UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x
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Filed by a Party other than the Registrant o
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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INDEPENDENCE
HOLDING COMPANY
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction
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Aggregate number of securities to which transaction
applies:
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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):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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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.
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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Certain statements and information
contained in this document may be considered “forward-looking statements,” such as statements relating to our views
with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and
other factors that could cause actual results to differ materially from historical experience or from future results expressed
or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions
in the markets in which we operate, new federal or state governmental regulation, our ability to effectively operate, integrate
and leverage any past or future strategic acquisitions, and other factors that may be found in our filings with the Securities
and Exchange Commission. We expressly disclaim any duty to update these forward-looking statements unless required by applicable
law.
INDEPENDENCE HOLDING COMPANY
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
To Be Held on November
12, 2019
Dear Stockholders:
We
cordially invite you to attend the 2019 Annual Meeting of Stockholders (“2019 Annual Meeting” or “Annual Meeting”)
of Independence Holding Company (“IHC” or the “Company”). Our 2019 Annual Meeting will be held on Tuesday,
November 12, 2019 at 10:00 a.m. Eastern time and will be our sixth completely virtual meeting of stockholders. You will be able
to attend the 2019 Annual Meeting, vote, and submit your questions during the meeting via live webcast by visiting www.virtualshareholdermeeting.com/IHC2019.
To enter the meeting, you must have your sixteen-digit control number that is shown on the proxy card accompanying this Proxy Statement.
You will not be able to attend the Annual Meeting in person.
Details
regarding logging onto and attending the meeting over the website and the business to be conducted are described in the Proxy Card
included with this Proxy Statement. We have also made available a copy of our 2018 Annual Report with this Proxy Statement. We
encourage you to read our Annual Report. It includes our audited financial statements and provides information about our business
and products.
The purpose of the meeting is to:
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elect nine directors, each for a term of one year;
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ratify the appointment of RSM US LLP as IHC’s independent registered public accounting firm for the fiscal year ending December 31, 2019; and
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transact any other business that may properly come before the meeting.
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Only
stockholders of record at the close of business on September 19, 2019 may vote at the meeting or any postponements or adjournments
of the meeting.
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By order of the Board of Directors,
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Loan Nisser
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Vice President – Legal and Secretary
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October 3, 2019
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HOW
TO VOTE: Your vote is important. Whether or not you plan to attend the meeting, we hope you will vote as soon as possible.
You may vote over the Internet, as well as by telephone or, if you requested to receive printed proxy materials, by mailing a proxy
or voting instruction card. Please review the instructions on each of your voting options described in this Proxy Statement as
well as in the proxy card. Your vote is important, no matter how many shares you owned on the record date. A return envelope is
enclosed for your convenience and needs no postage if mailed in the United States.
2019 PROXY STATEMENT
TABLE OF CONTENTS
INDEPENDENCE HOLDING COMPANY
96
Cummings Point Road
Stamford,
Connecticut 06902
(203) 358-8000
www.ihcgroup.com
2019 PROXY STATEMENT
The Board of Directors
(the “Board”) of Independence Holding Company (“IHC”) is furnishing you this proxy statement in connection
with the solicitation of proxies on its behalf for the 2019 Annual Meeting of Stockholders to be held via live webcast on the Internet
at www.virtualshareholdermeeting.com/IHC2019. The meeting will take place on Tuesday, November 12, 2019 at 10:00 a.m. Eastern time.
At the online meeting, stockholders will vote on
the following proposals:
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elect nine directors, each for a term of one year;
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ratify the appointment of RSM US LLP as IHC’s independent registered public accounting firm for the fiscal year ending December 31, 2019; and
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transact any other business that may properly come before the meeting.
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Stockholders also will consider
any other matter that may properly come before the meeting, although we know of no other business to be presented.
By submitting your proxy
(via the Internet, telephone or mail), you authorize Ms. Teresa A. Herbert, IHC’s Chief Financial Officer and Senior Vice
President, and Ms. Loan T. Nisser, IHC’s Vice President - Legal and Secretary, to represent you and vote your shares at the
meeting in accordance with your instructions. They also may vote your shares to adjourn the meeting and will be authorized to vote
your shares at any postponements or adjournments of the meeting.
IHC’s 2018 Annual
Report, which includes IHC’s audited financial statements, is being made available to IHC’s stockholders concurrently
herewith (the “Annual Report”). Although the Annual Report is being made available concurrently with this proxy statement,
it does not constitute a part of the proxy solicitation materials and is not incorporated by reference into this proxy statement.
We
are first sending the proxy statement, form of proxy and accompanying materials to stockholders on or about October 3, 2019.
We will be hosting the
2019 Annual Meeting live via the Internet. A summary of the information you need to attend the meeting online is provided below:
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Any stockholder can attend the 2019 Annual Meeting live via the Internet at www.virtualshareholdermeeting.com/IHC2019;
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Webcast starts at 10:00 a.m. Eastern time;
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Stockholders may vote and submit questions while attending the 2019 Annual Meeting on the Internet; and
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Stockholders need a sixteen-digit control number to join the 2019 Annual Meeting.
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YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY VOTE YOUR SHARES OVER THE INTERNET, BY TELEPHONE OR BY MAIL.
INFORMATION ABOUT THE ANNUAL MEETING OF STOCKHOLDERS
What is the purpose of the
2019 Annual Meeting and why is it being held over the Internet?
At the 2019 Annual Meeting,
the stockholders will be asked to:
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elect nine directors, each for a term of one year;
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ratify the appointment of RSM US LLP as IHC’s independent registered public accounting firm for the fiscal year ending December 31, 2019; and
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transact any other business that may properly come before the meeting.
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The 2019 Annual Meeting
is being held on a virtual-only basis in order to reach the broadest number of stockholders possible and to save costs relative
to holding an in-person meeting. A number of prominent publicly-traded Delaware companies have held virtual-only meetings.
Who is entitled to vote?
The record date for the
meeting is September 19, 2019. Only stockholders of record at the close of business on that date are entitled to vote at the meeting.
The only class of stock entitled to be voted at the meeting is IHC common stock. Each outstanding share of common stock is entitled
to one vote for all matters before the meeting. At the close of business on the record date, there were 14,847,911 shares of IHC
common stock outstanding.
How do I vote by proxy?
If you properly complete,
sign and date the accompanying proxy card or voting instruction card and return it in the enclosed envelope, it will be available
for examination on the Internet through the virtual web conference during the annual meeting.
Please note that there
are separate telephone and Internet arrangements depending on whether you are a registered stockholder (that is, if you hold your
stock in your own name) or you hold your shares in “street name” (that is, in the name of a brokerage firm, bank, trustee
or other nominee that holds your securities account). In either case, you must follow the procedures described in the proxy card.
Am I entitled to vote if my
shares are held in “street name”?
If your shares are held
by a bank, brokerage firm, trustee or other nominee, you are considered the “beneficial owner” of shares held in “street
name.” If your shares are held in “street name,” the proxy materials are being made available to you by your
bank, brokerage firm, trustee or other nominee (the “record holder”), along with voting instructions. As the beneficial
owner, you have the right to direct your record holder how to vote your shares, and the record holder is required to vote your
shares in accordance with your instructions. If you do not give instructions to your record holder, it will nevertheless be entitled
to vote your shares in its discretion on the ratification of the appointment of the independent registered public accounting firm
(Proposal 2), but not on the election of directors (Proposal 1).
As the beneficial owner
of shares, you are invited to attend the annual meeting. If you are a beneficial owner, however, you may not vote your shares at
the meeting unless you obtain a legal proxy, executed in your favor, from the record holder of your shares.
How many shares must be
present to hold the online meeting?
A quorum must be present
at the meeting for any business to be conducted. The presence at the meeting, in person or by proxy, of the holders of a majority
of the shares of common stock outstanding on the record date will constitute a quorum. Proxies received but marked as abstentions
or treated as broker non-votes will be included in the calculation of the number of shares considered to be present at the meeting.
What if a quorum is not present at the online meeting?
If a quorum is not present
or represented at the meeting, the holders of a majority of the shares entitled to vote at the meeting who are present in person
or represented by proxy, or the chairman of the meeting, may adjourn the meeting until a quorum is present or represented. The
time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given.
What do I need in order to be able to attend the
online meeting?
The Company will be hosting
the 2019 annual meeting live online. You can attend the 2019 annual meeting live online at www.virtualshareholdermeeting.com/IHC2019.
The webcast will start at 10:00 a.m. Eastern time. You may vote and submit questions while attending the meeting online. You will
need the sixteen-digit control number included on your proxy card in order to be able to enter the meeting.
How can I vote my shares during the online meeting?
Shares held in your name
as the stockholder of record may be voted by you, while the polls remain open, at www.virtualshareholdermeeting.com/IHC2019 during
the meeting. You will need your sixteen-digit control number found in the proxy card. Shares held beneficially in “street
name” may be voted by you at the meeting only if you obtain a legal proxy from the brokerage firm, bank, trustee or other
nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the online meeting, we recommend
that you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide
not to attend the online meeting.
How can I vote my shares without attending the online
meeting?
Whether you hold shares
directly as the stockholder of record or beneficially in “street name,” you may direct how your shares are voted without
attending the online meeting. If you are a stockholder of record, you may vote by proxy. You can vote by proxy over the Internet
or telephone by following the instructions provided on the proxy card. If you hold shares beneficially in “street name,”
you may also vote by proxy over the Internet, telephone or by mail by following the voting instruction card provided to you by
your brokerage firm, bank, trustee or other nominee.
Is there a deadline for submitting proxies electronically
or by telephone or mail?
Proxies submitted electronically
or by telephone as described above must be received by 11:59 pm Eastern time on November 11, 2019. Proxies submitted by mail should
be received before 10:00 a.m. Eastern time on November 11, 2019.
Can I revoke my proxy and change my vote?
