InterContinental Life Corporation
Austin Centre, 701 Brazos, Austin, Texas 78701
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders of
InterContinental Life Corporation, which will be held at the Austin
Centre, 701 Brazos, Austin, Texas 78701 on May 19, 1998, at 10:00
a.m. local time. For those of you who cannot be present at this
meeting, we urge that you participate by indicating your choices on
the enclosed proxy and completing and returning it to us in the
enclosed postage paid envelope at your earliest convenience. By
returning your proxy promptly, you will assist us in reducing the
Company's expenses relating to the meeting. You can revoke your
signed proxy at any time before it is used.
We appreciate your support and cooperation in returning the enclosed
proxy.
Cordially,
Roy F. Mitte
Chairman, President and Chief Executive
Officer
InterContinental Life Corporation
Austin Centre, 701 Brazos, Austin, Texas 78701
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 May 19, 1998 at 10:00 a.m. local
time. 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. Such other business that may properly come before the meeting
or any adjournment thereof.
Only those Shareholders of record at the close of business on March 27,
1998 (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.
April 16, 1998
By Order of the Board of Directors
Eugene E. Payne
Secretary
PROXY STATEMENT FOR 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 Annual Meeting of Shareholders to
be held May 19, 1998, 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 April 16, 1998.
A copy of the Annual Report to Shareholders for the year ended
December 31, 1997, 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 March 27, 1998, will be entitled to vote at the
Annual Meeting. At the close of business on such date, there were
outstanding and entitled to vote 5,427,965 shares of common stock, $.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
specification 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, except Elizabeth T. Nash. 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 are
set forth below. The data supplied below is based on information
received from the Directors.
Name Age Director Since Principal Occupation and Other
Information
Robert A. Bender 44 1997 Director of ILCO since October,
1997. Vice President of Family
Life Insurance Company (a
subsidiary of Financial Industries
Corporation) since January 1997.
Vice President of Investors Life
Insurance Company of North America
since January 1997. Vice President
of Investors Life Insurance Company
of Indiana (formerly known as
InterContinental Life Insurance
Company) since January 1997.
Assistant Vice President of
Investors Life Insurance Company of
North America from February 1994 to
January 1997. Assistant Vice
President of Investors Life
Insurance Company of Indiana from
February 1994 to January 1997, when
it merged into ILIC. Assistant
Vice President of Family Life
Insurance Company from February
1994 to January 1997. Retired from
22 years of service in the U.S.
Army in February 1994.
Jeffrey H. Demgen 45 1995 Director of FIC since May 1995.
Vice President of FIC since August
1996. Vice President and Director
of ILCO since August 1996.
Director of FIC since May 1995.
Executive Vice President and
Director of Family Life Insurance
Company since August 1996. Senior
Vice President and Director 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
Investors Life Insurance Company of
Indiana (formerly known as
InterContinental Life Insurance
Company) since August 1996.
Executive Vice President and
Director of Investors Life
Insurance Company of Indiana from
August 1996 to December 1997, when
it merged into ILIC. Senior Vice
President of United Insurance
Company of America from September
1984 to July 1992.
Theodore A. Fleron 58 1991 Vice President and Director of ILCO
since May 1991. Assistant
Secretary of ILCO 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 Investors Life
Insurance Company of Indiana
(formerly known as 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 from June 1995 to December
1997, when it merged into ILIC.
Senior Vice President, General
Counsel, Director and Assistant
Secretary of Family Life Insurance
Company since August 1996.
W. Lewis Gilcrease 66 1988 Dentist practicing in San Marcos,
Texas. Director of ILCO since
1988. Director of FIC from 1979 to
July 6, 1991.
James M. Grace 54 1984 Vice President and Treasurer of
ILCO since January 1985. Vice
President, Treasurer and Director
of Financial Industries Corporation
since July 1976. Executive Vice
President, Treasurer and Director
of Investors Life Insurance
Company of Indiana (formerly know
as InterContinental Life Insurance
Company ) since 1989. Executive
Vice President and Treasurer of
Investors Life Insurance Company of
North America since 1989.
