[ILCO LOGO]
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 23, 2000, at 9:00 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
<PAGE>
InterContinental Life Corporation
Austin Centre, 701 Brazos, Austin, Texas 78701
NOTICE OF ANNUAL MEETING
TO BE HELD MAY 23, 2000
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 23, 2000 at 9:00 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 April 10, 2000
(the "Record Date") will be entitled to notice of and vote at the meeting or any
adjournment thereof.
The Proxy Statement accompanies this notice.
April 19, 2000
By Order of the Board of Directors
Eugene E. Payne
Secretary
YOUR VOTE IS IMPORTANT
We hope that you will be able to attend the meeting in person. IF YOU DO NOT
EXPECT TO ATTEND IN PERSON, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT
PROMPTLY in the enclosed envelope for which no postage is necessary if mailed in
the United States. It will assist us in reducing the expenses of the Annual
Meeting if shareholders who do not attend in person return the signed proxy
promptly. You may revoke your proxy at any time before it is voted.
<PAGE>
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
OF
InterContinental Life Corporation
701 Brazos o Austin Centre o Austin, Texas o 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 23, 2000, 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 19, 2000.
A copy of the Annual Report to Shareholders for the year ended December 31,
1999, 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 10, 2000, will be entitled to vote at the Annual Meeting. At the close
of business on such date, there were outstanding and entitled to vote 8,274,791
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 solicited by this Proxy Statement is revokable at any time prior to
the exercise thereof at the meeting by written notice submitted to Eugene E.
Payne, Secretary, InterContinental Life Corporation, Austin Centre, 701 Brazos,
Austin, Texas 78701 or by delivery of a subsequent proxy. All shares represented
by executed and unrevoked proxies will be voted in accordance with instructions
contained therein. Proxies submitted without specification will be voted to
elect the nominees for Directors named herein.
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<PAGE>
PROPOSAL 1:
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 are set forth below.
The data supplied below is based on information received from the Directors.
Director
Name Age Since Principal Occupation and Other Information
Robert A. Bender 46 1997 Director of ILCO since October, 1997.
Vice President of Family Life Insurance
Company since January, 1997. Vice
President of Investors Life Insurance
Company of North America since January,
1997. Vice President of Investors-IN,
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-Indiana from
February, 1994 to January, 1997.
Assistant Vice President of Investors-IN,
formerly known as InterContinental Life
Insurance Company from February, 1994 to
January, 1997. 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.
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<PAGE>
Director
Name Age Since Principal Occupation and Other Information
Charles K. 42 2000 Vice President and Director of FIC since
Chacosky January, 2000. Vice President and
Director of ILCO since January, 2000.
Executive Vice President and Chief
Actuary of Family Life Insurance Company,
Investors Life Insurance Company of North
America and Investors Life Insurance
Company of Indiana since January, 2000.
Senior Manager, PricewaterhouseCoopers
from February, 1997 to December, 1999.
Vice President, Germantown Life Insurance
Company, February, 1995 to January, 1997.
Jeffrey H. Demgen 47 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-IN, formerly known as
InterContinental Life Insurance Company
since August, 1996. Senior Vice President
of Investors-IN, formerly known as
InterContinental Life Insurance Company
from October, 1992 to June, 1995.
Executive Vice President and Director of
Investors-Indiana from August, 1996 to
December, 1997. Senior Vice President of
United Insurance Company of America from
September, 1984 to July, 1992.
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<PAGE>
Director
Name Age Since Principal Occupation and Other Information
Theodore A. 60 1991 Vice President and Director of ILCO since
Fleron 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
Investors-IN, 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 Investors- IN, formerly known
as InterContinental Life Insurance Company
from January, 1989 to July, 1992. Senior
Vice President, General Counsel, Director
and Assistant Secretary of Investors -
Indiana from June, 1995 to December, 1997.
Senior Vice President, General Counsel,
Director and Assistant Secretary of Family
Life Insurance Company since August, 1996.