You may change your vote
at any time prior to the taking of the vote at the online meeting. If you are the stockholder of record, you may change your vote
by (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described
above (and until the applicable deadline for each method), (2) providing a written notice of revocation to IHC’s Secretary
at Independence Holding Company, 485 Madison Avenue, 14th Floor, New York, New York 10022 prior to your shares being
voted, or (3) attending the online meeting and voting. Attendance at the online meeting will not cause your previously granted
proxy to be revoked unless you specifically so request. For shares you hold beneficially in “street name,” you may
change your vote by submitting new voting instructions to your brokerage firm, bank, trustee or other nominee following the instructions
they provided, or, if you have obtained a legal proxy from your brokerage firm, bank, trustee or other nominee giving you the right
to vote your shares, by attending the online meeting and voting.
Who can participate in the online meeting?
Only stockholders eligible
to vote or their authorized representatives in possession of a valid sixteen-digit control number will be admitted as participants
to the online meeting.
Will my vote be kept confidential?
Yes, your vote will be kept confidential
and not disclosed to IHC unless:
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you expressly request disclosure on your proxy; or
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there is a proxy contest.
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Who will count the votes?
Broadridge Financial Solutions, an independent
third party, will tabulate and certify the votes. A representative of Broadridge Financial Solutions will serve as the inspector
of election.
How does the Board recommend I vote on the proposals?
The Board recommends that you vote:
• FOR the election of the nine nominees to the Board; and
• FOR the ratification of the appointment of RSM US LLP as IHC’s independent registered public accounting firm for the
fiscal year ending December 31, 2019.
What if I do not specify how my shares are to
be voted?
If you submit a proxy but do not indicate any voting
instructions, your shares will be voted:
• FOR the election of the nine nominees to the Board; and
• FOR the ratification of the appointment of RSM US LLP as IHC’s independent registered public accounting firm for the
fiscal year ending December 31, 2019.
Will any other business be conducted at the meeting?
IHC’s by-laws require
stockholders to give advance notice of any proposal intended to be presented at the meeting. The deadline for this notice has passed
and we have not received any such notices. If any other matter properly comes before the stockholders for a vote at the meeting,
however, the proxy holders will vote your shares in accordance with their best judgment.
How many votes are required to elect the director
nominees?
The affirmative vote of
a plurality of the votes cast at the online meeting is required to elect the nine nominees as directors. This means that the nine
nominees will be elected if they receive more affirmative votes than any other person. The proxy card enables you to vote FOR all
nominees proposed by the Board, to WITHHOLD authority for all nominees or to vote FOR ALL EXCEPT one or more of the nominees being
proposed. Voting for all nominees except those you list on the proxy card is the equivalent of withholding your vote for those
directors you have listed. If you vote “Withheld” with respect to one or more nominees, your shares will not be voted
with respect to the person or persons indicated.
What happens if a nominee is unable to stand for
election?
If a nominee is unable
to stand for election, the Board may either reduce the number of directors to be elected or select a substitute nominee. If a substitute
nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority.
How many votes are required
to ratify the appointment of IHC’s independent registered public accounting firm for the fiscal year ending December 31,
2019?
The ratification of the
appointment of RSM US LLP as IHC’s independent registered public accounting firm for the fiscal year ending December 31,
2019 requires the affirmative vote of a majority of the shares present at the online meeting or by proxy and entitled to vote.
The proxy card enables you to vote FOR or AGAINST the proposal or ABSTAIN from voting on the proposal. Abstentions will have the
same practical effect as votes against the proposal.
How will abstentions be treated?
Abstentions will be treated
as shares present for quorum purposes and entitled to vote, and will have the same practical effect as votes against a proposal.
How will broker non-votes be treated?
Broker non-votes will
be treated as shares present for quorum purposes. Your broker will be entitled to vote your shares in its discretion on the ratification
of the appointment of the independent registered public accounting firm for the fiscal year ending December 31, 2019 (Proposal
2) without your voting instructions, but not on the election of directors (Proposal 1).
STOCK OWNERSHIP
Directors and Executive Officers
The
following table sets forth certain information concerning the number of shares of our common stock beneficially owned based on
14,847,911 issued and outstanding shares of common stock as of September 19, 2019 (the “Record Date”) by: (i) each
of our directors and nominees, and (ii) each of our named executive officers.
Beneficial
ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities.
Other than as described in the notes to the table, we believe that all persons named in the table have sole voting and investment
power with respect to shares beneficially owned by them. All share ownership figures include all securities that can be acquired,
within sixty (60) days of the Record Date, by exercising or converting stock options, warrants, convertible securities or otherwise
and all rights to acquire the Company’s equity securities, which are deemed outstanding and beneficially owned by such person
for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other
person.
The address of each individual named below is c/o
IHC at 96 Cummings Point Road, Stamford, Connecticut 06902.
Name of Beneficial Owner
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Number of Shares
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Percent of Class
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Mr. Gary J. Balzofiore
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37,039
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(1)
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*
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Mr. Vincent Furfaro
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17,333
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(2)
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*
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Mr. Larry R. Graber
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80,482
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(3)
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*
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Ms. Teresa A. Herbert
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110,117
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(4)
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*
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Mr. David T. Kettig
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116,787
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(5)
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*
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Mr. Allan C. Kirkman
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32,076
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*
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Mr. John L. Lahey
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28,050
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*
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Mr. Steven B. Lapin
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122,162
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(6)
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*
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Mr. Ronald I. Simon
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44,950
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(7)
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*
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Mr. James G. Tatum
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44,076
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*
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Mr. Roy T. K. Thung
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300,198
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(8)
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2.0
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%
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All directors, nominees for director and executive officers as a group (11 persons)
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933,270
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6.2
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%
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Represents less than 1% of the outstanding common stock.
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(1)
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Includes 6,667 shares of common stock underlying stock
options exercisable within sixty (60) days from the date above.
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(2)
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Includes 17,333 shares of common stock underlying stock
options exercisable within sixty (60) days from the date above
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(3)
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Includes 25,000 shares of common stock underlying stock
options exercisable within sixty (60) days from the date above.
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(4)
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Includes 26,333 shares of common stock underlying stock
options exercisable within sixty (60) days from the date above. Excludes the 9,145,226 shares of common stock held by Geneve Holdings,
Inc., of which the named individual is an officer.
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(5)
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Includes 28,333 shares of common stock underlying stock
options exercisable within sixty (60) days from the date above. Includes 110 shares of common stock held by one of his children
of which shares Mr. Kettig disclaims beneficial ownership.
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(6)
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Excludes the 9,145,226 shares of common stock held by
Geneve Holdings, Inc., of which the named individual is an officer and director.
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(7)
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Includes 32,475 shares of common stock held by the Simon
Family Trust and 2,000 shares of common stock held in Mr. Simon’s wife’s IRA account, of which shares Mr. Simon disclaims
beneficial ownership.
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(8)
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Includes 55,000 shares of common stock underlying stock
options exercisable within sixty (60) days from the date above. Excludes the 9,145,226 shares of common stock held by Geneve Holdings,
Inc., of which the named individual is an officer.
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Significant Stockholders
The
following table sets forth certain information concerning the number of IHC shares of common stock beneficially owned, based on
14,847,911 issued and outstanding shares of common stock as of the Record Date, by certain persons known by IHC to beneficially
own more than five percent of the outstanding shares of IHC common stock.
Beneficial
ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities.
Other than as described in the notes to the table, we believe that the person named in the table has sole voting and investment
power with respect to shares beneficially owned by it. All share ownership figures include all securities that can be acquired,
within sixty (60) days of the Record Date, by exercising or converting stock options, warrants, convertible securities or otherwise
and all rights to acquire the Company’s equity securities, which are deemed outstanding and beneficially owned by such person
for purposes of computing its percentage ownership, but not for purposes of computing the percentage ownership of any other person
Name
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Number of Shares
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Percent of Class
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Geneve Holdings, Inc. (1)
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9,145,226
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61.59
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%
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(1)
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Geneve Holdings, Inc. (“GHI”), a private
diversified financial holding company, is a member of a group consisting of itself and certain of its affiliates that together
hold the shares of common stock of IHC. The address of GHI is 96 Cummings Point Road, Stamford, Connecticut 06902.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires directors and certain officers of IHC and persons who own more
than ten percent (10%) of IHC common stock to file with the U.S. Securities and Exchange Commission (“SEC”) initial
reports of beneficial ownership (Form 3) and reports of subsequent changes in their beneficial ownership (Form 4 or Form 5) of
IHC’s common stock. Such directors, officers and greater-than-ten-percent stockholders are required to furnish IHC with copies
of the Section 16(a) reports they file. The SEC has established specific due dates for these reports, and IHC is required to disclose
in this proxy statement any late filings or failures to file.
Based
solely upon a review of the copies of the Section 16(a) reports (and any amendments thereto) furnished to IHC and written representations
from certain reporting persons that no additional reports were required, IHC believes that its directors, reporting officers and
greater-than-ten-percent stockholders complied with all these filing requirements for the fiscal year ended December 31, 2018.
CORPORATE GOVERNANCE MATTERS
Corporate Governance Documents
In
furtherance of its longstanding goals of providing effective governance of IHC’s business and affairs for the long- term
benefit of stockholders and promoting a culture and reputation of the highest ethics, integrity and reliability, the Board has
adopted:
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a Code of Business Ethics that applies to IHC’s
Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, controller and other IHC employees performing
similar functions (the “Code of Ethics”);
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a Corporate Code of Conduct that applies to all employees, officers and
directors of IHC and its subsidiaries and affiliates (the “Code of Conduct”);
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Corporate Governance Guidelines (“Guidelines”) to advance the
functioning of the Board and its committees and set forth the Board’s expectations as to how it should perform its functions;
and
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written charters for its Audit Committee and Compensation Committee of the
Board (collectively, the “Charters”).
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It has
also adopted an Insider Trading Policy, which prohibits, unless express and specific consent is obtained from the Compliance Officer,
the members of the Board and officers of IHC and its subsidiaries, as applicable (collectively,
the “Company Insiders”), or any employee that IHC may designate from time to time as “Covered Persons”
because of such person’s position, responsibilities or his/her actual or potential access to material information (together
with the Company Insiders, the “Covered Persons”), or a Covered Person’s family member or controlled entity,
from engaging in hedging or monetizing transactions (such as zero-cost collars, forward sale contracts, prepaid variable
forwards, equity swaps, collars and exchange funds).