Executive Vice President, Treasurer
and Director of Family Life
Insurance Company (a subsidiary of
FIC) since June 1991. Director,
Executive Vice President and
Treasurer of Investors Life
Insurance Company of Indiana from
February 1995 to December 1997,
when it merged into ILIC.
Richard A. Kosson 65 1981 Certified Public Accountant and a
partner in the firm of Manheim,
Kosson & Novick in Millburn, New
Jersey.
Roy F. Mitte 66 1985 Chairman of the Board and Chief
Executive Officer of ILCO and
Investors Life Insurance Company of
Indiana (formerly known as
InterContinental Life Insurance
Company) since January 1985.
President of ILCO since April 1985.
Chairman of the Board, President
and Chief Executive Officer of
Financial Industries Corporation
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 from February 1995 to
December 1997, when it merged into
ILIC.
Elizabeth T. Nash 48 Member, Board of Regents, Texas
State University System from 1993
to present; Vice Chairman from 1996
to 1997 and Chairman from 1997 to
1998. Trustee, Southwest Texas
State University Development
Foundation from 1992 to present;
Chairman from 1992 to 1997.
Community Board of Directors (San
Marcos, Texas) Norwest Bank since
1996.
Eugene E. Payne 55 1989 Vice President of ILCO since
December 1988 and Director and
Secretary since May 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 December
1988. Executive Vice President
since December 1988 and Director
since May 1989 of Investors Life
Insurance Company of Indiana
(formerly known as InterContinental
Life Insurance Company). Executive
Vice President, Secretary and
Director of Family Life Insurance
Company since June 1991. Director,
Executive Vice President and
Secretary of Investors Life
Insurance Company of Indiana from
February 1995 to December 1997,
when it merged into ILIC.
H. Gene Pruner 69 1996 Director of ILCO since August 1996.
Director of Investors Life
Insurance Company of Indiana
(formerly known as InterContinental
Life Insurance Company) since
December, 1997. Director of
Investors Life Insurance Company of
Indiana from February 1995 to
December 1997, when it merged into
ILIC. President of Market Share,
Inc. since April 1985.
Steven P. Schmitt 51 1994 Senior Vice President since April
1992 and Director, Vice President
and Assistant Secretary since
August 1989 of Investors Life
Insurance Company of North America
and Investors Life Insurance
Company of Indiana (formerly known
as 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-
Indiana from June 1995 to December
1997.
All of the nominees named on the previous pages were elected
Directors at the 1997 Annual Shareholders Meeting, except (i) Mr.
Bender who was appointed a Director by the Board of Directors in
October, 1997 and (ii) Mrs. Nash who was nominated by the Board of
Directors to be elected at the 1998 Annual Meeting of Shareholders.
The incumbent directors, except for Donald Shuman, have been
nominated for submission to vote of the shareholders for reelection at
the 1998 annual shareholders' meeting.
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 66 Chairman of the Board,
President and Chief Executive
Officer
James M. Grace 54 Vice President and Treasurer
Eugene E. Payne 55 Vice President and Secretary
Jeffrey Demgen 45 Vice President
In May 1991, Roy F. Mitte suffered a stroke, resulting in partial
paralysis affecting his speech and mobility. Mr. Mitte continues to
make the requisite decisions in his capacity as Chief Executive
Officer, although his ability to communicate and his mobility are
impaired.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to
file reports of beneficial ownership on 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 representation that no Forms 5 were required, the Company
believes that during the period from January 1, 1997 through December
31, 1997, all Section 16(a) filing requirements applicable to its
officers directors and greater than ten percent beneficial owners were
complied with, except as follows: Robert A. Bender filed a Form 5 in
February, 1998, to report his appointment as a Director of the Company
as of October 10, 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information as of March 16, 1998 as to
all persons who, to the knowledge of the Company, were beneficial
owners of five (5%) percent or more of the Common Stock of the Company.
Amount and
Nature of Percent of
Name and Address Beneficial Ownership Class
Financial Industries Corp.
