<PAGE>
Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
INDEPENDENCE HOLDING COMPANY
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
<PAGE>
INDEPENDENCE HOLDING COMPANY
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 22, 2000
-------------------
To the Stockholders of
INDEPENDENCE HOLDING COMPANY:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
INDEPENDENCE HOLDING COMPANY (the "Company") will be held on June 22, 2000 at
9:30 A.M., local time, at the Greenwich Civic Center, 90 Harding Road, Old
Greenwich, Connecticut for the following purposes:
1. To elect nine directors of the Company;
2. To vote upon a proposal to ratify the selection of independent
auditors; and
3. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Only stockholders of record at the close of business on April 26, 2000 are
entitled to notice of, and to vote at, the Annual Meeting of Stockholders.
Your attention is directed to the Proxy Statement submitted with this
notice. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE DATE AND
SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
IN THE EVENT A STOCKHOLDER DECIDES TO ATTEND THE MEETING, SUCH STOCKHOLDER MAY
REVOKE SUCH PROXY AND VOTE SUCH SHARES IN PERSON. No postage need be affixed to
the enclosed envelope if mailed in the United States.
By Order of the Board of Directors
David T. Kettig
Secretary
April 28, 2000
<PAGE>
INDEPENDENCE HOLDING COMPANY
96 CUMMINGS POINT ROAD
STAMFORD, CT 06902
203-358-8000
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Independence Holding Company (the "Company") of Proxies to
be used at the Annual Meeting of Stockholders to be held at the Greenwich Civic
Center, 90 Harding Road, Old Greenwich, Connecticut on June 22, 2000 at 9:30
A.M., local time. In addition to solicitation of Proxies by mail, the directors,
officers and employees of the Company may solicit Proxies personally, by
telephone, telefax or telegram. The expense of all such solicitation, including
the cost of preparing, printing and mailing this Proxy Statement, will be borne
by the Company. The Company will, upon request, reimburse brokers, banks or
other persons for their reasonable out-of-pocket expenses in forwarding proxy
material to beneficial owners of the Company's shares. This Proxy Statement and
the accompanying Proxy and the Company's Annual Report to Stockholders, which
contains financial statements for the year ended December 31, 1999, will first
be mailed to stockholders of the Company on or about May 16, 2000.
If the enclosed form of Proxy is executed and returned, it will be voted as
directed by the stockholder. If no directions are given, Proxies will be voted
(i) for election as directors of all of the nominees specified therein and (ii)
for the ratification of the selection of KPMG LLP ("KPMG") as independent
auditors for the calendar year 2000. A Proxy may be revoked at any time, insofar
as the authority granted thereby has not been exercised at the Annual Meeting of
Stockholders, by filing with the Secretary of the Company a written revocation
or a duly executed Proxy bearing a later date. Any stockholder present at the
meeting may vote personally on all matters brought before the meeting and, in
that event, such stockholder's Proxy will not be used at the meeting by holders
of the Proxy.
Only stockholders of record as of the close of business on April 26, 2000
will be entitled to vote at the meeting. On that date, the Company had
outstanding and entitled to one vote per share, 7,180,100 shares of Common
Stock, par value $1.00 per share ("Common Stock"). An additional 2,481,519
shares of Common Stock are held in treasury by the Company and are not entitled
to vote. A majority of the outstanding shares will constitute a quorum at the
meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the votes cast on proposals presented
to stockholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
If no contrary instruction is indicated, shares represented by properly
executed Proxies in the accompanying form of proxy will be voted by the persons
designated in the printed portion thereof (i) FOR the election of the nominees
named below to serve as directors for a one-year term, and (ii) and FOR the
ratification of the selection of KPMG as independent auditors for the calendar
year 2000. Each director must be elected by the affirmative vote of a plurality
of the votes cast at the meeting by the holders of shares of Common Stock
represented in person or by Proxy. Approval of KPMG as independent auditors
requires the affirmative vote of a majority of the shares of Common Stock
present or represented at the meeting.