The
Code of Ethics, Code of Conduct, Guidelines, Charters and Insider Trading Policy can be found on IHC’s website at www.ihcgroup.com,
and are also available in print to any stockholder who requests them. The information on IHC’s website, however, is not incorporated
by reference in, and does not form part of, this proxy statement. The Board does not anticipate substantively modifying the Code
of Ethics or the Code of Conduct, or granting any waivers to either, but were any such waiver or modification to occur, it would
promptly be disclosed on IHC’s website.
Director Independence
As
a company listed on the New York Stock Exchange (“NYSE”), IHC uses the definition of independence prescribed in the
NYSE Listed Company Manual (the “Manual”). Each of Messrs. Kirkman, Tatum, Lahey and Simon met such independence requirements.
The Board has affirmatively determined that none of them had any material relationship described in Item 407(a) of Regulation S-K
promulgated by the SEC with IHC at all applicable times during 2018.
IHC
qualifies as a “controlled company,” as defined in Section 303A.00 of the Manual, because more than 50% of IHC’s
voting power is held by Geneve Holdings, Inc. (“GHI”). Therefore, IHC is not subject to certain NYSE requirements
that would otherwise require IHC to have: (i) a majority of independent directors on the Board (Manual Section 303A.01); (ii)
compensation of IHC’s executive officers determined by a compensation committee composed solely of independent directors
(Manual Section 303A.04); or (iii) director nominees selected, or recommended for the Board’s selection, by a nominating
committee composed solely of independent directors (Manual Section 303A.05).
Of
IHC’s directors, none of Ms. Herbert or Messrs. Graber, Kettig, Lapin or Thung is independent under the NYSE’s standards.
For
each independent director, after reasonable investigations and in reliance on representations by such independent director to IHC,
IHC believes there is no material transaction, relationship or arrangement described in Item 407(a) of Regulation S-K promulgated
by the SEC between each such director not disclosed in this proxy statement under the caption “Certain Relationships and
Related Transactions.”
Board Leadership Structure
The
Board understands that there is no single, generally accepted approach to providing Board leadership and that given the dynamic
and competitive environment in which we operate, the right Board leadership structure may vary as circumstances warrant. To this
end, the Board has no policy mandating the combination or separation of the roles of Chairman and CEO and believes the matter should
be discussed and considered from time to time as circumstances change. Currently, Mr. Roy T.K. Thung is both our CEO and Chairman.
Board Role in Risk Oversight
The
Board administers its risk oversight function directly and through its Audit Committee. The Board and the Audit Committee regularly
discuss with management, and the Company’s independent auditors and internal auditor, our major risk exposures, their potential
financial impact on the Company, and the steps we take to manage these risks.
In
general, management is responsible for the day-to-day management of the risks the Company faces, while the Board, acting as a whole
and through the Audit Committee, has responsibility for the oversight of risk management. In its risk oversight role, the Board
has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate
and functioning as designed. Senior management attends the regular quarterly meetings of the Board and is available to address
questions and concerns raised by the Board on risk management-related and other matters.
The
Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of
financial reporting, internal controls, and compliance with legal and regulatory requirements. In addition, the Audit Committee
discusses policies with respect to risk assessment and risk management with management, internal audit and the independent auditors.
The
Audit Committee assists the Board with oversight of risk management by reviewing the Company’s financial statements and meeting
with the Company’s independent auditors and internal auditor at regularly scheduled meetings of the Audit Committee, to review
their reports on the adequacy and effectiveness of our internal audit and internal control systems, and discusses with management
the Company’s major financial risks and exposures and the steps management has taken to monitor and control such risks and
exposures.
Audit Committee Financial Expert
The
Board has determined that each of Mr. Tatum and Mr. Simon is an audit committee financial expert as such term is defined in Item
407(d)(5)(ii) of Regulation S-K promulgated by the SEC.
Executive Sessions of Non-Management Directors
Non-management
Board members meet without management present at least twice annually, at regularly scheduled executive sessions. At least once
a year, such meetings include only the independent members of the Board. Mr. Kirkman presides over meetings of the non-employee
and independent directors.
Communications with Directors
You
may communicate directly with any member or committee of the Board by writing to: IHC Board of Directors, c/o Corporate Secretary,
485 Madison Avenue, 14th Floor, New York, New York 10022. Please specify to whom your letter should be directed. The
Corporate Secretary of IHC will review all such correspondence and regularly forward to the Board a summary of all such correspondence
and copies of all correspondence that, in her opinion, deals with the functions of the Board or its committees or that she otherwise
determines requires the attention of any member, group or committee of the Board. Board members may, at any time, review a log
of all correspondence received by IHC that is addressed to Board members and request copies of any such correspondence.
Interested
parties who wish to communicate with non-management IHC directors, or with the presiding director of the Board’s executive
sessions, may do so by writing to IHC Board of Directors, c/o Corporate Secretary, Attn: Non- management Directors or the Presiding
Director for Executive Sessions, as applicable, 485 Madison Avenue, 14th Floor, New York, New York 10022. All such mail
received will first be opened and screened for security purposes.
Nomination of Director Candidates
In
light of GHI’s majority voting power, the Board has determined that the Board, rather than a nominating committee, is the
most appropriate body to identify director candidates and select nominees for presentation at the annual meeting of stockholders.
In making nominations, the Board seeks candidates with outstanding business experience who will bring such experience to the management
and direction of IHC. The minimum criteria employed by the Board in its selection of candidates are set forth in the Guidelines,
along with certain other factors that inform the selection process. All directors serving on the Board participate in the consideration
of director nominees. Furthermore, in light of GHI’s voting power, the Board has determined that no policy with respect to
consideration of candidates recommended by security holders other than GHI’s would be appropriate.
The
Board does not have a formal policy with respect to diversity. However, the Board seeks to have a Board that reflects an appropriate
balance of knowledge, experience, skills, expertise and diversity, as applicable to our industry. The Board assesses its achievement
of diversity through the review of Board composition as part of the Board’s annual self- assessment process.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Meetings
During
2018, the Board held four formal meetings. Each director attended at least 75% of the aggregate of: (i) the total number of meetings
of the Board; and (ii) the total number of meetings held by all committees of the Board on which he or she served, during the applicable
period.
Committees
The Board has standing Audit and Compensation Committees.
Committee memberships are as follows:
Audit Committee
|
|
Compensation Committee
|
Mr. James G. Tatum (Chairman)
|
|
Mr. Allan C. Kirkman (Chairman)
|
Mr. Allan C. Kirkman
|
|
Mr. John L. Lahey
|
Mr. John L. Lahey
|
|
Mr. James G. Tatum
|
Mr. Ronald I. Simon
|
|
|
Audit
Committee. The principal functions of the Audit Committee are to: (i) select an independent registered public accounting
firm; (ii) review and approve management’s plan for engaging IHC’s independent registered public accounting firm during
the year to perform non-audit services and consider what effect these services will have on the independence of IHC’s independent
registered public accounting firm; (iii) review IHC’s annual financial statements and other financial reports which require
approval by the Board; (iv) oversee the integrity of IHC’s financial statements, IHC’s systems of disclosure controls
and internal controls over financial reporting, and IHC’s compliance with legal and regulatory requirements; (v) review the
scope of audit plans of IHC’s internal audit function and independent registered public accounting firm and the results of
their audits; and (vi) evaluate the performance of IHC’s internal audit function and independent registered public accounting
firm.
The
Audit Committee met five times in 2018. Each of its members meets the independence requirements of the NYSE and applicable SEC
rules and regulations. The Audit Committee and the Board have determined that each member of the Audit Committee is financially
literate and that each of Mr. Tatum and Mr. Simon qualifies as an “audit committee financial expert,” as such term
is defined in Item 401(h)(2) of Regulation S-K promulgated by the SEC.
Compensation
Committee. The Compensation Committee assists the Board in fulfilling its responsibilities with regard to compensation
matters, is responsible for determining or ratifying (as the case may be) the compensation of IHC’s executive officers, and
administers IHC’s 2016 Stock Incentive Plan. The Compensation Committee met two times in 2018. The Compensation Committee
has sole authority to determine the compensation for IHC’s Chief Executive Officer.
Attendance at Annual Meeting of Stockholders
Each
IHC director is expected to be online for the Annual Meeting of Stockholders. At last year’s annual meeting, every IHC director
attended online.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Director Independence
As
a company listed on the New York Stock Exchange (“NYSE”), IHC uses the definition of independence prescribed in the
NYSE Listed Company Manual (the “Manual”). Each of Messrs. Kirkman, Tatum, Simon and Lahey met such independence requirements.
The Board has affirmatively determined that none of them had any material relationships described in Item 407(a) of Regulation
S-K promulgated by the SEC with IHC at all applicable times during 2018.
IHC
qualifies as a “controlled company,” as defined in Section 303A.00 of the Manual, because more than 50% of IHC’s
voting power is held by GHI. Therefore, IHC is not subject to certain NYSE requirements that would otherwise require IHC to have:
(i) a majority of independent directors on the Board (Manual Section 303A.01); (ii) compensation of IHC’s executive officers
determined by a compensation committee composed solely of independent directors (Manual Section 303A.04); or (iii) director nominees
selected, or recommended for the Board’s selection, by a nominating committee composed solely of independent directors (Manual
Section 303A.05).
Of
IHC’s directors, none of Ms. Herbert or Messrs. Graber, Kettig, Lapin or Thung is independent under the NYSE’s standards.
For
each independent director, after reasonable investigations and in reliance on representations by such independent director to IHC,
IHC believes there is no transaction, relationship or arrangement described in Item 407(a) of Regulation S-K promulgated by the
SEC between each such director not disclosed in this proxy statement under the caption “Certain Relationships and Related
Transactions.”