701 Brazos, Suite 1400
Austin, TX 78701............. 3,668,501 (1) 60.68% (6)
Roy F. Mitte
701 Brazos, Suite 1400
Austin, TX 78701.............. 3,684,361 (2,3) 60.94% (6)
Investors Life Insurance Company
of North America
701 Brazos, Suite 1400
Austin, TX 78701................ 334,960 (4) 7.71% (6)
Investors Life Insurance
Company of Indiana
701 Brazos, Suite 1400
Austin, TX 78701................. 281,560 (5) 6.48% (6)
Fidelity Management & Research
Company
82 Devonshire Street
Boston, MA 02109................... 432,7007 9.96% (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 16, 1998, Mr. Mitte, jointly with his wife Joann,
currently owns 1,493,216 common shares of Financial
Industries Corporation ("FIC"). Mr. Mitte and his wife also
control the Roy F. and Joanne Cole Mitte Foundation, a Texas
non-profit corporation (the "Foundation"), which owns 373,304
common shares of FIC stock as a result of a donation made by
Mr. Mitte and his wife from their personal holdings. The
holdings of the Foundation combined with Mr. and Mrs. Mitte's
remaining personal holdings in FIC stock constitutes 34.39
percent of the outstanding common stock of that company. 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 15,860 shares allocated to Mr. Mitte's account
under the Employee Stock Ownership Plan.
4. Represents 281,560 shares owned by Investors Life Insurance
Company of Indiana (formerly InterContinental Life Insurance
Company) and 53,400 shares owned directly by Investors-NA.
Investors-IN is a life insurance company subsidiary of
Investors-NA. All of these shares are treated as treasury
shares.
5. All are directly owned by Investors Life Insurance Company of
Indiana and are treated as treasury shares.
6. Assumes that 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 &
Research 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 432,700 shares of ILCO common stock,
of which 418,300 shares were reported on a Schedule 13(G)
filed on February 14, 1997 and 14,400 additional shares which
were reported on a schedule 13(g) filed on February 14, 1998.
The following table contains information as of March 16, 1998 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.
Amount
Nature of Percent of
Name Beneficial Ownership Class
Robert A. Bender 854 (3) *
Jeffrey H. Demgen 4,067 (3) *
Theodore A. Fleron 15,689 (3,4) *
W. Lewis Gilcrease -0-
James M. Grace (1) 61,346 (2,3) 1.4%
Richard A. Kosson 200 *
Roy F. Mitte 1 3,684,361 (3) 60.94%
Elizabeth T. Nash -0-
Eugene E. Payne (1) 32,286 (3) *
H. Gene Pruner -0-
Steven P. Schmitt 14,347 (3,4) *
Donald Shuman 450 *
All Executive
Officers and
Directors as a
group, all of
whom are listed
above 3,813,600 (1,2,3,4) 62.83%
* Less than 1%
(1) As an executive officer and/or director of FIC which as of
March 16, 1998 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, above), Mr.
Grace owns 5,600 shares of FIC Common Stock.
(2) Includes 12,000 shares issuable upon exercise of options
granted under the Non-Qualified Stock Option Plan during 1988
to Mr. Grace at a price of $3.33 (as adjusted) per share,
which are currently available for exercise.
(3) Includes shares beneficially acquired through participation
in the Company's ESOP, 401K 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 each of Messrs. Fleron and Schmitt at a price of $3.33 (as
adjusted) per share, which are currently exercisable.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTOR
Summary Compensation Table
The following table sets forth information concerning the
compensation of the Company's Chief Executive Officer and each of the
three other persons who were serving as executive officers of the
Company at the end of 1997 and received cash compensation exceeding
$100,000 during 1997.
<PAGE>
Annual Compensation
Long Term
Compensa-
tion
Awards
Name and Stock
Principal Options All Other
Position Year Salary(1) Bonus(8) Other(2)(Shares) Compensation(9)
Roy F.
Mitte,
Chairman,
President 1997 $252,253 $751,500 -0- -0- -0-
and Chief 1996 $286,643 -0- -0- -0- $2,446,397(3)
Executive 1995 $286,643 -0- -0- -0- $ 713,513(4)
Officer
James M.
Grace,
Vice
President 1997 $195,000 $40,000 -0- (5) -0- $ 19,024
and 1996 $195,000 $15,000 -0- -0- -0-
Treasurer 1995 $195,000 $10,000 -0- -0- -0-
Eugene E.