W. Lewis 68 1988 Dentist practicing in San Marcos, Texas.
Gilcrease Director of ILCO since 1988. Director of
FIC from 1979 to July, 1991.
James M. Grace 56 1984 Vice President and Treasurer of the
Company since January, 1985. Executive
Vice President, Treasurer and Director of
Investors-IN, formerly known as
InterContinental Life Insurance Company
since 1989. Vice President, Treasurer and
Director of Financial Industries
Corporation since July, 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
Financial Industries Corporation) since
June, 1991. Director, Executive Vice
President and Treasurer of Investors-
Indiana from February, 1995 to
December, 1997.
Richard A. 68 1981 Certified Public Accountant and a partner
Kosson in the firm of Manheim, Kosson & Novick in
Millburn, New Jersey. Director of ILCO
since 1981.
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<PAGE>
Director
Name Age Since Principal Occupation and Other Information
Roy F. Mitte 68 1984 Chairman of the Board and Chief Executive
Officer of the Company and Investors-IN
formerly known as InterContinental Life
Insurance Company since January, 1985.
President of the Company 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-Indiana from February 1995 to
December, 1997. Chairman, ILG Securities
Corporation since December 1988.
Elizabeth T. Nash 50 1998 Member of the Board of Regents, Texas
State University System since 1993,
Chairman from 1997 to 1998, Vice-Chairman
from 1996 to 1997. Trustee of the
Development Foundation of Southwest Texas
State University since 1987, Chairman from
1992 to 1997, Vice-Chairman from 1989 to
1992. Director of ILCO since 1998.
Eugene E. Payne 57 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- IN, 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-Indiana from
February, 1995 to December, 1997.
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<PAGE>
Director
Name Age Since Principal Occupation and Other Information
Steven P. Schmitt 53 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-IN, 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.
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 68 Chairman of the Board, President
and Chief Executive Officer
Charles K. Chacosky 42 Vice President
Jeffrey H. Demgen 47 Vice President
James M. Grace 56 Vice President and Treasurer
Eugene E. Payne 57 Vice President and Secretary
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.
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<PAGE>
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 for the
period from January 1, 1999 through December 31, 1999 all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of April 1, 2000, the Company had 8,275,191 shares of its common stock
outstanding (excluding shares held in Treasury and not entitled to vote). The
following table presents information 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
Name and Address Beneficial Ownership Percent of Class
Financial Industries Corp.
701 Brazos, Suite 1400
Austin, TX 78701 3,932,692 47.52% (5)
Roy F. Mitte
701 Brazos, Suite 1400
Austin, TX 78701 3,998,890 (1,2) 48.24 %(5)
Investors Life Insurance
Company of North America
701 Brazos, Suite 1400
Austin, TX 78701 669,920 (3) 8.10% (5)
Investors Life Insurance
Company of Indiana
701 Brazos, Suite 1400
Austin, TX 78701 563,120 (4) 6.80 % (5)
Fidelity Management &
Research Company
82 Devonshire Street
Boston, MA 02109 878,100 (6) 10.61% (5)
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<PAGE>
1. As of April 1, 2000, Mr. Mitte, jointly with his wife Joann, owned
1,552,206 common shares of Financial Industries Corporation ("FIC"). The
holdings of Mr. Mitte of FIC's common stock constitutes 30.71% of the
outstanding common stock of that company. In addition, Mr. Mitte holds the
position of Chairman, President and Chief Executive Officer of FIC. Since
FIC holds a controlling interest in ILCO, 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.
2. Includes 31,998 shares allocated to Mr. Mitte's account under the Employees
Savings and Investment Plan and 32,200 shares owned directly by Mr. Mitte.
3. Represents 563,120 shares owned by Investors-IN and 106,800 shares owned
directly by Investors-NA. Investors-IN is a life insurance company
subsidiary of Investors-NA.