Compensation Committee Interlocks and Insider Participation
Messrs. Kirkman, Lahey and Tatum served on the Compensation
Committee of the Board during fiscal year 2018.
Transactions with Management and Other Relationships
With Geneve Holdings, Inc.
IHC
and Geneve Holdings, Inc. (“GHI”), IHC’s controlling stockholder, operate under cost-sharing arrangements pursuant
to which certain items are allocated between the two companies. During 2017, IHC paid GHI (or accrued for payment thereto) approximately
$455,000 under such arrangements. Such cost-sharing arrangements include GHI providing IHC with the use of office space as IHC’s
corporate headquarters for annual consideration of $160,000 in 2017. During 2018, IHC paid GHI (or accrued for payment thereto)
approximately $426,000 under such arrangements, and paid or accrued an additional $225,000 for the first six months of 2019. Such
cost-sharing arrangements include GHI providing IHC with the use of office space as IHC’s corporate headquarters for annual
consideration of $158,000 in 2018. The foregoing arrangement is subject to the annual review and approval of the Audit Committee,
and IHC’s management believes that the terms thereof are no less favorable than could be obtained by IHC from unrelated parties
on an arm’s-length basis.
Parent of Smaller Reporting
Company
As described
under “Stock Ownership—Significant Stockholders,” GHI beneficially owns 9,145,226 shares of the Company's common
stock, representing 61.59% of the Company's issued and outstanding shares of common stock as of the Record Date. As a result
of GHI's status as the Company's controlling stockholder, GHI may be considered to be the parent of the Company under applicable
SEC rules.
Review, Approval, or Ratification of Transactions
with Related Persons
Section
5.7 of IHC’s by-laws states that no contract or transaction between IHC and one or more of its directors or officers (or
their affiliates) is per se void (or voidable) if, among other things, the material facts as to the relevant relationships
and interests were disclosed to the Board (or the relevant committee thereof) and the transaction in question was approved by a
majority of the disinterested directors voting on the matter. The Audit Committee’s charter requires the Audit Committee
to review all interested-party transactions, and IHC’s other governance documents specifically prohibit various conflicts
of interest and impose disclosure requirements in connection with any potential conflict of interest.
The
Audit Committee has reviewed and approved each of the related-party transactions set forth above. IHC is not aware of any transaction
reportable under paragraph (a) of Item 404 of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended,
in respect of 2018, that was not so reviewed and approved.
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Board currently consists of nine members. All of IHC’s directors are elected at each annual meeting of stockholders and hold
office until the next annual meeting of stockholders. The Board proposes that each of the nine current directors be re-elected
to the Board. Each of the directors elected at this annual meeting will hold office until the annual meeting of stockholders to
be held in 2020 and until his or her successor is duly elected and qualified. The Company believes that its Board as a whole should
encompass a range of talent, skill, diversity, and expertise enabling it to provide sound guidance with respect to the Company's
operations and interests. In addition to considering a candidate's background and accomplishments, candidates are reviewed in the
context of the current composition of the Board and the evolving needs of our businesses.
Each
nominee has consented to being named in this proxy statement and has agreed to serve if elected. If a nominee is unable to stand
for election, the Board may either reduce the number of directors to be elected or select a substitute nominee. If a substitute
nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority.
The
following table sets forth, with respect to each nominee, his or her name, age, principal occupation, employment during at least
the past five years, the year he or she was first elected an IHC director and directorships held in other public companies.
NOMINEES FOR ELECTION TO THE BOARD
Director, Year First
Elected as Director
|
|
Age
|
|
Principal
Occupation, Business and Directorships and Qualifications
|
|
|
|
|
|
Mr. Larry R.
Graber
2000
|
|
70
|
|
Since March 2012, Chief Life and Annuity Actuary and Senior Vice President of IHC; for more than the five years prior thereto,
Senior Vice President — Life and Annuities of IHC; for more than the past five years, a director and President of Madison
National Life Insurance Company, Inc., a wholly owned subsidiary of IHC (“Madison National Life”); since July 2018,
a director of Independence American Insurance Company, a wholly owned subsidiary of IHC (“IAIC”); for more than the
past five years, a director and President of Southern Life and Health Insurance Company, an insurance company with principal offices
in Homewood, Alabama and a wholly owned subsidiary of Geneve Holdings, Inc., a private diversified holding company that is the
controlling stockholder of IHC (“GHI”); for more than the past five years, a director of Standard Security Life Insurance
Company of New York, a wholly owned subsidiary of IHC (“Standard Security Life”).
The experiences, qualifications,
attributes or skills that led the Board to conclude that Mr. Graber should serve as one of IHC’s directors are his extensive
experience in many facets of the insurance business, particularly relating to the acquisition and administration of blocks of life
insurance.
|
Director,
Year First
Elected as Director
|
|
Age
|
|
Principal
Occupation, Business and Directorships and Qualifications
|
|
|
|
|
|
Ms. Teresa A. Herbert
2016
|
|
58
|
|
Since June 2019, Independent Non-Executive Member of the Board of Directors of Avangrid, Inc., a leading sustainable energy services
company; since July 2019, a member of the Audit and Compliance Committee of Avangrid, Inc.; for more than the past five years,
Chief Financial Officer and Senior Vice President of IHC; for more than the past five years, Vice President – Finance and
Treasurer of GHI; for more than the five years prior to August 2016, Chief Financial Officer and Senior Vice President of American
Independence Corp., formerly a public company traded on Nasdaq and a majority-owned subsidiary of IHC that was merged out of existence
on August 31, 2016 (“AMIC”); from March 2011 to August 2016, a director of AMIC; since 2016, a director of Standard
Security Life and Independence American.
The experiences, qualifications,
attributes or skills that led the Board to conclude that Ms. Herbert should serve as one of IHC’s directors are her extensive
financial and accounting experience and her experience with companies with complex organizational structures, intercompany transactions,
diverse and complex business transactions, the insurance industry, and public companies.
|
|
|
|
|
|
Mr. David T. Kettig
2011
|
|
60
|
|
Since September 25, 2017,
President of IHC; from April 1, 2016 to September 24, 2017, Executive Vice President of IHC; for more than the past five years,
Chief Operating Officer and Acting General Counsel of IHC; from April 2009 to April 1, 2016, Chief Operating Officer and Senior
Vice President of IHC; from August 2013 to August 2016, President of AMIC; from April 2009 to March 2012, Chief Operating Officer
and Senior Vice President of AMIC; from March 2011 to August 2016, a director of AMIC; for more than the past five years, President
and a director of IAIC; from March 2012 to March 2016, President of Standard Security Life; since April 2016, Chairman and Chief
Executive Officer of Standard Security Life; for more than the past five years, a director of Standard Security Life.
The experiences, qualifications,
attributes or skills that led the Board to conclude that Mr. Kettig should serve as one of IHC’s directors are his extensive
experience in diverse, complex businesses and transactions, corporate governance, legal affairs, risk management, and insurance.
|
|
|
|
|
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Mr. Allan C. Kirkman
1980
|
|
76
|
|
For more than the past
five years, a member of each of the Audit Committee and the Compensation Committee of IHC and Chairman of the Compensation Committee
of IHC; for more than the five years prior to his retirement in October 2005, Executive Vice President of Mellon Bank, N.A., a
national bank.
The
experiences, qualifications, attributes or skills that led the Board to conclude that Mr. Kirkman should serve as one of IHC’s
directors are his extensive experience in diverse, complex businesses and transactions, including that involving public companies
in the financial services fields.
|
Director,
Year First
Elected as Director
|
|
Age
|
|
Principal
Occupation, Business and Directorships and Qualifications
|
|
|
|
|
|
Mr. John L.
Lahey
2006
|
|
73
|
|
For more than the past five
years, a member of the Audit Committee and the Compensation Committee of IHC; since July 2018, President Emeritus and Professor
of Logic and Philosophy at Quinnipiac University, a private university located in Hamden, Connecticut; from March 1987 to June
2018, President of Quinnipiac University; since 2010, a member of the Board of Trustees of Yale-New Haven Health Systems; between
1994 and December 2015, a director of the UIL Holdings Corporation, a publicly-held utility holding company with principal offices
in New Haven, Connecticut; since July 2019, Chairman of the Nominating, Governance and Compensation Committee, and member of the
Independent Directors’ Committee, of Avangrid, Inc., a diversified energy and utility company with principal offices in New
Haven, Connecticut that is the successor-in-interest by merger to UIL Holdings Corporation; since December 2015, a director, Nominating,
Governance and Compensation Committee member, and Executive Committee member of Avangrid, Inc.; since 2004, a director of Alliance
for Cancer Gene Therapy, the only national non-profit organization committed exclusively to cancer gene and cell therapy research;
from June 2006 to January 2017, a director of Standard Security Life.
The experiences, qualifications,
attributes or skills that led the Board to conclude that Mr. Lahey should serve as one of IHC’s directors are his extensive
executive experience in major organizations and valuable expertise in management and corporate governance.
|
|
|
|
|
|
Mr. Steven
B. Lapin
1991
|
|
74
|
|
For more than the past five
years, Vice Chairman of the Board of Directors of IHC; for more than the past five years, Chairman, Chief Executive Officer, President
and a director of GHI; for more than the past five years, Chairman, Chief Executive Officer, President and a director of Geneve;
for more than the five years prior to August 2016, a director of AMIC; for more than the five years prior to November 2018, a director
of Madison National Life; for more than the five years prior to October 2018, a director of Standard Security Life.
The
experiences, qualifications, attributes or skills that led the Board to conclude that Mr. Lapin should serve as one of IHC’s
directors are his extensive experience in diverse,complex businesses and transactions, corporate governance of public companies,
risk management and insurance.
|
|
|
|
|
|
Mr. Ronald I. Simon
2016
|
|
80
|
|
Since
November 2016, a director of IHC; since November 2017, a member of the Audit Committee of IHC; from January 2003 to August 2016,
Chairman of the Compensation Committee of AMIC; from January 2005 to August 2016, a member of the Audit Committee of AMIC; from
2011 to August 2016, Chairman of the Audit Committee of AMIC; since August 2007, a director and member of the Audit and Compensation
Committees, and Chairman of the Corporate Governance Committee, of Ellington Financial, Inc. a REIT specializing in acquiring
and managing mortgage-related assets; since May 2013, a director and member of the Audit and Compensation Committees, and Chairman
of the Corporate Governance Committee, of Ellington Residential Mortgage REIT.