<PAGE>
Management does not know of any other matters to be brought before the
meeting at this time; however, if any other matters are brought before the
meeting, the proxy holder shall vote in his discretion with respect to the
matter. In the event a stockholder specifies a different choice on the Proxy,
such stockholder's shares will be voted or withheld in accordance with the
specifications so made. Should any nominee for director named herein become
unable or unwilling to accept nomination or election, it is intended that the
persons acting under proxy will vote for the election of such other person as
the Board of Directors of the Company may recommend unless the number of
directors is reduced by the Board of Directors. The Company has no reason to
believe that any nominee will be unable or unwilling to serve if elected to
office.
PRINCIPAL STOCKHOLDERS
Listed below are the number of shares of Common Stock beneficially owned as
of April 26, 2000 by the holders of more than 5% of the Common Stock of the
Company.
<TABLE>
<CAPTION>
COMMON STOCK
------------
<S> <C>
Geneve Holdings, Inc.(1) ................................... 4,092,906
96 Cummings Point Road 57%
Stamford, Connecticut 06902
</TABLE>
- ---------
(1) According to (i) information disclosed in Amendment No. 34 to Schedule 13D
dated January 7, 1997 of Geneve Holdings, Inc. (together with its affiliates
also referred to herein as "Geneve") supplemented by (ii) information
provided to the Company by Geneve in response to a Company questionnaire, a
group consisting of Geneve and certain of its affiliates are the beneficial
owners of 4,092,906 shares of Common Stock. As of December 31, 1999, Geneve
did not own any of the Company's share purchase warrants (the "Warrants").
Mr. Edward Netter, Chairman and a director of the Company, is an executive
officer and a director of Geneve. Mr. Netter and members of his family
control Geneve by virtue of his voting interest. Mr. Netter disclaims
beneficial ownership as to the shares of Common Stock owned by Geneve.
-------------------
To the best knowledge of the Company, Geneve has sole investment and voting
power with respect to the shares listed above, and no other person or persons
acting in concert own beneficially more than 5% of the Common Stock.
The following table sets forth for each director of the Company, the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company for the year ended December 31, 1999 (the "Named Officers"), and
for all directors and executive officers of the Company as a group, information
regarding beneficial ownership of Common Stock as of April 26, 2000. Except
2
<PAGE>
as provided below, none of the directors, Named Officers or directors and
executive officers as a group owns beneficially any Warrants.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF CLASS
NAME SHARES ENTITLED TO VOTE
---- ------ ----------------
<S> <C> <C>
Larry R. Graber.............................. 33,359(1) *
Harold E. Johnson............................ 12,000(2) *
Allan C. Kirkman............................. 5,000(2) *
Steven B. Lapin.............................. 42,132 *
Edward Netter................................ (3) --
Robert P. Ross, Jr........................... 82,516(4) 1.1%
Edward J. Scheider........................... 77,236(2)(5) 1.1%
James G. Tatum............................... 2,785(6) *
Roy T.K. Thung............................... 309,616(7) 4.2%
David T. Kettig.............................. 28,081(8) *
Roy L. Standfest............................. 1,000 *
All directors and executive officers as a
group (14 persons)......................... 649,775(1)(2)(3)(4)(5)
(6)(7)(8)(9) 8.6%
</TABLE>
- ---------
(1) Includes 12,500 shares of Common Stock subject to options granted to Mr.
Graber in April 1996, all of which are presently exercisable, and 17,500
shares of Common Stock subject to options granted to Mr. Graber in December
1999, which will vest ratably over three years commencing in December 2000.
(2) Constitutes or includes 5,000 shares of Common Stock subject to options
granted to each such director all of which, in each case, are presently
exercisable.
(3) As described in the table relating to Principal Stockholders, Geneve and
certain of its affiliates are the beneficial owners of 4,092,906 shares of
Common Stock, which represents 57% of the outstanding Common Stock as of
April 26, 2000. Mr. Edward Netter, Chairman and a director of the Company,
is an executive officer and a director of Geneve. Mr. Netter and members of
his family control Geneve by virtue of his voting interest. Mr. Netter
disclaims beneficial ownership as to the shares of Common Stock owned by
Geneve.
(4) Includes 150 shares of Common Stock owned by Mr. Ross' wife and 54,461
shares owned by Starboard Partners, L.P., a limited partnership managed by
an entity controlled by Mr. Ross ("Starboard L.P."), and 22,905 shares of
Common Stock receivable upon exercise of 15,000 Warrants, of which 12,216
shares are owned by Starboard L.P.. Mr. Ross disclaims beneficial ownership
of the shares owned by his wife and the shares owned or receivable by
Starboard L.P.