4. All are directly owned by Investors-IN.
5. Assumes that outstanding stock options available to other persons have not
been exercised.
6. As reported to the Company on a Schedule 13(G), as amended, filed by FMR
Corporation, the parent company of Fidelity Management & Research Company
("Fidelity"). According to the Schedule 13(G) filings, Fidelity acts as
investment advisor to the Fidelity Low-Priced Stock Fund, a registered
investment company, and the Fund is the owner of 878,100 shares of ILCO
common stock, including 10,300 shares which were purchased subsequent to
the Schedule 13(G)/A filed on February 1, 1999. The most recent Schedule
13(G)/A was filed on February 14, 2000.
The following table contains information as of April 1, 2000 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.
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<PAGE>
Amount and Nature of
Name Beneficial Ownership (2) Percent of Class
Robert A. Bender 4,438 (3) *
Charles K. Chacosky -0-
Jeffrey H. Demgen 10,132 (3) *
Theodore A. Fleron 20,931 (3) *
W. Lewis Gilcrease -0-
James M. Grace 107,624 (3) 1.30%
Richard A. Kosson 200 *
Roy F. Mitte 1 3,998,800 (3) 48.24%
Elizabeth T. Nash 200 *
Eugene E. Payne 23,729 (3) *
H. Gene Pruner -0-
Steven P. Schmitt 15,348 (3) *
All Executive Officers
and Directors as a
group, all of whom are
listed above 4,181,402 (3) 50.44%
* Less than 1%
1. As an executive officer and director of FIC, which as of April 1, 2000
beneficially owned 3,932,692 shares of the Company's common stock .
2. Includes shares beneficially acquired through participation in the
Company's Employees Stock Ownership Plan, 401K Plan and/or the Employee
Stock Purchase Plan, which are group plans for eligible employees.
3. Includes shares issuable upon exercise of options granted under the 1999
Non-Qualified Stock Option Plan to executive officers and directors who are
also employees of the Company or its subsidiaries, which options become
exercisable on May 18, 2000.
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<PAGE>
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 three other persons who were
serving as executive officers of the Company at the end of 1999 and received
cash compensation exceeding $100,000 during 1999:
Annual Compensation
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Other (2,3,4) Awards/
Name and Annual Stock All Other
Principal Compensa- Options Compensa-
Position Year Salary (1) Bonus (5) tion (2,3,4) (Shares)(6) tion (7)
Roy F. Mitte,
Chairman,
President and 1999 $ 356,679 $1,535,000 -0- 10,000 -0-
Chief Executive 1998 356,679 1,535,000 -0- -0- -0-
Officer 1997 252,253 751,500 -0- -0- -0-
James M.
Grace, Vice 1999 195,000 20,000 191,215 10,000 1,600
President and 1998 195,000 25,000 227,040 -0- 1,350
Treasurer 1997 195,000 40,000 437,340 -0- 16,165
Eugene E.
Payne, Vice 1999 195,000 20,000 95,520 10,000 1,600
President and 1998 195,000 20,000 100,020 -0- 4,390
Secretary 1997 195,000 40,000 278,920 -0- 20,025
Jeffrey H. 1999 $ 150,000 $ 20,000 -0- 10,000 1,600
Demgen, Vice 1998 $ 145,384 $ 15,000 -0- -0- 1,615
President 1997 $ 117,884 $ 30,000 -0- -0- 1,400
</TABLE>
(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 1997, 1998 and 1999: (i) Mr. Mitte: $999,746, $1,111,821 and
$1,111,821 respectively, which amounts are not included in the above table;
(ii) Mr. Grace: $68,150, $64,152 and $62,694, respectively, which amounts
are included in the above table; (iii) Dr. Payne: $68,150, $61,447 and
$61,447, respectively, which amounts are included in the above table; and
(iv) Mr. Demgen: $66,548, $72,173 and $76,500, respectively, which amounts
are included in the above table. Dr. Payne elected to defer a portion
($13,000) of his 1998 compensation under the provisions of the Company's
Non-Qualified Deferred Compensation Plan. See also, Note 5.