The experiences, qualifications,
attributes or skills that led the Board to conclude that Mr. Simon should serve as one of IHC’s directors are his extensive
experience in finance and senior management, and in growing successful organizations with entrepreneurial company cultures.
|
James G. Tatum, C.F.A.
2000
|
|
78
|
|
For more than the past five years, Chairman of the Audit Committee of IHC; for more than the past five years, member of the Compensation
Committee of IHC; for more than the past five years, a director of Standard Security Life; for more than the past five years, sole
proprietor of J. Tatum Capital, LLC, a registered investment advisor, located in Birmingham, Alabama, managing funds primarily
for individual and trust clients; Chartered Financial Analyst for more than twenty-five years; from March 2011 until August 2016,
a director of AMIC; from March 2011 until August 2016, a member of the Audit Committee of AMIC.
The
experiences, qualifications, attributes or skills that led the Board to conclude that Mr. Tatum should serve as one of IHC’s
directors are his extensive executive experience in major organizations and valuable expertise with financial issues, risk management
and oversight.
|
|
|
|
|
|
Mr. Roy T.K. Thung
1990
|
|
75
|
|
Since September 2017, Chief Executive Officer and Chairman of the Board of IHC; since March 2011, Chief Executive Officer, President
and Chairman of the Board of IHC; since January 2000, Chief Executive Officer of IHC; since July 1999, President of IHC; for more
than the five years prior to July 1999, Executive Vice President and Chief Financial Officer of IHC; for more than the past five
years, Executive Vice President of Geneve; from July 2002 until August 2016, a director of AMIC; from November 2002 until March
2012, Chief Executive Officer and President of AMIC; from March 2012 until August 2016, Chief Executive Officer of AMIC; for more
than the five years prior to April 2016, Chief Executive Officer and Chairman of the Board of Standard Security Life; for more
than the five years prior to October 2018, director of Standard Security Life; for more than the five years prior to November 2018,
Chairman of the Board of Madison National Life.
The experiences, qualifications,
attributes or skills that led the Board to conclude that Mr. Thung should serve as one of IHC’s directors are his extensive
experience in diverse, complex businesses and transactions, including involving public companies in the insurance industry, and
executive and management experience.
|
NAMED EXECUTIVE OFFICERS
IHC’s officers are elected by the Board,
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.
Vincent J. Furfaro
(Age 55)
Since January 2019, Senior
Vice President Corporate Development & Chief Information Security Officer (“CISO”); from February 2018 to December
2018, Vice President Strategic Corporate Development and Chief Information Security Officer; from 2015 to February 2018, Vice President
–Information Technology. From February 2018, CISO of Standard Security Life, Independence American and Madison National Life
Insurance Company, Inc., an indirect wholly owned subsidiary of IHC (“Madison National Life”). For more than the five
years prior to February 2018, Vice President of Information Technology of Standard Security Life, Independence American and Madison
National Life.
DIRECTORS’ COMPENSATION
The
general policy of the Board is that compensation for independent directors should be a mix of cash and equity. IHC does not pay
management directors for Board service in addition to their regular employee compensation. The Compensation Committee has the primary
responsibility for reviewing and considering any revisions to director compensation.
During 2019, each non-employee (outside) director
will be paid:
|
•
|
an annual retainer of $36,000;
|
|
•
|
$1,500 for each Board or committee meeting attended;
|
|
•
|
$9,000 for service as chairman of a Board committee; and
|
|
•
|
2,475 restricted share units of IHC common stock, vesting
ratably over the three annual anniversaries of the award, and contingent upon continuing service as a director.
|
The
following table summarizes compensation paid to IHC’s directors during 2018, except for Mr. Roy T.K. Thung, IHC’s Chief
Executive Officer and Chairman of the Board, Mr. David T. Kettig, President, Chief Operating Officer and Acting General Counsel,
Mr. Larry R. Graber, Chief Life and Annuity Actuary and Senior Vice President, and Teresa A. Herbert, Chief Financial Officer and
Senior Vice President, for whom compensation is disclosed elsewhere herein.
Director
Summary Compensation
Name
|
|
Fees Earned or Paid
in Cash
($)
|
|
|
Stock Awards
($)
|
|
|
Total
($)
|
|
Mr. Allan C. Kirkman
|
|
|
63,000
|
|
|
|
95,263
|
|
|
|
158,263
|
|
Mr. John L. Lahey.
|
|
|
54,000
|
|
|
|
95,263
|
|
|
|
149,263
|
|
Mr. Steven B. Lapin (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Mr. Ronald I. Simon
|
|
|
51,000
|
|
|
|
95,263
|
|
|
|
146,263
|
|
Mr. James G. Tatum.
|
|
|
61,500
|
|
|
|
95,263
|
|
|
|
156,763
|
|
|
(1)
|
Mr. Lapin received no compensation in connection with his service as an IHC director during 2018.
|
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
“Say-on- Pay” and “Say-on-Frequency”
The
Compensation Committee considered the voting results of the advisory, non-binding “say-on-pay” vote at IHC’s
2017 Annual Meeting of Stockholders in connection with the discharge of its responsibilities. IHC’s stockholders expressed
their support of the compensation for our CEO, CFO and the three other most-highly compensated officers in respect of 2016, with
a substantial majority of the votes cast voting to approve the compensation of IHC’s named executive officers described in
IHC’s 2017 proxy statement. Following the Compensation Committee’s review and consideration of this stockholder support,
as well as the other factors discussed in more detail below, we determined to make no changes to our approach to executive compensation.
The next advisory, non-binding “say-on-pay” vote will occur at IHC’s 2020 Annual Meeting of Stockholders.
At
IHC’s 2017 Annual Meeting of Stockholders, a majority of IHC’s stockholders voted for “say-on-pay” proposals
to occur every three years. In light of this voting result on the frequency of “say-on-pay” proposals, the Board decided
that IHC will present “say-on-pay” proposals every three years until the next required vote on the frequency of stockholder
votes on named executive officer compensation. We held a say on frequency of “say-on-pay” vote at our 2017 Annual Meeting
of Stockholders. The next stockholder vote on the frequency of stockholder votes on named executive officer compensation will occur
at IHC’s 2023 Annual Meeting of Stockholders.
Compensation Objectives
Compensation
of each of IHC’s executive officers is intended to be based on performance of IHC and the executive. The Compensation Committee
has responsibility for establishing and reviewing the compensation of IHC’s CEO and for reviewing the compensation for all
of IHC’s executive officers.
In establishing executive officer compensation, the
following are among the Compensation Committee’s objectives:
|
·
|
attract and retain individuals of superior ability and managerial talent;
|
|
·
|
ensure compensation is aligned with IHC’s corporate
strategies, business objectives and the long-term interests of IHC’s stockholders; and
|
|
·
|
enhance incentives to increase IHC’s stock price and maximize stockholder value by providing
a portion of total compensation in IHC equity and equity-related instruments.
|
IHC’s
overall compensation program is structured to attract, motivate and retain highly qualified executive officers by paying them competitively,
consistent with IHC’s success and their contributions to such success. To this end, base salary and bonus are designed to
reward annual achievements and to be commensurate with an executive’s scope of responsibilities, demonstrated leadership
abilities and management experience and effectiveness. Other elements of compensation focus on motivating and challenging IHC’s
executive officers to achieve superior, long-term, sustained results.
Implementation of Objectives
Salaries
The
salary of an IHC executive officer is based on his or her level of responsibility, experience and qualifications and recent performance.
Adjustments to salary are made in response to changes in any of the foregoing factors and changes in market conditions. Executive
officer salaries are typically reviewed by the Compensation Committee every twelve months. The Compensation Committee has sole
authority to determine the compensation for IHC’s Chief Executive Officer. Neither the Compensation Committee nor IHC has
retained a compensation consultant or similar organization for assistance in reviewing or setting executive officer salaries or
other compensation.
Cash Bonuses
Following
the close of each fiscal year, IHC’s Chief Executive Officer makes determinations that are communicated to the Compensation
Committee as to cash bonuses for IHC’s executive officers (excluding himself), based on an analysis of: (i)
any contractual commitments set forth in an employment agreement; (ii) IHC’s performance in the year ended versus
IHC’s plan for such year; and (iii) a subjective evaluation of a variety of factors as to each executive officer’s
individual contribution during the year. The Compensation Committee then convenes outside the presence of the Chief Executive
Officer and, following appropriate deliberation, approves or ratifies bonuses for all IHC executive officers.
The salaries paid and
annual bonuses awarded to IHC’s named executive officers in respect of 2018 are set forth in the Summary Compensation Table.
Equity Awards
The
Board of Directors approved a 2016 Stock Incentive Plan (the “2016 Plan”) and submitted it for stockholder approval
at the 2016 Annual Meeting of Stockholders. A majority of the shares present at that meeting in person or by proxy approved the
2016 Plan. The following is a description of the 2016 Plan.
The
types of equity awards that may be granted under the 2016 Plan are: (i) options; (ii) share appreciation rights (“SARs”);
(iii) restricted shares, restricted share units (which are shares granted after certain vesting conditions are met) and unrestricted
shares; (iv) deferred share units; and (v) performance awards. The Compensation Committee determines the type and amount of the
award with reference to factors that include the present value of the award relative to the executive officer’s salary and
anticipated cash bonus, the anticipated importance of the executive’s position to IHC’s future results, and the size
of the executive’s total compensation relative both to other executives within IHC and to compensation levels at other companies.
