InterContinental Life Corporation
Austin Centre, 701 Brazos, Austin, Texas 78701
Dear Shareholder:
You are invited to attend the rescheduled Annual Meeting of
Shareholders of InterContinental Life Corporation, which will be
held at the Austin Centre, 701 Brazos, Austin, Texas 78701 on
June 17, 1997, at 10:00 a.m. local time. As we previously
advised you, the date of the Annual Meeting has been changed from
the originally scheduled date (May 20, 1997) in order to include
an additional matter on the agenda for the meeting. In addition
to the election of directors, the revised agenda includes a
proposal whereby the domicile of the Company would be changed
from New Jersey to Texas.
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
InterContinental Life Corporation
Austin Centre, 701 Brazos, Austin, Texas 78701
NOTICE OF ANNUAL MEETING
TO BE HELD JUNE 17, 1997
Notice is hereby given that the Annual Meeting of Shareholders of
InterContinental Life Corporation will be held at the Austin
Centre, 701 Brazos, Austin, Texas 78701 on June 17, 1997 at 10:00
a.m. local time. This date represents a rescheduled date for the
meeting which was originally scheduled to be held on May 20,
1997. At the Annual Meeting, the following matters are to be
considered and acted upon:
1. The election of eleven Directors for the ensuing year.
2. The approval of the Redomestication of the Company and
the related Plan and Agreement of Merger of the Company into
ILCO-Texas, a wholly-owned subsidiary of the Company.
3. 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
April 28, 1997 (the "Record Date") will be entitled to notice of
and vote at the meeting or any adjournment thereof.
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.
May 12, 1997
By Order of the Board of
Directors
Eugene E. Payne
Secretary
PROXY STATEMENT FOR THE RESCHEDULED
ANNUAL MEETING OF SHAREHOLDERS
OF
InterContinental Life Corporation
701 Brazos Austin Centre Austin, Texas 78701
This Proxy is furnished in connection with the solicitation
of proxies by the Board of Directors of InterContinental Life
Corporation (ILCO or the Company) for use at the Rescheduled
Annual Meeting of Shareholders to be held June 17, 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 the Company. The Company intends to reimburse
broker-dealers and others for forwarding the proxy materials to
beneficial owners of the Company's stock. The approximate date
on which this Proxy Statement and the enclosed Form of Proxy will
be sent or given to Shareholders is May 12, 1997.
A copy of the 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, InterContinental Life Corporation,
701 Brazos, Austin Centre, Austin, Texas 78701.
Only Shareholders of record on the books of the Company at
the close of business on April 28, 1997, will be entitled to vote
at the Rescheduled Annual Meeting. At the close of business on
such date, there were outstanding and entitled to vote 5,339,497
shares of common stock, $.22 par value, of the Company.
Shareholders of the Company are entitled to one vote for each
share held of record at the close of business on the Record Date.
The proxy is revokable at any time prior to the exercise thereof
at the meeting by written notice filed with the Secretary of the
Company or by delivery of a later proxy. All shares represented
by executed and unrevoked proxies will be voted in accordance
with specifications 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 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, as of April 21, 1997, are set forth below.
The information is based on information received from the
Directors.
Name Age Principal Occupation and Other Director
Occupation Since
Joseph F. 58 Vice President of ILCO from May 1991
Crowe, FSA 1991 to January 1997, when he
retired from active service with
the Company. Director of ILCO
since May 1991. Vice President of
FIC from February 29, 1992 to
January 3, 1997. Director of FIC
since February 29, 1992. Executive
Vice President and 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.
Theodore A. 57 Vice President and Director of 1991
Fleron, Esq. ILCO since May 1991. Assistant
Secretary since June 1990. Vice
President and Director of FIC
since August 1996. 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.
W. Lewis 64 Dentist practicing in San Marcos, 1988
Gilcrease, DDS Texas. Director of ILCO since
1988. Director of FIC from 1979
to July 6, 1991.
James M. 53 Vice President and Treasurer of 1984
Grace, CPA ILCO since January 1985. Executive
Vice President, Treasurer and
Director of InterContinental Life
Insurance Company since 1989. Vice
President, Treasurer and Director
of Financial Industries
Corporation since 1976. 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 (a
subsidiary of FIC) since June
1991. Director, Executive Vice
President and Treasurer of
Investors Life Insurance Company
of Indiana since February 1995.
Jeffrey H. 44 Director of FIC since May 1995. 1995
Demgen 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 from September
1984 to July 1992.
Richard A. 64 Certified Public Accountant and 1981
Kosson, CPA partner in the firm of Manheim,
Kosson & Novick in Millburn, New
Jersey.
Roy F. Mitte 65 Chairman of the Board and Chief 1984
Executive Officer of the Company
and InterContinental Life
Insurance Company since 1985.
President of the Company since
April, 1985. Chairman of the
Board, President and Chief
Executive Officer of FIC since
1976. Chairman of the Board,
President and Chief Executive
Officer of Investors Life
Insurance Company of North America
since December 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.
Eugene E. 54 Vice President of ILCO since 1989
Payne, Ph.D December 1988 and Director since
1989. Vice President and Director
of Financial Industries
Corporation since February 1992.
Executive Vice President,
Secretary and Director of
Investors Life Insurance Company
of North America since 1988.
Executive Vice President since
December 1988 and Director since
May 1989 of InterContinental Life
Insurance Company. Executive Vice
President, Secretary and Director
of Family Life Insurance Company
since June 1991. Executive Vice
President, Secretary and Director
of Investors Life Insurance
Company of Indiana since February
1995.
H. Gene Pruner 69 Director of ILCO since August 1995
1996. Director of Investors Life
Insurance Company of Indiana since
February, 1995. President of
Market Share, Inc. since April
1985.
Steven P. 50 Senior Vice President since April 1994
Schmitt 1992 and Director, Vice President
and Assistant Secretary since 1989
of Investors Life Insurance
Company of North America and
InterContinental Life Insurance
Company. Senior Vice President
since April 1992 and Director and
Vice President since June 1991 of
Family Life Insurance Company.
Director, Senior Vice President
and Assistant Secretary of
Investors Life Insurance Company
of Indiana since June 1995.
Donald Shuman 72 Real estate specialist, engaged in 1980
sales and management of real
estate for his own company, Don
Shuman Associates, a real estate
brokerage and management firm.
Mr. Shuman was the general partner of Shuman-Carlisle Mall
Associates, a partnership that owned a 400,000 square foot shopping
mall located in Carlisle, Pennsylvania. In January 1993, the
partnership filed a petition pursuant to Chapter 11 of the Federal
Bankruptcy Code, and that bankruptcy proceeding was concluded in
early 1995.
All of the nominees named on the previous pages were elected
Directors at the 1996 Annual Shareholders Meeting, except Mr.
Demgen and Mr. Pruner, who were appointed Directors by the Board of
Directors on August 26, 1996.
The incumbent directors have been nominated for submission
to vote of the shareholders for reelection at the 1997 annual
shareholders' meeting.
REDOMESTICATION OF THE COMPANY
The second item which is to be considered at the Annual
Meeting is the redomestication of the Company from the State of
New Jersey to the State of Texas (the "Redomestication"). In
order to accomplish this change of domicile, the Company has
created a wholly-owned subsidiary, ILCO-Texas, a Texas company.
If the Redomestication proposal is approved by the Shareholders
of the Company, the Company would merge with ILCO-Texas (the
"Merger"), pursuant to a Plan and Agreement of Merger (the "Plan
of Merger"). The surviving company in the Merger will be ILCO-
Texas. Immediately following the completion of the Merger,
ILCO-Texas will change its name to InterContinental Life
Corporation. Each share of the common stock of InterContinental
Life Corporation, a New Jersey company, ($.22 par value), will be
automatically converted into one share of common stock of ILCO-
Texas, a Texas company, (par value $.22), by operation of the
merger. As of April 28, 1997, there were 5,339,497 shares of the
common stock of the Company issued and outstanding. The terms
and conditions of the proposed merger are described more fully in
the Plan of Merger attached hereto as Exhibit "A".
The Board of Directors of the Company unanimously approved
the proposed change of domicile of the Company and the related
Plan of Merger, by unanimous written consent, on April 29,
1997 .
ILCO-Texas was incorporated in Texas on April 29, 1997. A
copy of the Articles of Incorporation is attached hereto as
Exhibit "B". The Board of Directors of ILCO-Texas has adopted
Bylaws, a copy of which is attached hereto as Exhibit "C". The
Bylaws of ILCO-Texas are substantially similar as the Bylaws of
the Company.
The Articles of Incorporation of ILCO-Texas provide for
authorized common stock in the amount of 15,000,000 shares of
$.22 par value. The Articles of Incorporation of the Company
provide for authorized common stock in the amount of 10,000,000
shares. In connection with the authorization of the
incorporation of ILCO-Texas, the Board of Directors of the
Company believes that it is desirable to have sufficient
authorized shares of common stock available to ILCO-Texas for
future stock splits or dividends, financing and acquisition
transactions and other general corporate purposes. The
additional shares of common stock would be available for issuance
without further action by the stockholders unless such action is
required by applicable law or regulation. Neither the Company
nor ILCO-Texas has any present intent, understandings or
arrangements for issuance of the 5,000,000 shares of common stock
authorized by the Articles of Incorporation of ILCO-Texas which
are in addition to the 10,000,000 shares of common stock
presently authorized by the Articles of Incorporation of the
Company.