(5) Includes 33,500 shares of Common Stock owned by Mr. Scheider's wife's
estate, as to which shares Mr. Scheider disclaims beneficial ownership, and
5,000 shares of Common Stock subject to options granted to Mr. Scheider, all
of which are presently exercisable.
(6) Includes 580 shares owned by Mr. Tatum's wife, as to which shares Mr. Tatum
disclaims beneficial ownership.
(7) Includes (i) 56,250 shares of Common Stock subject to options granted to Mr.
Thung in April 1995, all of which are presently exercisable, (ii) 38,250
shares of Common Stock subject to options granted to Mr. Thung in December
1995, all of which are presently exercisable, (iii) 34,500 shares of Common
Stock subject to options granted to Mr. Thung in June 1999, which will vest
ratably over three years commencing in June 2000, and (iv) 95,000 shares of
Common Stock subject to options
(footnotes continued on next page)
3
<PAGE>
(footnotes continued from previous page)
granted to Mr. Thung in December 1999, which will vest ratably over three
years commencing in December 2000.
(8) Includes 12,500 shares of Common Stock subject to options granted to Mr.
Kettig in April 1995, all of which are presently exercisable, 10,000 shares
of Common Stock subject to options granted to Mr. Kettig in June 1999, which
will vest ratably over three years commencing June 2000, and 4,581 shares of
Common Stock receivable upon exercise of 3,000 Warrants.
(9) Includes 42,500 shares of Common Stock subject to options granted to three
executive officers, 30,834 of which are presently exercisable, 4,166 of
which will vest on January 1, 2001, and the balance of which will vest
ratably over three years commencing June 2000.
* Represents less than 1% of the outstanding Common Stock.
PROPOSAL 1
NOMINEES FOR ELECTION AS DIRECTORS
Nine directors will be elected at the meeting, each to hold office until the
next Annual Meeting of Stockholders and until such director's successor shall be
elected and shall qualify.
It is intended that shares represented by Proxies will be voted for the
election of the nominees named below. If at the time of the meeting any of the
nominees should be unwilling or unable to serve, the discretionary authority
provided in the Proxy will be exercised to vote for a substitute or substitutes,
as the Board of Directors recommends. The Board has no reason to believe that
any of the nominees will be unwilling or unable to serve as a director.
The persons named below have been nominated for election as directors. All
of such nominees presently serve as directors of the Company.
LARRY R. GRABER, age 50
Director
Since January 2000, director of the Company; since April 1996 a director and
President of Madison National Life Insurance Company, Inc., a wholly-owned
subsidiary of the Company with principal offices in Middleton, Wisconsin; since
April 1996, a director and President of Southern Life and Health Insurance
Company, an insurance company with principal offices in Birmingham, Alabama,
which is a subsidiary of Geneve Corporation, a private diversified holding
company with principal offices in Stamford, Connecticut, which is an affiliate
of the Company ("Geneve"); for more than one year prior to April 1996, President
of Hill Country Acquisition Consultants, Inc., an insurance acquisition
consulting firm with principal offices in Austin, Texas.
HAROLD E. JOHNSON, age 81
Director
Since November 1987, director of the Company; for more than five years prior
to retirement in 1983, Executive Vice President of The Continental Corporation,
a diversified insurance and financial holding company with principal offices in
New York, New York; since November 1993, director of Queens County Bancorp,
Inc., a banking holding company with principal offices in Queens County, New
York.
4
<PAGE>
ALLAN C. KIRKMAN, age 56
Director
Since December 1980, director of the Company; for more than the past five
years, Executive Vice President of Mellon Bank, N.A., a national bank with
principal offices in Pittsburgh, Pennsylvania.
STEVEN B. LAPIN, age 54
Vice Chairman
Director
Since July 1991, director of the Company; since July 1999, Vice Chairman of
the Company; for more than five years prior to July 1999, President and Chief
Operating Officer of the Company; for more than the past five years, President
and Chief Operating Officer and a director of Geneve; since January 1998, a
director of The Aristotle Corporation, a holding company with principal offices
in New Haven, Connecticut which, through a subsidiary, designs, manufactures and
markets health and medical education teaching aids ("Aristotle").