Within
the limitations of the 2016 Plan, the Compensation Committee may modify an award to: (i) accelerate the rate at which an option
or SAR may be exercised (including, without limitation, permitting an option or SAR to be exercised in full without regard to the
installment or vesting provisions or whether the option or SAR is at the time exercisable); (ii) accelerate the vesting of any
award; or (iii) accept the cancellation of outstanding awards. However, the Compensation Committee may not, without stockholder
approval, cancel an outstanding option that is underwater for the purpose of reissuing the option to a grantee within six months
thereafter at a lower exercise price, or granting a replacement award of a different type. Notwithstanding the foregoing provision,
no modification of an outstanding award can materially and adversely affect a grantee’s rights thereunder, unless the grantee
provides written consent, there is an express 2016 Plan provision permitting the Compensation Committee to act unilaterally to
make the modification, or the Compensation Committee reasonably concludes that the modification is not materially adverse to the
grantee.
Options
Incentive
stock options (“ISOs”) and non-incentive stock options (“Non-ISOs”) may be granted under the 2016 Plan.
At the sole discretion of the Compensation Committee, any option may be exercisable, in whole or in part, immediately upon the
grant thereof, or only after the occurrence of a specified event, or only in installments, which installments may vary. The term
of any option may not exceed ten years from the grant date; provided, however, that in the case of an ISO granted to an
employee of IHC or any of its affiliates who owns stock representing more than ten percent (10%) of the voting stock on the grant
date (“Employee Ten Percent Holder”), the term of the ISO shall not exceed five years from the grant date. The exercise
price of an option is determined by the Compensation Committee in its sole discretion; provided, however, that if an ISO
is granted to an Employee Ten Percent Holder, the per share exercise price shall not be less than 110% of the closing price per
share on the NYSE on the grant date (“Fair Market Value”); and provided further that for all other options,
the per share exercise price shall not be less than 100% of the Fair Market Value on the grant date. Neither IHC nor the Compensation
Committee can allow for a repricing without stockholder approval.
Each
of IHC’s named executive officers holds stock options, having varying exercise prices and expiration dates (based on the
date granted). Please see the information set forth in the tables below for additional information. IHC does not have a target
level of stock ownership applicable to any of its employees, including the named executive officers.
Share Appreciation Rights (SARs)
The
Compensation Committee may grant SARs either concurrently with the grant of an option or with respect to an outstanding option
(in which case the SAR will extend to all or a portion of the shares covered by the related option, the exercise price is the same
as the exercise price of the related option, and the SAR is exercisable at such time or times, and to the extent, that the related
option will be exercisable), or independent of any option. The Compensation Committee may also grant SARs that are exercisable
only upon or in respect of a change in control (as defined in the 2016 Plan) or any other specified event. The per share exercise
price of a SAR cannot be less than 100% of the Fair Market Value, and the SARs may only be exercised when the Fair Market Value
of the shares underlying the SAR exceeds the exercise price of the SAR. Neither IHC nor the Compensation Committee can allow for
a repricing without stockholder approval.
Restricted Shares, Restricted Share Units and Unrestricted
Shares
Subject
to applicable law, an award of 2,475 restricted shares (or such other amount that the Board may determine on a prospective basis)
will be granted to each non-employee director of IHC following each annual meeting of IHC’s stockholders. One-third of those
restricted shares will vest on each of the next three annual anniversaries of the date the restricted shares were awarded. In the
event that a non-employee director terminates his or her membership on the Board for any reason, the director will immediately
forfeit any unvested restricted shares.
At any
time within the thirty-day period (or other shorter or longer period that the Compensation Committee selects in its sole discretion)
in which a grantee who is a member of a select group of management or highly compensated employees receives an initial award of
either restricted shares or restricted share units, the Compensation Committee may permit the grantee to irrevocably elect to defer
the receipt of all or a percentage of the shares that would otherwise be transferred to the grantee upon the vesting of such award.
Deferred Share Units
The
Compensation Committee may permit any director, consultant or member of a select group of management or highly compensated employees
to irrevocably elect to forego the receipt of cash or other compensation (including shares), and in lieu thereof to have IHC credit
to an internal 2016 Plan account a number of deferred share units having a Fair Market Value equal to the shares and other compensation
deferred.
Performance Awards
The
Compensation Committee may grant a performance award based on one or more of the following to measure IHC, affiliate, and/or business
unit performance during a specified performance period: (i) gross or net premiums; (ii) profit margin; (iii) number of insured
lives; (iv) basic, diluted, or adjusted earnings per share; (v) sales or revenue; (vi) earnings before interest, taxes, and other
adjustments (in total or on a per share basis); (vii) basic or adjusted net income; (viii) returns on equity, assets, capital,
revenue or similar measure; (ix) economic value added; (x) working capital; (xi) total stockholder return; and (xii) product development,
product market share, research, licensing, litigation, human resources, information services, mergers, acquisitions, or sales of
assets of affiliates or business units. Performance measures may vary from performance period to performance period and from grantee
to grantee.
A grantee
will be eligible to receive payment in respect of a performance award only to the extent that the performance measure(s) for such
award is achieved, and it is determined that all or some portion of such grantee’s award has been earned for the performance
period. The Compensation Committee reviews whether, and to what extent, the performance measure(s) for a particular performance
period (of not less than one fiscal year) have been achieved and, if so, determines the amount of the performance award to be paid.
The Compensation Committee may use negative discretion to decrease, but not increase, the amount of the award otherwise payable
based upon such performance.
At
any time prior to the date that is at least six months before the close of a performance period (or shorter or longer period that
the Compensation Committee selects), the Compensation Committee may permit a grantee who is a member of a select group of management
or highly compensated employees to irrevocably elect to defer the receipt of all or a percentage of the cash or shares that would
otherwise be transferred to the grantee upon the vesting of a performance award.
Termination, Rescission and Recapture of Awards
Each
award under the 2016 Plan granted to an employee is intended to align such employee’s long-term interest with those of IHC.
Therefore, if the employee discloses confidential or proprietary information of IHC, provides services to a competitor of IHC,
solicits a non-administrative employee of IHC, or has engaged in activities which conflict with IHC’s interests (including
any breaches of fiduciary duty or the duty of loyalty), the employee is acting contrary to IHC’s long-term interests. Accordingly,
except as otherwise expressly provided in an award agreement, IHC may terminate any outstanding, unexercised, unexpired, unpaid,
or deferred awards, rescind any exercise, payment or delivery pursuant to the award, or recapture any common stock (whether restricted
or unrestricted) or proceeds from the employee’s sale of shares issued pursuant to the award. Notwithstanding the foregoing,
IHC may, in its sole and absolute discretion, choose not to terminate, rescind or recapture upon the occurrence of any of the
foregoing events.
Tax Implications
The
Company is subject to Section 162(m)(1) of the Tax Code, which limits the amount a publicly-held corporation may deduct for compensation
paid to a covered employee to $1 million per year. A covered employee includes the CEO, CFO, and the three other highest paid officers.
Once an employee is treated as a covered employee, the individual remains a covered employee for all future years.
Compensation Committee Report
The
Compensation Committee assists the Board in fulfilling its responsibilities with regard to compensation matters, and is responsible
for establishing and approving the compensation of IHC’s executive officers. The Compensation Committee has sole authority
to determine the compensation for IHC’s Chief Executive Officer. The Compensation Committee has reviewed and discussed the
“Compensation Discussion and Analysis” section of the Form 10-K, as amended, for IHC’s fiscal year ended December
31, 2018 with management, including our Chief Executive Officer and our Chief Financial Officer.
Compensation Committee
|
|
Mr. Allan C. Kirkman (Chairman)
|
Mr. John L. Lahey
|
Mr. James G. Tatum
|
Compensation Risk Assessment
The
Compensation Committee considered the Company's compensation policies and practices and concluded that they did not need to be
modified.
Summary Compensation
Table
The following table
lists the annual compensation for IHC’s CEO and the two other most highly compensated executive officers in 2018 for the
years 2018 and 2017.
Name and Principal
Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity Incentive Plan Compensation
($)
|
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other Compensation
($)
|
|
|
Total
($)
|
|
Mr. Roy T.K. Thung
|
|
|
2018
|
|
|
|
484,711
|
|
|
|
338,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,120,000
|
(1)
|
|
|
168,227
|
(2)
|
|
|
7,658
|
(3)
|
|
|
2,119,396
|
|
Chief Executive Officer
|
|
|
2017
|
|
|
|
475,231
|
|
|
|
338,800
|
|
|
|
-
|
|
|
|
891,000
|
(4)
|
|
|
910,000
|
(1)
|
|
|
158,705
|
(2)
|
|
|
24,017
|
|
|
|
2,797,753
|
|
and Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. David T. Kettig
|
|
|
2018
|
|
|
|
395,352
|
|
|
|
330,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
27,234
|
(5)
|
|
|
752,586
|
|
President and Chief
|
|
|
2017
|
|
|
|
387,600
|
|
|
|
325,000
|
|
|
|
-
|
|
|
|
346,500
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
27,781
|
|
|
|
1,086,881
|
|
Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Vincent J. Furfaro (6)
|
|
|
2018
|
|
|
|
249,711
|
|
|
|
200,000
|
|
|
|
-
|
|
|
|
253,310
|
(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
11,175
|
(8)
|
|
|
714,196
|
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Development and CISO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents strategic and long-term incentive earnings as a result of Mr. Thung’s Employment
Agreement with IHC for the year indicated. IHC is party to the Officer Employment Agreement by and between IHC and Mr. Roy T.K.