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<PAGE>
(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 (10%) of the total amount of annual salary
and bonus for any named individual.
(3) Includes the value realized by Mr. Grace in connection with the exercise of
stock options. In 1999, Mr. Grace exercised options to purchase 24,000
shares of the Company's common stock under the Non-Qualified Stock Option
Plan. See "Aggregated Options Exercised in 1999" below.
(4) Includes the value realized by Dr. Payne in connection with the exercise of
stock options. In 1999, Dr. Payne exercised options to purchase 6,000
(which number does not reflect the stock dividend paid on April 17, 1999,
since Dr. Payne exercised the options prior to the date of the dividend)
shares of the Company's common stock under the Non-Qualified Stock Option
Plan . See "Aggregated Options Exercised in 1999" below.
(5) The data in this column represents the amount of annual bonus awarded. The
bonuses for Mr. Grace, Dr. Payne and Mr. Demgen for the year 1997 represent
amounts paid in 1997, but include the bonuses awarded with respect to the
years 1996 and 1997. Dr. Payne elected to defer the amounts shown for 1997,
1998 and 1999 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 7.
(6) The data in this column represents the number of shares available for
exercise under options granted in 1999 under the 1999 ILCO Non-Qualified
Stock Option Plan. See also, "Option Grants in 1999", below.
(7) All Other Compensation includes:
(i) Company contributions to the ILCO Employees Savings and Investment
Plan. The amount of each such contribution for the years 1997, 1998 and
1999, respectively, was as follows: (a) Mr. Grace: $1,350, $1,350 and
$1,600, respectively, (b) Dr. Payne: $2,100, $2,100 and $1,600,
respectively and (c) Mr. Demgen: $1,400, $1,615 and $1,600, respectively.
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<PAGE>
(ii) amounts paid by the Company to Mr. Grace and Dr. Payne to supplement
the benefits under the Company's Pension Plan. The Pension Plan 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. In
1998, the Company made similar payments, with respect to benefit accruals
for the preceding year. Mr. Grace and Dr. Payne elected to defer their
respective amounts into the Company's Non- Qualified Deferred Compensation
Plan. In 1999, the actuarial consulting firm which provides the Company
with the calculations of the amounts of the supplements advised the Company
that certain errors had been made with respect to prior years. As a result,
the Company adjusted the amount of the supplements for each of Dr. Payne
and Mr. Grace. The adjustments resulted in a credit to the Company in the
amount of $74.96 for Dr. Payne and $6,574.43 with respect to Mr. Grace.
These amount were deducted from the Non-Qualified Deferred Compensation
Plan maintained by the Company for each individual The Company intends to
make a similar payment with respect to benefit accruals for subsequent
years; however, there is no obligation for it to do so. See also, Note 5.
Option Grants in 1999
The following table sets forth certain information regarding stock options
granted during calendar year 1999 to the persons named in the Summary
Compensation Table, above. The options were granted under the InterContinental
Life Corporation 1999 Stock Option Plan. The plan was approved at the Annual
Meeting of Stockholders held on May 18, 1999. During 1999, options to purchase
10,000 shares of the common stock of the Company were granted to each of 46
employees of the Company, its subsidiaries and affiliates, for a total of
460,000 options. As of December 31 1999, options to purchase a total of 20,000
shares had terminated as a result of employee turnover.
The potential realizable values on date of grant of stock options granted in
1999 shown below are presented pursuant to SEC rule and are calculated using
assumed annual rates of stock price appreciation for the option term. The
theoretical values of options do not necessarily bear a relationship to the
compensation cost to the Company or potential gain realized by an executive. The
actual amount, if any, realized upon exercise of stock options will depend upon
the market price of the common stock of the Company relative to the exercise
price of the stock option at the time the stock option is exercised. There is no
assurance that the theoretical values of stock options reflected in this table
actually will be realized.