Payne,
Vice 1997 $195,000 $40,000 -0-(6) -0- $17,925
President 1996 $195,000 $15,000 -0- -0- -0-
and 1995 $195,000 $10,000 -0- -0- -0-
Secretary
Jeffrey
H. Demgen 1997 $117,884 $ 30,000 -0- -0- -0-
Vice 1996 $102,500 $ 7,500 -0- -0- -0-
Presi-
dent(7)
(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. FIC and/or Family Life reimbursed
the Company (or, in the case of Mr. Mitte, authorized payment of) the
following amounts as FIC's or Family Life's share of these executive
officers' cash compensation and bonus for 1995, 1996 and 1997: (i) Mr.
Mitte: $216,857, $216,857, and $999,746 respectively, which amounts are
not included in the above table; (ii) Mr. Grace: $88,293, $83,987 and
$68,150 respectively; (iii) Dr. Payne: $79,875, $83,987 and $68,150
respectively; and (iv) Mr. Demgen $46,125 and $66,548(1996 and 1997
only).
(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 was 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 paid
$407,000 of these option cancellation payments to Mr. Mitte, with the
balance of $713,513 being paid by ILCO.
(5) Mr. Grace exercised stock options in 1997 to purchase 12,000
shares of the Company's Common Stock under the Non-Qualified Option
Plan and 30,000 shares of the Company s Common Stock under the
Incentive Stock Option Plan. See "Aggregated Option Exercises in 1997"
below.
(6) Dr. Payne exercised stock options in 1997 to purchase 6,000
shares of the Company's Common Stock under the Non-Qualified Stock
Option Plan and 20,000 shares of the Company s Common Stock under the
Incentive stock Option Plan. See "Aggregated Option Exercises in 1997"
below.
(7) Mr. Demgen became an executive officer of the Company in August,
1996.
(8) The data in this column represents the annual bonus paid in 1997.
The bonuses for Mr. Grace, Dr. Payne and Mr. Demgen represent amounts
paid in 1997, but include the bonuses awarded with respect to the years
1996 and 1997. Dr. Payne elected to defer this amount into the
Company's Non-Qualified Deferred Compensation Plan. The Plan was
established in 1997 to permit Mr. Grace and Dr. Payne to defer a
portion of their compensation. Under the provisions of the Plan,
contributions are invested on a money purchase basis and plan benefits
are based on the value of the account at retirement or other
distribution. In accordance with applicable tax law requirements,
amounts allocated to the Plan are subject to the claims of general
creditors of the Company. See also, Note 9.
(9) The data in this column represents the amount paid by the Company
in 1997 to Mr. Grace and Dr. Payne to supplement the benefits under the
Company's Pension Plan. The supplement relates to each of the past
service years for Mr. Grace and Dr. Payne which were affected by the
limitation on compensation which the Pension Plan may take into
account for benefit accrual purposes. Under federal pension rules, an
employee's benefits under a qualified pension plan, such as the ILCO
Pension Plan, are limited to certain maximum amounts. The amount of
the payments made in 1997 was determined by comparing the accrued
benefit for the listed individuals under the ILCO Pension Plan through
December 31, 1996 to the accrued benefit which the individual would
have had under the Plan's benefit formula without application of the
limitations applicable to tax qualified retirement plans. The value of
the difference, representing an amount payable for life commencing at
normal retirement age, was then commuted to its present value, which
amount is included in this column. Mr. Grace and Dr. Payne elected to
defer their respective amounts into the Company's Non-Qualified
Deferred Compensation Plan. The Company intends to make a similar
payment with respect to benefit accruals for the year 1997 only;
however, there is no obligation for it to do so. See Note 8.
Aggregated Option Exercised in 1997
The following table sets forth information concerning each
exercise of stock options during 1997 by each of the individuals who
were executive officers of the Company as of December 31, 1997:
Shares Acquired Value
Name On Exercise (#) Realized ($)
James M. Grace 42,000 $ 437,340
Eugene E. Payne 26,000 $ 278,920
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 In-the
Options Held at Money Options at December
December 31, 1997 31, 1997
Name Exercisable Unexercisable Exercisable Unexercisable
James M. Grace 12,000 12,000 $ 200,040 $200,040
Eugene E. Payne 6,000 6,000 $ 100,020 $100,020
(1) Based on the closing price of the Company's Common Stock on
NASDAQ on December 31, 1997 ($20.00).