EDWARD NETTER, age 67
Chairman
Director
Since December 1980, director of the Company; since August 1997, Chairman of
the Compensation Committee; for more than the past five years, Chairman of the
Company; for more than five years prior to January 2000, Chief Executive Officer
of the Company; from December 1990 to November 1993, President of the Company;
for more than the past five years, Chairman, Chief Executive Officer and
director of Geneve; since January 1998, a director of Aristotle.
ROBERT P. ROSS, JR., age 57
Director
Since April 2000, director of the Company; for more than the past five
years, Chairman of GRO Corporation, a NASD registered broker/dealer located in
Houston, Texas and licensed in all 50 states, that offers trading services to
individuals and money managers at discount prices, and Chairman of The Starboard
Capital Management Corporation, located in Houston, Texas, which manages
Starboard Partners, L.P., a hedge fund for high net worth individuals and
corporate clients.
EDWARD J. SCHEIDER, age 83
Director
Since November 1987, director of the Company and Chairman of the Audit
Committee; for more than five years prior to retirement in March 1995, Vice
President of Kidder, Peabody & Co., Inc., an investment banking and brokerage
firm with principal offices in New York, New York.
JAMES G. TATUM, age 58
Director
Since April 2000, director of the Company; for more than the past five
years, registered investment advisor, located in Birmingham, Alabama, managing
funds for individual, corporate and trust clients.
5
<PAGE>
ROY T.K. THUNG, age 56
Chief Executive Officer, President and Chief Operating Officer
Director
Since December 1990, director of the Company; since January 2000, Chief
Executive Officer of the Company; since July 1999, President and Chief Operating
Officer of the Company; for more than five years prior to July 1999, Executive
Vice President, Chief Financial Officer and Treasurer of the Company; from May
1990 to November 1993, Senior Vice President, Chief Financial Officer and
Treasurer of the Company; from June 1983 to December 1986, director of the
Company; for more than the past five years, Executive Vice President and Chief
Financial Officer of Geneve.
-------------------
Between January 1, 1999 and December 31, 1999, the Board of Directors of the
Company met four times. In addition, the Audit Committee of the Board, which
exercises responsibility in respect of the recommendation of the Company's
independent public auditors, the review of such auditor's audit and
recommendations concerning internal controls, met once. The Audit Committee
currently consists of Messrs. Scheider and Johnson. The Compensation Committee
of the Board, which exercises responsibility in respect of recommendations
concerning compensation matters, currently consists of Messrs. Netter, Johnson
and Kirkman. The Compensation Committee met four times in 1999. Each director
who has been nominated for election as a director attended at least 75% of the
Board meetings and meetings of Committees on which such director served.
Directors of the Company who are not also officers of the Company receive a
monthly fee of $500 plus $400 for each Board or Committee meeting attended.
Directors who are officers of the Company do not receive compensation for
serving as directors of the Company.
Pursuant to the Company's 1988 Stock Incentive Plan, directors of the
Company who are not also employees of the Company or a subsidiary are each
entitled to receive non-qualified stock options with respect to 500 shares of
Common Stock at the first meeting of the Board of Directors following each
Annual Meeting of Stockholders of the Company, which stock options vest six
months after date of grant. Outstanding options granted at such 1999 Board
meeting fully vested on December 22, 1999, and have an exercise price of $12.31
per share.
EXECUTIVE OFFICERS
In addition to Messrs. Lapin, Netter and Thung, listed above, who also serve
as directors of the Company, set forth below are each executive officer's name,
age, all positions and offices held with the Company, principal occupations and
business experience during the past five years. Officers are elected by the
Board of Directors, each to serve until his or her successor is elected and has
qualified, or until his or her earlier resignation, removal from office or
death.
ALEX GIORDANO, age 57
Vice President -- Marketing
Since February 2000, Vice President -- Marketing of the Company; for more
than the past five years, Executive Vice President, Chief Marketing Officer and
director of Standard Security Life Insurance Company of New York, a wholly-owned
subsidiary of the Company located in New York, New York ("Standard Security");
for more than the past five years, President of First Standard Security
Insurance Company, a wholly-owned subsidiary of Standard Security located in New
York, New York.