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
% of Total
Options Potential Realizable
Granted to Value at Assumed
Employees Annual Rates of Stock
Options During Exercise Expiration Price Appreciation for
Name Granted (1) 1999 Price Date Option Term (2)
5% 10%
Roy F. Mitte 10,000 2.27% $9.00 5/18/05 $14,434 $30,880
James M. 10,000 2.27% 9.00 5/18/05 14,434 30,880
Grace
Eugene E. 10,000 2.27% 9.00 5/18/05 14,434 30,880
Payne
Jeffrey H. 10,000 2.27% 9.00 5/18/05 14,434 30,880
Demgen
</TABLE>
1. The options shown in the preceding table were each granted on May 18, 1999.
Options vest in 20% increments with the first 20% vesting on the first
anniversary of the date of grant and an additional 20% vesting on each
subsequent anniversary. The option period for each sequentially vested
portion of an option is one year from the respective Anniversary Date on
which said portion of the option becomes partially exercisable.
2. The potential realizable values on date of grant are calculated assuming
that the market price of the underlying security appreciates in value from
the date of the grant to the last date on which the options may be
exercised at an assumed annualized rate of 5% and, alternatively, 10%. The
calculations assume that each vested option is exercised as of the initial
date on which such vested percentage may be exercised.
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<PAGE>
Aggregated Options Exercised in 1999
The following table sets forth information concerning each exercise of stock
options during 1999 by each of the individuals who were executive officers of
the Company as of December 31, 1999.
Shares
Acquired Value
Name On Exercise (#) Realized ($)
James M. Grace 24,000 (1) $191,215
Eugene E. Payne 6,000 (2) 95,520
(1) The number of shares acquired upon exercise of options reflects the stock
dividend which was paid on March 17, 1999.
(2) The number of shares acquired upon exercise does not reflect the stock
dividend which was paid on March 17, 1999, since the options were exercised
prior to that date.
Aggregated Stock Option Values
The following table sets forth information with respect to the unexercised
options held by the executive officers of the Company. The value of unexercised
in-the-money stock options at December 31, 1999 shown below are presented in
accordance with SEC rules. The actual amount, if any, realized upon exercise of
stock options will depend upon the market price of the common stock of the
Company relative to the exercise price per share of the stock option at the time
the stock option is exercised. There is no assurance that the values of
unexercised in-the-money stock options reflected in the following table will be
realized.
Number of Unexercised Value of Unexercised
Options Held at In-the-Money Options at
December 31, 1999 December 31, 1999(1)
Exercisable Unexercisable Exercisable Unexercisable
Roy F. Mitte -0- 10,000 $ -0- $ 2,500
Jeffrey H. Demgen -0- 10,000 -0- 2,500
James M. Grace -0- 10,000 -0- 2,500
Eugene E. Payne -0- 10,000 -0- 2,500
(1) Based on the closing price of the Company's common stock on NASDAQ on
December 31, 1999 ($9.250).
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<PAGE>
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 1999 only, covered by the Pension Plan (salary
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, 1999 being shown in parentheses:
Mr. Mitte, $160,000 (12 years), Mr. Grace, $160,000 (12 years), Dr. Payne,
$160,000 (11 years), and Mr. Demgen, $150,000 (7 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 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.
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<PAGE>
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, Richard A. Kosson and Elizabeth T. Nash 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 granted under the 1999
Stock Option Plan, and the Employees Savings and Investment (401K) Plan. They
also participate in various other benefits, including medical and pension plans
generally available to employees of the Company.