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
30 or
Remuneration 15 20 25 more
$125,000 $29,437 $39,250 $49,062 $58,875
150,000 35,325 47,100 58,875 70,650
160,000 37,680 50,240 62,800 75,360
175,000 41,212 54,950 68,687 82,425
200,000 47,100 62,800 78,500 94,200
The normal retirement benefit provided under the Pension Plan is
equal to 1.57% of final average eligible earnings less 0.65% 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, 1995, and 1996 and
is $160,000 for 1997 and each subsequent year.
The annual eligible earnings, for 1997 only, covered by the
Pension Plan (salary and bonus up to $160,000) 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, 1997 being shown in parentheses: Mr. Mitte, $160,000
(10 years), Mr. Grace, $160,000 (10 years), Dr. Payne, $160,000 (9
years), and Mr. Demgen (5 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 , the
Employees Stock Ownership Plan ("ESOP") and the Savings and Investment
(401K) Plan. They also participate in various other benefits,
including medical and pension plans generally available to employees of
the Company. The objectives of the stock option plan, the ESOP and the
401K Plan 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 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, 1997, options
to purchase 84,000 shares were outstanding, of which options to buy
36,000 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, 1996 or 1997.
ILCO's ESOP is a noncontributory employee benefit plan available
to all employees who have completed one year of service. Allocations
of ILCO's contributions are made to participants in accordance with
their compensation. Vesting of participants in their accounts occurs
in annual installments over a period of approximately ten years. The
assets of the ESOP consist of 350,296 shares of ILCO's Common Stock, of
which are 45,512 shares are allocated to the accounts of executive
officers of the Company and ILCO and the balance of the shares are
allocated to the other participants.
ILCO's 401K Plan allows eligible employees to make voluntary
contributions on a tax deferred basis. During 1997, the Plan was
changed to provide for a matching contribution by participating
companies. The match, which is in the form of shares of ILCO common
stock, is equal to 100% of an eligible participant's elective deferral
contributions, as defined in the Plan, not to exceed 1% of the
participant's plan compensation. Allocations are made on a quarterly
basis to the account of participants who have at least 250 hours of
service in that quarter.
The Company provides medical and pension benefits to the
executive officers that are generally available to employees.
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. For the year
1997, the Committee recommended that the Chief Executive Officer's
1997 Compensation continue at the same level in effect for the year
1996 ($286,643). In addition, the Committee recommended that the Chief
Executive Officer receive a cash bonus in the amount of $750,000.
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.
Since the Chief Executive officer's 1997 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 1997. Nevertheless, the
Committee believes that it is noteworthy that (i) the Company's net
income for 1997 was $20,540,000 ($4.75 basic and $4.70 diluted per
share) compared to net income of $26,938,000 ($6.36 basic and $6.07
diluted per share) for 1996 and (ii) net income for the year 1997
includes $9.1 million from the sale of Investors Life's interest in the
Bridgepoint Square Offices.
The foregoing report is submitted by the members of the
Compensation Committee.
<PAGE>
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,
1992 of $100 in the Company's Common Stock, the Nasdaq Stock Market
(U.S.) and an index of stock of life insurance companies traded on
Nasdaq and the reinvestment of all dividends).
[Performance Graph Omitted]
2/31/92 12/31/93 12/31/94 12/31/95 12/30/96 12/31/97
The Company (1) $100.00 $113.33 $ 93.33 $113.33 $112.34 $181.31
The Nasdaq Stock
Market (US) $100.00 $114.80 $112.20 $158.70 $195.20 $239.50
Index of Nasdaq
Life Insurance
Stocks(2) $100.00 $119.60 $102.90 $154.60 $199.50 $263.40
(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 (41 issues traded during that period, of
which, 25 issues were traded on December 29, 1997). 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 and Payne 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 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
(a) The obligations of the Company under the Senior Loan are guaranteed
by FIC. FIC presently owns 1,966,346 shares of the company's
Common Stock, constituting 45.40% 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 60.80% of the
outstanding shares of the Company's Common Stock. As described
under the heading Senior Loan , the current Senior Loan of ILCO
is scheduled to be fully repaid on October 1, 1998. Accordingly,
unless ILCO s Senior Loan is extended, or ILCO otherwise incurs
indebtedness which is guaranteed by FIC, FIC s rights under the
1986 option agreement would expire on October 1, 1998.