TERESA A. HERBERT, age 38
Vice President and Chief Financial Officer
Since July 1999, Chief Financial Officer of the Company; for more than five
years prior to July 1999, Vice President and Controller of the Company.
6
<PAGE>
DAVID T. KETTIG, age 41
Vice President -- Legal and Secretary
For more than the past five years, Vice President -- Legal and Secretary of
the Company; since October 1998, Senior Vice President and Chief Administrative
Officer of Standard Security; for more than the past five years, Vice
President -- Legal and Secretary of Geneve.
BRIAN R. SCHLIER, age 45
Vice President -- Taxation
For more than the past five years, Vice President -- Taxation of the
Company; for more than the past five years, Director of Taxation of Geneve.
ROY L. STANDFEST, age 36
Vice President -- Investments and Chief Investment Officer
Since April 1999, Vice President -- Investments and Chief Investment Officer
of the Company; since April 1999, Vice President -- Investments and Chief
Investment Officer of Geneve; from September 1997 to March 1999, Vice President
of Daiwa America Strategic Advisors Corporation, a proprietary fixed-income
trading group affiliated with Daiwa Securities America with principal offices in
New York, New York; from August 1994 to October 1996, Managing Director of
MetLife Investment Management Company, a fixed-income money manager affiliated
with MetLife Insurance Company with principal offices in White Plains, New York.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid by the Company and its
subsidiaries to the Named Officers for services rendered for the last three
fiscal years.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- ------------------------- ----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION(2)
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- -------- ---- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Roy T.K. Thung .......... 1999 224,062 135,000 -- -- 134,500 -- 44,635
Chief Executive Officer 1998 200,932 126,000 -- -- -- -- 41,058
and President 1997 200,932 126,000 -- -- -- -- 38,042
Edward Netter ........... 1999 255,105 50,000 -- -- -- -- 2,576
Chairman 1998 251,177 50,000 -- -- -- -- 6,369
1997 251,177 50,000 -- -- -- -- 6,565
Steven B. Lapin ......... 1999 182,255 96,656 -- -- -- -- 49,484
Vice Chairman 1998 250,930 157,500 -- -- -- -- 46,777
1997 250,930 157,500 -- -- -- -- 43,289
Roy L. Standfest ........ 1999 104,808 134,000 -- -- 22,500 -- 762
Vice President --
Investments
David T. Kettig ......... 1999 145,900 30,000 -- -- 10,000 -- 2,314
Vice President -- 1998 105,604 29,165 -- -- -- -- 2,630
Legal and Secretary 1997 105,604 29,165 -- -- -- -- 2,719
</TABLE>
7
<PAGE>
(Footnotes from previous page)
- ---------
(1) Amounts shown for 1997, 1998 and 1999 for all of the Named Officers include
the dollar value of premiums paid for term life insurance. In addition,
amounts shown for Messrs. Lapin and Thung include amounts accrued during
1997, 1998 and 1999 under Retirement Benefit Agreements with the Company
(described below under the heading 'Retirement Benefit Agreements'). The
amounts shown for Messrs. Netter and Kettig include profit-sharing
contributions by Standard Security to their 401(k) accounts of $4,050 in
1997 and 1998 for Mr. Netter and $1,679 in each of 1997, 1998 and 1999 for
Mr. Kettig. Certain of the Named Officers also received compensation and
benefits during 1997, 1998 and 1999 from Geneve and/or its affiliates (other
than the Company) for services rendered to such companies, which amounts are
not included in this table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options to the Named Officers who received grants during 1999.
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE
- -------------------------------------------------------------------------------------------------- ---------
(a) (b) (c) (d) (e) (f)
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE GRANT
SARS EMPLOYEES OR BASE DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
NAME (#) YEAR ($/SH) DATE VALUE$(1)
---- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Roy T.K. Thung................................... 39,500 18% 11.94 6/20/04 127,585
95,000 44% 11.69 12/20/04 314,450
David T. Kettig.................................. 10,000 5% 11.94 6/20/04 32,300
Roy L. Standfest................................. 22,500 10% 12.66 5/31/04 76,230
</TABLE>
- ---------
(1) Present value determinations were made using the Black-Scholes model of
theoretical options pricing, and were based on the following assumptions:
(A) expected volatility is based on the three year period, calculated
weekly, preceding the date of grant; (B) the risk-free rate of return is
based on the 10 year U.S. Treasury Note yield to maturity as at the date of
grant; (C) dividend yield assumes that the current dividend rate paid on the
Common Stock continues unchanged until the expiration date of the options;
and (D) a three-year phased-in vesting period that averages two years. The
actual value a Named Officer receives is dependent on future stock market
conditions, and there can be no assurance that the amounts reflected in
column (f) of the Option/SAR Grants Table will actually be realized. No gain
would be realized by a Named Officer without appreciation in the market
value of the Common Stock, which would benefit all stockholders
commensurately.