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<PAGE>
The objectives of the stock option plan 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 1999 Stock Option Plan, options to buy the Company's common
stock at 100% of the fair market value on the date of grant but in no event less
than $7.50 per share, can be granted to officers of the Company and its
subsidiary and affiliated companies. The 1999 Stock Option Plan, which was
adopted by the Company in March, 1999 and became effective upon its approval by
the shareholders of the Company at the annual meeting on May 18, 1999,
authorizes the Company's Board of Directors to grant options to purchase up to a
maximum of 800,000 shares of the Company's common stock. Under its provisions,
the 1999 Stock Option Plan remains in effect until the eleventh anniversary of
the effective date of the Plan. At December 31, 1999, options to purchase
460,000 shares of the Company's common stock were outstanding, of which options
to buy 40,000 shares were held by executive officers of FIC and the Company. The
Company's Board of Directors administers the plan.
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, was 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. Effective January 1, 2000, the Plan was amended
to increase the match percentage from 1% to 2%. Allocations are made on a
quarterly basis to the account of participants who have at least 250 hours of
service in that quarter.
ILCO's 401K Plan also includes participant accounts which were transferred from
the ILCO Employee Stock Ownership Plan ("ESOP"). The merger of the ESOP into the
401K Plan was approved in May, 1998. The ESOP was a noncontributory employee
benefit plan available to all employees who have completed one year of service.
Allocations of ILCO's contributions were made to participants in accordance with
their compensation. Vesting of participants in their accounts occurred in annual
installments over a period of approximately ten years. As of December 31, 1999,
that portion of the assets of the 401K Plan which represent participant accounts
transferred from the ESOP consisted of 579,314 shares of ILCO's common stock of
which 87,079 shares were allocated to executive officers of the Company and the
balance of the shares were allocated to the other participants.
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.
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<PAGE>
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 1999, the Committee recommended that
the Chief Executive Officer's 1999 Compensation continue at the same level in
effect for the year 1998. In addition, the Committee recommended that the Chief
Executive Officer receive a cash bonus in the amount of $1,535,000.
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 1999 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 1999. Nevertheless, the Committee believes that it is
noteworthy that (i) the Company's net income for 1999 was $12,765,000 ($1.45
basic and $1.45 diluted per share), compared to net income of $11,119,000 ($1.27
basic and $1.25 diluted per share) for the year1998, and (ii) the net income for
the year 1999 includes $0.992 million resulting from the donation by Investors
Life Insurance Company of North America ("Investors Life") of the Standard Life
Insurance Company headquarters building (the "Standard Life Building") to the
Jackson Redevelopment Authority ("JRA") and the sale to the JRA of real estate
adjacent to the Standard Life Building which was owned by Investors Life.
The foregoing report is submitted by the members of the Compensation Committee.
Performance Graph
The graph and table below compare the cumulative total shareholder return on the
Company's common stock for the last five calendar years with the cumulative
total return on The Nasdaq Stock Market (US) and an index of stocks of life
insurance companies traded on Nasdaq over the same period (assuming the
investment on December 31, 1994 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]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
12/31/94 12/30/95 12/29/96 12/29/97 12/31/98 12/31/99
The Company(1) $100.00 $ 121.40 $128.60 $190.50 $190.50 $176.20
The Nasdaq Stock Market (US) $100.00 $ 141.30 $173.90 $213.10 $300.20 $542.40
Index of Nasdaq Life Insurance Stocks(2) $100.00 $ 150.30 $193.90 $256.00 $258.20 $224.50
</TABLE>
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 (35 issues listed during that period, of which 16 issues were traded
on December 31, 1999). These peer companies were selected by the Company on
a line-of-business basis.
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<PAGE>
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. As part of the financing arrangement for the acquisition of Family Life
Insurance Company, Family Life Corporation ("FLC"), a subsidiary of
Financial Industries Corporation ("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 Life to FLC and a $2.5 million loan provided directly
to FIC by Investors Life Insurance Company of California ("Investors-CA").
In addition to the interest provided under those loans, Investors Life 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.
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<PAGE>
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 Life. 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 Life had previously made to FLC and that continue to be
outstanding.
