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):
[ ] $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
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2.) Aggregate number of securities to which
transaction applies:
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transaction computed pursuant to Exchange Act
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filing fee is calculated and state how it was
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[ ] Check box if any part of the fee is offset as
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identify the filing for which the offsetting fee
was paid previously. Identify the previous filing
by registration statement number, or the Form
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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 20, 1997,
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 20, 1997
Notice is hereby given that the 1997 Annual Meeting of
Shareholders of Financial Industries Corporation is scheduled to
be held at the Austin Centre, 701 Brazos, Austin, Texas 78701 on
May 20, 1997, 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 28, 1997 (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 18, 1997
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 20, 1997, 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 18, 1997.
A copy of FIC's Annual Report to Shareholders for the year
ended December 31, 1996, 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 28, 1997, will be entitled to vote at the
Annual Meeting. At the close of business on such date, there
were outstanding and entitled to vote 5,427,965 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 (11) 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.
John D. Barnett Age 54 Director Since 1991
Vice President-Investments, Investment Professionals, Inc. since
August 1996. Vice President-Investments of Prudential Securities
from April 1983 to July 1996.
Joseph F. Crowe, FSA Age 58 Director Since 1992
Vice President of FIC from February 29, 1992 to January 3, 1997,
when he retired from active service with the Company. Director
of FIC since February 29, 1992. Vice President of ILCO from May
1991 to January 1997. Director of ILCO since May 1991.
Executive Vice President of Investors Life Insurance Company of
North America and InterContinental Life Insurance Company from
June 1991 to January 1997. Director of Investors Life Insurance
Company of North America and InterContinental Life Insurance
Company since June 1991. Executive Vice President of Family
Life Insurance Company from June 1991 to January 1997. Director
of Family Life Insurance Company since June 1991. Executive Vice
President of Investors Life Insurance Company of Indiana from
February 1995 to January 1997. Director of Investors Life
Insurance Company of Indiana since February 1995. From December
1986 to March 1991, Executive Vice President of Personal
Financial Security Division of Aetna Life & Casualty Company.
Jeffrey H. Demgen Age 44 Director Since 1995
Director of FIC since May 1995. Vice President of FIC since
August 1996. Vice President and Director of ILCO since August
1996. Director of Family Life Insurance Company since October
1992. Executive Vice President of Family Life Insurance Company
since August 1996. Senior Vice President of Family Life
Insurance Company from October 1992 to August 1996. Executive
Vice President and Director of Investors Life Insurance Company
of North America since August 1996. Senior Vice President and
Director of Investors Life Insurance Company of North America
from October 1992 to June 1995. Executive Vice President of
Intercontinental Life Insurance Company since August 1996.
Senior Vice President of Intercontinental Life Insurance Company
from October 1992 to June 1995. Executive Vice President and
Director of Investors Life Insurance Company of Indiana since
August 1996. Senior Vice President of United Insurance Company
of America, Chicago, Illinois from 1984 to July 1992.
Theodore A. Fleron, Esq. Age 57 Director Since 1996
Vice President and Director of FIC since August 1996. Vice
President and Director of ILCO since May 1991. Assistant
Secretary of ILCO since June 1990. Senior Vice President,
General Counsel, Assistant Secretary and Director of Investors
Life Insurance Company of North America and Intercontinental Life
Insurance Company since July 1992. General Counsel, Assistant
Secretary and Director of Investors Life Insurance Company of
North America and Intercontinental Life Insurance Company from
January 1989 to July 1992. Senior Vice President, General
Counsel, Director and Assistant Secretary of Investors Life
Insurance Company of Indiana since June 1995. Senior Vice
President, General Counsel, Director and Assistant Secretary of
Family Life Insurance Company since August 1996.
James M. Grace, CPA Age 53 Director Since 1976
Vice President, Secretary, Treasurer and Director of FIC since
1976. Vice President and Treasurer of ILCO since January 1985.
Executive Vice President, Treasurer and Director of
InterContinental Life Insurance Company since 1989. Executive
Vice President and Treasurer of Investors Life Insurance Company
of North America since 1989. Executive Vice President, Treasurer
and Director of Family Life Insurance Company since June 1991.