The Articles of Incorporation of ILCO-Texas also provide for
authorized preferred stock in the amount of 30,000,000 shares of
$1.00 par value. This provision is intended to continue in
effect, after the Merger, the combined preferred stock structure
of the Company. The current preferred stock structure of the
Company is described in the following paragraph. ILCO-Texas has
no present intent, understandings or arrangements for issuance of
the Preferred Stock which is authorized by the Articles of
Incorporation of ILCO-Texas.
The Articles of Incorporation of the Company provide for
three classes of preferred stock - (i) Class A Preferred Stock,
5,000,000 shares of $1.00 par value, (ii) Class B Preferred
Stock, 15,000,000 shares of $1.00 par value and (iii) Class C
Preferred Stock, 10,000,000 shares of $1.00 par value. The Class
A Preferred Stock and the Class B Preferred Stock were issued in
December, 1988, in connection with the acquisition by the Company
of two life insurance companies from CIGNA Corporation. In May,
1990, the Company effected an exchange of its Class A Preferred
Stock and its Class B Preferred Stock for subordinated notes
issued to the holders of the preferred stock. The subordinated
notes were subsequently prepaid by the Company. As a result of
the May, 1990 exchange, the Class A Preferred Stock and the Class
B Preferred Stock are classified as preferred stock held in
treasury. The Company has not issued any of the Class C
Preferred Stock.
The initial Board of Directors of ILCO-Texas consists of the
same individuals who are currently members of the Board of
Directors of the Company. If the individuals who are proposed
for election as directors of the Company at this meeting are
elected by the Shareholders, such individuals would continue to
serve as directors of ILCO-Texas, until the Annual Meeting of
Shareholders of ILCO-Texas or until their successors are elected
and qualified.
Vote Required:
The affirmative vote of a majority of those shares of common
stock of the Company constituting at least a quorum is required
in order for the proposed Redomestication to be approved. Since
ILCO-Texas is a wholly-owned subsidiary of the Company, the
Company has sufficient voting power to cause ILCO-Texas to
approve the proposed transaction on behalf of ILCO-Texas.
Financial Industries Corporation ("FIC") owns approximately
46% of the outstanding common stock of the Company.
Reasons for the Redomestication:
Since 1992, the employees of the life insurance subsidiaries
of the Company have been located at the executive offices in
Austin, Texas. While the Company leases an office building in
Elizabeth, New Jersey which previously served as the home office
of the Company, and a subsidiary of the Company, InterContinental
Life Insurance Company, is currently domiciled in New Jersey and
owns several small parcels of real estate located in Elizabeth,
New Jersey, the Company currently does not have any significant
business contacts within the State of New Jersey.
The Company does not expect that the change in domicile will
effect any significant cost savings. However, the Company
believes that the proposed transaction will enable it to
centralize its primary corporate reporting and compliance
activities in the same jurisdiction where its executive offices
are located.
FIC, which owns approximately 46% of the common stock of the
Company, is also incorporated in the State of Texas.
Conditions to the Redomestication and Merger:
The proposed redomestication and the related Plan of Merger
are subject to certain conditions, including the following: (i)
the affirmative vote of a majority of those shares of common
stock of the Company constituting at least a quorum of the
outstanding shares of common stock of the Company and (ii) the
obtaining of all necessary consents or approvals of any federal
or state regulatory authority necessary for the consummation of
the proposed transaction.
The Board of Directors of the Company may terminate the Plan
of Merger if, in its opinion, consummation of the redomestication
and merger would be inadvisable or because of the number of
shares of stock held by Shareholders of the Company who vote
against the proposed transaction. No specific percentage of
shares voting against the proposal which would result in the
termination of the redomestication and the Plan of Merger has
been established at this time. See also the discussion under the
caption "Dissenters' Rights", for a description of the additional
circumstances under which the Board of Directors may terminate
the Plan of Merger.
Effective Date:
The Plan of Merger provides that the merger will become
effective (the "Effective Time") upon the filing of all required
documents with the Texas Secretary of State and the New Jersey
Secretary of State, whichever is later, provided that such
documents shall not be filed until the later of the following:
a. approval of this Merger by the affirmative vote of
a majority of those shares of common stock of ILCO
constituting at least a quorum at the meeting of
Shareholders at which the Plan of Merger is
considered;
b. approval of this Merger by the sole shareholder of
ILCO-Texas; and
c. the obtaining of all consents or approvals
necessary for the consummation of the Merger,
including, but not limited to, the consent of
approval of any federal or state regulatory
authority.
The Plan of Merger provides for automatic termination in the
event that the above described conditions have not been satisfied
on or before December 31, 1997.
Dissenters' Rights:
Under the provisions of the New Jersey Business Corporation
Act, Shareholders who do not vote in favor of the proposed
redomestication and the related Plan of Merger will not have any
"rights of dissenting shareholders", as that term is defined in
the Act. Section 14A:11-1 provides, in part, that:
(1) Any shareholder of a domestic corporation shall
have the right to dissent from any of the following
corporate actions
(a) any plan of merger or consolidation to
which the corporation is a party, provided
that, unless the certificate of incorporation
otherwise provides
(i) a shareholder shall not have
the right to dissent from any plan
of merger or consolidation with
respect to shares:
(A) of a class or series which is
listed on a national securities
exchange or is held of record by
not less that 1,000 holders of
record on the record date fixed to
determine the shareholders entitled
to vote upon the plan of merger or
consolidation;
As of the record date for the Annual Meeting, there were
1,533 holders of record of the common stock of the Company. In
addition, the common stock of the Company is listed on the Nasdaq
SmallCap Market. Accordingly, the Company believes that the
rights of dissenting shareholders (including the right to demand
payment of fair value) as described in Chapter 11 of the New
Jersey Business Corporation Act are not available to
Shareholders who do not vote in favor of the proposed
redomestication and the related Plan of Merger. In the event
that a determination is subsequently made that, notwithstanding
the foregoing discussion, shareholders of the Company do have
dissenters' rights, the Board of Directors of the Company
reserves the right to terminate the Plan of Merger if, in its
opinion, consummation of the Merger is inadvisable due to the
number of shares of stock of the Company held by stockholders who
dissent from the Plan of Merger and request payment in cash for
the fair value of their shares, in accordance with applicable
laws.
Comparison of State Law:
The following is a comparison of the general provisions of
the rights of Shareholders under the Business Corporation Acts of
New Jersey and Texas. The comparison is not intended as an
exhaustive comparison of such laws and persons interested in a
more complete review of the similarities and differences between
such laws are encouraged to consult with their own legal advisor.
If the proposed Redomestication and the related Plan of Merger is
consummated, the rights of Shareholders of the Company will be
changed as follows:
1. Governing Law. As a result of the Redomestication, the
state of incorporation will be changed to Texas from New Jersey.
The Company will be conducting business in Texas as a domestic
corporation, rather than a foreign corporation. Since the
Company will continue to have an interest in real property
located in New Jersey, it will register as a foreign corporation
in New Jersey. Except as described below, under the caption
"Shareholder Voting", there are no material differences between
the laws of Texas and New Jersey as they pertain to the operation
of the Company.
2. Classification of Directors. Under the laws of New
Jersey and Texas, there are no specific requirements pertaining
to the structure of the board of directors of a corporation. In
both states, the minimum number of directors is one. Both New
Jersey and Texas law permit the creation of classes of directors,
so as to provide for staggered terms. In the case of a New
Jersey corporation, any provision for classes of directors must
be set forth in the articles of incorporation. A corporation
domiciled in Texas may create classes of directors pursuant to
its bylaws. The articles of incorporation of the Company do not
provide for the creation of classes of directors. Neither the
articles of incorporation or the bylaws of ILCO-Texas provide for
the creation of classes of directors and there are no present
plans to create such classes.
The laws of both New Jersey and Texas permit the creation of
one or more committees of the board of directors of a
corporation. The Bylaws of the Company currently provide for an
Executive Committee and such other committees as approved by the
Board of Directors. The Bylaws of ILCO-Texas include similar
provisions. Upon consummation of the Redomestication and the
Plan of Merger, the committee structure of ILCO-Texas will be the
same as the current committee structure of the Company.
3. Shareholder Voting. Under the laws of the State of New
Jersey, shareholders do not have the right to cumulative voting
with respect to the election of directors, unless the articles of
incorporation so provides. The Articles of Incorporation of the
Company do not provide for cumulative voting.
Texas law provides for cumulative voting with respect to the
election of directors, unless the articles of incorporation
provide otherwise. The Articles of Incorporation of ILCO-Texas
preclude cumulative voting in connection with the election of
directors.
The laws of both New Jersey and Texas allow one vote for
each share on matters submitted to the vote of shareholders.
Under the laws of New Jersey, a plan of merger or consolidation
requires the vote of a majority of those shares constituting at
least a quorum of the outstanding shares of stock. The
corresponding provisions of the laws of Texas provides that the
affirmative vote of the holders of at least two-thirds of the
outstanding shares is required in order to effect the merger of a
corporation domiciled in Texas with another corporation.
4. Preemptive Rights: Under the laws of both New Jersey
and Texas, the provisions of the articles of incorporation of
a corporation determine whether shareholders have preemptive
rights . The articles of incorporation of both the Company
and ILCO-Texas do not permit shareholders to exercise preemptive
rights.
