presents the information set forth in the table
below.]
12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95
The Company (1) $100 $346 $535 $410 $299 $367
The Nasdaq Stock
Market (US) $100 $161 $187 $215 $210 $297
Index of Nasdaq Life
Stocks(2) $100 $139 $192 $230 $199 $298
(1) The dollar amounts for the Company's Common Stock are based
on the closing bid prices on Nasdaq on the dates indicated.
(2) The Index of Nasdaq Life Insurance Stocks is comprised of
life insurance companies whose stocks were traded on Nasdaq
during the last five calendar years (56 issues traded during
that period, of which 30 issues were traded on December 29,
1995). These peer companies were selected by the Company on a
line-of-business basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The obligations of ILCO under the ILCO Senior Loan are
guaranteed by FIC. FIC presently owns 1,966,346 shares of ILCO
Common Stock, constituting 47.03% of such shares outstanding, and
holds options to acquire an additional 1,702,155 shares at the
average bid price of such shares during the six-month period
preceding the date of any such purchase. In the event that such
options were to be fully exercised, the total number of ILCO's
shares owned by FIC would constitute 62.35% of ILCO's outstanding
Common Stock.
Roy F. Mitte serves as Chairman, President and Chief
Executive Officer of both FIC and ILCO. James M. Grace serves as
Vice President, Treasurer and Director of both companies and
Secretary of FIC, and Messrs. Payne and Crowe serve as Vice
Presidents and Directors of both companies. Mr. Roy F. Mitte
holds beneficial ownership of 34.39% of the outstanding shares of
the Company (see "Security Ownership of Certain Beneficial
Owners"). Mr. Mitte was granted an option to purchase 600,000
shares of the common stock of ILCO (as adjusted to reflect a
three-for-one split in February 1990) on May 8, 1989 in equal
annual installments of 150,000 shares each. Each installment was
subject to the approval of the Board of Directors, and would be
exercisable for a period of ten years from the date of grant at a
price of $1.00 per share (as adjusted). The Board of Directors
voted to award installments of 150,000 shares in each of 1989,
1990, 1991 and 1992. In October 1992, Mr. Mitte surrendered to
ILCO for cancellation options to purchase 120,000 shares. ILCO
and Mr. Mitte entered into an agreement in 1993 providing for the
cancellation of the remaining options to purchase 480,000 shares.
See "Compensation of Executive Officers and Directors."
In May, 1989, the Board of Directors of ILCO granted Roy F.
Mitte the right to borrow up to $650,000 from ILCO to be used
solely for the purchase of FIC common stock pursuant to Mr.
Mitte's then existing options. A principal purpose or said loan
was to enable Mr. Mitte to maintain his equity position in FIC,
as required under the terms of the lending agreements entered
into in connection with the purchase of the Investors Life
Companies. Said loan, which was exercised on June 1, 1989,
carried no interest and was repayable in five years. The loan
was paid in full in 1994. See "Compensation of Executive
Officers and Directors."
When it acquired Austin Centre, Investors-NA leased the
hotel to FIC Realty Services, Inc. ("FIC Realty"), a subsidiary
of FIC, pursuant to which FIC Realty pays monthly rent to
Investors-NA in an amount equal to 95% of the net operating
profits of the hotel for the preceding month (excess of all hotel
revenues over all hotel expenses, including insurance, utilities
and property taxes). Any net operating loss for a month is
carried forward and deducted from the net operating profit for
the next month that has such a profit. During 1995, FIC Realty
paid $1,991,356 of rent to Investors-NA pursuant to this lease.
FIC Realty has delegated the management of the hotel to an
unrelated third party pursuant to a management agreement, but FIC
Realty bears most of the economic risks in operating the hotel.
As an inducement to FIC Realty's agreeing to bear those risks,
Investors-NA has agreed to provide funds to pay expenses in
operating the hotel to the extent that the cash flow from such
operations is not sufficient to do so.
Alcoholic beverages had been sold at the hotel by an
unrelated third party pursuant to a lease it had with FIC Realty
until September 30, 1994. Commencing October 1, 1994, all
alcoholic beverages sales have been conducted by Atrium Beverage
Corporation ("Atrium Beverage"), a new subsidiary of FIC Realty.
Atrium Beverage subleases from FIC Realty space in the hotel for
the storage, service and sale of alcoholic beverages pursuant to
which Atrium Beverage pays monthly rent to FIC Realty of $12,500.
The sublease provides that the rent paid during each calendar
year will be reduced to the extent necessary to ensure that
Atrium Beverage's net operating profit from alcoholic beverages
sales is not less than 5% of its gross receipts from such sales.
Atrium Beverage and FIC Realty are also parties to a management
agreement whereby FIC Realty manages Atrium Beverage's alcoholic
beverage operations at the hotel for a monthly fee equal to 28%
of the gross receipts from alcoholic beverage sales. During
1995, Atrium Beverage paid FIC Realty rent and management fees
totalling $319,815. All of that amount was included in the hotel
revenues of FIC Realty for purposes of determining its net
operating profits under the hotel lease agreement with Investors-
NA.
Investors-NA entered into a management agreement in
September 1991 with FIC Property Management, Inc. ("FIC
Management"), a subsidiary of FIC, whereby it appointed FIC
Management to manage, lease and operate the office tower, retail
areas, underground parking garage and common areas of Austin
Centre. FIC Management is paid fees in an amount equal to 5% of
the net operating profit that Investors-NA receives from the
properties managed and leased by FIC Management. During 1995,
Investors-NA paid $130,760 of fees to FIC Management under this
agreement.