Director, Executive Vice President and Treasurer of Investors
Life Insurance Company of Indiana since February 1995.
Roy F. Mitte Age 65 Director Since 1976
Chairman of the Board, President and Chief Executive Officer of
FIC since 1976. Chairman of the Board, President and Chief
Executive Officer of ILCO and InterContinental Life Insurance
Company since January 1985. President of ILCO since April 1985.
Chairman of the Board, President and Chief Executive Officer of
Investors Life Insurance Company of North America since 1988.
Chairman of the Board, President and Chief Executive Officer of
Family Life Insurance Company since June 1991. Chairman of the
Board, President and Chief Executive Officer of Investors Life
Insurance Company of Indiana since February 1995. Chairman, ILG
Securities Corporation since 1988.
Dale E. Mitte Age 62 Director Since 1994
Senior Vice President since January 1993 and Vice President,
Chief Underwriter and Director since 1988 of Investors Life
Insurance Company of North America and InterContinental Life
Insurance Company. 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. Nadler Age 54 Director Since 1994
Senior Managing Director of Julien J. Studley, Inc. since 1996.
President, Leonard Nadler Associates, Inc., a commercial real
estate brokerage company located in Los Angeles, California, for
more than the last five years.
Frank Parker Age 67 Director Since 1994
President, Gateway Tugs, Inc. and 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. Payne Age 54 Director Since 1992
Vice President and Director of FIC since February 29, 1992. Vice
President of ILCO since December 1988 and Director of ILCO since
May 1989. Executive Vice President, Secretary and Director of
Investors Life Insurance Company of North America since December
1988. Executive Vice President since December 1988 and Director
since 1989 of InterContinental Life Insurance Company. Executive
Vice President, Secretary and Director of Family Life Insurance
Company since June 1991 Director, Executive Vice President and
Secretary of Investors Life Insurance Company of Indiana since
February 1995.
Thomas C. Richmond Age 55 Director Since 1996
Director of FIC since August 1996. Director of ILCO from March
1994 to August 1996. Director from March 1989 to February 1990,
Senior Vice President since January 1993 and Vice President from
March 1989 to January 1993 of Investors Life Insurance Company of
North America and InterContinental Life Insurance Company.
Senior Vice President of Family Life Insurance Company since June
1991. Senior Vice President of Investors Life Insurance Company
of Indiana since June 1995.
All outside Directors serve individually and not as
representatives of their professional affiliations and/or
institutions.
The incumbent directors have been nominated for submission
to vote of the shareholders for reelection at the 1997 annual
shareholders' meeting.
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 names above were elected Directors at
the 1996 Annual Shareholders' Meeting, except Messrs. Fleron and
Richmond, who were appointed as Directors by the Board of
Directors in August, 1996.
EXECUTIVE OFFICERS
The following table sets forth the names and ages of the
persons who currently serve as the Company's executive officers
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 65 Chairman, President and Chief
Executive Officer
James M. Grace 53 Vice President, Secretary and
Treasurer
Eugene E. Payne 54 Vice President
Jeffrey H. Demgen (1) 44 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.
(1) Mr. Demgen was appointed a Vice President of the Company on
August 26, 1996.
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, 1996 through December 31, 1996, all Section 16(a)
filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with,
except as follows: (i) Frank Parker filed a Form 5 in February,
1997, to report the purchase in June, 1996 of 2,000 shares
(10,000 shares as adjusted to reflect the five-for one stock
split effective November 12, 1996) of FIC common stock; and (ii)
Eugene E. Payne filed a Form 5 in February, 1997, to report the
purchase in August, 1996, of 347 shares (1,735 shares as adjusted
to reflect the five-for one stock split effective November 12,
1996) of FIC common stock.
Thomas C. Richmond and Theodore A. Fleron each filed a Form
5 in February, 1997, to report his appointment as a Director of
the Company as of August 26, 1996 and to report no beneficial
ownership of FIC common stock.
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 14, 1997.