In June, 1996, the provisions of the notes from Investors Life to FIC, 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% and
(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%.
In December, 1998, FLIIC was dissolved. In connection with the dissolution,
all of the assets and liabilities of FLIIC became the obligations of
FLIIC's sole shareholder (FIC). Accordingly, the obligations under the
provisions of the $4.5 million note described above are now the obligations
of FIC.
b. The data processing needs of the Company's and FIC's insurance subsidiaries
are provided by FIC Computer Services, Inc. ("FIC Computer"), a subsidiary
of FIC. Under the provisions of the data processing agreement, 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 $2.7 million and Family Life paid $1.9 million
to FIC Computer for data processing services provided during the year ended
December 31, 1999.
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<PAGE>
c. In 1995, Investors Life 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.
d. In 1996, Investors Life 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.
e. Roy F. Mitte serves as Chairman, President and Chief Executive Officer of
both FIC and the Company. James M. Grace serves as Vice President,
Treasurer and Director of both companies and Secretary of FIC. 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.
Mr. Roy Mitte holds beneficial ownership of 30.71 % of the outstanding
shares of FIC (see "Security Ownership of Certain Beneficial Owners and
Management").
f. Mr. Joseph F. Crowe retired from active service with the Company in
January, 1997 and served on the Company's 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 provides for a payment of $25,000 per
year for a period of five-years.
g. The Company and Investors Life are parties to two surplus debentures. The
surplus debentures were originally issued by Standard Life Insurance
Company. Upon the merger of Standard Life into Investors Life, the
obligations of the surplus debentures were assumed by Investors Life. Under
the terms of the surplus debentures, Investors Life paid to the Company
principal and interest on the surplus debentures of $10.8 million in 1999.
As of December 31, 1999, the outstanding principal balance of the surplus
debentures was $0.956 million and $4.94 million, respectively. The terms of
the latter debenture provided for final payment of the remaining principal
on September 30, 1999. In September, 1999, Investors Life and the Company
amended the payment schedule to provide for payment of the remaining
balance in four installments, with the final installment being due July 1,
2000.
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<PAGE>
BOARD, COMMITTEES AND MEETINGS
ILCO's Board of Directors met formally four times during 1999. All of the
incumbent Directors attended 100% of the required meetings, except Mr. Bender
and Mr. Demgen, who each attended 75% of the meetings.
The Board has an Audit Committee, which met formally once during 1999. The
Directors serving on the Audit Committee in 1999 were W. Lewis Gilcrease,
Richard A. Kosson, and H. Gene Pruner. Mr. Pruner served on the committee for
the period from January 1, 1999 through October 19, 1999. In October, 1999,
Elizabeth T. Nash replaced Mr. Pruner. The responsibilities of the Audit
Committee include: (i) reviewing the scope of the annual audits of the financial
statements of the Company, (ii) reviewing the audit results with the independent
auditors and management and (iii) evaluating the performance of the independent
auditors of the Company.
The members of the Compensation Committee during 1999 were: W. Lewis Gilcrease,
Richard A. Kosson and Elizabeth T. Nash. The Compensation Committee met once
during 1999 for the purpose of considering the compensation of the Chief
Executive Officer for the year 1999. The responsibilities of the Compensation
Committee include recommending to the Board the amount and nature of the
compensation paid by the Company to the Chief Executive Officer.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's accounting firm for the current year is PricewaterhouseCoopers
LLP. Representatives of PricewaterhouseCoopers LLP are expected to be available
for comment at the Shareholders Meeting and will be given an opportunity to
respond to appropriate questions.
SHAREHOLDER PROPOSALS
It is contemplated by the management of the Company that the next Annual Meeting
of the Shareholders of the Company will be held on or about May 21, 2001.
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, 2000 and must
be in compliance with applicable laws and Securities and Exchange Commission
regulations.
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ADDITIONAL 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 19, 2000
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