Certain Federal Income Tax Consequences:
The following is a summary of the material U.S. federal
income tax consequences of the proposed Merger to holders of the
common stock of the Company. The summary is based upon the
Internal Revenue Code, administrative pronouncements, judicial
decisions and Treasury regulations, subsequent changes to any of
which may affect the tax consequences described herein. The
summary does not purport to be a comprehensive description of all
of the tax consequences applicable to a particular taxpayer.
Shareholders are urged to consult their tax advisors as to the
particular federal income tax consequences to them of the Merger
and as to state, local and other tax consequences, if any.
The Merger is intended to qualify for federal income tax
purposes as a "reorganization" within the meaning of Section 368
of the Internal Revenue Code. The Company intends to obtain an
opinion from Sneed, Vine & Perry, counsel to the Company,
that based upon customary representations and assumptions, the
Merger so qualifies. The consummation of the Merger is
contingent upon the receipt of such opinion. If the Merger
qualifies as a reorganization under the Internal Revenue Code,
the Company anticipates that the opinion of its tax advisors
will confirm the following tax consequences: (i) no gain or loss
will be recognized to the Company or ILCO-Texas as a result of
the Merger, (ii) no gain or loss will be recognized to the
shareholders of the Company upon the conversion of their shares
of stock of the Company into shares of ILCO-Texas, (iii) the tax
basis of shares of stock of the Company will continue to be the
tax basis for shares of ILCO-Texas stock with respect to
individuals whose shares of stock in the Company are converted
into shares of ILCO-Texas, (iv) the holding period of shares of
stock of ILCO-Texas received by shareholders will include the
holding period of the shares of the Company for such individuals,
provided that such shares were capital assets in the hands of the
shareholder of the Company at the time of the Merger, and (v) the
Merger will permit the following federal income tax attributes to
be carried over from the Company to ILCO-Texas: (a) net operating
loss carryovers, (b) unused investment credit, (c) capital loss
carryovers, (d) accounting methods, (e) tax year and (e) earnings
and profits.
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 of the Board,
President and
Chief Executive Officer
James M. Grace 53 Vice President and
Treasurer
Eugene E. Payne 54 Vice President and
Secretary
Jeffrey 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 representations 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) Jeffrey H. Demgen 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 beneficial ownership
of (a) 198.5076 shares of ILCO common stock through the Employee
Stock Purchase Plan made available to employees of the Company and
2,803 shares of ILCO common stock through the Employee Stock
Ownership Plan, a non-contributory, tax-qualified plan made
available to employees of the Company; (ii) W. Lewis Gilcrease
filed a Form 5 in February, 1997, to report the disposition in
December, 1996 of 4,420 shares of ILCO common stock to participants
in a tax qualified retirement plan for which he served as trustee;
(iii) Eugene E. Payne filed a Form 5 in February, 1997, to report
the purchase in August, 1990, of 1,200 shares of ILCO common stock
which had not been included in prior Form 4 filings; and (iv) Roy
F. Mitte filed a Form 5 in February, 1997, to report the surrender,
in December, 1996, of options to acquire 120,000 shares of ILCO
common stock and the receipt of final payment from the Company of
amounts payable in connection with such cancellation.
H. Gene Pruner 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 ILCO common stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information as of March 14, 1997
as to all persons who, to the knowledge of the Company, were
beneficial owners of five percent (5%) or more of the Common Stock
of the Company.
Amount & Nature of
Name and Address Beneficial Ownership Percent of Class
Financial Industries
Corporation
701 Brazos, Suite 1400
Austin, Texas 78701..........3,668,501(1) 61.54%(6)
Roy F. Mitte
701 Brazos, Suite 1400
Austin, Texas 78701..........3,723,392(2)(3) 62.46%(6)
Investors Life Insurance
Company of North America
701 Brazos, Suite 1400
Austin, Texas 78701.......... 334,960(4) 7.86%(6)
InterContinental Life
Insurance Company
701 Brazos, Suite 1400
Austin, Texas 78701.......... 281,560(5) 6.61%(6)
Fidelity Management
& Research Company
82 Devonshire Street
Boston, MA 02109 ............ 418,300(7) 9.82%(6)
(1) Includes 1,966,346 shares of the Company's stock presently
owned and an option to purchase up to 1,702,155 shares of the
Company's authorized but unissued Common Stock which is the balance
of the option granted to Financial Industries Corporation (FIC) by
the Company in December 1985. This option may be exercised by FIC
at any time at an exercise price equal to the average bid prices of
the Company's Common Stock over the six month period immediately
preceding such exercise.
(2) As of March 14, 1997, Mr. Mitte owned directly 25,000 shares
of the Company's stock . Mr. Mitte, jointly with his wife, Joann,
also owns 1,866,520 common shares of FIC which constitutes 34.39
percent of the outstanding common stock of that company, and Mr.
Mitte holds the position of Chairman, President and Chief Executive
Officer of FIC.
Since FIC holds a controlling interest in the Company, Mr.
Mitte's personal holdings in the Company have been combined with
the holdings of FIC in determining the amount and percentage of Mr.
Mitte's beneficial ownership of the Company.
(3) Includes 14,611 shares allocated to Mr. Mitte's account under
the Employee Stock Ownership Plan.
(4) Represents 281,560 shares owned by InterContinental Life
Insurance Company (ILIC) and 53,400 shares owned by Investors Life
Insurance Company of North America (Investors-NA). ILIC is a life
insurance subsidiary of Investors-NA. All of these shares are
treated as treasury shares.
(5) All are directly owned by ILIC and are treated as treasury
shares.
(6) Assumes that the outstanding stock options or warrants
available to other persons have not been exercised.
(7) As reported to the Company on a Schedule 13(G) filed by FMR
Corporation, the parent company of Fidelity Management Company
(Fidelity). According to the Schedule 13(G), Fidelity acts as
investment advisor to the Fidelity Low-Priced Stock Fund, a
registered investment company, and the Fund is the owner of 418,300
shares of ILCO common stock.
The following table contains information as of April 21, 1997
as to the Common Stock of the Company beneficially owned by each
Director, nominee and executive officer and by all executive
officers and directors of the Company as a group. The information
contained in the table has been obtained by the Company from each
director 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 & Nature of Beneficial Ownership Percent of Class
Joseph F. Crowe(1) 38,744 (3) *
Jeffrey H. Demgen 3,001 (3) *
Theodore A. Fleron 14,366 (3) (4) *
W. Lewis Gilcrease -0- *
James M. Grace (1) 63,387 (2) (3) 1.86%
Richard Kosson 200 *
Roy F. Mitte (1) 3,723,292 (2) (3) 62.46%
Eugene E. Payne (1) 48,199 (3) 1.26%
H. Gene Pruner -0- *
Donald Shuman 450 *
Steven P. Schmitt 7,041 (3) *
All Executive Officers
and Directors as a
group, all of whom
are listed above 3,898,680 (1) (2) (3) (4) 64%
* Less than 1%
(1) Is an executive officer and/or director of FIC which as of
April 21, 1997, beneficially owned 3,668,501 shares of the
Company's Common Stock (including option rights to purchase
1,702,155 shares of the Company). In addition to the shareholdings
of Mr. Mitte in FIC (see Note 2, prior page), Mr. Grace owns 5,600
shares of FIC Common Stock.
(2) 379,738 shares of the Company's Common Stock are held by the
Trustees of the Company's Employee Stock Ownership Plan ("ESOP") of
which 15,180 shares are unallocated to any participant's account.
Messrs. Grace and Mitte are the Trustees of the ESOP and are
entitled to vote such unallocated shares. The ESOP participants
have the right to direct the voting of shares allocated to their
respective accounts. Beneficial ownership of these unallocated
shares is disclaimed by Messrs. Grace and Mitte. The same 15,180
shares are included in the above table for each of Messrs. Grace
and Mitte as required for technical compliance with the definition of
beneficial ownership promulgated by the Securities and
Exchange Commission, and are counted once for purposes of
executive officers and directors as a group.
(3) Includes shares beneficially acquired through participation in
the Company's ESOP and/or the Employee Stock Purchase Plan, which
are group plans for eligible employees.
(4) Includes 6,000 shares issuable upon exercise of options
granted under the Non-Qualified Stock Option Plan during 1988 to
Mr. Fleron at a price of $3.33 (as adjusted) per share, which are
currently exercisable.
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
Long Term
Compensa-
tion
Awards
Name and Stock
Principal Options All Other
Position Year Salary(1) Bonus(1) Other (Shares) Compensation
Roy F.
Mitte,
Chairman,
President
and Chief 1996 $286,643 -0- -0- -0- $2,446,397(3)
Executive 1995 286,643 -0- -0- -0- 713,513(4)
Officer 1994 251,750 $576,159(5) -0- -0- 1,376,663(6)
James M.
Grace,
Vice
President 1996 195,000 15,000 -0-(7) -0- -0-
and 1995 195,000 10,000 -0- -0- -0-
Treasurer 1994 195,000 2,000 -0- -0- -0-
Eugene E.
Payne,
Vice
President 1996 195,000 15,000 -0-(8) -0- -0-
and 1995 195,000 10,000 -0- -0- -0-
Secretary 1994 195,000 5,000 -0- -0- -0-
Joseph F.