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.............. 1,866,520(1) 34.39%(1)
InterContinental Life Corporation
Austin Centre
701 Brazos
Austin, Texas 78701 ............. 727,115(2) 12.19%(3)
Investors Life Insurance Company
of North America
Austin Centre
701 Brazos
Austin, Texas 78701 ............. 727,115(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, 145,500 shares are owned by Investors Life
Insurance Company of North America ("Investors-NA"), 44,250
shares are owned by Intercontinental Life Insurance Company
("ILIC"), and 537,365 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.
A Special Meeting of the Shareholders of FIC was held on
November 12, 1996, for the purpose of obtaining the vote of the
shareholders on a proposal to amend the Articles of Incorporation
to: (i) increase the number of authorized shares of common stock
from 3,304,200 shares to 10,000,000 shares and (ii) to reduce the
par value of the common stock from $1.00 to $.20. These
amendments to the Articles of Incorporation were related to the
implementation of the five-for-one stock split authorized by the
Board of Directors on September 27, 1996.
The following table contains information as of March 14,
1997 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, Fleron and Richmond did not
beneficially own any shares of FIC as of March 14, 1997. 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.
Name Amount and Nature of Beneficial Ownership Percent of Class
Roy F. Mitte 1,866,520 (1) (2) 34.39%
Frank Parker 10,000 *
James M. Grace 5,600 (2) *
Eugene E. Payne 5,360 (2) *
Dale E. Mitte 2,000 *
Leonard A. Nadler 1,665 *
All Executive Officers,
Nominees and Directors
as a group
(10 persons) 1,891,145 (1) (2) 34.84%
(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, Payne, Crowe
and Demgen are executive officers and/or directors of ILCO and
beneficially owned approximately 63.9% of the outstanding shares
of ILCO common stock as of March 14, 1997. Since FIC
beneficially owns 61.5% 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 727,115 shares of FIC common
stock (12.19% of the outstanding shares) as of March 14, 1997.
* 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 1996 and received cash compensation
exceeding $100,000 during 1996.
Annual Compensation
Name and
Principal All Other
Position Year Salary(1) Bonus(1) Other(2) Compensation
Roy F. Mitte,
Chairman of
Board,
President and
Chief 1996 $503,500 -0- -0- $2,446,397 (3)
Executive 1995 503,500 -0- -0- 1,120,513 (4)
Officer 1994 503,500 $1,076,159 (5) -0- 1,376,663 (6)
James M.
Grace,
Vice
President, 1996 195,000 15,000 -0- -0-
Secretary and 1995 195,000 10,000 -0- -0-
Treasurer 1994 195,000 2,500 -0- -0-
Eugene E.
Payne, 1996 195,000 15,000 -0- -0-
Vice 1995 195,000 10,000 -0- -0-
President 1994 195,000 5,000 -0- -0-
Joseph F.
Crowe, 1996 196,500 15,000 -0- -0-
Vice 1995 195,000 10,000 -0- -0-
President 1994 195,000 5,500 -0- -0-
Jeffrey
H. Demgen,
Vice Presi-
dent (7) 1996 102,500 7,500 -0- -0-
(1) The salaries and bonuses set forth in the table were paid by
ILCO, except that $216,857 of Mr. Mitte's salary in 1996,
$216,857 of Mr. Mitte's salary in 1995 and $251,700 of Mr.
Mitte's salary and $538,080 of his bonus in 1994 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 1994, 1995 and
1996: $789,780, $216,857 and $216,857, respectively, for Mr.
Mitte; $75,880, $88,293 and $83,987, respectively, for Mr. Grace;
$126,750, $79,875 and $83,987, respectively, for Dr. Payne;
$68,250, $88,293 and $84,633, respectively, for Mr. Crowe; and
$46,125 (1996 only) for Mr. Demgen.
Mr. Mitte and FIC are parties to an employment agreement,
providing for the employment of Mr. Mitte as Chairman, President
and Chief Executive Officer of the Company. The agreement, which
was initially effective February 25, 1982, provides for five-year
terms and for automatic renewals for successive five-year
periods, unless otherwise terminated in accordance with the terms
of the agreement. The agreement provides that the level of
compensation will be fixed each year by agreement, but not less
than $120,000 per year. In addition, the agreement provides that
Mr. Mitte is entitled to reimbursement for reasonable business
expenses and to participate in all fringe benefit plans and
arrangements available generally to employees of the Company.