Thung, IHC’s Chief Executive Officer and Chairman of the Board of Directors, dated as of May 11, 2011. Under the agreement,
Mr. Thung is entitled to an incentive payment upon the disposition of a strategic asset of IHC equal to 3% of the amount above
which the consideration received by IHC for such disposition exceeds the book value of such asset as of March 31, 2011. In addition,
any termination of the agreement other than for “cause” triggers an incentive payment to Mr. Thung in respect of such
appreciation in the overall book value of IHC. The initial term of Mr. Thung’s employment agreement was two years from the
date it was entered into, but, by its terms, will be automatically extended for successive two-year periods unless one hundred
twenty days’ prior notice of non-renewal is given by IHC. Mr. Thung did not receive any cash incentive payments in 2018 or
2017. Had the strategic and long-term incentive provisions of Mr. Thung’s agreement been triggered on December 31, 2018,
Mr. Thung would have received $5,105,000.
|
|
(2)
|
Represents the increase (decrease) in the value of Mr. Thung’s Retirement Benefits Agreement
with IHC for the year indicated. Refer to Potential Payments to Named Executive Officers for additional information regarding this
agreement.
|
|
(3)
|
The amount shown for 2018 represents reimbursements related to employer-matching contributions
to Mr. Thung’s 401(k) account.
|
|
(4)
|
Represents the grant date fair value of options and/or stock appreciation rights granted during
2017.
|
|
(5)
|
The amount shown for 2018 represents reimbursements related to the use of an automobile, employer-matching
contributions to Mr. Kettig’s 401(k) account, group life insurance premiums paid on Mr. Kettig’s behalf, and employer
contributions to Mr. Kettig’s disability insurance.
|
|
(6)
|
Mr. Furfaro was not a named executive officer in 2017 and therefore his compensation for such year
is not included in the table above.
|
|
(7)
|
Represents the grant date fair value of options granted during 2018.
|
|
(8)
|
The amount shown for 2018 represents reimbursements related to employer-matching contributions
to Mr. Furfaro’s 401(k) account and group life insurance premiums paid on Mr. Furfaro’s behalf.
|
Outstanding
Equity Awards at Fiscal Year-End
The following table
sets forth for each named executive officer certain information about unexercised stock options and unvested shares of restricted
stock held as of December 31, 2018.
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
|
Number of
Securities Underlying Unexercised Options
(#)
Exercisable
|
|
|
|
Number of Securities Underlying Unexercised Options
(#)
Unexercisable
|
|
|
|
Option Exercise Price
($)
|
|
|
|
Option Expiration Date
|
|
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
|
|
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
|
|
Roy T.K. Thung
|
|
|
151,000
|
|
|
|
-
|
|
|
$
|
9.09
|
|
|
|
January 4, 2019
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
5,500
|
|
|
|
11,000
|
|
|
$
|
27.65
|
|
|
|
November 16, 2022
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
27,500
|
|
|
|
55,000
|
|
|
$
|
27.65
|
|
|
|
November
16, 2022
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David T. Kettig
|
|
|
10,000
|
|
|
|
5,000
|
|
|
$
|
19.95
|
|
|
|
December
1, 2021
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
3,666
|
|
|
|
7,334
|
|
|
$
|
27.65
|
|
|
|
November
16, 2022
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
9,166
|
|
|
|
18,334
|
|
|
$
|
27.65
|
|
|
|
November
16, 2022
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vincent J. Furfaro
|
|
|
4,000
|
|
|
|
2,000
|
|
|
$
|
19.95
|
|
|
|
December
1, 2021
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,000
|
|
|
|
4,000
|
|
|
$
|
22.20
|
|
|
|
September
12, 2022
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
13,000
|
|
|
$
|
31.30
|
|
|
|
March
13, 2023
|
(5)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
15,000
|
|
|
$
|
35.60
|
|
|
|
May
6, 2022
|
(6)
|
|
|
-
|
|
|
|
-
|
|
|
(1)
|
Stock appreciation rights granted on November 16, 2017 vest in three equal installments beginning
on November 16, 2018.
|
|
(2)
|
Stock options granted on November 16, 2017 vest in three equal installments beginning on November
16, 2018.
|
|
(3)
|
Stock options granted on December 1, 2016 vest in three equal installments beginning on December
1, 2017.
|
|
(4)
|
Stock options granted on September 12, 2017 vest in three equal installments beginning on September
12, 2018.
|
|
(5)
|
Stock options granted on March 13, 2018 vest in three equal installments beginning on March 13,
2019.
|
|
(6)
|
Stock options granted on November 6, 2018 vest in three equal installments beginning on November
6, 2019.
|
Potential Payments to Named
Executive Officers Upon Termination or Change-in-Control.
With
Mr. Thung
IHC is
party to a Retirement Benefits Agreement with Mr. Roy T.K. Thung, dated as of September 30, 1991, and amended by amendments dated
as of December 20, 2002, June 17, 2005 and December 31, 2008, respectively, pursuant to which Mr. Thung is entitled to a lump-sum
cash payment upon a “separation from service” from IHC of $1,659,557, increasing on a cumulative, compounding basis
of 6% per annum from December 31, 2008. “Separation from service” is as defined under U.S. Treasury Regulations 1.409A-1(h)(1),
and would generally include Mr. Thung’s death, retirement or any other termination of employment, including permanent disability.
For example, had this provision been triggered on December 31, 2018, Mr. Thung would have been entitled to receive a payment of
$2,972,014.
IHC is
party to the Officer Employment Agreement by and between IHC and Mr. Roy T.K. Thung, IHC’s Chief Executive Officer and Chairman
of the Board of Directors, dated as of May 11, 2011. Under this employment agreement, if Mr. Thung’s employment by IHC or
its affiliate were to cease under certain circumstances, Mr. Thung would be entitled to receive a lump-sum severance amount equal
to the average annual aggregate total compensation received by Mr. Thung during the preceding five years, adjusted pro rata
for the applicable severance period. The applicable severance period would be the longer of: (i) twelve months; and (ii) a number
of months equal to the aggregate number of years of service of Mr. Thung to IHC and its affiliates. The circumstances under which
such severance would be paid are: (i) Mr. Thung’s employment by IHC being involuntarily terminated under circumstances that
would not constitute “cause” (examples of “cause” being Mr. Thung’s material failure to follow IHC’s
lawful directions, material failure to follow IHC’s corporate policies, breach of the non-compete covenants in the employment
agreement or his engaging in unlawful behavior that would damage IHC or its reputation); (ii) such employment being voluntarily
terminated under circumstances that would constitute “good reason” (examples of “good reason” being in
connection with IHC’s material breach of its obligations under the employment agreement, IHC’s non-renewal of the employment
agreement or change in control of IHC or its ultimate parent); or; (iii) upon Mr. Thung’s death or permanent disability.
In addition, under the agreement, Mr. Thung is also entitled to strategic and long-term incentive payments which are included in
the Summary Compensation Table above. The initial term of Mr. Thung’s employment agreement is two years from the date it
was entered into, but, by its terms, it will be automatically extended for successive two-year periods unless one hundred twenty
days’ prior notice of non-renewal is given by IHC. For example, had the severance provisions of Mr. Thung’s agreement
been triggered on December 31, 2018, Mr. Thung would have been entitled to receive approximately $68,513 per month for forty-one
months ($2,809,033 in the aggregate).
With
Mr. Kettig
IHC is
party to the Officer Employment Agreement, by and among IHC, Standard Security Life (which subsequently assigned the agreement
to its affiliate AMIC Holdings, Inc.), and Mr. David T. Kettig, IHC’s President, Chief Operating Officer and Acting General
Counsel, dated as of April 18, 2011 and amended on January 1, 2017. Under this employment agreement, if Mr. Kettig’s employment
by AMIC Holdings, Inc. or its affiliate were to cease under certain circumstances, Mr. Kettig would be entitled to receive a severance
amount equal to the average annual aggregate total compensation received by Mr. Kettig during the preceding five years, adjusted
pro rata for the applicable severance period. The applicable severance period would be the longer of: (i) twelve months;
or (ii) a number of months equal to the aggregate number of years of service of Mr. Kettig to IHC and its affiliates, not to exceed
twenty-four months. The circumstances under which such severance would be paid are (i) Mr. Kettig’s employment by AMIC Holdings,
Inc. being involuntarily terminated under circumstances that would not constitute “cause” (examples of “cause”
being Mr. Kettig’s material failure to follow AMIC Holdings, Inc.’s or IHC’s lawful directions, material failure
to follow AMIC Holdings, Inc.’s or IHC’s corporate policies, breach of the non-compete covenants in the employment
agreement or his engaging in unlawful behavior that would damage AMIC Holdings, Inc., IHC or their respective reputations), or
(ii) such employment being voluntarily terminated under circumstances that would constitute “good reason” (examples
of “good reason” being in connection with AMIC Holdings, Inc.’s (or its successor’s) material breach of
its obligations under the employment agreement or upon AMIC Holdings, Inc.’s non-renewal of the employment agreement). The
initial term of Mr. Kettig’s employment agreement is two years from the date it was entered into, but, by its terms, it will
be automatically extended for successive two-year periods unless one hundred twenty days’ prior notice of non-renewal is
given by AMIC Holdings, Inc. For example, had the severance provision in Mr. Kettig’s agreement been triggered on December 31,
2018, Mr. Kettig would have been entitled to receive approximately $65,589 per month for twenty-four months ($1,574,136 in the
aggregate).
With
Mr. Furfaro
IHC is
party to the Officer Employment Agreement, by and among IHC, Standard Security Life (which subsequently assigned the agreement
to its affiliate AMIC Holdings, Inc.), and Mr. Vincent J. Furfaro, IHC’s Senior Vice President Corporate Development and
CISO, dated June 22, 2015 and amended on January 1, 2017. Under this employment agreement, if Mr. Furfaro’s employment by
AMIC Holdings, Inc. or its affiliate were to cease under certain circumstances, Mr. Furfaro would be entitled to receive a severance
amount equal to the applicable annual base salary in monthly installments over twelve months. The circumstances under which such
severance would be paid are (i) Mr. Furfaro’s employment by AMIC Holdings, Inc. being involuntarily terminated under circumstances
that would not constitute “cause” (examples of “cause” being Mr. Furfaro’s material failure to follow
AMIC Holdings, Inc.’s or IHC’s lawful directions, material failure to follow AMIC Holdings, Inc.’s or IHC’s
corporate policies, breach of the non-compete covenants in the employment agreement or his engaging in unlawful behavior that would
damage AMIC Holdings, Inc., IHC or their respective reputations), or (ii) such employment being voluntarily terminated under circumstances
that would constitute “good reason” (examples of “good reason” being in connection with AMIC Holdings,
Inc.’s (or its successor’s) material breach of its obligations under the employment agreement or upon AMIC Holdings,
Inc.’s non-renewal of the employment agreement). The initial term of Mr. Furfaro’s employment agreement is one year
from the date it was entered into, but, by its terms, it will be automatically extended for successive one-year periods unless
thirty days’ prior notice of non-renewal is given by AMIC Holdings, Inc. For example, had the severance provision in Mr.