Crowe,
Vice 1996 196,000 15,000 -0-(9) -0- -0-
Presi- 1995 195,000 10,000 -0- -0- -0-
dent 1994 195,000 5,500 -0- -0- -0-
Jeffrey
H. Demgen
Vice
Presi-
dent(10) 1996 102,500 7,500 -0- -0- -0-
(1) The executive officers of the Company have also been executive
officers of the Company's insurance subsidiaries and FIC and FIC's
insurance subsidiary, Family Life. The only executive officer who
has been paid compensation directly by Family Life is Mr. Mitte,
who received $216,857 in salary in 1996, $216,857 in salary 1995
and $251,750 in salary and $538,080 in bonus in 1994 from Family
Life, which amounts are not included in the table above. Family
Life reimbursed the Company (or, in the case of Mr. Mitte, paid Mr.
Mitte directly) the following amounts as Family Life's share of
these executive officers' cash compensation for 1994, 1995 and
1996: $789,780, 216,857 and $216,857, respectively, for Mr. Mitte;
$70,590, $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.
(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, the Company 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 above in this footnote. Each of these
payments were made pursuant to the contract referred to in footnote
(4).
(4) In 1989, the Board of Directors granted Mr. Mitte options to
purchase 600,000 shares (as adjusted for the three-for-one stock
split effective February 15, 1990) of the Common Stock of the
Company in equal annual installments of 150,000 shares each. Each
installment was subject to the approval of the Board of Directors
and is exercisable for a period of ten years from the date the
options become exercisable 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 the Company for cancellation options
to purchase 120,000 shares. The Company and Mr. Mitte entered into
a contract in 1993 providing for the cancellation in 1993 of
240,000 options for an aggregate amount of $3,237,120 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 the 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 contract 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) The Company's Compensation Committee made a recommendation to
the 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
the Company had made to Mr. Mitte in 1989 and to reimburse him for
the amount of federal income tax payable on the bonus. Since the
Company 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, the Company paid $576,159, and FIC paid $500,000, of the
bonus.
(6) During 1994, the Company paid Mr. Mitte $997,520 for the
cancellation in 1994 of options to purchase 68,500 shares of the
Company's Common Stock and $379,143 for the federal income tax
reimbursement relating to the cancellation in 1993 of options to
purchase 240,000 shares. Both of these payments were made pursuant
to the contract referred to in footnote (4).
(7) Mr. Grace exercised stock options in 1996 to purchase 12,000
shares of the Company's Common Stock. See "Aggregated Option
Exercises in 1996" below.
(8) Dr. Payne exercised stock options in 1996 to purchase 6,000
shares of the Company's Common Stock. See "Aggregated Option
Exercises in 1996" below.
(9) Mr. Crowe exercised stock options in 1996 to purchase 8,000
shares of the Company's Common Stock. See "Aggregated Option
Exercises in 1996" below.
(10) Mr. Demgen became an executive officer of the Company in
August, 1996.
Aggregated Option Exercises in 1996
The following table sets forth information concerning each
exercise of stock options during 1996 by each of the executive
officers of the Company.
Shares Acquired Value
Name on Exercise (#) Realized ($)
Joseph F. Crowe 8,000 $ 44,000
James M. Grace 12,000 119,040
Eugene E. Payne 6,000 58,020
Aggregated Stock Option Values
The following table sets forth information with respect to
the unexercised options held by the executive officers of the
Company.
Number of Unexercised Value of Unexercised
Options Held At In-the Money
December 31, 1996 Options at December 31, 1996(1)
Exercisable Unexercisable Exercisable Unexercisable
James M.
Grace 42,000 24,000 $420,840 $244,080
Eugene E.
Payne 26,000 12,000 264,420 122,040
Joseph F.
Crowe 22,000 0 104,500 0
(1) Based on the closing price of the Company's Common Stock on
NASDAQ on December 31, 1996 ($13.50).
Pension Plan Table
The following table sets forth estimated annual pension
benefits payable upon retirement at age of 65 under the Company's
noncontributory defined benefit plan ("Pension Plan") to an
employee in the final pay and years of service classifications
indicated, assuming a straight life annuity form of benefit. The
amounts shown in the table do not reflect the reduction related to
Social Security benefits referred to below.
Years of Service
Remuneration 15 20 25 30 or more
$125,000 $31,250 $41,667 $52,083 $62,500
150,000 37,500 50,000 62,498 75,000
175,000 43,750 58,333 72,914 87,500
200,000 50,000 66,667 83,330 100,000
The normal retirement benefit provided under the Pension Plan
is equal to 1.57% of final average eligible earnings less .65% of
the participant's Social Security covered compensation multiplied
by the number of years of credited service (up to 30 years). The
compensation used in determining benefits under the Pension Plan is
the highest average earnings received in any five consecutive full-
calendar years during the last ten full-calendar years before the
participant's retirement date. The maximum amount of annual salary
and bonus that can be used in determining benefits under the
Pension Plan is $200,000 for any year prior to 1994 and is $150,000
for 1994 and each subsequent year.
The annual eligible earnings for 1996 only covered by the
Pension Plan (salary and bonus up to $150,000) with respect to
the individuals reported in the Summary Compensation Table were
as follows, with their respective years of credited service under
the Pension Plan at December 31, 1996 being shown in parentheses:
Mr. Mitte, $150,000 (9 years), Mr. Grace, $150,000 (9 years), Dr.
Payne, $150,000 (8 years) and Mr. Crowe, $150,000 (5 years) and
Mr. Demgen (4 years).
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. In the case of telephonic meetings of the Board,
non-employee directors who participate in such telephonic meetings
are compensated $500 for such a meeting. Directors who participate
via telephone in a regular or special meeting which is held by
other than conference telephone are not entitled to a fee for such
meeting.
Non-employee directors serving on committees of the Board are
compensated in the amount of $500 for each committee meeting they
attend whether such participation is in person or by telephone,
provided that the committee meeting is held on a day other than
that on which the Board meets.
Members of Compensation Committee
W. Lewis Gilcrease, Donald Shuman and Richard A. Kosson are
the members of the Company's Compensation Committee, which makes
recommendations to the Board of Directors with respect to the Chief
Executive Officer's compensation.
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 FIC. He also determines the
compensation of all executive officers of FIC, other than the Chief
Executive Officer.
Reports on Executive Compensation
The following report 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 1993 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, preestablished 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.
The Company's compensation program consists of cash
compensation, long-term equity-based compensation in the form of
stock options and interests in the Employees Stock Ownership Plan
("ESOP") and various other benefits, including medical and pension
plans generally available to employees of the Company. 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 ownership position in the Company's Common Stock. This
assures that key employees have a meaningful stake in the Company,
the ultimate value of which is dependent on the Company's continued
long-term success, and that the long-term interests of those
employees are aligned with those of the shareholders.
Under the Company's Incentive Stock Option Plan, options to
purchase shares of the Company's Common Stock at 100% of fair
market value on the date of grant have been granted to certain
executive officers and other key employees. At December 31, 1996,
options to acquire 72,000 shares were outstanding, all of which
options are held by executive officers. Under the Company's Non-
Qualified Stock Option Plan, options to buy Company's Common Stock
at 100% of the fair market value on the date of grant but in no
event less than $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. The Company'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.
The Company's ESOP is a noncontributory employee benefit plan
available to all employees who have completed one year of service.
Allocations of the Company'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 the Company's Common Stock, of which 76,835 shares are
allocated to the accounts of executive officers and 273,402 shares
are allocated to the other participants.
The Company provides medical and pension benefits to the
executive officers that are generally available to employees. In
addition, executive officers may participate in the Company's
Savings and Investment Plan (401K Plan). Although the Company 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 ($286,643).
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 notes that the Company's net income for
1996 was $26,938,000 ($5.12 per share) as compared to net income in
1995 of $10,714,000 ($2.11 per share).
The foregoing report is submitted by W. Lewis Gilcrease,
Richard A. Kosson and Donald Shuman, 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 (U.S.) 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 12/31/94 12/30/95 12/31/96
The Company(1) $100 $150.0 $168.8 $131.3 $159.4 $168.8
The Nasdaq
Stock Market
(US) $100 $116.4 $133.6 $130.6 $184.7 $227.2
Index of
Nasdaq Life
Insurance
Stocks(2) $100 $138.0 $165.1 $142.0 $213.4 $275.2
(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.
Employments Agreements and Change in Control Arrangements
The terms and conditions of employment agreements that the
Company would enter into upon the occurrence of certain events
that result in the agreements taking effect were approved by the
Board of Directors with respect to Messrs. Grace, Payne and Crowe
in 1991. Each agreement would include two independent provisions
with respect to the effective date and the term of each agreement.
First, the term of the agreement would begin on the earlier of (i)
the date of retirement (early, normal or deferred) of Roy F. Mitte
from his position as Chairman, President and Chief Executive
Officer of the Company or (ii) the date of death or disability of
Mr. Mitte, and would terminate on the last day of the twelfth month
next following the commencement date of the term of the agreement,
unless extended upon mutually acceptable terms.
Independently, the term of the agreement would commence upon
the date that any person who is not currently a control person with
respect to the Company acquires, or enters into an agreement to
acquire, control of the Company, directly or indirectly, and would
end on the last day of the twelfth month next following the date on
which the employee receives notice of the termination of his
employment with the Company or the life insurance subsidiaries of
the Company.