(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) During 1996, ILCO paid Mr. Mitte (i) $1,862,000 for the
cancellation in 1996 of options to purchase 121,500 shares of the
Company's Common Stock, plus interest at the rate of 8% per year
on such amount for a one year period (for a total of $2,011,737);
(ii) $120,700 for the federal income tax reimbursement relating
to the cancellation in 1995 of options to purchase 50,000 shares
of the Company's Common Stock; and (iii) $313,960 for the federal
income tax reimbursement relating to the 1996 options
cancellation described in this footnote. Each of these payments
was made pursuant to the contract referred to in footnote (4).
(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 cancellation 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) 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.
(6) 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).
(7) Mr. Demgen became an executive officer of FIC and ILCO in
August 1996.
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 certain executive
officers. At December 31, 1996, options to acquire 72,000 shares
were outstanding, all which options 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, 1996, options to purchase
174,000 shares were outstanding, of which options to buy 84,000
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, 1994 or 1996, 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 365,417 shares of ILCO's Common Stock, of which 76,835
shares are allocated to the accounts of executive officers of the
Company and ILCO and 273,402 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. In
June, 1996, the Committee recommended that the Chief Executive
Officer's 1996 compensation continue at the same level in effect
for the year 1995 ($216,857).
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 1996 would have been justified, it accepted his
request that his annual base compensation for 1996 remain the
same as it was in 1995.
Since the Chief Executive Officer's 1996 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
1996.
Nevertheless, the Committee does believe that it is
noteworthy that the Company paid off its bank debt during 1996,
the net income of ILCO, in which the Company has a 46% interest,
increased to $26.9 million in 1996 from $10.7 million in 1995,
and the Company's net income for 1996 was $16,157,000 ($2.90 per
share) compared to net income in 1995 of $10,017,000 ($1.81 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, 1991 of $100 in the Company's Common
Stock, The Nasdaq Stock Market (U.S.) and an index of stocks of
life insurance companies traded on Nasdaq and the reinvestment of
all dividends).
(Performance Graph Omitted)
12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
The Company(1) $100.00 $155.00 $118.49 $ 86.41 $106.00 $172.35
The Nasdaq
Stock Market
(US) $100.00 $116.40 $133.60 $130.60 $184.70 $227.20
Index of
Nasdaq
Life Ins.
Stocks (2) $100.00 $138.00 $165.10 $142.00 $213.40 $275.20
(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 (50 issues traded during
that period, of which 26 issues were traded on December 31,
1996). 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 46.17% 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 61.54% 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; Dr. Payne serves as Vice President and
Director of both companies and Secretary of ILCO; Messrs. Demgen
and Fleron serve as Vice Presidents and Directors of both
companies; and Mr. Crowe serves as a Director of both companies
and, until his retirement in January, 1997, served as a Vice
President 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 of 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 payable 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 1996, FIC Realty
paid $658,509 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. This arrangement was
terminated upon the sale by Investors-NA of the Austin Centre in
March, 1996.
FIC Realty conducts the leasing activities for the
Bridgepoint Square properties owned by Investors-NA. In payment
for such services, FIC Realty receives a commission of 4% of the
gross rent under each lease which is negotiated by it. During
1996, Investors-NA paid commissions in the amount of $100,811 to
FIC Realty.
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 beverage
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 beverages sales. During
1996, Atrium Beverage paid FIC Realty rent and management fees
totalling $117,998. 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 1996,
Investors-NA paid $33,027 of fees to FIC Management under this
agreement. This arrangement was terminated upon the sale by
Investors-NA of the Austin Centre in March, 1996.
As part of the financing arrangement for the acquisition of
Family Life, 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-CA to FIC. In addition to the
interest provided under those loans, Investors-NA and Investors-
CA were 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. As a result of FIC's
five-for-one stock split, which was effective November 12, 1996,
the option price is currently $2.10 per share. The options were
to expire on June 12, 1998 if not previously exercised. In
connection with the 1996 amendments to the subordinated notes, as
described below, the expiration date of the options were extended
to September 12, 2006.