(b) In connection with the December, 1997 sale of Bridgepoint Square
Offices by Investors-NA and Family Life Insurance Company, FIC
Realty received a commission in the amount of $156,000, of which
$122,538 was paid by Investors-NA and $33,462 by Family Life.
(c) 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, Ins. ("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 non-transferable options to
purchase, in the amounts proportionate to their respective loans,
up to a total of 9.9 percent of shares of FIC's common stock at a
price of $10.50 per share ($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 totaling $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.
In June, 1996, the provisions of the notes from Investors-NA to
FIC, Family Life Corporation ( FLC ) and Family Life Insurance
Investment Company ( FLIIC ) were modified as follows: (a) the
$22.5 million note was amended to provide for twenty quarterly
principal payments, in the amount of $1,125,000 each, to commence
on December 12, 1996; the final quarterly principal payment is due
on September 12, 2001; the interest rate on the note remains at
11%, (b) the $30 million note was amended to provide for forty
quarterly principal payments, in the amount of $163,540 each for
the period December 12, 1996 to September 12, 2001; beginning with
the principal payment due on December 12, 2001, the amount of the
principal payment increases to $1,336,458; the final quarterly
principal payment is due on September 12, 2006; the interest rate
on the note remains at 9%, (c) the $4.5 million note was amended
to provide for forty quarterly principal payments, in the amount
of $24,531 each for the period December 12, 1996 to September 12,
2001; beginning with the principal payment due on December 12,
2001, the amount of the principal payment increases to $200,469;
the final quarterly principal payment is due on September 12, 2006;
the interest rate on the note remains at 9%, (d) the $2.5 million
note was amended to provide that the principal balance of the note
is to be repaid in twenty quarterly installments of $125,000 each,
commencing December 12, 1996 with the final payment due on
September 12, 2001; the rate of interest remains at 12%, (e) the
Master PIK note, which was issued to provide for the payment in
kind of interest due under the terms of the $2.5 million note prior
to June 12, 1996, was amended to provide that the principal balance
of the note ($1,977,119) is to be paid in twenty quarterly
principal payments, in the amount of $98,855.95 each, to commence
December 12, 1996 with the final payment due on September 12, 2001;
the interest rate on the note remains at 12%.
(d) The Company reimbursed FIC for rental expenses and certain other
operating expenses incurred during 1997 on behalf of the Company.
The amount of such reimbursement was approximately $822,000.
(e) 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 $3,010,110 and Family Life paid $824,425 to FIC
Computer for data processing services provided during the year
ended December 31, 1997.
(f) 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.
(g) 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.
(h) 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. Dr. Payne
serves as Vice President, Secretary and Director of both companies.
Messrs. Demgen and Fleron serve as Vice Presidents and Directors
of both companies; and Mr. Crowe served as a Director of ILCO until
October, 1997; he serves as a Director of FIC 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").<PAGE>
(i) Mr. Crowe retired from active
service with the Company in January, 1997 and served on the ILCO Board
until October, 1997; he continues to serve on the Board of Directors
of FIC. Following Mr. Crowe's retirement, the Company entered into
a consulting agreement with him. Under the terms of the agreement,
Mr. Crowe is to be available for periodic consultation on actuarial
matters related to the operations of the life insurance companies.
The agreement provide of a payment of $25,000 per year for a period
of five years.
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 1997.
All of the incumbent directors attended 100% of the required meetings.
Members of the Nominating Committee are: Roy F. Mitte, James M.
Grace and Eugene E. Payne. 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, 1998. The Nominating Committee did not meet on
a formal basis during 1997.
The members of the Audit Committee are: 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 1997.
The members of the Compensation Committee are: W. Lewis Gilcrease,
Richard A. Kosson and Donald Shuman. The Compensation Committee held
one meeting during 1997.
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 20, 1999. 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 be received by
the Company no later than December 31, 1998 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 judgement in the interest of the company.
By Order of the Board of Directors
InterContinental Life Corporation
Eugene E. Payne, Secretary
April 16 , 1998