As part of the financing arrangement for the acquisition of
Family Life Insurance Company, a $22.5 million loan was made by
Investors-NA to Family Life Corporation, a subsidiary of FIC, and
a $2.5 million loan was made by Investors-NA to FIC. In addition
to the interest provided under those loans, Investors-NA was
granted by FIC non-transferable options to purchase, in the
amounts proportionate to their respective loans, up to a total of
9.9 percent of shares of FIC's common stock at a price of $10.50
per share, equivalent to the then current market price, subject
to adjustment to prevent dilution. The options will expire on
June 12, 1998 if not previously exercised.
On July 30, 1993, Investors-NA loaned $34.5 million to two
subsidiaries of FIC in connection with the prepayment of the
subordinated indebtedness owed by those subsidiaries to the
seller of Family Life Insurance Company.
FIC was reimbursed by ILCO for rental expense and certain
other operating expenses incurred during 1995 on behalf of ILCO.
The amount of such reimbursement was approximately $830,000.
Pursuant to a data processing agreement with a major service
company, the data processing needs of ILCO's and FIC's insurance
subsidiaries were provided at a central location until November
30, 1994. Commencing December 1, 1994, all of those data
processing needs are provided to ILCO's and FIC's Austin, Texas
and Seattle, Washington facilities by FIC Computer Services, Inc.
("FIC Computer"), a new subsidiary of FIC. Each of FIC's and
ILCO's insurance subsidiaries has entered into a data processing
agreement with FIC Computer whereby FIC Computer provides data
processing services to each subsidiary for fees equal to such
subsidiary's proportionate share of FIC Computer's actual costs
of providing those services to all of the subsidiaries. Family
Life paid $779,052 and Investors-NA and ILIC paid $1,655,486 to
FIC Computer for data processing services provided during 1995.
In 1995, Family Life entered into a reinsurance agreement
with Investors-NA pertaining to universal life insurance written
by Family Life. The reinsurance agreement is on a co-insurance
basis and applies to all covered business with effective dates on
and after January 1, 1995. The agreement applies to only that
portion of the face amount of the policy which is less than
$200,000; face amounts of $200,000 or more are reinsured by
Family Life with a third party reinsurer.
BOARD, COMMITTEES AND MEETINGS
FIC's Board of Directors met formally three times during
1995. All Directors attended all of the Board's meetings.
The Board has an Audit Committee which did not have any
formal meetings during 1995. The Board does not have a
Nominating Committee. The Directors serving on the Audit
Committee in 1995 were Messrs. Dale Mitte, Grace, Barnett and
Crowe. The duties of the Audit Committee are to review the
financial statements and the results of the Company's annual
audit with FIC's independent auditors.
The members of the Compensation Committee during 1995 were:
Messrs. Barnett, Nadler and Parker. The Compensation Committee
held two meetings during 1995.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
FIC's accounting firm for the current year is Price
Waterhouse LLP. Representatives of Price Waterhouse LLP are
expected to be available for comment at the Shareholders Meeting
and will be given an opportunity to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
It is contemplated by the management of FIC that the next
Annual Meeting of the Shareholders of FIC will be held on or
about May 20, 1997. Proposals submitted by any security holders
and intended to be included in FIC's Proxy Statement and Form of
Proxy relating to the meeting must by received by the Company at
its principal executive offices no later than December 31, 1996
and must be in compliance with applicable laws and Securities and
Exchange Commission regulations.
ADDITIONAL MATTERS
At the date hereof, there are no other matters which the
Board of Directors intends to present or has reason to believe
others will present at the meeting. However, if any other matter
should be presented, the persons named in the accompanying proxy
will vote according to their best judgment in the interest of FIC
with respect to such matters.
Date: April 19, 1996
By Order of the Board of
Directors
Financial Industries
Corporation
James M. Grace
Secretary
PROXY
FINANCIAL INDUSTRIES CORPORATION
Annual Meeting of Shareholders, May 21, 1996
Roy F. Mitte and James M. Grace, or either of them, each
with the power of substitution, are hereby authorized to
represent and vote the shares of the undersigned, with all the
powers that the undersigned would possess if personally present
at the Annual Meeting of Shareholders of Financial Industries
Corporation to be held on Tuesday, May 21, 1996 or at any
postponements or adjournments thereof, as indicated below.
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed
below (except as
indicated)
[ ] WITHHOLD authority to
vote for all nominees
listed below
If you wish to withhold authority to vote for any individual
nominee, strike a line through that nominee's name in the list
below.
J. Barnett, J. Crowe, J. Demgen, J. Grace, R. Hamm, D. Mitte,
R. Mitte, L. Nadler, F. Parker, E. Payne, R. Spears
2. In their discretion, the proxies are authorized to vote
upon such other matters which may properly come before
the meeting or at any postponements or adjournments
thereof.
(Continued on reverse side)
(Continued from reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTIONS
ARE GIVEN, THIS PROXY WILL CONSTITUTE AUTHORIZATION TO VOTE THE
UNDERSIGNED'S SHARES FOR THE ELECTION OF NOMINEES FOR DIRECTOR
WHOSE NAMES ARE LISTED ON THE REVERSE. It will be voted on other
business matters which may properly be brought before the meeting
in accordance with the best judgment of the proxies.
The Board of Directors recommends a vote "FOR" on all
matters set forth in this proxy.
Please date, sign and return in the
enclosed postage paid envelope.
Dated: , 1996
Signature
Signature
(if held jointly)
In the case of joint or common
ownership, each owner should sign.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FINANCIAL INDUSTRIES CORPORATION