On July 30, 1993, the subordinated indebtedness owed to
Merrill Lynch and its affiliate was prepaid. The Company paid
$38 million plus accrued interest to retire the indebtedness,
which had a principal balance of approximately $50 million on
July 30, 1993.
The primary source of the funds used to prepay the
subordinated debt was new subordinated loans totalling $34.5
million that FLC and another subsidiary of FIC obtained from
Investors-NA. The principal amount of the new subordinated debt
was payable in four equal annual installments in 2000, 2001, 2002
and 2003 and bears interest at an annual rate of 9%. The other
terms of the new debt were substantially the same as those of the
$22.5 million subordinated loans that Investors-NA had previously
made to FLC and that continue to be outstanding.
As of June 12, 1996, the provisions of the notes from
Investors-NA to FIC, FLC and FLIIC were modified as follows: (a)
the $22.5 million note was amended to provide for twenty
quarterly principal payments, in the amount of $1,125,000 each,
to commence on December 12, 1996; the final quarterly principal
payment is due on September 12, 2001; the interest rate on the
note remains at 11%; (b) the $30 million note was amended to
provide for forty quarterly principal payments, in the amount of
$163,540 each for the period December 12, 1996 to September 12,
2001; beginning with the principal payment due on December 12,
2001, the amount of the principal payment increases to
$1,336,458; the final quarterly principal payment is due on
September 12, 2006; the interest rate on the note remains at 9%;
(c) the $4.5 million note was amended to provide for forty
quarterly principal payments, in the amount of $24,531 each for
the period December 12, 1996 to September 12, 2001; beginning
with the principal payment due on December 12, 2001, the amount
of the principal payment increases to $200,469; the final
quarterly principal payment is due on September 12, 2006; the
interest rate on the note remains at 9%; (d) the $2.5 million
note was amended to provide that the principal balance of the
note is to be repaid in twenty quarterly installments of $125,000
each, commencing December 12, 1996 with the final payment due on
September 12, 2001; the rate of interest remains at 12%; (e) the
Master PIK note, which was issued to provide for the payment in
kind of interest due under the terms of the $2.5 million note
prior to June 12, 1996, was amended to provide that the principal
balance of the note ($1,977,119) is to be paid in twenty
quarterly principal payments, in the amount of $98,855.95 each,
to commence December 12, 1996 with the final payment due on
September 12, 2001; the interest rate on the note remains at 12%.
FIC was reimbursed by ILCO for rental expense and certain
other operating expenses incurred during 1996 on behalf of ILCO.
The amount of such reimbursement was approximately $305,000.
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 $1,055,639 and ILCO's insurance subsidiaries paid
$2,243,234 to FIC Computer for data processing services provided
during 1996.
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.
In 1996, Family Life entered into a reinsurance agreement
with Investors-NA, pertaining to annuity contracts written by
Family Life. The agreement applies to contracts written on or
after January 1, 1996.
BOARD, COMMITTEES AND MEETINGS
FIC's Board of Directors met formally three times during
1996. All of the incumbent Directors attended at least 75% of
the required meetings, except Frank Parker and Eugene E. Payne,
who attended two of the three meetings (66%).
The Board has an Audit Committee which did not have any
formal meetings during 1996. The Board does not have a
Nominating Committee. The Directors serving on the Audit
Committee in 1996 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 1996 were:
Messrs. Barnett, Nadler and Parker. The Compensation Committee
held one meeting during 1996.
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 19, 1998. 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, 1997
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 18, 1997
By Order of the Board of
Directors
Financial Industries Corporation
James M. Grace
Secretary
PROXY
FINANCIAL INDUSTRIES CORPORATION
Annual Meeting of Shareholders, May 20, 1997
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 20, 1997 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, T. Fleron, J. Grace, D. Mitte,
R. Mitte, L. Nadler, F. Parker, E. Payne, T. Richmond
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:___________________,1997
______________________________
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