Furfaro’s agreement been triggered on December 31, 2018, Mr. Furfaro would have been entitled to receive approximately
$20,809 per month for twelve months ($249,711 in the aggregate).
Stock Incentive Plans
Under
the terms of IHC’s stock incentive plans, the Compensation Committee may make appropriate provision for the holders of awards
thereunder in the event of a change in control of IHC or similar event. The specifics of such an occurrence cannot be anticipated,
and thus the prospective effect upon IHC cannot reliably be quantified.
Equity Compensation Plan Information
The following table sets
forth certain information as of the end of the most recently completed fiscal year with respect to compensation plans under which
shares of IHC common stock may be issued.
Equity Compensation
Plan Information
Plan Category
|
|
Number
of Shares
to be Issued Upon Exercise of
Outstanding Options
|
|
|
Weighted-Average
Exercise Price of
Outstanding Options
|
|
|
Number of Shares
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Shares Reflected
in the First Column)
|
|
Equity compensation plans approved by stockholders
|
|
|
567,384
|
|
|
$
|
19.40
|
|
|
|
821,400
|
|
REPORT OF THE AUDIT
COMMITTEE
The
Audit Committee assists the Board in oversight of the financial reporting process, including the effectiveness of internal accounting
and financial controls and procedures, and controls over the accounting, auditing and quality of financial reporting practices
of IHC. The Audit Committee operates under a written charter adopted by the Board.
Management
of IHC has primary responsibility for the financial reporting process, the preparation of financial statements in conformity with
U.S. generally accepted accounting principles, the system of internal controls and the establishment of procedures designed to
insure compliance with accounting standards and applicable laws and regulations. RSM US LLP was responsible for auditing IHC’s
financial statements for its fiscal year ended December 31, 2018. The Audit Committee’s responsibility is to monitor and
review these processes and procedures. Audit Committee members are not professionally engaged in the practice of accounting or
auditing. The Audit Committee relies on the information provided to it, including the representations of management that the financial
statements have been prepared with integrity and objectivity, and the representations of management and the opinion of RSM that
such financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting
principles.
The
Audit Committee also reviewed the Report of Management on Internal Control over Financial Reporting contained in IHC’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2018 prior to filing such report with the SEC, as well as RSM’s
Reports of Independent Registered Public Accounting Firm (also included in IHC’s Annual Report on Form 10-K) and RSM’s
reports related to the audit of IHC’s consolidated financial statements. The Audit Committee continues to oversee IHC’s
efforts related to its internal control over financial reporting and management’s preparations for the evaluation in 2019.
The
Audit Committee met with management periodically during the year to consider the adequacy of IHC’s internal controls and
the objectivity of its financial reporting. The Audit Committee discussed these matters with appropriate IHC financial and internal
audit personnel and with RSM. The Audit Committee also discussed with IHC’s senior management the process used for certifications
by IHC’s chief executive officer and chief financial officer which are required for certain filings with the SEC.
The
Audit Committee appointed RSM as IHC’s independent registered public accounting firm for the year ended 2019 after reviewing
the firm’s performance and independence from management.
The
Audit Committee reviewed with management and RSM, IHC’s audited financial statements and met separately with both management
and RSM to discuss and review those financial statements and reports prior to issuance. Management has represented to the Audit
Committee that the financial statements were prepared in conformity with U.S. generally accepted accounting principles. RSM’s
report states the firm’s opinion that such financial statements are fairly presented, in all material respects, in conformity
with U.S. generally accepted accounting principles.
The
Audit Committee reviewed with RSM, which is responsible for auditing IHC’s financial statements and for expressing an opinion
on the conformity of those audited financial statements with accounting principles generally accepted in the United States, its
judgment as to the quality, not just the acceptability, of IHC’s accounting principles and such other matters as are required
to be discussed with the Audit Committee under Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16, Communications
with Audit Committees. In addition, the Audit Committee has received from RSM written disclosures regarding the auditors’
independence required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence,
and has discussed with RSM its independence from the Company and its management. In concluding that RSM is independent, the Audit
Committee considered whether the non- audit services provided by the independent auditors in 2018 were compatible with its independence.
Based
on these reviews and discussions, the Audit Committee recommended to the Board that IHC’s audited financial statements be
included in IHC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Audit Committee Members
|
Mr. James G. Tatum (Chairman)
Mr. Allan C. Kirkman
|
Mr. John L. Lahey
Mr. Ronald I. Simon
|
AUDIT AND NON-AUDIT
FEES
The following
table sets forth fees for services that RSM US LLP (“RSM”) provided to IHC during 2018 and 2017:
|
|
2018
|
|
|
2017
|
|
Audit fees (1)
|
|
$
|
1,268,000
|
|
|
$
|
1,380,000
|
|
Audit-related fees
|
|
|
-
|
|
|
|
-
|
|
Tax fees
|
|
|
-
|
|
|
|
-
|
|
All other fees (2)
|
|
|
20,000
|
|
|
|
20,000
|
|
Total
|
|
$
|
1,288,000
|
|
|
$
|
1,400,000
|
|
|
(1)
|
Audit Fees. Represents fees for professional services provided for
the audit of IHC’s annual financial statements, the review of IHC’s quarterly financial statements and audit services
provided in connection with other statutory or regulatory filings.
|
|
(2)
|
All other fees represent fees to RSM for the audit of the Company’s 401(k) plan.
|
The Audit
Committee has determined that the provision of non-audit services by RSM is compatible with maintaining RSM’s independence.
Any such engagement of RSM to provide non-audit services to IHC must be pre-approved by the Audit Committee.
Vote Required for the Election of Directors
The
affirmative vote of a plurality of the votes cast at the meeting is required to elect the nine nominees as directors. This
means that the nine nominees will be elected if they receive more affirmative votes than any other person.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE “FOR” THE ELECTION OF EACH OF THE NINE NOMINEES.
PROPOSAL 2
RATIFICATION OF THE
APPOINTMENT OF
THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Appointment of Independent Registered Public
Accounting Firm
On
October 3, 2016, the Audit Committee appointed RSM US LLP (“RSM”) to be IHC’s independent registered public accounting
firm for the fiscal year ending December 31, 2016, which was ratified by stockholders at the 2016 Annual Meeting of Stockholders.
On May 9, 2017, the Audit Committee appointed RSM to be IHC’s independent registered public accounting firm for the fiscal
year ending December 31, 2017, which was ratified by stockholders at the 2017 Annual Meeting of Stockholders. On August 8, 2018,
the Audit Committee appointed RSM to be IHC’s independent registered public accounting firm for the fiscal year ending December
31, 2018, which was ratified by stockholders at the 2018 Annual Meeting of Stockholders. On May 7, 2019, the Audit Committee appointed
RSM to be IHC’s independent registered public accounting firm for the fiscal year ending December 31, 2019. The stockholders
are asked to ratify this appointment at the annual meeting. Representatives of RSM will be present at the meeting.
Vote Required For Ratification
The
Audit Committee is responsible for selecting IHC’s independent registered public accounting firm. Accordingly, stockholder
approval is not required to appoint RSM as IHC’s independent registered public accounting firm for 2019. The Board believes,
however, that submitting the appointment of RSM to the stockholders for ratification is a matter of good corporate governance.
If the stockholders do not ratify the appointment, the Audit Committee will review its future selection of the independent registered
public accounting firm.
The
ratification of the appointment of RSM as IHC’s independent registered public accounting firm requires the affirmative vote
of a majority of the shares present at the meeting in person or by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
“FOR” THIS PROPOSAL.
OTHER MATTERS
IHC’s
by-laws require stockholders to give advance notice of any proposal intended to be presented at the annual meeting. The deadline
for this notice has passed and IHC has not received any such notice. If any other matter properly comes before the stockholders
for a vote at the meeting, however, the proxy holders will vote your shares in accordance with their best judgment.
ADDITIONAL INFORMATION
Proxy Solicitation
IHC
will bear all costs of this proxy solicitation. In addition to soliciting proxies by this mailing, IHC expects that its directors,
officers and regularly engaged employees may solicit proxies personally or by mail, telephone, facsimile or other electronic means,
for which solicitation they will not receive any additional compensation. IHC will reimburse brokerage firms, custodians, fiduciaries
and other nominees for their out-of-pocket expenses in forwarding solicitation materials to beneficial owners upon our request.
Stockholder Proposals for 2020 Annual Meeting
Stockholder
proposals intended to be presented at IHC’s 2020 annual meeting must (pursuant to Rule 14a-8 of the Exchange Act) be received
by IHC no later than June 5, 2020 to be eligible for inclusion in IHC’s proxy statement and form of proxy for next year’s
meeting. Proposals should be addressed to Independence Holding Company, Attention: Corporate Secretary, 485 Madison Avenue, 14th
Floor, New York, New York 10022.
For
any proposal that is not submitted for inclusion in next year’s proxy statement (as described in the preceding paragraph),
but is instead sought to be presented directly at the 2020 annual meeting, the federal securities laws require stockholders to
give advance notice of such proposals. The required notice must (pursuant to Rule 14a-4 of the Exchange Act) be given no later
than August 19, 2020. Any such notice must be provided to Independence Holding Company, Attention: Corporate Secretary, 485 Madison
Avenue, 14th Floor, New York, New York 10022. If a stockholder fails to provide timely notice of a proposal to be presented
at the 2020 Annual Meeting, the chairman of the meeting will declare it out of order and disregard any such matter.
|
By order of the Board of Directors,
|
|
|
|
|
|
Loan Nisser
|
|
Vice President – Legal and Secretary
|
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