During the term of the agreement, the employee would be
entitled to perform all of the duties of the position or positions
held by the employee with the Company and all the subsidiaries of
the Company on the date immediately preceding the commencement date
of the term of the agreement.
During the term of the agreement, the employee would be
entitled to an annual rate of compensation which is not less than
the annual rate of compensation in effect as of the date
immediately preceding the commencement date of the term of the
agreement. During the term of the agreement, the employee would be
entitled to participate in and benefit from all employee benefit
plans and other fringe benefits on the same basis as such plans and
benefits are made available to other executive personnel of the
Company.
The agreement may be terminated by the Company only in the
event that the employee is guilty of theft of property of the
Company or commits a wrongful act which has a material adverse
effect upon the business of the Company and with respect to which
the employee would not be entitled to indemnification under the
provisions of the Bylaws of the Company in effect as of the
commencement date of the term of the agreement. The employee may
terminate the agreement upon thirty days advance written notice to
the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH MANAGEMENT
The obligations of the Company under its Senior Loan are
guaranteed by FIC. FIC presently owns 1,966,346 shares of the
company's 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 the
Company's shares owned by FIC would constitute 61.54% of the
outstanding shares of the Company's Common Stock.
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 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 commission in the amount of $108,811 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 insure 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 of the Austin Centre in
March, 1996.
As part of the financing arrangement for the acquisition of
Family Life Insurance Company, Family Life Corporation ("FLC"), a
subsidiary of FIC, entered into a senior loan agreement under which
$50 million was provided by a group of banks. The balance of the
financing consisted of a $30 million subordinated note issued by
FLC to Merrill Lynch Insurance Group, Inc. ("Merrill Lynch") and
$14 million borrowed by another subsidiary of FIC from an affiliate
of Merrill Lynch and evidenced by a senior subordinated note in the
principal amount of $12 million and a junior subordinated note in
the principal amount of $2 million and $25 million lent by two
insurance company subsidiaries of ILCO. The latter amount was
represented by a $22.5 million loan from Investors-NA to FLC and a
$2.5 million loan provided directly to FIC by Investors-CA. In
addition to the interest provided under those loans, Investors-NA
and Investors-CA were granted by FIC nontransferable 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 ($2.10 per share as adjusted for the
five-for-one stock split in November, 1996), equivalent to the then
current market price, subject to adjustment to prevent dilution.
The original provisions of the options provided for their
expiration 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 is
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 are 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 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%.
The Company believes that this restructuring of subordinated
debt should enhance the value of the loans that Investors-NA has
made to FIC's subsidiaries and the options it holds to purchase
FIC's stock.
The Company reimbursed FIC for rental expenses and certain
other operating expenses incurred during 1996 on behalf of the
Company. 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. The Company's insurance
subsidiaries paid $2,243,234 and Family Life paid $1,055,639 to FIC
Computer for data processing services provided during 1996.
In 1995, Investors-NA entered into a reinsurance agreement
with Family Life 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, Investors-NA entered into a reinsurance agreement
with Family Life, pertaining to annuity contracts written by Family
Life. The agreement applies to contracts written on or after
January 1, 1996.
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 Mitte holds beneficial ownership of 34.39% of
the outstanding shares of FIC (see "Security Ownership of Certain
Beneficial Owners and Management").
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company'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.
BOARD AND COMMITTEES
ILCO's Board of Directors met formally three times during
1996. All of the incumbent Directors attended at least 75% of the
required meetings, except W. Lewis Gilcrease, who attended 2 of the
3 meetings (66%).
Members of the Nominating Committee are: Roy F. Mitte, Eugene
E. Payne and James M. Grace. The Nominating Committee makes
recommendations to the Board of Directors with respect to vacancies
and as to additions to the Board of Directors. The Nominating
Committee will consider nominees recommended by Shareholders. All
such nominations must be submitted in writing to the Nominating
Committee no later than December 31, 1996. The Nominating
Committee held one meeting in 1996.
The members of the Audit Committee are: Joseph F. Crowe,
Richard A. Kosson, Eugene E. Payne and Steven P. Schmitt. The
Audit Committee reviews the financial statements and the results of
the Company's annual independent audit. The Audit Committee did
not meet on a formal basis in 1996.
The members of the Compensation Committee are: W. Lewis
Gilcrease, Richard A. Kosson and Donald Shuman. The Compensation
Committee held one meeting during 1996.
SHAREHOLDER PROPOSALS
It is contemplated by the management of the Company that the
next Annual Meeting of the Shareholders of the Company will be held
on or about May 19, 1998. Accordingly, all proposals of security
holders intended to be submitted by the Company for inclusion in
the Proxy Statement and Form of Proxy relating to the meeting must
by received by the Company no later than December 31, 1997 and must
be in compliance with applicable laws and Securities and Exchange
Commission regulations.
OTHER MATTERS
As of the date of this Proxy Statement, management does not
know of any other matters which will be presented to the
Shareholders at the Annual 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 the
Company.
By Order of the Board of Directors
InterContinental Life Corporation
Eugene E. Payne, Secretary
May 12, 1997
<PAGE>
EXHIBIT A
PLAN AND AGREEMENT OF MERGER
BETWEEN
INTERCONTINENTAL LIFE CORPORATION
AND
INTERCONTINENTAL LIFE CORPORATION OF TEXAS
This PLAN AND AGREEMENT OF MERGER (the "Agreement") is dated
this day of , 1997, by and between
InterContinental Life Corporation of Texas, a Texas domiciled
company (hereinafter "ILCO-Texas" or the "Surviving Company") and
InterContinental Life Corporation, an New Jersey domiciled
company (hereinafter "ILCO" or the "Merging Company"), in
accordance with Article 5.01 of the Texas Business Corporation
Act and Section 14A:10-7 of the New Jersey Business Corporation
Act.
RECITALS
A.ILCO-Texas is a duly organized and validly existing company
under the Texas law and is in good standing under the laws
of the State of Texas. ILCO-Texas is a direct, wholly-owned
subsidiary of ILCO;
B.ILCO is a duly organized and validly existing company under
the New Jersey law and is in good standing under the laws of
the State of New Jersey;
C.The Board of Directors of ILCO has determined that it is
desirable and in the best interests of ILCO to change the
domicile of ILCO from New Jersey to Texas. To accomplish
that change, the Board of Directors of ILCO authorized the
creation of ILCO-Texas, as a wholly-owned subsidiary of
ILCO. In addition, the Board of Directors of ILCO has
adopted a resolution authorizing the merger of ILCO with and
into ILCO-Texas (the "Merger") in accordance with the terms
and conditions set forth in this Plan and Agreement of
Merger and pursuant to the provisions of the laws of the
State of New Jersey and the State of Texas.
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E. This Plan and Agreement of Merger and the Merger is subject
to the approval of the shareholders of ILCO, by an
affirmative vote by a majority of those shares of ILCO
constituting at least a quorum at the Annual Meeting. This
Plan and Agreement of Merger and the Merger has been
authorized and approved by the sole shareholders of ILCO-
Texas.
F.No director, officer, agent or employee of ILCO or ILCO-
Texas has received or will receive any fee, commission,
compensation or other valuable consideration for aiding,
promoting or assisting the Merger.
NOW THEREFORE, ILCO and ILCO-Texas, in consideration of the
mutual covenants, agreements and provisions hereinafter
contained, do hereby agree upon and prescribe the terms and
conditions of the Merger and the mode of carrying it into effect,
as follows:
ARTICLE I
MERGER AND SURVIVING CORPORATION
1.1. At the Effective Time, as defined in Section 4.1 below,
ILCO shall be merged into and with ILCO-Texas. The
Surviving Company shall be ILCO-Texas.
1.2. The Merger shall occur pursuant to the provisions of
Part 5, Articles 5.01, 5.03, 5.04 and 5.05 of the Texas
Business Corporation Act and Section 14A:10-7 of the
New Jersey Business Corporation Act.
ARTICLE II
TERMS, CONDITIONS AND MODE OF MERGER
2.1. The Articles of Incorporation and Bylaws of the
Surviving Company shall not be amended by this Merger
and shall remain in effect unchanged until those
Articles of Incorporation or Bylaws may be amended in
accordance with the laws of the State of Texas.
2.2. The directors and officers of the Surviving Company at
the Effective Time shall continue to be the directors
and officers of the Surviving Company until their
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respective successors shall have been elected and
qualified as provided by the Bylaws of the Surviving
Company and the laws of the State of Texas.
2.3. At the Effective Time, the separate existence of the
Merging Company shall cease and all the property,
rights, privileges, franchises, patents, trademarks,
licenses, registrations, causes of action, and other
assets of every kind and description of the Merging
Company at the Effective Time shall, to the extent
permitted by law, transfer to, vest in and devolve upon
the Surviving Company without further act or deed.
2.4 All rights of creditors, including but not limited to
insurance policyholders, and all liens upon the
property of the Surviving Company and the Merging
Company shall be preserved unimpaired, notwithstanding
the Merger, and from and after the Effective Time all
debts, liabilities and duties of the Merging Company
shall attach to the Surviving Company and may be
enforced against it to the same extent as if said
debts, liabilities and duties had been incurred or
contracted by the Surviving Company.