8
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table sets forth certain information concerning stock options
of the Named Officers who had options at December 31, 1999.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END(#) AT FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Roy T.K. Thung.......................... 5,000 0 94,500/129,500 $491,558/0
Steven B. Lapin......................... 118,000 $619,505 0/0 0
David T. Kettig......................... 0 0 12,500/10,000 $70,688/0
Roy L. Standfest........................ 0 0 0/22,500 0/0
</TABLE>
RETIREMENT BENEFIT AGREEMENTS
In 1991, the Company entered into retirement benefit agreements with Messrs.
Lapin and Thung pursuant to which they are entitled to receive cash payments,
based upon their salaries, at such time as they retire or otherwise terminate
their employment with the Company. Such payments are fully vested. Assuming that
their employment with the Company had terminated on December 31, 1999, Messrs.
Lapin and Thung would have been entitled to receive approximately $607,256 and
$556,482, respectively, which amounts increase each year they remain employed by
the Company until they attain age 62. Of such amounts, $48,680 and $42,446,
respectively, were accrued in 1999 for Messrs. Lapin and Thung.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Management's recommendations as to the form and level of compensation of the
Company's executive officers are subject to the approval of the Compensation
Committee of the Company's Board of Directors. The Committee has not retained a
compensation consultant.
The Company's compensation policies seek to attract and retain key
executives necessary to the long-term success of the Company, to align
compensation with both annual and long-term strategic plans and goals and to
reward performance in the continued growth and success of the Company and in the
enhancement of shareholder values. In furtherance of these goals, the Company
has employed a combination of annual base salaries, which are set at levels
which management believes to be competitive with industry and regional pay
practices and economic conditions, and annual and longer term incentive
compensation, including options to purchase Common Stock.
Management recommended to the Compensation Committee a bonus pool for the
Company's employees (including the executive officers) based on the Company's
performance in 1999 (including management's accomplishments in enhancing the
insurance group's capital position, strategically planning the direction of the
insurance group, and improving the Company's profitability). The amount of the
1999 bonus pool was approved by the disinterested members of the Committee.
Specifically regarding the chief executive officer, Roy Thung, base salary has
been determined by considering Company and individual performance. Mr. Thung's
annual bonus payments are subject to approval by the disinterested members of
the Compensation Committee.
MEMBERS OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
HAROLD E. JOHNSON ALLAN C. KIRKMAN EDWARD NETTER, Chairman
9
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the five year cumulative total
return of the Common Stock with that of the Nasdaq Stock Market (US) Index and
the Nasdaq Stock Market Insurance Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG INDEPENDENCE HOLDING COMPANY, NASDAQ STOCK MARKET (U.S.) INDEX
AND NASDAQ INSURANCE STOCKS INDEX
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NASDAQ Stock Market (U.S.) Index..................... $100 $141 $174 $213 $300 $542
NASDAQ Insurance Stocks Index........................ $100 $142 $162 $238 $212 $164
Independence Holding Company......................... $100 $126 $125 $202 $237 $198
</TABLE>
* Assumes that dividends were reinvested and is based on a $100 investment on
December 31, 1994; indices data obtained from Center for Research in Security
Price (CRSP)
RELATED PARTY TRANSACTIONS
The Company and Geneve operate under cost-sharing arrangements pursuant to
which certain items are allocated between the companies. During 1999, the
Company paid to Geneve or accrued for payment thereto approximately $225,000
under such arrangements, and paid or accrued approximately an additional $56,000
for the first quarter of 2000. Geneve also provides the Company the use of
office space as its corporate headquarters for annual consideration of $236,000.