ARTICLE III
TREATMENT OF SHARES
3.1. At the Effective Time, all of the issued and
outstanding shares of the common stock of ILCO,
consisting of 5,339,497 shares of common stock, par
value of $.22 per share, shall be converted into issued
and outstanding shares of ILCO-Texas, par value of $.22
per share.
3.2. At the Effective Time, all of the authorized shares of
(i) the Class A preferred stock of ILCO, consisting of
5,000,000 shares, par value of $1.00 per share, held in
treasury and (ii) the Class B preferred of ILCO,
consisting of 15,000,000 shares, par value of $1.00 per
share, held in treasury shall be converted into
authorized and unissued shares of the preferred stock
of ILCO-Texas, par value of $1.00 per share.
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ARTICLE IV
EFFECTIVE TIME
4.1. This Merger shall become effective (the "Effective
Time") upon the filing of all required documents with
the Texas Secretary of State and the New Jersey
Secretary of State, whichever is later, provided that
such documents shall not be filed until the later of
the following:
a. approval of this Merger by the affirmative vote of
a majority of those shares of common stock of ILCO
constituting at least a quorum at the meeting of
shareholders at which the Merger is considered;
b. approval of this Merger by the sole shareholder of
ILCO-Texas; and
c. the obtaining of all necessary consents or
approvals of any federal or state regulatory
authority necessary for the consummation of the
Merger.
4.2. Notwithstanding anything to the contrary in this Plan
and Agreement of Merger, in the event that the
conditions set forth in Section 4.1.a. to 4.1.c.,
hereof, have not been satisfied on or before December
31, 1997, this Agreement shall be automatically
terminated without the need for further action by
either party.
ARTICLE V
POWER OF ATTORNEY
5.1 As of the Effective Time, ILCO-Texas hereby appoints
the New Jersey Secretary of State and his or her
successors in office as the attorney-in-fact or agent
of ILCO-Texas to accept service of process in any
proceeding to enforce any obligation of the Surviving
Company (including any obligations of ILCO), and
service on the New Jersey Secretary of State shall be
deemed sufficient service on the Surviving Company,
This power of attorney shall be irrevocable so long as
the Surviving Company has outstanding in the State of
New Jersey any contracts or other obligation
whatsoever.
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ARTICLE VI
TERMINATION
6.1 Subject to applicable law, this Plan and Agreement of
Merger may be amended, modified, supplemented or
abandoned by mutual consent of the respective Boards of
Directors of ILCO and ILCO-Texas before or after
approval hereof by the respective shareholders of ILCO
or ILCO-Texas.
ARTICLE VII
GOVERNING LAW
7.1. THIS PLAN AND AGREEMENT OF MERGER SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS, EXCEPT TO THE EXTENT THE LAWS OF THE STATE OF
NEW JERSEY SHALL MANDATORILY APPLY TO THIS MERGER.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized
officers on this day of , 1997.
INTERCONTINENTAL LIFE CORPORATION
By: Roy F. Mitte
Chairman of the Board,
President
and Chief Executive Officer
Attest:
Eugene E. Payne, Secretary
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INTERCONTINENTAL LIFE CORPORATION OF
TEXAS
By:
Roy F. Mitte
Chairman of the Board,
President
and Chief Executive Officer
Attest:
Eugene E. Payne, Secretary
A-6
Exhibit B
ARTICLES OF INCORPORATION
OF
INTERCONTINENTAL LIFE CORPORATION OF TEXAS
The undersigned natural person of the age of 18 years or more,
acting as sole incorporator of a corporation under the Texas
Business Corporation Act, does hereby adopt the following
Articles of Incorporation for such corporation:
ARTICLE I
The name of the corporation is INTERCONTINENTAL LIFE CORPORATION
OF TEXAS
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purpose for which the corporation is organized is to transact
any lawful business for which corporations may be incorporated
under the Texas Business Corporation Act.
ARTICLE IV(A)
The aggregate number of shares of capital stock which the
corporation shall have the authority to issue is forty-five
million (45,000,000) to be divided into two classes as follows:
(1) 30 million shares of Preferred Stock with a par value
of one dollar ($1.00) each, which may be issued from
time to time in one or more series, each series to be
B-1
designated by a distinguishing letter or title. The
Board of Directors of the corporation is hereby
authorized, within the restrictions stated within this
Article IV, to establish each series of Preferred
Stock, to provide for the number of shares in such
series and to establish preferences, qualifications,
limitations, restrictions and special or relative
rights of such series. The authority of the Board of
Directors of the corporation with respect to each
series shall include, but not be limited to, the
determination of the following:
(a) Liquidation: The rights of the shares of each
such series in the event of voluntary or
involuntary liquidation, dissolution or winding up
of the corporation and the relative rights of
priority, if any, of payment of such shares of
such series.
(b) Designation: The number of shares constituting
each such series and the distinctive designation
thereof.
(c) Dividends: The dividend rate on each such
series, whether dividends on the shares of such
series shall be cumulative (and, if cumulative,
the date or dates from which such dividends would
accumulate), and the relative rights of
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priority, if any, of payment of dividends on
shares of such series.
(d) Voting Rights: The voting rights, if any, of
each such series, in addition to the voting rights
provided by law, and the terms thereof.
(e) Redemption: The redemption options or
obligations, if any, in respect of each such
series and the terms and conditions thereof,
including, without limitation, the date or dates
upon or after which such shares are redeemable and
the redemption price payable in respect of such
shares being so redeemed.
(f) Sinking Fund: The sinking fund requirements,
if any, in respect of any redemption required
pursuant to Clause (e) of this Article IV.
(g) Conversion: The conversion privileges, if any,
of each such series and the terms and conditions
thereof.
Dividends on outstanding shares of any series of
Preferred Stock shall be paid or declared and set apart
for payment before any dividends shall be paid or
declared or set apart for payment on the Common Stock
with respect to the same dividend period.
(2) 15 million shares of Common Stock with a par value of
$0.22 each, which may be issued from time to time in
one or more series, each series to be designated by a
B-3
distinguishing letter or title. The Board of Directors
of the corporation is hereby authorized, within the
restrictions stated within this Article IV, to
establish each series of Common Stock, to provide for
the number of shares in such series and to establish
preferences, qualifications, limitations, restrictions
and special or relative rights of such series. The
Preferred Stock is senior to the Common Stock, and the
Common Stock is subject to the rights and preferences
of the Preferred Stock.
(B) No shareholder shall be entitled to cumulate his votes by
giving one candidate as many votes as the number of such
directors to be elected multiplied by the number of shares owned
by such shareholder or by distributing such votes on the same
principle among any number of such candidates.
ARTICLE V
The corporation will not commence business until it has received
for the issuance of its shares consideration of a value not less
than One Thousand Dollars ($1,000.00), consisting of money, labor
done, or property actually received.
ARTICLE VI
The address of the corporation's initial registered office is 701
Brazos, Suite 1400, Austin, Texas 78701, and the name of its
initial registered agent at such address is James M. Grace.
ARTICLE VII
If, with respect to any action taken by the shareholders of the
B-4
corporation, other than plan of merger or consolidation, any
provision of the Texas Business Corporation Act would, but for
this Article, require the vote or concurrence of the holders of
shares having more than a majority of the votes entitled to be
cast thereon, or any class or series thereof, the vote or
concurrence of the holders of shares having only a majority of
the votes entitled to be cast thereon, or any class or series
thereof, shall be required with respect to any such action.
ARTICLE VIII
The number of directors constituting the initial Board of
Directors is eleven (11) and the names and addresses of the
persons who are to serve as directors until the first annual
meeting of the shareholders or until their successors are elected
and qualify are:
Name Address
Roy F. Mitte 701 Brazos, Suite 1400
Austin, Texas 78701
James M. Grace 701 Brazos, Suite 1400
Austin, Texas 78701
Eugene E. Payne 701 Brazos, Suite 1400
Austin, Texas 78701
Jeffrey H. Demgen 701 Brazos, Suite 1400
Austin, Texas 78701
Theodore A. Fleron 701 Brazos, Suite 1400
Austin, Texas 78701
Joseph F. Crowe 706 Golf Crest Lane
Austin, Texas
W. Lewis Gilcrease 114 West San Antonio
San Marcos, Texas
B-5
Name Address
Richard A Kosson 18 Rale Terrace
Livingston, New Jersey
H. Gene Pruner 8705 Flagship Circle
Indianapolis, Indiana
Steven P. Schmitt 701 Brazos, Suite 1400
Austin, Texas 78701
Donald P. Shuman 2 Dayton Road
Flemington, New Jersey
ARTICLE IX
The name and address of the incorporator is:
Christopher W. Schrauff
701 Brazos, Suite 1400
Austin, Texas 78701
EXECUTED BY THE UNDERSIGNED on this 29th day of April, 1997.
/s/ Christopher W. Schrauff
Christopher W. Schrauff
SWORN TO BEFORE ME on this 29th day of April, 1997, by the above
named incorporator,
/s/ Sara Bramlett
Notary Public in and for
Travis County, Texas
B-6
ARTICLES OF AMENDMENT
OF THE ARTICLES OF INCORPORATION
OF INTERCONTINENTAL LIFE CORPORATION OF TEXAS
The undersigned certifies that:
1. He is the Secretary of InterContinental Life Corporation of
Texas.