In addition, certain directors, officers and/or employees of the Company or its
subsidiaries, who are also directors, officers and/or employees of Geneve,
received compensation and benefits from Geneve for services rendered thereto
since January 1, 1999. The foregoing is subject to the approval of the Audit
Committee of the Board of Directors at least annually, and management of the
Company believes that the terms thereof are no less favorable than could be
obtained by the Company from unrelated parties on an arm's length basis.
At various times since January 1, 1999, certain securities transfers were
made between the Company and/or certain of its subsidiaries, on the one hand,
and Geneve, on the other hand, at fair market value. The Company has invested as
a limited partner in Dolphin Limited Partnership-A, an investment partnership of
which Mr. Donald Netter is the Chairman, Chief Executive Officer and President
of the managing member of the general partner and the principal shareholder. Mr.
Donald
10
<PAGE>
Netter is the son of Mr. Edward Netter. Consistent with the terms of the
partnership agreement, in addition to other defined expenses, limited partners
pay quarterly a management fee based on their beginning capital accounts, and an
annual performance-based incentive allocation.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected KPMG as the independent auditors of the
Company for the year 2000. It is anticipated that representatives of KPMG, who
also served as the Company's auditors for 1999, will be present at the Annual
Meeting of Stockholders and will have an opportunity to make a statement if they
so desire and to answer any appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' PROPOSAL 2.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present at the Annual Meeting of
Stockholders to be held in 2001 must be received at the Company's principal
executive office not later than December 31, 2000 in order to be includable in
the proxy material for such meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other business to be presented for action at the meeting. As to any business
which would properly come before the meeting, the Proxies confer discretionary
authority in the persons named therein and those persons will vote or act in
accordance with their best judgment with respect thereto.
By Order of the Board of Directors
DAVID T. KETTIG
Secretary
April 28, 2000
4409-PS-00
11
<PAGE>
APPENDIX 1
INDEPENDENCE HOLDING COMPANY
96 CUMMINGS POINT ROAD
STAMFORD, CONNECTICUT 06902
PROXY-SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Independence Holding Company (the
"Company") hereby appoints Steven B. Lapin and David T. Kettig, and each or
either of them, the true and lawful proxies, agents and attorneys of the
undersigned, each with full power to act without the other and with full power
of substitution to vote all shares of the Company which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held on Thursday, June 22, 2000 at 9:30 A.M., E.D.T., at the
Greenwich Civic Center, 90 Harding Road, Old Greenwich, Connecticut and at any
adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL PROPOSALS.
(1) To elect nine directors.
[ ] FOR all nominees listed below (except as instructed below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
Larry R. Graber, Harold E. Johnson, Allan C. Kirkman, Steven B. Lapin,
Edward Netter, Robert P. Ross, Jr., Edward J. Scheider, James G. Tatum,
Roy T.K. Thung.
Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name here:
...........................................................
(2) To ratify the appointment of KPMG LLP as independent auditors for the
fiscal year ending December 31, 2000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To transact any other business that may properly come before the Annual
Meeting and any adjournment or postponement thereof.
THE SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AS DIRECTED
ABOVE. IF NO DIRECTION IS GIVEN AND THE PROXY CARD IS VALIDLY EXECUTED,
THE SHARES WILL BE VOTED FOR ALL LISTED PROPOSALS.
<PAGE>
(see reverse)
The undersigned hereby ratifies and confirms all that said proxies, agents and
attorneys, or any of them or their substitutes, lawfully may do at the meeting
and hereby revokes all proxies heretofore given by the undersigned to vote at
said meeting or any adjournment or postponement thereof.
PLEASE SIGN THE PROXY EXACTLY AS YOUR NAME(S) APPEARS HEREON. JOINT OWNERS
SHOULD EACH SIGN PERSONALLY. TRUSTEES AND OTHER FIDUCIARIES SHOULD INDICATE THE
CAPACITY IN WHICH THEY SIGN, AND WHERE MORE THAN ONE NAME APPEARS, A MAJORITY
MUST SIGN. IF A CORPORATION, THE SIGNATURE SHOULD BE THAT OF AN AUTHORIZED
OFFICER WHO SHOULD STATE HIS OR HER TITLE.
Dated........................., 2000
(L.S.)
................................
(L.S.)
................................
PLEASE DATE, SIGN AND RETURN. YOUR
PROMPT ATTENTION WILL BE APPRECIATED.