2.At a duly held meeting of the Board of Directors of
InterContinental Life Corporation of Texas, held on May 6, 1997,
the Board of Directors adopted the following resolution approving
the following amendment to the Articles of Incorporation:
The following shall be added to, not replace, Article VII of
the Articles of Incorporation:
"No holder of securities of the of the corporation
shall be entitled as a matter of right, preemptive or
otherwise, to subscribe for or purchase any securities of
the corporation now or hereafter authorized to be issued,
or securities held in the treasury of the corporation,
whether issued or sold for cash or other consideration or
as a dividend or otherwise. Any such securities may be
issued or disposed of by the Board of Directors to such
persons and on such terms as in its discretion it shall
deem advisable."
3.No shares of InterContinental Life Corporation of Texas stock
have been issued as of the date of these Articles of Amendment.
Therefore, shareholder approval of these Articles of Amendment is
not required.
4.The undersigned has executed these Articles of Amendment on
May 7, 1997.
/s/ Eugene E. Payne
Eugene E. Payne
Vice President and Secretary
B-7
Exhibit C
BY-LAWS OF
INTERCONTINENTAL LIFE CORPORATION OF TEXAS
ARTICLE I
OFFICES
Section 1. The principal office shall be located at 701
Brazos, Austin, Texas 78701. The registered office of the
Corporation shall be located at 701 Brazos, Austin, Texas 78701.
The Agent upon whom process against the corporation may be served
is James M. Grace at said address. The corporation may also have
offices at such other places within and without the State of Texas
as the Board of Directors may, from time to time, determine or the
business of the corporation may require.
Section 2. The corporation may also have offices at such
other places as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
Section 1. All meetings of the stockholders shall be held at
the principal office of the corporation or at such other place as
may from time to time be designated by the Board of Directors and
stated in the notice of the meeting.
Section 2. An annual meeting of stockholders, commencing with
the year 1997, shall be held on the first Friday of July in each
C-1
year if not a legal holiday, and if a legal holiday, then on the
next secular day following, at 3:00 P.M., or at such other time and
place as designated in a Resolution adopted by the Board of
Directors, when the stockholders shall elect by a plurality vote,
by ballot, a Board of Directors, and transact such other business
as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting shall be
served upon or mailed to each stockholder entitled to vote thereat,
at such address as appears on the stock books of the corporation,
not less than ten nor more than sixty days prior to the meeting.
Section 4. At least ten days before every election of
Directors, the Secretary shall make a complete list of the
stockholders entitled to vote at the ensuing election, arranged in
alphabetical order, with the post office address, and the number of
shares held be each, which list shall be at all times, during the
usual hours of business, be kept at the principal office, open to
the examination of any stockholder. The Board of Directors shall
produce at the time and place of each election the transfer books
and stock books of the corporation and said list of stockholders
which shall remain there during the election.
Section 5. Special meetings of the stockholders, for any
purpose or purposes, other than those prescribed by statute or by
the Articles of Incorporation, may be called by the Chairman of the
Board, or by the President and shall be called by the Chairman of
the Board or the President or Secretary at the request in writing
of a majority of the members of the Board of Directors.
C-2
Section 6. Written notice of a special meeting of
stockholders, stating the time and place and object thereof, shall
be served upon or mailed to each stockholders entitled to vote
thereat, at such address as appears on the books of the
corporation, not less than ten days nor more than sixty days before
such meeting.
Section 7. Business transacted at all special meetings shall
be confined to the objects stated in the call.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a
quorum at all meetings of the stockholders for the transaction of
business, except as otherwise provided by statute, by the Articles
of Incorporation or by these By-Laws. If, however, a quorum shall
not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 9. When a quorum is present or represented at any
meeting, vote of the holders of a majority of the stock having
voting power present in person or represented by proxy shall decide
any question brought before such meeting, unless the question is
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one upon which by express provision of the statutes or of the
Articles of Incorporation or of these By-laws, a different vote is
required in which case such express provision shall govern and
control the decision of such question.
Section 10. At any meeting of the stockholders every
stockholder having the right to vote shall be entitled to vote in
person or by proxy appointed by an instrument in writing subscribed
by such stockholder or by his duly authorized attorney and bearing
a date not more than three years prior to said meeting. Each proxy
shall be delivered to the Secretary of the corporation prior to the
holding of the meeting. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have
the effect of revoking the proxy unless the stockholder so
attending shall, in writing, so notify the Secretary at any time
prior to the voting of the proxy. Each stockholder shall have one
vote for each share of stock having voting power registered in his
name at the time of the closing of the transfer books or on the
date fixed as a record date for said meeting. In case the transfer
books of the corporation shall not have been closed and no date
shall have been fixed as a record date for the determination of the
stockholders entitled to vote, no share of stock shall be voted on
at any election of Directors, after the first election of
Directors, which has been transferred on the books of the
corporation within twenty days next preceding such election of
Directors.
Section 11. Any action required to be taken at a meeting of
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the stockholders may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all
of the stockholders entitled to vote with respect to the subject
matter thereof.
ARTICLE III
DIRECTORS
Section 1. The number of Directors which shall constitute the
whole Board shall be any number not less than three nor more than
twenty-five as authorized by vote of a majority of the entire Board
of Directors at any regular or special meeting, provided that no
decrease shall shorten the term of any incumbent Director. The
Directors shall be elected by the stockholders at the annual
meeting of stockholders, and each Director shall be elected to
serve until his successor shall be elected and shall qualify.
No Director's name shall be submitted to the shareholders at
the Annual Meeting for reelection unless said Director during his
preceding term in office attended at least half of the duly called
meetings of the Directors of the Company unless the Board in light
of existing circumstances determines otherwise.
Section 2. A regular meeting of the Board shall be held
without notice immediately following and at the same place as the
annual shareholders' meeting for the purposes of electing officers
and conducting such other business as may come before the meeting.
The Board, by resolution, may provide for additional regular
meetings which may be held without notice.
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Section 3. A special meeting of the Board may be called at
any time by the Chairman of the Board or by a majority of the
members of the Board of Directors for any purpose. Such meeting
shall be held upon not less than three (3) days notice. Such
notice shall be given by posting written notice in the United
States mail, postage prepaid. Such notice shall specify the date,
time and place of the meeting.
Section 4. The Board may act without a meeting if, prior or
subsequent to such action, each member of the Board shall consent
in writing to such action. Such written consent or consents shall
be filed in the minute book.
Section 5. At all meetings of the Board, the presence of a
majority of the Directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of
a majority of the Directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the
Articles of Incorporation or by these By-laws. Any Director may
participate in a meeting of the Board or a committee thereof by
means of a conference telephone or any other means of
communication, provided, that all persons participating in the
meeting are able to hear each other. Any Director participating in
accordance with the preceding sentence of this Section 5 of Article
III shall be deemed present for all purposes of the meeting. If a
quorum shall not be present at any meeting of Directors, the
Directors present thereat may adjourn the meeting from time to
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time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 6. Any vacancy in the Board, including a vacancy
caused by an increase in the number of Directors, may be filled by
the affirmative vote of a majority of the remaining Directors, even
though less than a quorum of the Board, or by a sole remaining
Director.
Section 7. The property and business of the corporation shall
be managed by its Board of Directors who may exercise all such
powers of the corporation and do all such lawful acts and things as
are not by statute or by the Articles of Incorporation or by these
By-laws directed or required to be exercised or done by the
stockholders.
If the Corporation owns 10% or more of the shares of stock of
another corporation, any voting or other action that may be taken
by the Corporation in its capacity as shareholder of such
corporation shall be taken by a majority vote of the Corporation's
Board of Directors or a majority vote of the Executive Committee of
the Board of Directors.
Section 8. The Board of Directors shall have the power to
remove Directors for cause and to suspend Directors pending a final
determination that cause exists for removal.
EXECUTIVE AND OTHER COMMITTEES
Section 9. The Board of Directors may appoint an executive
committee, to consist of two or more of the Directors, which,
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except to the extent limited in said resolution, shall have and may
exercise the powers of the Board of Directors in the management of
the business, affairs and property of the corporation during the
intervals between the meetings of the Directors, and may have power
to authorize the seal of the corporation to be affixed to all
papers which may require it. Vacancies in the membership of the
committee shall be filled by the Board of Directors at a regular
meeting thereof or at a special meeting called for that purpose.
The executive committee shall keep regular minutes to its
proceedings and report the same to the Board when required. The
Board of Directors is authorized from time to time by a resolution
adopted by a majority of the entire board to establish one or more
other committees, each committee shall have at least three members.
Said resolution may provide the committees with powers consistent
with the laws of the State of Texas. The Board of Directors may be
resolution adopted by a majority of the entire Board abolish any
such committees or amend any resolution authorizing such
committees.
COMPENSATION OF DIRECTORS
Section 10. Directors, as such, shall not receive any stated
salary for their services, but, by resolution of the Board, a fixed
sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board;
provided, that nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other
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capacity and receiving compensation therefor. Members of the
executive or any other committee may be allowed like compensation
for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Any notice required by these By-laws, by the
Articles of Incorporation, or by the Texas Business Corporation Act
may be waived in writing by any person entitled to notice. The
waiver or waivers may be executed either before or after the event
with respect to which notice is waived. Each Director or
shareholder attending a meeting without protesting, prior to its
conclusion, the lack of proper notice shall be deemed conclusively
to have waived notice of the meeting.
Section 2. Whenever under the provisions of the statutes or
of the Articles of Incorporation or of these By-Laws, notice is
required to be given to any Director or stockholder, it shall not
be construed to mean personal notice, but such notice may be given
in writing, by mail, addressed to such Director or stockholder at
such address as appears on the books of the corporation, and such
notice shall be deemed to be given at the time when the same shall
be thus mailed.
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ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be a
Chairman of the Board, President, one or more Vice Presidents, a
Secretary, a Treasurer and one or more Assistant Secretaries. Any
two of the aforesaid offices, except those of President and Vice
President, may be held by the same person.
Section 2. The Board of Directors at its first meeting after
each annual meeting of stockholders shall elect a President from
its members, and the Board shall also annually choose a Vice
President, a Secretary and a Treasurer none of whom need be members
of the Board.
Section 3. The Board may appoint additional Vice Presidents
and Assistant Secretaries and Assistant Treasurers and such other
officers, and agents as it shall deem necessary, who shall have
such authority and shall perform such duties as from time to time
shall be prescribed by the Board.
Section 4. The officers of the corporation shall hold office
until their successors are chosen and qualify in their stead. Any
officer elected or appointed by the Board of Directors may be
removed with or without cause, at any time, by the affirmative vote
of a majority of the whole Board of Directors. If the office of
any officer becomes vacant for any reason, the vacancy shall be
filled by the Board of Directors.
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CHAIRMAN
Section 6. The Chairman of the Board shall be the Chief
Executive Officer of the Corporation and shall preside at all
meetings of the shareholders and the Board of Directors. Subject
only to the authority of the Board of Directors, he shall have
general charge and supervision over, and responsibility for, the
business and affairs of the Corporation. All other officers of the
Corporation shall be subject to the authority, supervision and
direction of the Chairman of the Board. The Chairman may enter
into and execute in the name of the Corporation, contracts or other
instruments in the regular course of business and contracts and
other instruments not in the regular course of business and
contracts and other instruments not in the regular course of
business which are authorized, either generally or specifically, by
the Board of Directors or the Executive Committee.
PRESIDENT
Section 7. The President shall perform such duties and shall
have such authority as is usually vested in the office of the
president of a corporation, subject to the supervision and
direction of the Chairman of the Board of Directors.
VICE PRESIDENT
Section 8. One or more Vice President shall be elected to
perform such duties and have such authority as from time to time
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may be delegated to them by the Chairman of the Board or by the
President or by the Executive Committee.
TREASURER
Section 9. The Treasurer shall have the custody of the funds
and securities of the corporation and shall keep or cause to be
kept regular books of account for the Corporation. The Treasurer
shall perform such other duties and possess such other powers as
are incident to that office or as shall be assigned by the Chairman
of the Board or by the President or by the Executive Committee.
SECRETARY AND ASSISTANT SECRETARY
Section 10. The Secretary shall cause notices of all meetings
to be served as prescribed in these By-laws and shall keep or cause
to be kept the minutes of all meetings of the shareholders and the
Board and Executive Committee. The Secretary shall perform such
other duties and possess such other powers as are incident to that
office or as are assigned by the Chairman of the Board or by the
President or the Executive Committee. One or more Assistant
Secretaries may be elected to perform such duties as may be
assigned to them by the Chairman of the Board or by the President
or by the Executive Committee, but they shall not have authority to
give notices of meetings. The Secretary shall be the only person
authorized to give notices of meetings and shall cause notices of
all meetings to be served as prescribed in these By-laws.
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ARTICLE VI
CERTIFICATES OF STOCK
Section 1. The certificates of stock of the corporation shall
be numbered and entered into the books of the corporation as they
are issued. They shall exhibit the holder's name and the number of
shares owned by him in the corporation, and shall be signed by the
president or Vice-President and Treasurer or Assistant Treasurer or
the Secretary or Assistant Secretary. If any certificate is signed
by a transfer agent or an assistant transfer agent or by a transfer
clerk on behalf of the corporation and a registrar, the signature
of any such officer may be facsimile.
LOST CERTIFICATES
Section 2. The Board of Directors may direct a new
certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation,
alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of
stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in
such manner as it shall require and/or give the corporation a bond
in such sum and with such surety or sureties as it may direct as
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indemnity against the corporation with respect to the certificate
alleged to have been lost or destroyed.
TRANSFER OF STOCK
Section 3. Upon surrender to the corporation or transfer
agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or
authority of transfer, it shall be the duty of the corporation to
issued a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 4. The Board of Directors may close the stock
transfer books of the corporation in its discretion for a period
not exceeding fifty days preceding the date of any meeting, annual
or special, of the stockholders, or the date for payment of any
dividend, or the date for the allotment of rights or the date when
any change or conversion or exchange of capital stock shall go into
effect. In lieu of closing the stock transfer books, the Board of
Directors may fix, in advance, a date not exceeding fifty (50) days
preceding the date of any meeting, annual or special, of
stockholders or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or
conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to
notice of and to vote at any such meeting, or entitled to receive
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payment of any such dividend, or any such allotment of rights, or
to exercise the rights in respect to any such change, conversion or
exchange of capital stock, and in such case only stockholders of
record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting or to receive payment of such dividend
or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the
corporation after such record date fixed as aforesaid.
REGISTERED STOCKHOLDERS
Section 5. The corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in
fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other
notice thereof, except as expressly provided by the laws of Texas.
ARTICLE VII
INDEMNITY
Section 1. Any present or future director or officer of the
corporation and any present or future director or officer of any
other corporation serving as such at the request of the corporation
because of the corporation's interest in such other corporation, or
the legal representative of any such director or officer, shall be
indemnified by the corporation against reasonable costs, expenses
(exclusive of any amount paid to the corporation in settlement) and
counsel fees paid or incurred in connection with any action, suit
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or proceeding to which any such director or officer or his legal
representative may be made a party by reason of his being or having
been such director or officer and shall otherwise be accorded the
fullest benefits contemplated and set forth in Articles 2.02 and
2.02-1 of the Texas Business Corporation Act, subject to the
qualifications set forth in said Statute.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon stock of the corporation, subject
to the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be declared in cash, in
property or in stock.
Section 2. Before payment of any dividend, there may be set
aside out of the funds of the corporation available for dividends
such sum or sums as the Directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other
purpose as the Directors shall think conducive to the interests of
the corporation, and the Directors may modify or abolish any such
reserve in the manner in which it was created.
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CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may, from time to
time, designate.
FISCAL YEAR
Section 4. The fiscal year shall begin the first date of
January in each year.
SEAL
Section 5. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the
words "Corporate Seal, Texas."
ARTICLE IX
AMENDMENTS TO AND EFFECT OF BY-LAWS
Section 1. These By-laws are subject to the provisions of the
Texas Business Corporation Act and the Corporation's Articles of
Incorporation, as it may be amended from time to time. If any
provision in these By-laws is inconsistent with a provision in that
Act or the Articles of Incorporation, the provision of that Act or
the Articles of Incorporation shall govern.
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Section 2. These By-laws may be altered, amended or repealed
by the shareholders or the Board. Any By-law adopted, amended or
repealed by the shareholders may be amended or repealed by the
Board, unless the resolution of the shareholders adopting such By-
law expressly reserves to the shareholders the right to amend or
repeal it.
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CERTIFICATION
I hereby certify to the best of my knowledge as Secretary of
Intercontinental Life Corporation of Texas that the attached copy
of the Articles of Incorporation is a true and correct copy.
Date:
Eugene E. Payne
CERTIFICATION
I hereby certify as Secretary of InterContinental Life
Corporation of Texas that the attached copy of the By-Laws is a
true and correct copy of the By-Laws of InterContinental Life
Corporation of Texas.
Dated:
Eugene E. Payne
InterContinental Life Corporation
P R O X Y
Annual Meeting of Shareholders, June 17, 1997
This Proxy is Solicited on Behalf of the Board of Directors of
InterContinental Life Corporation
Roy F. Mitte and James 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 InterContinental Life Corporation to be
held on Tuesday, June 17, 1997 or at any postponements or
adjournments thereof, as indicated on the reverse side of this
card.
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 AND IN FAVOR OF ITEM
NO. 2. 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.
(Continued and to be signed on reverse side)
1. ELECTION OF DIRECTORS
FOR all nominees listed below
WITHHOLD AUTHORITY to vote for all nominees listed below
EXCEPTIONS
Nominees: J. Crowe, J. Demgen. T. Fleron, L. Gilcrease, J.
Grace, R. Kosson, R. Mitte, E. Payne, H.G. Pruner, S.
Schmitt, D. Shuman
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the exceptions box and strike a line through that
nominee's name.
2. REDOMESTICATION OF THE COMPANY AND THE RELATED PLAN AND
AGREEMENT OF MERGER OF THE COMPANY INTO ILCO-TEXAS, A WHOLLY-
OWNED SUBSIDIARY OF THE COMPANY
FOR AGAINST ABSTAIN
3. 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.
Please mark boxes in blue or black ink.
Address Change and/or Comments Mark Here
In the case of joint or common
ownership, each owner should sign.
Dated: , 1997
Signature
Signature if held jointly
Please Mark, Sign, Date and Return This Proxy Card Promptly Using
the Enclosed Envelope.
